What’s the latest on Austin’s HealthSouth property downtown?

AUSTIN (KXAN) — Austin City Council and city staff discussed Tuesday various development options for the city’s HealthSouth building downtown, which had previously been earmarked as a site for affordable housing development opportunities.

In late September, council directed city leadership to convert at least a portion of the former HealthSouth property into affordable housing. The total complex is located at both 1215 Red River St. and 606 E. 12th St. and includes the former hospital and the now-demolished garage.

It came after a city-led community impact survey revealed people “overwhelmingly” supported more affordable housing opportunities downtown, with specific prioritization flagged for healthcare, hospitality and service industry workers.

That initial recommendation to Interim City Manager Jesús Garza included developing the site in phases, with affordable housing on one portion of the property and market-rate development on the other. However, Tuesday’s discussion addressed three additional scenarios for the redevelopment process.

Here’s a breakdown of each of the considerations.

Scenario 1: Hybrid model

This version, based on council’s September recommendation, would create 178 on-site affordable housing units at 1215 Red River St. There would be an additional 328 market-rate units at 606 E. 12th St.

Due to constraints courtesy of the capitol corridor view, this project would only be able to develop up to five stories high on the former hospital site while the former garage site could accommodate a high-rise structure.

The market-rate portion of the project would result in $3.1 million for in-lieu payment, but it would require a $17.1 million public city subsidy from the city to aid in the affordable portion.

PAST COVERAGE: Austin City Council eyes future of HealthSouth building

Due to density bonuses applied here, it would result in $74.8 million in public revenue initially before site acquisition costs are deducted, per council documents. In the end, officials said this revenue stream could subsidize an estimated 267 additional, off-site affordable housing units to be developed.

In total, this plan would yield 445 on-site and off-site affordable units.

Scenario 2: Downtown bonus with in-lieu fees

This scenario wouldn’t feature any affordable housing units on the site itself, but would be structured financially to pay toward off-site affordable unit developments.

This scenario anticipates upwards of $305 million in net public revenue acquired through downtown bonus programs, which would go toward supporting off-site affordable units.

Approximately 1,589 off-site affordable housing units could be developed under this scenario, with roughly 1,400 market-rate units offering a mix of unit styles — from studio spaces to three-bedroom offerings.

Scenario 3: ‘Rainey Street’-style bonus with on-site units

This option is developed similarly to Rainey Street’s current bonus program, with the possibility of providing 5% of the project’s on-site units being listed below the market rate. However, officials noted replacing market-rate units with affordable units doesn’t cut development costs and impacts the project’s assessed value as well as its property taxes.

ICYMI: Recommendation for new affordable housing in downtown Austin

Under this scenario, there would be 93 on-site affordable units split between the two segments of the property, with the rest serving as market-rate housing units. It would help gain $238 million in net public revenue that could contribute to roughly 1,237 affordable housing units off-site, yielding a total of 1,331 affordable units.

Scenario 4: ‘Pilot’ to maximize site revenue, off-site development

This fourth version would include market-rate residential units at 1215 Red River St. and 606 E. 12th St., with both portions of the property featuring ground floor commercial opportunities. Due to the lack of on-site affordable units or in-lieu fee payments, city documents said it would result in the “highest annual ground lease of any of the scenarios,” bolstering off-site affordable housing development opportunities.

That net public revenue gain is estimated at around $330 million, which could help cover development costs for approximately 1,719 off-site affordable housing units.

Staff recommendation, next steps

Due to the higher construction costs and competitive bidding nature given other development projects in town, staff suggested council pause the item until the summertime or the fall, when city leaders have a better understanding of the fiscal year 2024-25 budget as well as market conditions.

For the latest news, weather, sports, and streaming video, head to KXAN Austin.