In Chicago Affordable Housing, The Squeeze Is On
Like all U.S. cities, Chicago has a distinct lack of affordable housing units, according to the opening panel at Bisnow's Multifamily Annual Conference Midwest. It has been hard for the private sector to provide them, and public sector efforts to fill the gap can be problematic at best.
Residential development in Chicago the last five or so years has skewed toward properties for residents who have a median income between $100K and $150K/year, who can afford rents averaging around $2,300/month, the speakers said.
In the current economic climate, those price points are the ones that allow developers to make any kind of profit. Even property development at that level is a tight game, considering the increasing cost of labor and materials, and the elaborate process of entitlement and other regulations.
The result is that not only are people in dire poverty faced with a lack of affordable housing, but median-income households are squeezed as well. The city has adjusted its affordable housing law in recent years, but it isn't clear yet how much of an impact that will have.
Chicago Housing Authority CEO Eugene Jones, who oversees the second-largest public housing authority in the country after only New York City, said that the threshold of affordable housing is 30% of income, whatever that happens to be. The more over that, the less affordable it is, whatever the rent.
"A lot of people are paying a lot more than 30% of their income for a place to live [and] as much as 60% to 70% in the worst cases," Jones said. "We're trying to address affordable housing, which is something that politicians don't talk about in this country. But it's the key ingredient in making everything else work: transportation, education and healthcare."
Two factors are going to be driving even further demand for affordable housing in the next decades, Jones said. "One is senior housing, the other is addressing the homeless and mentally ill population."
"Affordable represents a spectrum of need," Preservation Of Affordable Housing Vice President of Community Partnerships Felicia Dawson said. POAH is a Boston-based affordable housing development company.
One resident might be a single mother working a minimum-wage job, making 30% of area median income, while another might be a larger family with three children who needs a larger place, and who makes 60% of AMI, Dawson said. Chicago's AMI is about $63K/year.
"The private rental market can't offer what they need," she said.
"There's a misconception in Chicago's Affordable Requirements Ordinance," Belgravia Group CEO Alan Lev said, pointing out that 60% of AMI is over $50K/year for a family of four in a rental unit, while in for-sale product, 60% of AMI is over $100K/year for a family of four.
"To me, those levels are workforce housing," Lev said. "There's certainly a lack of that kind of housing, but the city ordinance isn't addressing the need for the lower levels of income, households of less than $50K."
For for-sale housing, the ARO is "fairly unworkable if you can't buy out of it," Lev said. "The price to buy out is steep, and it's economically impractical to put affordable units in most projects.
"The new pilot program has been a disaster so far," Lev added. "The number of affordable units has actually gone down, even though the total number of new units has not. Making it citywide won't create more units and won't generate funds to develop them."
Not everyone on the panel agreed fully with that assessment.
"Lower-income houses still want choices, and they want neighborhood amenities," such as good schools and nearby grocery stores, Dawson said.
So affordable housing to her is more than just building or funding housing units — it is promoting the fabric of a neighborhood.
ARO is beginning to work in terms in providing support for commercial development in neighborhoods, Dawson said, citing the new Jewel at 61st and Cottage Grove in the Woodlawn neighborhood as an example. The store will be in a previous food desert and near Woodlawn Station, which is the latest phase in POAH's Woodlawn Choice Initiative, the goal of which is to revitalize Woodlawn.
"ARO can't work by itself, but rather with other tools at the city's disposal," Dawson said.
"We're all in agreement that there is a great need being unmet, and government has a large role in fulfilling that need," Lev said. "We need to go to a system that spreads the cost of affordable housing more widely.
"A permit fee, for example, that applies to every permit in the city of Chicago — a new home or a hotel or renovating a property — that would generate a huge amount for affordable development. So far, this idea hasn't gone anywhere."