Apartments near the 606 Bloomingdale Trail have been subject to density minimums and demolition fees since early last year. [Eric Allix Rogers]

Backed by neighborhood activists and a handful of junior aldermen, Chicago housing officials took on a controversial experiment early last year to slow displacement in two of the city’s most rapidly gentrifying areas. 

The City Council approved the plan in January 2021 to flip city zoning rules on their head by setting a minimum allowable density in Pilsen and the area surrounding the 606 Bloomingdale Trail, and they followed up two months later by tacking a “surcharge” onto home demolitions in the same neighborhoods. Their goal was to interrupt a runaway pattern of “deconversions” and demolitions that saw two-flat and three-flat apartment buildings replaced with lavish new single-family houses, a trend that was eating away at the neighborhoods’ precious remaining stock of affordable homes. 

The two-part plan was pilloried by landlord groups and opposed by a dozen aldermen who predicted the new rules would tie the hands of property owners without making a meaningful dent in displacement. The demolition fees, which have since April charged at least $15,000 on every residential building that faced a wrecking ball in the two neighborhoods, came under especially heavy fire from critics inside and outside city government who said such a policy would trample private property rights guaranteed under the Illinois Constitution. 

A year later, the architects of the policies are ready to declare that the critics were wrong. 

Building deconversions have ground to a virtual halt around Pilsen and the 606. Officials credit the surcharges for making a meaningful dent in demolitions while raising more than $100,000 for city-backed affordable housing initiatives. Legal challenges have sputtered, and city leaders are probing for ways to make both policies permanent tools in the city’s uphill battle against a housing affordability crisis. 

“The anti-deconversion ordinances appear to have been extremely successful,” Chicago Department of Housing policy director Daniel Hertz told The Daily Line on Monday. “We could not find any [deconversions] since the policies went into effect.” 

Deconversions halt 

The companion ordinances (O2020-6206, O2020-6207) backed by Mayor Lori Lightfoot and approved last January require developers to apply for zoning changes if they want to to create single-family homes in parts of Pilsen and the Near Northwest Side that are zoned for multi-family housing. 

Related:  

•  ‘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

The city’s housing and buildings departments keep no definitive list of builders who gut apartment buildings and transform them into detached houses. But Hertz and other housing officials used the real estate database Chicago Cityscape to search for permit applications that include the word “deconvert” or “deconversion.” They found an average of eight annual deconversions in the 606 area and six in Pilsen in 2017, 2018 and 2019 — followed by a total drop-off in 2021. 

A map of the area surrounding the 606 Bloomingdale Trail where the anti-deconversion and demolition surcharge ordinances apply [Chicago Cityscape]

Meanwhile, deconversions continued apace in neighboring areas last year, with 16 permits recorded in West Town, 15 in Logan Square and four in Bridgeport. 

“It seems like this ordinance worked exactly the way it was written to work,” said urban planner Steven Vance, who launched and operates Chicago Cityscape. “I think it should absolutely be expanded…to make sure we do not lose the type of housing that contains the bulk of the unsubsidized affordable housing in Chicago, which are the two-, three- and four-unit buildings.” 

Demolitions slow 

Permit data show that the demolition fee ordinance (O2021-746), a one-year pilot that went into effect on April 30 last year, had a similar but less decisive effect. Residential demolitions declined by nearly 90 percent in the 606 area and by nearly 40 percent in Pilsen compared to pre-pandemic averages, slightly outpacing surrounding neighborhoods that have also seen wrecking permits slow since 2020. 

Related: Demolition surcharge pilot moves to City Council for approval; Municipal depositories approved

At the same time, the fees raised $120,000 through last November for the Chicago Community Land Trust, a city-backed nonprofit that helps income-qualifying homebuyers snag houses at reduced prices, according to the housing department. 

“The ordinances showed a remarkable successfulness in decreasing demolitions in the 606 impact area,” said Ald. Daniel La Spata (1), whose ward overlaps the zone. La Spata pitched a tougher crackdown (O2020-3777) on demolitions in July 2020 before joining Lightfoot’s housing department to advocate the anti-deconversion and demolition fee ordinances that ultimately passed in 2021. 

“We know that whether it’s related to sustainability and the emissions impact, or the affordability impact of demolitions, or even the aesthetic impact when people value existing housing in their community, [the demolitions] were harmful to our neighborhoods,” La Spata said. “When you lose housing on the scale that we were, it really impacts the affordability of our rental markets and emissions in the city.”  

