City looks to boost affordable housing by changing how it doles out $60M in tax credits

The new “Qualified Application Plan” targets the greatest areas of need in the city while giving developers clear ground rules, officials said.

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Housing Commissioner Marisa Novara talks to a housing advocate after Novara’s confirmation hearing in June.

Housing Commissioner Marisa Novara talks to a housing advocate after Novara’s confirmation hearing in June.

Fran Spielman for the Sun-Times

Mayor Lori Lightfoot’s administration is changing the rules for how the city allocates federal low-income housing tax credits to confront an affordable housing crisis that has left Chicago 120,000 units short.

Homeless advocates and their City Council allies have been pressuring Lightfoot to deliver on her campaign promise to raise Chicago’s real estate transfer tax on high-end home sales by a whopping 160% to reduce homelessness and bankroll affordable housing.

Instead, Lightfoot wants to reserve that potential windfall — as high as $150 million — for reducing Chicago’s massive budget shortfall.

The new “Qualified Application Plan” for up to $60 million in low-income-housing tax credits does not include any additional revenue to solve an affordable housing crisis that has contributed to Chicago’s shrinking population.

The rules target the money to the greatest areas of need and income while giving developers clear ground rules for the awarding of tax credits that represent roughly two-thirds of city spending on affordable housing.

In developing the new rules, Housing Commissioner Marisa Novara said it was important to “dig deeper” into the “120,000 affordable-unit gap.”

What she learned was that “nearly 70 percent of low-income renters make $25,000 a year or less for a family of four” or 30 percent of the area median income.

But the low-income housing tax credit that is Chicago’s “biggest housing production tool” sets affordable rents at twice that amount of $50,000 for a family of four.

“We have a major mismatch between the need and the tools that we have. Given that data, we’re trying to make some data-driven policy decisions through this request,” Novara said.

The new plan also pushes developers to target families with higher incomes.

“We’re giving preference in this qualified allocation plan to proposals that include units for this very low-income population and, for the first time, we’re not just allowing, but actually encouraging developers to be able to go a little higher at the incomes that they’ll serve, she said, “as long as they are also going lower so we allow for a broader range of incomes to be served.”

Chicago and New York are the only U.S. cities to receive a dedicated allocation of federal low-income housing tax credits. Every other major city receives its housing credits, through the state.

The draft plan issued Tuesday will set the stage for a request for proposals that will culminate in the selection of developers. Designated developers will then sell their tax credits to investors to help finance their projects.

Novara openly acknowledged that Chicago has “a bigger problem than we have resources” for.

“We’re not working, unfortunately, with any different amount of money from the federal government. What we are doing here is trying to be as clear and transparent as possible with the development community about our policy goals,” Novara said.

“We are coordinating much more closely with the continuum of care around addressing homelessness. We are for the first time emphasizing re-entry housing as a priority. We are giving priority to those who keep their units affordable in perpetuity so that we don’t lose them after a period of time. Also, because of the changes the mayor has enacted, we’re no longer requiring evidence of community support or aldermanic support.”

Rachel Johnston, a senior staffer for the Chicago Rehab Network, called the new plan a “great start” and said she’s thrilled the city is committed to issuing a new plan every two years.

“The transparency is awesome. She knows this is the most important resources for rental housing and she wants it administered fairly,” Johnston said.

In the past, “people didn’t know how to compete for the resources,” she said.

But because the new plan does not add resources, “we’re hopeful that the city can find some innovative resources to expand and preserve affordable rental housing,” Johnston said.

“There’s no reason why the city can’t use a portion of its general obligation bonds to improving the city’s housing stock. Make it part of a five-year push to boost the population. Consider it an economic stimulus plan.”

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