Emanuel’s affordable housing plan derailed amid concern higher fees could stifle development

Two powerful aldermen concerned about stifling development and pricing out middle-class consumers on Wednesday temporarily derailed Mayor Rahm Emanuel’s complex solution to Chicago’s affordable-housing crisis.

Budget Committee Chairman Carrie Austin (34^th), and downtown Ald. Brendan Reilly (42^nd), her vice-chair, stalled the ordinance that would have required downtown developers who fail to build their own units within reach for low-and moderate-income residents to pay dramatically higher fees.

Like the increase in Chicago’s minimum wage to $13 an hour by 2019, Emanuel has confronted the affordable housing issue as part of a broader effort to shed the “Mayor 1%” label and undercut the progressive base of his challengers.

But he’ll have to wait — until the next City Council meeting, maybe longer.

In a text message to the Chicago Sun-Times, Reilly acknowledged that the current system of creating affordable housing units is “broken” and in dire need of an update.

But he cited the concerns raised by the development and construction industries about the fee structure saddling them with millions in added costs that “could jeopardize financing for major projects.”

“Every construction crane you see downtown has 800-to-1,400 construction jobs associated with it and millions in annual property tax revenue for the city,” Reilly wrote.

“We simply want this delay to allow for other fee structures and revenue ideas to be fully considered and vetted. It’s an important issue, and we need to get it right because thousands of jobs and tens of millions in revenue are at stake.”

Austin said she, too, is concerned the dramatically higher fees could have a chilling effect on development.

“I believe in affordable housing, but we have to protect our tax base as well. And if we continue on with affordables, then where will we get additional revenue? I would like to look at it some more before we rush into it,” Austin said.

“It will stifle development. And with a lot of us that are struggling to try to develop, [it could have a negative effect.] I have affordable. I welcome affordable. But if I don’t get some market-rate [housing], what good would that do me? I have a lot of vacant land. I can’t build all affordables. That’s my biggest concern.”

Developer Alan Lev, president and CEO of the Belgravia Realty Group, applauded the City Council for taking the go-slow approach.

”This is important legislation and we need to ensure it is done smartly and without unintended consequences that would put a stop to the momentum of new residential development in our city. We look forward to working with the city on a revised ordinance that will save jobs, increase affordable-housing options, and keep our city’s economy growing,” Lev said in a statement.

Chicago’s existing “affordable requirements ordinance” offers a choice to developers of projects with 10 or more new or rehabilitated units that involve zoning change, 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.

Emanuel wants to carve the city up into three different zones and impose a wide range of fees, depending on the location.

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 would also 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.

Even after last-minute tweaks aimed at easing the financial burden, a parade of developers have argued that it’s all too much for them to bear.

At a Housing Committee meeting last week, 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.”

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.

Housing Committee Chairman Ray Suarez was not moved by the testimony. Suarez said there is “no such thing as a a perfect, 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.

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

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

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