Image: James Rambin
The failure of the agreement between private developers Aspen Heights Partners and the City of Austin’s Economic Development Department to construct two residential towers containing hundreds of market-rate and affordable housing units on 1.73 acres of city-owned downtown land formerly occupied by the HealthSouth rehab hospital at 1215 Red River Street was one of the more quietly depressing news items of the summer, a sign that changing real estate market conditions are liable to kill projects that previously seemed like good deals to everyone involved — and it’s not the only affordable housing project on city-owned land to fall through in recent months.
A view of the HealthSouth tract, which also labels the nearby drive-thru credit union for some reason. Image: City of Austin
Besides the obvious concerns of the tract’s development timeline stretching past the decade mark, a more subtle problem with the city throwing out these deals and starting over is the risk of both municipal and public fatigue — the Aspen Heights plan for HealthSouth involved a lot of effort from city staff alongside a typically robust community engagement process seeking input from local stakeholders on the design and affordable component of the project. With that version of the plan now defunct, it’s hard to imagine a second take on the deal attracting the same enthusiasm, and the construction costs aren’t what they were when negotiations were finalized with Aspen Heights back in 2021. The numbing effect of this repetitive bureaucratic process is how well-intentioned people are conditioned to accept mediocrity, and it would be sad to see such desirable land receive anything less than its full investment potential.
But there’s a silver lining to this setback. Austin’s current City Council batting order is a more housing-friendly bunch these days, and the potential for a good deal at the HealthSouth site is still possible. What’s really important here is the tract’s emphasis on affordable housing, since although the main goal of the Innovation District appears to be attracting biotech tenants and naming things after the Moody Foundation, increased affordable housing stock downtown is the target of the city’s larger planning initiative for the Palm District, which contains the Innovation District at its north end — God forbid you get the two confused! Along with hundreds of market-rate residences at nearby buildings like Alexan Waterloo and the Waller apartment tower at Symphony Square, bringing a mixed-income demographic next door to a new downtown amenity like Waterloo Park should remain a firm priority for this plan.
A view of the design for the Aspen Heights version of the project, as seen from Waterloo Park. Image: STG
The Aspen Heights version of the project would have brought more than 900 homes to this site, spread between two 37-story towers and including between 116 and 232 affordable units. We don’t know if a new project here can achieve that scale, but we’d like to see as many units as possible here even if the affordable unit mix needs to be recalibrated to meet market conditions. There’s also a scarcity of retail in this region at the moment, so any plan for the site should emphasize a small-scale neighborhood market option like Royal Blue Grocery, Foxtrot, or successful corner stores in neighborhoods like Mueller. We’re less concerned about whether the project includes nice-to-haves like a live music venue — there was an “everyone gets a pony” aspect to the previous agreement that likely contributed to its failure, and we’d honestly rather just have more housing:
Among the additional community benefits highlighted in the May agreement are affordable child care services; spaces for local businesses such as “retailers, grocers and restaurants”; a live music and arts venue space available for rent and “prioritizing operators representing historically disenfranchised artists”; educational spaces; and public-access outdoor spaces and a viewing platform.
Whatever your priorities are for this site, the city wants to hear them — again. The relaunched public engagement process for the future of the HealthSouth site is now live, with feedback accepted until next month on what you’d like to see from a new development deal for the property. It’s your responsibility as a Towers reader to press the housing button until it breaks off. Smash that link, slick.
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