As Chicago’s apartment construction pipeline slows to historic lows and rapid rent growth raises questions over long-term housing affordability in the Windy City, low-income housing tax credit deals represent a potential lifeline for the city’s affordable housing stock.  

That is, if those developments actually get off the ground.

As of mid-September, only two of the 13 projects allocated credits in Chicago’s 2023 LIHTC funding round had closed and were under construction — 30 months after the city announced the awards in March 2024, according to records from the Chicago Department of Housing obtained by Bisnow. 

The LIHTC program has been a driving force in financing U.S. affordable housing projects since it became law in 1986. Since then, LIHTC has helped build more than 3.9 million housing units through 2024. 

But though Chicago officials have touted the city’s investments in affordable housing, its slow progress in getting LIHTC deals across the finish line has made it hard to quantify how much of it is actually on the path to getting built. 

A report from Housing Action Illinois earlier this year found that nearly 440,000 low-income renter households live in Illinois, but just over 150,000 affordable rental homes are available to them. In the Chicago metro area, only 31 affordable and available homes exist per 100 extremely low-income renters.

In March 2024, the city estimated the total development costs for the 13 projects at $562M between public and private resources — a number that has likely jumped given climbing construction costs over the past few years. City officials anticipated that projects would close within 18 to 36 months, with a projected end date of March 2027. 

Though the city’s initial window to close these deals hasn’t yet concluded, it is rapidly approaching. 

“The city of Chicago has significantly more layers of approvals. It's significantly longer to get things through,” said Rachel Rhodes, senior vice president of LIHTC production at the National Equity Fund. “The soft financing in the city comes from multiple different departments within City Hall, and so it just takes longer.”

Both of the projects that closed from the 2023 cycle were rehabilitation projects aimed at preserving existing units. Rehab and preservation projects cost hundreds of thousands of dollars less per unit than new construction in Chicago LIHTC projects, according to A City That Works. 

Five additional projects are expected to close before the end of the year. Four more are not expected to close before 2027, one has no closing date identified, and the final project is classified as “award withdrawn or inactive.” 

The delays have caused an increase in the estimated total costs for at least one of the projects. Hub 32, a 51-unit project in Garfield Park, carried a 2023 price tag of about $732K per unit, according to A City That Works. As of this February, the cost had increased to close to $796K per unit. 

Chicago’s LIHTC process is unique, as it’s one of only two municipalities, alongside New York City, with its own federal LIHTC allocation. This wrinkle was driven by a former congressman from Illinois who helped originate the housing law. 

State housing authorities, including the Illinois Housing Development Authority, allocate federal housing dollars through the LIHTC program, fielding various proposals from developers and applying different processes to decide how to do so. Those credits are usually sold to financial institutions and large companies seeking to lower their tax liability, which provides developers with equity for their projects. 

Both IHDA and the city itself allocate funding to projects in Chicago, but their separate guidelines and requirements when picking developments have led to different results. The annual cost for new state-funded LIHTC projects in the city between 2019 and 2023 was $454K per unit, or about 15% less than city-allocated projects at $519K, according to A City That Works.

Still, there’s a way to go — projects from both IHDA and the city can be more than 50% costlier than in comparable cities, like Houston.  

Mayor Brandon Johnson’s administration has looked to streamline development timelines through his Cut the Tape initiative, but some in CRE have said the measure hasn’t done enough to expedite projects through regulatory hurdles. The DOH has also updated certain portions of its building codes and its approach to awarding tax credits, seeking to tighten timelines from award to close. 

It will take time to see if these measures bear fruit, but in the interim, the projects will take a meandering path to their ribbon-cutting ceremonies.