Mayor Rahm Emanuel is confronting Chicago’s affordable housing crisis by offering yet another pre-election plum: a $30 million fund tailor-made to generate “300 affordable units in strong markets.”
With $5 million in seed money from the city and $25 million in foundation and private investments, Emanuel hopes the new “Chicago Opportunity Investment Fund” will provide developers “low-cost debt” to buy and renovate “existing, functioning rental buildings” in gentrifying city neighborhoods.
But there’s a catch: To qualify for the low-interest loans, developers must sign a 15-year commitment to make 20 percent of the units they create affordable. That means to qualify to live in those units, a family of four could have an annual income no higher than $39,500, or 50 percent of the median income in that area.
“It’s more cost-effective to preserve a unit of affordable housing than to build a new unit of affordable housing. Which is why the city is investing $5 million and that’s being leveraged with $25 million from foundations, financial institutions and other agencies,” said Chris Wheat, the city’s chief of policy.
“It’s not a gut rehab fund. It’s really designed to buy and hold apartment buildings in gentrifying, high-cost neighborhoods. It’s not just about rehabbing or developing new affordable housing. It’s also making sure that we’re keeping affordable housing in all neighborhoods.”
The goal of the combined $30 million public-private investment is to generate 300 affordable units in “strong markets” and 1,500 mixed income units.
That may sound like a drop in the bucket and nowhere near what’s needed to solve the affordable housing crisis or stop the black exodus from Chicago.
But Wheat said the new program is just one piece of a much larger puzzle.
“This is not a one-size-fits-all approach. Nor do we think this is the only arrow we have in our quiver. We’ve launched two pilots on the Near West and Northwest Sides that actually reduce the ability for developers to pay in-lieu fees and ensure that we’re having on-site development,” Wheat said.
Those “in-lieu-of” fees allow developers an option: instead of building affordable units on site, they can donate to a citywide fund used to bankroll affordable housing.
“From home ownership programs to the strengthening of our affordable rental ordinance to the city investing dollars into new development and rehabbing other buildings, there are a variety of things the city can and should be doing,” Wheat said. “This is simply another approach we’re taking to the problem.”
Mayoral challenger Paul Vallas said the $30 million program “smacks of a cynical election-year ploy designed to paper over” the fact that Emanuel has done “next to nothing for seven years to address the mushrooming unaffordability” of Chicago’s “revitalizing and depressed” communities.
“The numbers of units being proposed would be laughable if the problem of people being driven out of their neighborhoods wasn’t so serious. This is a drop in the bucket compared to the need,” Vallas wrote in an email to the Sun-Times.
“This will have no meaningful impact to protect those retirees, working families and the poor who are being driven out of gentrifying areas. Helping long-term home owners, renters and landlords in all neighborhoods manage the onslaught of higher taxes and fees, which are driving up housing costs, is what is really needed.”
The $30 million fund will be administered by the Community Investment Corporation, whose president and CEO is the city’s former Housing Commissioner Jack Markowski.
Three years ago, the City Council approved a new Affordable Housing Ordinance that includes dramatically higher fees and construction mandates that, City Hall predicted, would create 1,200 new units of affordable housing and generate $90 million over five years that could be used to build affordable housing.
The old ordinance offered a choice to developers of projects with 10 or more new or rehabilitated units that involve a zoning change, a planned development designation, city land or a city subsidy.
They could either make 10 percent of new residential units affordable or pay that in-lieu-of fee, which at the time was set at $100,000 for every unit they didn’t build.
Emanuel’s new version carved the city into three zones with varying fees.
For downtown developers, the fee was raised to $175,000; those who build in higher-income census tracts, pay $125,000 for every unit they don’t build. And in neighborhoods dominated by low-to-moderate income residents, the fee dropped to $50,000 per unit.
The mayor’s ordinance also required 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 could build, buy or renovate the required units within 2 miles as long as it’s in the same zone.
And downtown condo projects could build, buy or rehab the required units anywhere in the city.
The higher fees were phased in over a year.
Last year, aldermen approved Emanuel’s plan to create affordable housing in gentrifying neighborhoods — on the Near North and Near West Sides and along the Milwaukee Avenue corridor — despite fears that rents are too high for families to afford and the area being covered is too small.