MAR 04, 2022
Housing officials, aldermen scramble to renew demolition fees in Pilsen, 606 ahead of expiration deadline
A demolition site in Bucktown [Arvell Dorsey Jr. on Flickr]
Last month, city housing officials were trumpeting the success of an experimental policy to make demolitions more expensive in two of the city’s most rapidly gentrifying neighborhoods, saying they hoped to extend the fees and potentially replicate them in other neighborhoods.
Weeks later, city leaders are on the verge of letting the policy sunset.
Advocates of the demolition fee policy say they’re still working to prevent the pilot program from ending on April 1 as scheduled, and housing officials say they’re committed to keeping it alive. But landlords and real estate groups are rooting for its demise, saying the fees have choked off construction and will only hurt the city’s affordable housing efforts in the long run.
Aldermen who support the demolition fees say they’re exploring a legislative shortcut as a last-minute fix to keep the pilot form lapsing. And at least one alderman expressed interest in inserting a carveout that would spare owner-occupied houses from the extra costs.
Passed by the City Council in March 2021, the ordinance (O2021-746) charges a fee of $15,000 per building — or $5,000 per unit, whichever is more — on any residential demolition permit in Pilsen or a nearly 2-square-mile area surrounding the 606 Bloomingdale Trail in Bucktown, Humboldt Park and Logan Square.
The rules were designed to overlap with a pair of ordinances (O2020-6206, O2020-6207) passed months earlier that set a floor on zoning density within the same boundaries in an attempt to slow the trend of “de-conversions” that were replacing naturally affordable two-flats and three-flats with lavish single-family homes.
‘Anti-deconversion ordinance’ will ‘interrupt’ loss of cheap housing stock in Pilsen, 606 area, officials say Approved anti-displacement ordinances set floor on housing density in Pilsen, 606 area
But unlike the anti-deconversion ordinances, which were written as permanent rule changes, the demolition fees were designed as a one-year pilot program. They went into effect last April and are due to expire on April 1.
Chicago Department of Housing policy director Daniel Hertz presented data to aldermen last month showing that while demolitions have slowed across the city since 2020, teardowns have plunged in the neighborhoods covered by the ordinance. The 606 area saw just three residential demolitions between April 1 and Nov. 4 last year, compared to an average of more than 25 each year between 2017 and 2019. And Pilsen registered zero demolitions, though its previous baseline was far lower, notching between six and 12 demolitions annually between 2017 and 2020.
The fees also raised $120,000 through November for the Chicago Community Land Trust, a city-backed nonprofit that helps income-qualifying homebuyers snag houses at reduced prices, the housing department found.
“It’s really exciting…this shows that there are mechanisms for preserving the sort of low- and moderate-cost small-A affordable housing,” Hertz told The Daily Line last month. “It’s also a testament to the work that people in these neighborhoods have been doing for a long time to advocate for these policies.”
Making demolitions more expensive has been a priority for the Logan Square Neighborhood Association since at least 2015, when teenage organizers held a rally demanding city-backed demolition fees.
Ald. Daniel La Spata (1), a vocal early backer of demolition fees, also praised the policy’s results for what he called its “remarkable successfulness” in tamping down demolitions he considers an environmental and social hazard. That’s why he was surprised that Mayor Lori Lightfoot’s administration did not introduce a proposal last month to extend the pilot program, he said.
“It would, I think, be too detrimental to the housing stock in our communities to allow this ordinance to expire,” La Spata said. “I would dare say it would pretty much undo the good work that has happened over the last year if we were to allow the ordinance to lapse.”
Even a one-month delay in renewing the fees would “result in the loss of innumerable two- and three-flat housing in our community,” the alderman added. “We see it elsewhere.”
La Spata said he would “explore every avenue” to get the ordinance before a City Council committee via a direct introduction so that it can go into effect before April 1.
He was echoed by Ald. Carlos Ramirez-Rosa (35), another backer of the demolition fee policy, who wrote in a text message to The Daily Line Thursday that he and his allies are “working with the administration towards a direct introduction to extend the demolition fee.”
“We know this policy is helping protect naturally occurring affordable housing, and Ald. La Spata and I are committed to ensuring this successful housing policy is extended,” Ramirez-Rosa wrote.
