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Developers Face Higher Costs to Opt Out of Affordable Housing

By Ted Cox | January 14, 2015 4:18pm
 Planning and Development Commissioner Andrew Mooney and Ald. Deb Mell (33rd), a sponsor of the Affordable Requirements Ordinance, talk before Wednesday's meeting.
Planning and Development Commissioner Andrew Mooney and Ald. Deb Mell (33rd), a sponsor of the Affordable Requirements Ordinance, talk before Wednesday's meeting.
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DNAinfo/Ted Cox

CITY HALL — A joint City Council committee on Wednesday passed a proposed ordinance expected to expand affordable housing and make it more costly, in most cases, for developers to avoid regulations that require them to provide such shelter in new projects.

The newly amended Affordable Requirements Ordinance cleared the Housing and Zoning committees by a unanimous voice vote and heads to the full City Council next week.

It would basically establish three zones in the city to encourage development in poorer areas and use development in more lucrative areas to fund affordable housing citywide. It would also seek to put affordable apartments in all new developments that apply, or in nearby "off-site" locations, rather than allowing developments to opt for a cheaper penalty via "in lieu" payments.

 Diane Limas of Communities United presses a point in front of Commissioner Andrew Mooney (l.) and Chicagoland Chamber of Commerce spokeswoman Elise Houren (r.).
Diane Limas of Communities United presses a point in front of Commissioner Andrew Mooney (l.) and Chicagoland Chamber of Commerce spokeswoman Elise Houren (r.).
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DNAinfo/Ted Cox

Lawrence Grisham, a deputy commissioner in the Department of Planning and Development, called it "a major expansion of this program," begun in 2003 and amended in 2007.

Planning and Development Commissioner Andrew Mooney said the program had generated 2,500 units of affordable housing citywide and $53 million in funds devoted to affordable housing since its inception 12 years ago.

It continues to apply to any development concerning 10 or more units that seeks zoning changes from the city or uses city land or subsidies.

Yet Mooney added that it had generated "very few on-site units" in the recovery since the Great Recession. The new ordinance was intended to address that by calling for 25 percent of all new housing that applies to be devoted to affordable living, while dramatically hiking "in lieu" payments Downtown and eliminating a "Density Bonus" loophole that also tended to apply to major development Downtown. Mooney estimated that the "Density Bonus" had cost the city $25 million in funding over the years.

Ald. Brendan Reilly (42nd) said it was "almost automatic" these days for Downtown developers to take the "in lieu" penalty rather than allot affordable units.

Key elements of the new ordinance are the creation of three zones, based on high and low incomes and then Downtown. The map of the zones is in flux, and might be based on federal census tracts on income, or on average home values or on percentage of rental property, or a combination.

But, where "in lieu" payments are currently $100,000 a unit citywide, the new ordinance drops them to $50,000 in low areas, hikes them slightly to $125,000 in high areas and almost doubles them to $175,000 Downtown.

Mooney said that would create more affordable units in strong real-estate markets, while strengthening development in weaker markets. He said it set a standard for "on-site development that really has some teeth in it."

It also sets a standard 25 percent allocation for affordable housing for all applicable development.

Affordability is based on what seems appropriate for people earning 60 or 80 percent of the average income in a given area, and the new ordinance expands it by allowing eligibility for new sales to people making up to 120 percent of the average income.

Ald. Ameya Pawar (47th), a lead sponsor of the ordinance, emphasized that it attempts to remove the "us vs. them" stereotype associated with public housing, and that it's meant to keep longtime residents in an area even in relatively upscale neighborhoods like his own North Center and Ravenswood.

"Affordable housing is a spectrum," Pawar said. "There's a greater number of people who need it now than ever before." This applies, he added, to people earning low incomes, as well as to relatively recent college graduates still devoting much of their incomes to paying off student loans.

"It removes the one-size-fits-all application we had in the past," Pawar said. "You want to make sure you maintain diversity."

Developers tended to cry foul in testimony before the committee. "The ordinance will increase costs. Period," said Alan Lev, president of the Belgravia Group.

"It threatens to stifle development," said Richard Whitney, of FitzGerald Associates Architects, adding that it would "tip the scales in a negative way making projects unfeasible."

Brian Bernardoni, spokesman for the Chicago Association of Realtors, urged the committee to defer action and reconsider the ordinance before it created unintended consequences, saying, "Let's not guess our way out of this problem."

Yet Adam Gross, director of affordable housing for Business and Professional People for Public Interest, dismissed that, saying, "The market will adjust."

"This ordinance will significantly reduce the number of residential projects that will be developed in Chicago," predicted Michael Mini, vice president of the Chicagoland Apartment Association. "We believe that this proposed ordinance will reduce, not increase, the city's affordable housing supply."

Elise Houren, spokeswoman for the Chicagoland Chamber of Commerce, said it would "constrain growth."

Yet Diane Limas, of Communities United, countered that it was a "stronger ordinance" meant to address the 70,000 units of affordable housing lost citywide.

Mooney said the ordinance had been altered to give relief to developers by lengthening the effective date to 180 days after passage, increasing eligibility for sales and promising property-tax reforms, while expanding the range for "off-site" affordable housing from within a mile of a given development to two miles.

Yet Ald. Joe Moreno (1st) said that was going too far, pointing out, "In two miles you can cross four or five wards easily," potentially creating confusion and conflicts between aldermen.

Yet in the end the compromises prevailed as the ordinance passed.

"We're not here to hurt anybody," said Ald. Ray Suarez (31st), chairman of the Housing Committee. "We're here to make this work."

"You never can do enough when it comes to affordable housing," said Ald. Walter Burnett (27th), one of the lead sponsors.

The measure will go before the full City Council next Wednesday.

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