Demolition surcharge proposed to preserve affordable housing in Pilsen, along 606 trail

Developers who tear down single-family homes or multi-unit buildings in Pilsen and in the neighborhoods along the 606 trail would pay a price under a pilot plan proposed Wednesday that’s aimed at preserving affordable housing.

Last month, the City Council approved a pair of “anti-deconversion” ordinances intended to slow the gentrification displacing long-time residents of Pilsen and the neighborhoods of Logan Square, Wicker Park, Humboldt Park and Bucktown that border the 606.

Those ordinances made it harder for owners and developers of property on certain blocks to turn their multi-unit buildings into expensive single-family homes.

Those measures, and a two-month extension of anti-demolition rules around the 606, were meant to buy time to finalize a more sweeping protection plan.

Mayor Lori Lightfoot dropped the other shoe at Wednesday’s City Council meeting.

She introduced a pilot plan that would impose a $15,000 surcharge for demolishing a “detached house, townhouse or two-flat” and a $5,000-per-unit fee for tearing down “multi-unit residential buildings.”

The goal is to make sure “development does not de-stabilize and displace long-term residents and medium-income residents,” the mayor said. The fees would be paid into the city’s Affordable Housing Opportunity Fund and remain in place until April 1, 2022.

Developers can avoid demolition fees in two ways:

• If half the units in the replacement building are restricted to households earning up to 60% of the median income in the area.

• Or, if demolition is “determined to be necessary to remedy conditions imminently dangerous to life, health or property as evidenced by a written order by a court or the city departments of Buildings, Fire or Public Health.”

Ald. Carlos Ramirez-Rosa (35th), who represents Logan Square, joined Lightfoot in co-sponsoring the ordinance. The mayor lives in his ward.

“We have an interest in preserving the existing affordable housing. When we lose those two-flats and three-flats, we lose population. Small businesses lose customers. Our schools lose students. And there’s an environmental and an affordability impact as well,” he said.

“Developers can go and build things on empty lots on the South and West sides. There really is no need for them to keep demolishing perfectly good two- and-three flats in the area around the 606, particularly when we see the impact that demolition has on affordability and the environment.”

Ramirez-Rosa hopes the demolition fees end up preserving affordable housing, but acknowledged developers simply may choose to pay them.

“Condos are selling for, in some instances near the 606, $800,000. So if you’re a developer and you’re looking at a $15,000 fee to knock down a two-flat, you’re probably going to pay that surcharge,” he said.

“We will likely see some demolitions move forward. But that money that the surcharge will generate will help secure other affordable options in the community.”

Ramirez-Rosa denied the demolition fees amount to an illegal “taking” of property.

“That question’s been settled 100 years ago. The city of Chicago was one of the first cities to institute zoning and land-use policies. The Supreme Court has consistently found that the housing market, the development market is regulated. If you enter into a market that’s regulated, you can’t object to additional regulations,” Ramirez-Rosa said.

Ald. Byron Sigcho-Lopez (25th), who represents Pilsen, said the anti-deconversion ordinance was a reasonable alternative to a “huge landmark designation” that would have made his fast-gentrifying community even more expensive.

But, he added, demolition fees are an even better way to go about “preserving the fabric of the neighborhood and the historic nature” of Pilsen.

“We have expressed a concern that the fees may not be enough to prevent developers from demolishing buildings,” he said.

“However, the de-conversion ordinance does mandate that developers would need a special zoning change for tear-downs as well or up or down density. So in addition to demolition fees, we hope this will alleviate the issue. But we still think there is a lot of work to do to maintain the fabric. We need to help small homeowners who right now are vulnerable to developers who are very eager to purchase properties.”

Sigcho-Lopez cited research showing Pilsen has lost 25% of its density over the last decade.

“The vast majority of residents believe we can have balanced development and not these blank checks for developers to come in and do as they please as they have in the past,” the alderman said.