Housing department spokesperson Eugenia Orr wrote in a statement to The Daily Line Wednesday that “the City of Chicago is encouraged by the results of the pilot and is committed to working with local aldermen to continue its impacts.”
Asked whether the department is working to directly introduce an ordinance this month to prevent the policy from lapsing, Orr did not respond.
The demolition fees are far from universally popular. The housing department faces heavy pressure from real estate and construction groups who say the city would be better off without them.
“Instead of encouraging more density, instead of encouraging more construction, we’re enacting ordinances that further push people away from this neighborhood,” said Miguel Chacon, a Compass real estate broker who lives in Pilsen and owns 12 apartment buildings in the neighborhood.
“It’s already challenging enough to build anywhere in the city,” Chacon said. “But when you make it so much more difficult to build in one neighborhood, we end up not building anything.”
Chacon is one voice in a chorus of landlord and real estate groups that railed against the demolition fee rules during the lead-up to its passage last year and hope to see the experiment end.
Paul Colgan, government affairs director for the Homebuilders Association of Greater Chicago, has repeatedly blamed the fees for choking off new investment and construction in Pilsen and the 606 area. He said Thursday that the data collected by the housing department does not “take into account the people who were denied an opportunity to sell their house or replace their house because of this ordinance.”
“I think it’s premature for them to be talking about renewal when they don’t look at the full impact this ordinance had on the neighborhood,” Colgan said. “It’s hurting long-term owners, and most of those people are minorities…their generational wealth has been impacted by this ordinance, and they’re not reporting that.”
Preliminary real estate data show few signs that home sales and property values have suffered in the two neighborhoods since last year.
Pilsen registered 48 residential property sales between June and August 2021 with a median sale price of $435,333, compared to 32 sales averaging about $405,000 each during the same period in 2020, according to data from the real estate brokerage Redfin. Sales volumes and prices all saw similar jumps in the Logan Square, Humboldt Park and Wicker Park neighborhoods, which contain pieces of the 606 area, as the new ordinances were in effect.
Chacon acknowledged that the fees could make sense in relatively wealthy areas like Bucktown, or in Wicker Park or Ravenswood, which are “actually losing the most units” to de-conversions. But not in Pilsen, where he noted that the department’s own data showed far fewer demolitions even before the fees and a preceding moratorium on teardowns went into effect.
“I really do feel that it’s redlining this community, when it doesn’t affect the rest of the city,” Chacon said. “That’s not fair to property owners in the neighborhood, because you’re saying, ‘only in this neighborhood should you pay an extra $15,000.’”
Demolitions are a routine part of construction — especially in Pilsen, whose “housing stock is some of the oldest in the city,” Chacon said. And making them more expensive has already come back to bite homeowners who will see lower offers on their houses because buyers are factoring in the penalty, he said.
“I really feel that this is affecting longtime property owners who have weathered the storm over the last 30-40 years when the neighborhood wasn’t so great,” Chacon said. “Now they want to cash in on their retirement, and it’s like, no. They’re not the ones who are going to do that.”
Ald. Byron Sigcho-Lopez (25), the third aldermanic sponsor of the anti-gentrification ordinances, laughed when asked on Thursday if the fees have put a chill on new development in his ward.
“I haven’t seen a [construction] slowdown in Pilsen, and I walk the neighborhood quite often,” Sigcho-Lopez said.
Still, Sigcho-Lopez said he is talking to housing officials about adding a potential “carveout” into the ordinance for “small investors and owner-occupied properties.”
“We can recognize that sometimes when it’s an owner-occupied property, and it’s in conformity with the block, there can be a need” to avoid the fees, the alderman said. “But we want to make sure we can make a distinction between displacement and those who really want to invest in the community in the long term.”
Sigcho-Lopez said he hopes to “reach an agreement” next week with his colleagues and leaders Lightfoot’s administration so a new ordinance can pass at this month’s City Council meeting.
- ‘Anti-deconversion ordinance’ will ‘interrupt’ loss of cheap housing stock in Pilsen, 606 area, officials say Approved anti-displacement ordinances set floor on housing density in Pilsen, 606 area
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