Creating affordability in all of Chicago - Metropolitan Planning Council

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Creating affordability in all of Chicago

Flickr user Ian Freimuth (cc)

Lincoln Park is ending a 35-year drought of new affordable units.

You’ve probably heard by now that the old Children’s Memorial Hospital site in Chicago’s Lincoln Park neighborhood is being redeveloped. Dozens of news articles have detailed developer McCaffery Interest Inc.'s $350 million plan for a health club, ample retail space, two 21-story residential towers, 60 condos and 156 assisted living units—as well as the controversy the plan has elicited among some neighbors who’ve called it “out of character” for a low-rise neighborhood.

What you probably haven’t heard is a detail that’s been buried amidst news of rowdy community hearings and extended Plan Commission meetings: Of the 540 rental units planned for the site, 64 will be affordable.

This is worth a standing ovation for several reasons: Ald. Michele Smith (43rd Ward) noted that this is the “first time in 35 years” that one of the city’s wealthiest neighborhoods has created affordable units. According to the Chicago Rehab Network’s 2013 Affordable Housing Fact Book, in 2010 Lincoln Park had a median income of $86,440 (compared with $46,877 citywide) and only 443 project-based Section 8 (federally subsidized) units, accounting for 1.2 percent of all housing units in the community. By comparison, lower-income neighborhoods like Douglas and North Lawndale have 13.5 and 11 percent, respectively. Even in tony Lincoln Park, nearly 18 percent of the population in 2010 earned $25,000 or less, and of those, 85 percent were rent burdened (defined as paying more than 30 percent of one’s income for rent). In other words, Lincoln Park residents need affordability too.

Another reason to cheer is that actual, honest-to-goodness affordable units in an otherwise market-rate development have been as rare as a spring breeze in this never-ending winter. When the Affordable Requirements Ordinance (ARO) was created in the mid-2000s, the idea was to compel developers to set aside 10 percent of residential units as affordable if they received certain zoning changes, city financing or city-owned land, or were in a downtown Planned Development. However, another provision of the ordinance has dominated its use: Instead of building the required units, developers can opt to pay $100,000 per unit, which the vast majority choose to do. It is easy to understand why, since the $100,000 feewhich has not changed since inceptionis nowhere close to the actual cost of building the unit. Currently, those costs run more in the neighborhood of $250,000 to $350,000. The result? The accumulated fees are used to help fund affordable housing elsewhere in the city, which generally wind up supporting great projects in impoverished areas on Chicago’s south and west sides. In other words, the city’s low-income neighborhoods continue to provide the vast majority of affordable units for the poor, while wealthier areas provide very little. In a city with runaway crime inequality, school closures primarily on the south and west sides and notorious segregation, we need to care about this. And we need to do something about it.

Thankfully, change is in the air. The City’s most recent Five-Year Housing Plan calls for updates to the ARO to generate more affordable units in market-rate developments. Ideally, an uptick in the in-lieu fee to match the actual cost of development (and indexing it to inflation) will be considered, resulting in many more developers opting to build units on-site.

Which brings us back to the Children’s Memorial site, where a 5-year organizing campaign spear-headed by Lakeview Action Coalition (now called ONE: Northside) succeeded in securing commitments from Ald. Smith, McCaffery Interests, and Children's Memorial Hospital that hard units of affordable housing would be built at the redevelopment site.  In addition, the owner’s development advisor, U.S. Equities, strongly urged them to consider on-site affordability as a fitting legacy of the hospital’s service to the area. Without these efforts, the money would have certainly left Lincoln Park.  

Instead, when the hospital later released its Request for Proposals, it made clear that affordable units on site would be strongly preferred. The chosen developer, McCaffery Interests, is delivering the units without federal tax credit equity. While certainly reason to celebrate, it raises a question about all the opportunities we are losing out on in developments without such a mandate from the owner. How can we engage private sector developers in incorporating affordable units in their projects in a financially feasible way?

Recognizing these challenges, we at MPC are researching how other cities have successfully addressed the need to create affordable homes in profitable housing markets, and how we might better do so here in Chicago. Our community development corporations and mixed-income developers are doing yeoman’s work, but they cannot possibly close the housing affordability gap on their own. As typical affordable housing financing sources such as HOME dollars are being cut dramatically, we need to get creative about new ways to fund units in profitable housing markets. At MPC, we’ve spent 80 years partnering with communities, businesses and government to come up with solutions to problems just like this. Have ideas about how to tackle this one? Let us know below. If we want projects like affordable units at the former Children’s Memorial Hospital site to be commonplace rather than extraordinary, we all have work to do.

Comments

  1. 1. Steve from Chicago on April 18, 2014

    McCaffrey only put in the affordable when Children's Memorial reduced the land cost to get approvals that satisfied the various constituencies involved. To be revenue neutral, inclusionary housing should be 3% vs the in lieu fee of $100,000. At that percent, developers are 'revenue neutral' when their unit costs are $300,000+.

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