Photo by STG Design, via city of Austin, depicting the now-scrapped project that was going to be on the site.
HealthSouth redevelopment scenarios spell out options for affordable housing downtown
Tuesday, February 6, 2024 by
Chad Swiatecki The Housing Department has presented City Council with the four scenarios most likely to spur redevelopment of the former HealthSouth site on the eastern edge of downtown.
A memo from Housing Director Mandy DeMayo spells out for Council the findings of Economic & Planning Systems Inc. in its analysis of how the city can adjust levels of affordable housing, subsidies and density to bring different kinds of mixed use to the parcels located at 1215 Red River St. and 606 E. 12th St.
The city had an agreement with the Aspen Heights development company to bring a mix of affordable housing and other uses to the site, but that project failed when market conditions changed such that Aspen Heights said it could deliver only 65 affordable units. The Economic Development Department recommended last summer that the city terminate the Aspen Heights deal and look for new ways to develop the property.
The EPS study’s four scenarios include a hybrid development that seems to most closely resemble the Aspen Heights plan. It’s projected to yield 178 affordable units – the most of all four scenarios – and the lowest number of total housing units. The affordable units would require a $17 million subsidy from the city, as well as no-cost land dedication and a property tax exemption and funding from low-income tax credits.
The market-rate portion of the hybrid scenario is projected to generate $51 million in net revenue, which the city could use to fund another 267 affordable housing units elsewhere in the city.
The “downtown density bonus” scenario maximizes entitlements from fee-in-lieu considerations, with more than $300 million in revenue generated from purely market-rate housing. The firm estimates that money could generate 1,589 affordable units elsewhere in future developments.
The “Rainey District density bonus” scenario maximizes both fee-in-lieu and on-site affordability, with a projected 93 affordable units on the property. The market-rate portion of the project would then generate $237 million in revenue, enough to fund 1,237 affordable units elsewhere.
The fourth scenario, payment in lieu of taxes, would maximize market-rate housing on the site, with no affordable units. That approach is estimated to produce $330 million in ground lease revenue, which could fund more than 1,700 affordable units in other parts of the city.
August Harris, chair of the Downtown Commission, said the commission remains supportive of Council’s past goal of using the HealthSouth site as the largest location for affordable housing downtown.
Affordable housing downtown is one of the commission’s priorities, Harris said, “particularly for housing for families, and this was the place where it appeared most likely to be able to happen effectively. We were all very disappointed when the project was unable to proceed.”
“If you just want density on that site, then a couple of the other options provide higher levels of density. But if you want a diverse population in the central business district emphasizing affordable housing on a city-owned site, you’re not going to get many opportunities like that.”
Harris added that he wants to hear developers’ feedback on the four scenarios and how feasible they may be, especially given how unsuccessful the city has been in establishing affordable housing in other projects involving fee-in-lieu payments or other tools.
Council Member Ryan Alter said he wants to focus on bringing affordability to downtown.
“We have the potential to create an affordable home for thousands of people through this one site,” he said in an email. “This is a rare chance to create economic opportunity for our residents in and around downtown, and I’m excited to work with my colleagues to maximize the positive impact for our community.”
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