Resolution would start push for affordable housing on former HealthSouth property

On Thursday, City Council will vote on taking the first step in redeveloping the former HealthSouth property on Red River Street, which has been identified by many as a potential site for the city to create affordable housing units.

At Tuesday’s work session, Council members discussed the finer points of the request that will direct the city manager to issue a request for information from the private development community that will lead – likely early next year – to solicitation of development proposals. Most appeared in support of the push to reuse the small vacated parcel, with much of the debate focused on exploring options other than demolition and construction in place of a former medical rehabilitation facility.

Mayor Pro Tem Kathie Tovo has pushed in recent months for the city to move forward with establishing a plan for the site and said she and other co-sponsors of the resolution would prefer to have affordable housing built there instead of selling or using the property in a deal to create a larger quantity of affordable units elsewhere.

“We have a building, tremendous need for affordable housing in the city, and this is such a unique opportunity to move forward because we’ve all had so many conversations about how we should create affordable housing on public land,” she said.

“We’re not going to have another opportunity to build affordable units in a location like that. There’s no doubt we could sell it or otherwise use the land to create more units somewhere else, but the value of this is in creating places to live for the people who work in the hospital and nearby restaurants and need a place that is close to where they work.”

The city purchased the property in the 1970s and in 1988 leased the site for 75 years to the parent company that became HealthSouth.

That company sought to exit the lease in 2016, with the city buying it out for $6.5 million, well below the $30 million it is believed to be worth on the open development market because of its location in the confluence of the city’s new health care innovation district, the Waller Creek project and the state government’s Texas Capitol Complex.

A pair of recent studies by real estate think tanks looked at the feasibility of reusing the former HealthSouth building compared to demolition, as well as the tax structures and other considerations that could make the site useful for newly constructed affordable housing – with rents affordable to those earning roughly 60 percent of the area’s median family income. A report from Urban Land Institute Austin found the property “provides a rare opportunity to provide affordable housing within the Central Business District, an area of high opportunity.”

Council Member Greg Casar plans to propose an amendment to the resolution that would also ask staff to gather information from developers about possible trade-off deals or other arrangements that could make the HealthSouth property available for market-rate residential or commercial use in exchange for creating more affordable units in neighborhoods outside of downtown but near the city core.

It is believed the site could support about 200 affordable units, while a 2017 report from Economic and Planning Systems Inc. said sale of the property could generate enough revenue to build up to 1,500 affordable units in other parts of the city.

“I want to see the HealthSouth property used to address the city’s affordable housing crisis and part of that is seeing proposals for what could be done on that site versus other high-opportunity areas like Hancock or Cherrywood that are rapidly growing as well,” Casar said. “I’m trying to write an amendment to put some guardrails on this to make sure we’re getting affordable housing in the areas that need it, west of Airport Boulevard and south of North Loop.”

Map courtesy of Google Maps. This story has been changed since publication to reflect the fact that the property is not in District 9, as originally reported, but District 1.

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