New affordable housing fees advanced amid warnings

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Mayor Rahm Emanuel’s complex solution to Chicago’s affordable housing crisis was advanced by a City Council committee Wednesday, amid concern that the costly mandates could stifle residential development.

Chicago’s  existing “affordable requirements ordinance” offers a choice to developers of projects with 10 or more new or rehabilitated units that involve zoning changes, a planned development designation, city land or a city subsidy.

They can either make 10 percent of new residential units affordable or pay a fee of $100,000 for every unit they don’t build.

At Emanuel’s behest, the Housing Committee agreed to  carve the city up into three different zones with widely divergent fees.

For downtown developers and those who build in higher-income census tracts, the fee would rise to $175,000 and $125,000, respectively, for every unit they don’t build.

In neighborhoods dominated by low-to-moderate income residents, the fee would drop to $50,000 per unit.

The mayor’s ordinance also would require at least 25 percent of a project’s affordability requirement to be filled with on-site units, with two exceptions.

Downtown rental projects and rental or condo projects in higher-income areas would have the option to build, buy or renovate the required units within two miles as long as it’s in the same zone.

And downtown condo projects could build, buy or rehabilitate the required units anywhere in the city.

In spite of tweaks aimed at easing the financial burden, a parade of developers argued Wednesday that it was all too much for them to bear.

Developer Randy Fifield noted that her firm just completed a 2,140-unit project on Kinzie Street just west of the East Bank Club that could not have been financed or built if the mayor’s mandates had been in place.

“Maybe, and just maybe, in high-rent districts like Streeterville or in a very expensive condo can you absorb those proposed fees. But not in projects in mid-level neighborhoods or new neighborhoods to be created,” Fifield said.

“The unintended consequence of passing this is that new construction will slow down. New jobs and new real estate tax revenue will not be created. If you overreach with these funds — it will be another leased parking meter problem because it is rushed. It is not well thought out. Additionally, as these costs are passed on to renters through increased rents, we’re also making our work force rents out of reach for many of our workers and companies moving downtown today.”

Alan Lev, president and CEO of Belgravia Group, said the undeniable “truth” is that the ordinance will increase costs — either by raising fees or reducing revenue by requiring units on- or off-site.

“Everyone likes to look at developers and say, `They’re all rich.’ But we all know through 2008 and beyond how many went out of business. It’s an inherently difficult and risky business. The yields are at a historic low,” Lev said.

“My concern is that adding on fees that are going to $175,000 or $225,000 in some places and requiring on- site units is gonna push us over the edge. If we could lower the fee a little bit, phase it in, some pro-ration of fees, I would be the first one to stand up here and tell you on behalf of the development community that I would support the ordinance. We’re just not there yet.”

Richard Whitney, of Fitzgerald Associates Architects, said his clients have warned the ordinance “has the potential of stifling development” in Chicago “to the point where clients will look elsewhere” to build their projects.

“The impacts are potentially significant. We see this ordinance . . . as a tipping point for projects in the city. The revisions as proposed, we fear, will tip the scales in a negative way, making projects financially unfeasible,” he said.

Planning and Development Commissioner Andy Mooney flatly denied that the mayor’s plan would chill development.

“We were actually pretty conservative in the approach that we’ve taken,” Mooney said.

“This will not stop development in any way. But it will add significantly to the housing stock that we have of affordable units.”

Housing Committee Chairman Ray Suarez (31st) said there is “no such thing as a perfect ordinance, but we tried to get it as close as we possibly can.”

If it doesn’t work “within six or eight months,” the City Council will revise it, the chairman said.

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