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Council extends HealthSouth redevelopment negotiations

Monday, August 1, 2022 by Jonathan Lee

After a series of delays, the proposed redevelopment of two city-owned downtown parcels inched a step forward Thursday when City Council extended negotiations with developer Aspen Heights Partners. 

Aspen Heights plans to build 921 residential units, some affordable, in two towers on the former HealthSouth tract, which sits next to Waterloo Park at 1215 Red River St. and 606 E. 12th St. 

Council chose Aspen Heights to redevelop the site in January 2021. After a year-and-a-half of negotiations, city staffers said Thursday they need until Sept. 30 to evaluate the developer’s latest proposal, which was finalized the night before Council’s meeting.

The amount of affordable housing in the development remains up for discussion. Without any city money, Aspen Heights says it can make 116 of the units affordable. But if the city reinvests part of Aspen Heights’ lease payment back into the project, that number doubles to 232 affordable units. If the city reinvests the entire lease payment, the total would rise to 428 affordable units. Public dollars from other sources could push the total even higher.

All scenarios would have a mix of one-, two- and three-bedroom homes priced for those making between 50 and 60 percent of the median family income, which is $110,300 for a family of four.

Council Member Kathie Tovo argued that the proposal does not include enough affordable housing. “When we have city-owned land … we should be using it to create as much affordable housing as possible,” she said.

Tovo preferred to end negotiations with Aspen Heights and bring in public entities such as the Austin Economic Development Corporation and the Austin Housing Finance Corporation to achieve more affordable housing.

Mayor Steve Adler showed support for continued talks with Aspen Heights, pending staffers’ review. “It may be too good to be true, but if it’s not, and this can be performed, then it’s an incredible use of public-owned property downtown,” Adler said.

The project proposes additional community benefits valued at around $50 million, including an affordable child care center, an on-site music venue and public green space. Retail is also planned.

According to Amanda Swor, a land use lobbyist representing Aspen Heights, parking would be above- and below-ground, with as many spaces as the market demands. 

The proposal changed dramatically after Aspen Heights put an adjacent quarter-acre parcel at 614 E. 12th St. under contract in April. Swor explained that the additional land allows the southern tower, which was planned as offices, to shift to residential use. “That adds 413 units, so that’s a big difference,” Swor said. 

The motion to extend the negotiations until Sept. 30 passed 6-4-1, with Council members Alison Alter, Leslie Pool and Ann Kitchen joining Tovo in opposition. Council Member Vanessa Fuentes was absent.

The project is still a ways from breaking ground. If Aspen Heights’ proposal passes due diligence, city staffers will bring forward a draft master development agreement to Council in the coming weeks. Negotiations over the MDA could last between nine and 15 months, provided there are no further delays. If Council then approves the agreement, the project can move forward.

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