Austin Considers New Development Plans to Boost Affordable Housing Options

Austin Explores New Options for Affordable Housing Development

Austin city officials are looking into new plans to redevelop the former HealthSouth properties downtown, which could lead to an increased number of affordable housing units in the area. A memo shared last week by Mandy DeMayo, the interim director of the Housing Department, outlines two new scenarios aimed at reviving earlier efforts that had stalled due to a lack of financially viable redevelopment options.

Revisiting Redevelopment Scenarios

Earlier in the year, the City Council had pushed the HealthSouth properties to the back burner, as previous redevelopment proposals were deemed unattractive financially. However, in response to a Council resolution passed late last year, financial consultant Economic & Planning Systems Inc. (EPS) has come up with two new scenarios, labeled Scenario 5 and Scenario 6.

Scenario 5: Direct Provision of Affordable Units

Scenario 5 suggests that instead of paying a fee to meet affordable housing requirements, the development would provide 96 affordable units on-site. This plan would use the Downtown Density Bonus Program to maximize the development’s potential for affordable housing. By placing affordable units directly on the site, the city could boost its affordable housing stock without relying on funding units elsewhere.

Although the project would bring in less overall revenue, it could fund the creation of approximately 1,223 additional off-site affordable units. This ensures that the project makes a direct impact on housing availability in the city.

Scenario 6: Public Facility Corporation Model

Scenario 6 proposes utilizing a Public Facility Corporation (PFC) development structure. This plan would allocate around 700 units of a total residential project for affordable housing targeting households earning between 60% and 80% of the area’s median family income. The PFC model would grant developers a full exemption from property taxes contingent upon providing these affordable units.

Under this scenario, developers would make an upfront land payment to the city, which would fund the development of an estimated 404 additional off-site affordable units. However, EPS highlighted a significant concern: this scenario is estimated to result in a loss of about $492.9 million in tax revenue over an affordability period that could extend up to 99 years. This reduction in revenue could create challenges for public services in the long run.

Looking Ahead

While the memo does not lay out specific next steps for the City Council, it notes that Scenario 6 has the potential to deliver the highest number of on-site affordable units and the quickest strategy for funding off-site units. The trade-off, however, is the significant tax revenue loss.

The memo stated, “Should City Council desire additional conversation, including the contemplation of a solicitation for the redevelopment of the former Health South site, the Housing Department would work collaboratively with other city departments to discuss necessary resources and timelines.” This shows that while there are exciting possibilities ahead, the City Council will need to weigh the benefits against potential drawbacks carefully.

A Potential Solution for City Needs

For years, city leaders have viewed the HealthSouth properties as a solution for several downtown challenges. Ideas for development have included community resources like a childcare center and spaces for cultural activities. However, a previous partnership with the Aspen Heights group fell through when increased interest rates limited their ability to deliver on the promise of affordable housing.

The new scenarios provide a way forward that aims to increase the availability of affordable housing in Austin, addressing a pressing need in the city. Only time will tell which, if either, of these new plans will move forward, but discussions are already underway about the best path forward for the community and its families.