Austin plan to redevelop city-owned site salvaged by adding affordable housing units

Almost scrapped this summer, a plan to redevelop a city-owned site in downtown Austin is again viable after the developer agreed to provide more affordable housing units as part of the agreement.

As proposed, the former HealthSouth site, at Red River Street and East 12th Street, would include 232 units available at below market rates — twice as many units as were included in a proposal the Austin City Council rejected in July before agreeing, by a tight vote, to give the developer more time to revise the offer.

The proposed affordable units make up one-fourth of the project's 921 total units and will come in a location — near the Capitol, the University of Texas, and Interstate 35 — that is out of reach to many in the working class. In housing redevelopments, especially those on city land, the City Council is increasingly prioritizing affordable housing as a way to keep in the city lower-wage workers who otherwise would have no answer to rising taxes and home prices.

Mayor Steve Adler called it an "incredible deal."

"Scary it almost went away," Adler said this week.

On Thursday, Adler and other council members are expected to vote in favor of an agreement with the developer, Aspen Heights, with whom the city began negotiating back in early 2021.

More:Austin hits pause on redevelopment plans for former HealthSouth site

Negotiations nearly broke down over the council's insistence on more housing units priced below market value.

In June, the city's staff recommended letting lapse an exclusive negotiating agreement with the developer, and it appeared the council was ready to do that. But in the days before a vote in late July, Aspen Heights requested an extension, and the council, by a 6-4 vote, granted it. Ready to move on were Council Members Kathie Tovo, Leslie Pool, Ann Kitchen and Alison Alter.

The extension gave the developer time to secure additional funding for more affordable housing.

As proposed, $8.8 million that Aspen Heights was to give to the city will instead go to NHP Foundation and Capital A Housing, partners that rescued the deal by securing the extra affordable housing units. That reduced the city's cut to $12.2 million, which Aspen Heights will pay to lease the property.

"It ended up being a really good deal," said Conor Kenny, of Capital A Housing. "It's one of those rare situations that turned out very well after a process that was pretty rough."

The fight over affordable housing comes days after a new report offered some numbers on just how much Austin is doing on that issue. In 2017, the city established a goal of reaching 135,000 affordable housing units by 2028. As of last year, none of Austin's 10 council districts were on pace to reach their individual goals.

In November, Austin voters will weigh a $350 million affordable housing bond that most council members are supporting.

The Aspen Heights project calls for 921 housing units, all rental, in two towers, both of them 37 stories. The below-market units are in the south tower, which sits partially on a quarter-acre of private land acquired by Aspen Heights. A $200,000 mural will cover an exterior wall.

More:Austin home sales drop as fewer people can afford to live here, industry measure shows

A redevelopment plan was created in 2017, about 40 years after the city purchased the site, when HealthSouth closed the facility and sold to the city its lease. Tovo initiated the conversation with then-Council Member Ora Houston to leverage the site for affordable housing units.

"We knew the potential it could offer to our community, and I am thrilled to see that one day this property will be called home to hundreds of families that could not otherwise afford to live downtown," Tovo wrote on the council's message board.

Elsewhere on the 2 acres is space for lower-cost child care, retail and live music. There will be about 1,300 parking spaces.

About half of the affordable units are limited to people making 50% of the area's median family income, which is $44,000 for two persons, $49,000 for three persons and $55,000 for four persons. The remaining units are available to those making 60% of the area's median family income.

Half of the affordable units are for families, as 90 units would have two bedrooms and 23 would have three bedrooms. The others are studios or have one bedroom.

This article originally appeared on Austin American-Statesman: Plan to redevelop Austin-owned site salvaged with affordable housing