A mixed-use project on the former site of HealthSouth Rehabilitation Hospital in Downtown Austin could become the site of 232 units of affordable housing.

The city owns the 1.73-acre site at 1215 Red River Street, just south of (and adjacent to) the massive Central Health redevelopment of the former Brackenridge Hospital site and across the street from Waterloo Park. Aspen Heights Partners, which won the redevelopment contract for the site, plans to develop two towers on that property and an adjacent lot it purchased at 606 East 12th Street.

Along with equity partners Texas Growth Fund, it has advanced a plan for two 37-story residential apartment towers with 921 units and about 772,000 square feet of living space, 28,000 square feet of retail space including a gourmet food hall and indoor live music venue with below-market rental rates, onsite affordable child care, a business incubator, and a 30,000-square-foot, elevated outdoor plaza connecting the two buildings.

The Austin City Council on Sept. 29 approved “full negotiations” for a master development agreement for the site. Affordable housing developer Capital A Housing, affordable housing nonprofit the NHP Foundation, and Aspen Heights heights are doing the negotiating, aiming for a mixed-income residential project that could offer 232 affordable units — double the number the city now manages.

All of the affordable units would be in the 27-story south tower. One-bedroom apartments would make up half of them, with 90 two-bedrooms and 23 three-bedrooms completing the inventory.

The lease under negotiation lasts 99 years, and should be finalized by spring of 2023 for a summer of 2027 delivery target.

Ensuring affordable housing in the area is in some ways an attempt to rectify actions by the city and University of Texas in the 1960s, when a minority community with 475 households was razed for the development of Brackenridge Hospital, the Frank Erwin Center, and Waterloo Park. 

“It’s important to remember this history of this area,” said City Council Member Natasha Harper-Madison at the meeting where negotiations over the property were approved. “The urgent need to reconcile those bad decisions is what drove me to push my colleagues to give our city staff more time to kick the tires on this proposal.”