Apartments near the 606 Bloomingdale Trail. [Eric Allix Rogers]

A pilot program aimed at preserving affordable multifamily housing in Logan Square, Humboldt Park, Avondale, Hermosa and West Town is finally set to go into effect this weekend after months of delay. 

While the impacts of the pilot won’t be immediately apparent, affected building owners and realtors will be watching to see if properties experience reduced sale prices or delayed transactions.

The Northwest Side Housing Preservation Ordinance (SO2024-0011001), approved by the City Council in September, was sponsored by Alds. Daniel La Spata (1), Jessie Fuentes (26), Ruth Cruz (30), Felix Cardona (31), Rossana Rodriguez-Sanchez (33) and Carlos Ramirez-Rosa (35).  

Most of the policy changes in the ordinance applied to the Predominance of the Block (606) District — bounded by Pulaski Road, Addison Street, Fullerton Avenue, Kostner Avenue, Hirsch Street, Kedzie Avenue, North Avenue, California Avenue, Division Street, Western Avenue and the Chicago River’s north branch. 

Related: Alderpeople pushing for ordinance to protect affordable housing on Northwest Side  

The ordinance codified the Tenant Opportunity to Purchase Block (606) District Pilot Program, which will give tenants in that area the ability to purchase their multifamily building first if the owner plans to sell it.  

In the 606 district, the ordinance also disallowed the conversion of apartment buildings into single-family homes in areas that are mostly multifamily buildings and allowed the construction of two-flats by right in single-family zones.  

Additionally, the ordinance raised the city’s demolition permit surcharge in both the Predominance of the Block District and in a part of Pilsen. 

Under the original demolition surcharge ordinance, developers in parts of Pilsen and in parts of Logan Square, Humboldt Park, Avondale, Hermosa and West Town were required to pay a $15,000 fee to demolish a single-family home, two-flat or townhouse and a $5,000 fee per unit to demolish an apartment building.     

The Northwest Side Housing Preservation Ordinance raised the surcharge so that developers in that affected area must pay $60,000 to demolish a single-family home, two-flat or townhouse and a $20,000 fee per unit to demolish a multifamily building.  

While the demolition surcharge hike, construction of two-flats by right and apartment-to-home conversion changes all went into effect in October, the 606 pilot program’s start date was delayed until March 1 over concerns from the Chicago Association of REALTORS. 

An amendment to the ordinance (O2024-0014256) approved in December set the March pilot start date and also established a sunset date of Dec. 31, 2029, the same day the demolition surcharge will sunset. 

Related: Zoning committee advances right-of-first-refusal changes in Northwest Housing Preservation Ordinance  

Adriann Murawski, local government affairs director for Chicago REALTORS, told The Daily Line the organization appreciated the delayed implementation of the pilot because it gave the association time to educate its members. 

“We were pleased with the changes that had happened in December because it gave the industry more time to educate, more time to review the actual ordinance language, and then it also allowed us time to provide resources so that our members could be aware and prepare for it,” Murawski said. 

Under the pilot program, owners will need to tell tenants of their intent to sell a building at least 30 days in advance for buildings with four or fewer units and at least 60 days in advance for buildings with five or more units.  

After receiving a notice of sale to indicate the owner has found an outside buyer, tenants have a required window by which they can inform the property owner of their intent to match the third-party’s purchase offer and another window to secure financing and conduct due diligence before closing.  

Tenant groups in buildings with four or fewer units must provide a pre-approval from a lender to the owner in order to exercise the right of first refusal, and in buildings with five or more units, a group must provide a letter of intent from a lender or community organization in order to exercise the right. That requirement was added in the December amendment. 

The December amendment also gave property owners the explicit right to ask their tenants if they plan to waive their right of first refusal after the notice of intent-to-sell window, and it stated that if an initial offer fails to close, the right of first refusal would only be renewed with a new buyer and a price drop of at least 10 percent. Murawski said that’s to explicitly prevent the window from resetting when smaller or more routine contract changes occur. 

Murawski said the association hosted a technical training on the ordinance with the Chicago Department of Housing last week to allow members to ask questions and clear up confusion. 

“There’s definitely a concern of additional red tape on transactions,” she said. “We think that there will be delayed transactions and possibly some confusion over [the ordinance].” 

A housing department spokesperson told The Daily Line the department has spent the past few months preparing “for implementation and enforcement of this section of the ordinance” on March 1 and will put up new forms, rules and guidelines on its website in the coming days. 

The department is also “planning a series of community education sessions to educate residents, industry professionals, and community-based partners on the ordinance, rights guaranteed under it, and how to report non-compliance,” the spokesperson said. 

Ultimately, Murawski said it is “hard to predict” the impacts of the pilot, but she said one concern is whether less resourced third-party buyers “stick around and wait while the owner has to give the tenant timeline required in the law.” Some may choose to walk away and others could avoid transactions in the pilot area altogether, though Murawski said the impacts in practice will remain to be seen. 

Jeff Weinberg, co-president of the Northwest Side Building Coalition, said he thought the pilot program is likely to result in owners having to sell buildings for less than they are worth, which could mean losing the equity the owner had in the property.  

Weinberg also said the right of first refusal process elongates the timeline for selling a building, which can create potential headaches for owners that need to pay back or refinance a loan. 

“With this right of first refusal process that you get into, you can't control the timing,” Weinberg said. “[So,] now their note comes due, [and] they have to pay the bank back. Maybe the bank is flexible, and it's not a problem, but maybe the bank is like, ‘Oh no, there's penalties [etc.]’” 

Weinberg said the city should spend less time trying to regulate what happens to existing buildings and more time making it easier to build new housing. 

“The biggest problem is that there is a shortage of housing, and the process to develop housing is very costly and time-consuming,” Weinberg said. “Particularly, when you own a piece of land that you're planning on doing something with, and you have to spend a year, 18 months, two years, before you get any approval on anything, there's [a] real cost associated with it.”

Those added costs make it harder to build affordable housing as opposed to market-rate, he said.

“We're watching [the pilot] very, very closely,” Murawski said. “There may be unintended consequences that we definitely want to identify, and we want to make sure that the industry is represented.”