Downtown developers who fail to build their own units within reach for low-and moderate-income residents would pay dramatically higher fees to help solve Chicago’s affordable housing crisis, thanks to a controversial plan poised for City Council approval Wednesday.
Like the increase in Chicago’s minimum wage to $13-an-nour by 2019, Mayor Rahm Emanuel offered his complex solution to the affordable housing as part of a broader effort to shed the “Mayor 1%” label and undercut the progressive base of his challengers.
The affordable housing ordinance is expected to sail through at Wednesday’s City Council meeting, despite concern the costly mandates could have a chilling effect on development.
Chicago’s “affordable requirements ordinance” offers a choice to developers of projects with ten or more new or rehabilitated units that involve zoning change, a planned development designation, city land or a city subsidy.
Ald. Ray Suarez says the council will revise the law in a few months if needed but is confident the approach will work. | Peter Holderness / Sun-Times
They can either make 10 percent of new residential units affordable or pay a fee of $100,000 for every unit they don’t build.
Emanuel wants to carve the city up into three different zones and impose a wide range of fees, depending on the location.
For downtown developers and those who build in higher-income census tracts, the fee would rise to $175,000 and $125,000, respectively, for every unit they don’t build.
In neighborhoods dominated by low-to-moderate income residents, the fee would drop to $50,000-per-unit.
The mayor’s ordinance would also require at least 25 percent of a project’s affordability requirement to be filled with on-site units — with two exceptions.
Downtown rental projects and rental or condo projects in higher-income areas would have the option to build, buy or renovate the required units within two miles as long as it’s in the same zone. And downtown condo projects could build, buy or rehabilitate the required units anywhere in the city.
Even after last-minute tweaks aimed at easing the financial burden, a parade of developers have argued that it’s all too much for them to bear.
At a Housing Committee meeting last week, developer Randy Fifield noted that her firm just completed a 2,140-unit project on Kinzie Street just west of the East Bank Club that could not have been financed or built if the mayor’s mandates had been in place.
“Maybe, and just maybe, in high-rent districts like Streeterville or in a very expensive condo can you absorb those propsosed fees. But, not in projects in mid-level neighborhoods or new neighborhoods to be created,” Fifield said.
“The unintended consequence of passing this is that new construction will slow down. New jobs and new real estate tax revenue will not be created. If you overreach with these funds—it will be another leased parking meter problem because it is rushed. It is not well thought out. Additionally, as these costs are passed on to renters through increased rents, we’re also making our workforce rents out of reach for many of our workers and companies moving downtown today.”
Richard Whitney of Fitzgerald Associates Architects said his clients have warned the ordinance “has the potential of stifling development” in Chicago “to the point where clients will look elsewhere” to build their projects.
“The impacts are potentially significant. We see this ordinance…as a tipping-point for projects in the city. The revisions as proposed, we fear, will tip the scales in a negative way, making projects financially unfeasible,” he said.
Alan Lev, president and CEO of Belgravia Group, said the undeniable “truth” is that the ordinance will increase costs–—either by raising fees or reducing revenue by requiring units on- or off-site.
“Everyone likes to look at developers and say, `They’re all rich.’ But, we all know through 2008 and beyond how many went out of business. It’s an inherently difficult and risky business. The yields are at a historic low,” he said.
“My concern is that adding on fees that are going to $175,000 or $225,000 in some places and requiring on- site units is gonna push us over the edge. If we could lower the fee a little bit, phase it in, some pro-ration of fees, I would be the first one to stand up here and tell you on behalf of the development community that I would support the ordinance. We’re just not there yet.”
Housing Committee Chairman Ray Suarez was not moved by the testimony. Suarez said there is “no such thing as a perfect, perfect ordinance, but we tried to get it as close as we possibly can.”
If it doesn’t work “within six or eight months,” the City Council will revise it, the chairman said.
Planning and Development Commissioner Andy Mooney has flatly denied that the mayor’s plan would chill development.
“We were actually pretty conservative in the approach that we’ve taken,” Mooney.
“This will not stop development in any way. But, it will add significantly to the housing stock that we have of affordable units.”