La Spata backed the ordinances as a co-sponsor and was joined by neighboring Ald. Carlos Ramirez-Rosa (35) and Pilsen Ald. Byron Sigcho-Lopez (25) in the effort. 

“The loss of affordable housing and the loss of density can erode the social fabric of entire communities,” Sigcho-Lopez said. “I think both ordinances have helped slow down the speculation and demolitions that were concerning the community.” 

A map of the areain Pilsen where the anti-deconversion and demolition surcharge ordinances apply [Chicago Cityscape]

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. The group’s persistence has paid off, according to Christian Diaz, Logan Square Neighborhood Association’s director of housing. Diaz said beneath the data, “the way the neighborhood feels when you’re walking in that area shows that this policy has been successful.” 

“It’s a relief that our built environment and our history aren’t being completely destroyed, and that we have a fighting chance at preserving the diversity of this community,” Diaz said. “The results aren’t a surprise to stakeholders on the ground, because it’s just common sense that if you make it less profitable to do predatory development that harms people and the environment, developers are going to change their priorities.” 

“And for a long time, the priority along the 606 was to find the cheapest building possible, tear it down and replace it with a million-dollar single-family home,” he said. 

Developers resist 

Developers and homeowner groups fought hard against both ordinances last year and continue to bristle at the new restrictions and fines. Paul Colgan, government affairs director for the Homebuilders Association of Greater Chicago, testified at a January 2021 City Council zoning committee meeting that the anti-deconversion ordinances “don't address housing preservation issues — instead, they limit the property zoning rights.” And he told the council’s Committee on Finance in March that the demolition fees were a “bad policy” that would take a bite out of home values in the neighborhoods where they apply. 

Colgan held firm in his position on Monday, saying the ordinances mean that landlords in both areas have “lost an opportunity for investment to improve the neighborhood.” 

“Buildings deteriorate, and have to be either fixed up or replaced,” Colgan said. “So my question to the proponents is, how do you improve the neighborhood if you don’t invest in it? Why is that beneficial to the city?” 

Colgan said he’s heard from a litany of investors who have “backed off deals” in Pilsen and the 606 area when they “discover the ordinance.” 

“There’s been a chilling effect on investment in the neighborhood,” he said. 

But real estate data show the local housing markets in both areas have hardly sunk during the past 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. 

And Vance, who says he consults prospective developers and other real estate investors “every other day,” said “nobody bats an eye” when he tells him about the added rules in the two neighborhoods. 

“I don’t think it has changed anything about development activity in those areas, except the pattern of developers who were building speculative single-family houses,” Vance said. “Building something with two units instead of one doesn’t change much about the construction materials or massing or pricing.” 

Real estate groups and a substantial group of aldermen also predicted last year that the demolition fee ordinance would almost immediately run aground in court. Ald. Nicholas Sposato (38) said that he “can’t believe this is legal.” 

The industry followed through in May 2021 with a lawsuit from Stephen Brennan, a 606-area property owner who alleged that the “removal of any right to develop a property, and imposing an extra tax on a property, lessens the value of all properties in the area by changing what property owners may do with their properties.” He called for a judge to nullify both ordinances. 

But Cook County Judge John Curry dismissed the lawsuit in November for lack of standing, writing in an eight-page opinion that Brennan had failed to show evidence of a “direct injury” or that the city’s new policies are “arbitrary or unreasonable.” 

Curry dismissed the lawsuit without prejudice, leaving the door open for the plaintiff to try again. And attorney Lawrence Byrne, who filed the lawsuit on Brennan’s behalf, told The Daily Line Monday that he’s preparing to file a fresh lawsuit challenging the city rules. 

Still, bolstered by the legal victory and the data trends on deconversions and demolitions, backers of the ordinance like La Spata are setting their sights on extending the rules and potentially expanding their reach.  

“I would at minimum advocate to maintain them in our area,” La Spata said. “I would like to see the city think about thoughtful ways to expand these policies where they make sense.” 

Hertz said he and other housing department officials will “look at how the ordinance plays out” and keep in contact with aldermen and community groups about where the policies could potentially be expanded. 

“Before it was more theoretical, but now we have a track record of saying…that in the places where this happened, it’s worked,” Hertz said. “That’s part of the conversation now. It’s part of the policy toolkit in places where [gentrification] is a concern.”