AFFORDABLE HOUSING: CHANGE ON THE HORIZON IN CHICAGO?

The City of Chicago is considering amending its Affordable Housing Ordinance to bolster the requirement for developers to include affordable market-rate units in new residential developments or face stiffer financial consequences for failure to meet those requirements. Not surprisingly, the proposed amendment has met with a vocal response from both residential developers and affordable housing advocates.
Under the current Affordable Housing Ordinance, builders in Chicago can either set aside 10% of the units in new structures at below-market rates or pay $100,000 per required unit into a city fund. According to published media reports, many developers have simply chosen to pay the amounts into the city fund. The proposed changes to the Affordable Housing Ordinance would create different requirements depending upon where in the city new residential developments are to be constructed. Under the proposed changes, developers can no longer simply pay the fee to avoid meeting the 10% affordable housing requirement. Instead, in downtown Chicago or other high-income areas, residential developers must build at least 25% of the required affordable units in the proposed development or within a one-mile radius of that development. The other 75% of the required affordable units could be avoided by developers paying opt-out fees of $175,000 for downtown units and $125,000 per unit in other high-income areas – a significant increase from the current $100,000 per unit opt-out fee. In other areas of the city designated as low-to-moderate income, the opt-out fee would be $50,000 per unit. For condominium or townhome developers, a slightly different scheme would apply. Condominium and townhome developers could opt out of all affordable units for downtown projects but the fees could be as high as $225,000 per unit. Mayor Rahm Emanuel has publicly expressed his support for the initiative and published sources, including Crain’s Chicago Business, have stated that the change could generate as much as $100 million in housing funds and add 1,200 units of affordable housing over a five-year period.
Supporters and opponents have voiced their views over the proposed changes. Real estate developers worry that more aggressive affordable housing requirements could make projects harder to finance. Affordable housing advocates believe that the changes are needed because not enough affordable units have actually been generated under the existing ordinance, especially in gentrifying areas where developers simply pay the fee. On the other hand, some housing advocates have expressed concern about the proposed changes, concerned that they do not go far enough or are misdirected in addressing the shortage of affordable housing.

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