NOV 07, 2019
Housing Department unveils new data as task force starts to ‘reevaluate’ Affordable Requirements Ordinance
Three developments — all approved within the last year — will nearly triple the number of affordable units produced under the city’s Affordable Requirements Ordinance since it went into effect in 2007, according to data released by the Chicago Department of Housing on Thursday.
Developers have yet to break ground on the River District, The 78 and Lincoln Yards mega-projects. But if the builders follow through on their commitments to the city, their projects are set to collectively create 2,700 units of on-site or off-site affordable housing, eclipsing the 1,046 affordable units whose construction the evolving housing ordinance has forced to date.
Members of a new task force will consider that fact among reams of other data that the city’s housing department drummed up on the 12-year history of the Affordable Requirements Ordinance so that the group can suggest changes.
The goal is to create a “new framework” for the city’s inclusionary zoning policy so that the City Council can make revisions by the middle of next year, according to the housing department’s website. City leaders and housing advocates have criticized the program for not doing enough to ease the city’s affordability crisis, while developers have complained that recent revisions have cranked the requirements too high.
The Housing Department tallies 444 completed affordable units across the city that were spurred by the Affordable Requirements Ordinance. It counts another 602 units currently under construction.
The totals are broken down by project, and by neighborhood, on an interactive “dashboard” the housing department unveiled on Thursday to coincide with the housing department’s City Council budget hearing.
“We heard a lot through the transition into the new administration about changes that people wanted to see to the ARO,” Housing Comm.Marisa Novara told reporters on Wednesday. “It felt like the right time to reevaluate — what are the goals of this tool?”
The ordinance has “served many masters” since its creation in 2007, Novara said.
The original ordinance sponsored by former 4th Ward Ald. Toni Preckwinkle fined developers who did not build affordable units and put the money toward a suite of affordable housing programs. The rule was revised in 2015 to mandate that 10 percent of units in new developments be rented at affordable rates, but developers could opt out of most of that obligation by paying a fee to the city’s Affordable Housing Opportunity Fund.
Finally, city leaders in 2017 created three “pilot zones” on the city’s Near West and Northwest Sides where developers had to make 15 or 20 percent of their units affordable, with no option to pay a fee to avoid building affordable units. They added a fourth pilot zone in 2018 covering Pilsen and Little Village.
The rules are only triggered by residential developments with 10 or more units that are either seeking a zoning change, asking for city subsidies or are planned on city-owned land.
The city since 2017 has approved the construction of 541 on-site and 60 off-site affordable units across more than a dozen new developments inside the city’s Near North Pilot Zone, which includes Fulton Market and River West, according to the housing department’s data. More than half the on-site affordable units are planned at the “River District” site owned by Tribune Media, which plans to build up to thousands of apartments at 700 W. Chicago Ave.
‘That wasn’t enough, let’s do more’
Developers have bemoaned the Near North pilot, which requires developers to rent at least 20 percent of the units in new buildings at affordable rates. Ten percent must be included on-site and the other 10 percent may be built near the development.
The 20 percent requirement is “all right in my ward,” according to Ald. Walter Burnett (27), a sponsor of the 2017 measure whose ward includes most of the Near North pilot area.
Burnett is one of three “aldermanic co-chairs” named to the task force, according to city housing officials. He will join City Council Housing Committee Chair Ald. Harry Osterman (48) and Ald. Byron Sigcho-Lopez (25), who was a Pilsen housing activist before his election this year.
“I don’t have a problem with” the pilot zone requirements, Burnett told The Daily Line on Wednesday. “A lot of [developers] will tell you they’re not doing housing because of it, but I’ve got other folks that are doing it.”
The same is not true of the other three pilot zones, according to the city’s data. Officials count 49 new affordable units approved in the Milwaukee Corridor pilot area, which covers parts of West Town, Wicker Park, Bucktown and Logan Square.
And the Near West and Pilsen/Little Village pilot areas have collectively generated no new affordable units since 2017, according to the housing department.
For-profit developers have pointed to a slow-down in apartment construction inside the pilot areas, saying the high affordability benchmarks have made it harder for banks to get behind their proposals.
“The requirements ordinance has not achieved its intended result, and previous administrations have looked at it and said ‘That wasn’t enough, let’s do more,’” according to David Goldman, CEO of the Belgravia Group, one of the city’s most prolific condo developers.
“The pilot programs have increased the mandates even more, and that’s had a deleterious effect on getting more units built,” Goldman said Wednesday.
Goldman is one of 194 people who applied to fill 20 seats on the housing department’s task force. He pointed to an April study published by the real estate services firm Cushman & Wakefield that blamed the pilot zones for scuttling plans for more than 3,000 new homes, including 300 planned affordable units.
Burnett defended the pilot zones Wednesday, saying that he helped design them with an eye toward preventing developers from paying a fee to get out of their on-site affordable requirements.
“They weren’t building it. They were opting out,” Burnett said. “And the challenge of opting out for me, in my ward, was that money wasn’t going to my ward. It went all over the city.”
Developers’ opt-out fees have so far pumped more than $30 million this year into the city’s Affordable Housing Opportunity Fund, according to the data released on Thursday. More than two-thirds of that sum was generated by Related Midwest’s The 78 mega-development.
The city uses half the revenue from the fund to get new affordable housing developments off the ground. The other half goes into the city’s low-income housing trust fund, which subsidizes units targeted at some of the city’s poorest renters.
Affordable apartments in the Near North Side community area have seen by far the largest infusion of opportunity funds, with $9.65 million received to date, according to city data. Uptown and Albany Park follow, each having received about $5.6 million from the program.
Knowing where opt-out fees are flowing will help the task force better “understand what success looks like” for the city policymakers, Novara said on Wednesday.
Housing officials plan to announce the members of the task force later this month. They’ll look for candidates with “racial, gender and geographic diversity” who have “skills, knowledge and experience” on the subject, according to a press release.
Novara said her team is considering both for-profit and nonprofit developers among the candidates for task force members.
The commissioner declined on Wednesday to say whether she thinks the Affordable Requirements Ordinance has been effective, or what she hopes to change about it.
“Those kinds of policy questions are the reason why we’re embarking on this whole process” of forming a task force, Novara said.
But during a public meeting last month, Novara suggested that the city’s affordability requirements should treat condo developers differently than apartment builders, echoing the rallying cry of condo developers like Goldman.
And last year, when Novara was vice president of the nonprofit Metropolitan Planning Council, she tweeted a link to Crain’s article about a developer who blamed the affordability pilot zones after walking away from a contract to build an apartment complex on Goose Island.
“Not sure it's true that requiring 20% on-site affordable units ‘makes it more difficult for developers to finance projects,’” Novara tweeted. “Let's be honest about what the challenge is: It impacts their bottom line. The next developer will build the cost into their bid.”
That developer, Vancouver-based Onni Group, returned months later to buy the property at a lower price.
Simultaneous to the task force’s meetings, Osterman plans to hold hearings in the housing committee to discuss various affordable housing proposals, he said. Those will include a subject-matter hearing on Dec. 11 for the Development for All Ordinance (O2018-5102), which would hike the affordable housing inclusion requirements to 20 or 30 percent in some parts of the city.
“I made a commitment to the advocates and the sponsor of the ordinance to have a public hearing on it,” Osterman said, adding that he would “probably” hold a similar hearing for its companion measure, the Homes for All Ordinance (O2018-5099), in January.
“Next year is going to be a very significant year for housing policy in Chicago,” Osterman said.
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