Appeals court upholds decision in favor of City; dismissal of homeless housing lawsuit

AUSTIN (KXAN) — A Texas appeals court denied an Austin business owner's request to block the sale of a northwest Austin hotel that the City of Austin plans to convert into housing for people experiencing homelessness.

The City bought the former Candlewood Suites hotel, near U.S. Highway 183 and Texas 45 toll road, and renamed it Pecan Gardens. The facility will serve as permanent supportive housing for more than 70 homeless, elderly and disabled people under the eye of Family Eldercare.

Chaudhari Partnership, which owns nearby properties, sued claiming the housing project lowered the value of its property.

The trial court previously dismissed the lawsuit with prejudice.

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The property has been empty since Austin City Council approved its purchase — using 2018 affordable housing bond dollars — in 2021. In June 2022, city council approved a contract with Family Eldercare to operate the property.

Documents said Family Eldercare “discovered significant issues with the structure of the building, including mold, drainage, and fireproofing issues,” which caused delays.

The purchase faced a legal challenge from Williamson County and scrutiny from neighborhood groups.

In September 2023, a Williamson County district court judge dismissed a lawsuit from Williamson County. The county claimed the property was zoned for commercial use only and asked for a temporary restraining order to stop the conversion of the hotel.