We have a crisis in affordable housing throughout the city. It not only impacts the working poor, but every middle-class family. The Emanuel Administration’s affordable housing efforts have fallen far short of addressing this critical issue.
The Emanuel Administration has done very little to create new affordable housing in Chicago. Even more damaging has been their failure to take the type of actions needed to enable homeowners and renters to afford to remain in their own communities. Neither a sudden decision to restore the Department of Housing as you enter your eighth year as mayor, nor token programs that will create a few hundred affordable housing units will make up for the lack of a substantive, comprehensive plan, particularly with years of affordable housing neglect.
It is important to realize that the affordable housing issue is not only a problem for poorer communities, but it is becoming a major problem for the more affluent communities. Developers seek, and at times even secure, pubic subsidies financing the construction of multi-storied high-end residential apartment and condominium buildings. The city is growing vertically and not horizontally. This contributes to significant increases in property taxes, not to mention changes the character of the communities. Ironically, the Chicago Tribune recently disclosed that developers of multi-story luxury condominiums and/or commercial high-rise buildings have disproportionately been the beneficiaries of tax appeal reductions and exemptions. This occurs while families in middle and low-income communities continue to see property tax hikes, along with trash and water bill increases.
To date, no one in Chicago has advanced a comprehensive strategy to address the affordable housing needs in Chicago, which must include combating gentrification in at-risk neighborhoods. Gentrification can mean different things for different people. This includes new local investment, an increase in average incomes, rising home prices or rents, a different occupational mix, higher educational level, and/or a new race/ethnicity mix. I use gentrification to refer to revitalization and reinvestment, causing a relatively sharp increase in rents and home values in low-and moderate-income urban neighborhoods, which results in actual or imminent displacement of residents.
To the extent that existing residents can reap the benefits of rising home values, improved educational levels, enhanced median incomes, new small business development, greater job opportunities, improved credit scores and lower loan delinquency rates, gentrification becomes just good community development.
It is important to agree upon a key indicator that measures when a neighborhood is at-risk to the forces of gentrification and can serve as a “trigger” for investment of resources designed to prevent or mitigate displacement. While the City’s response has been tepid efforts to expand some affordable housing opportunities, next to nothing has been done to mitigate displacement! Clearly, stronger efforts are needed.
Any affordable housing strategy must include a robust strategy and programs designed to mitigate displacement. It must also allow the existing resident renters to share in the benefits of development must be put in place. We must protect existing property owners from the rising property taxes and fees that drive owners of modest means, as well as the poor from gentrifying communities.
The Vallas Approach
My strategy is simple: address the issue of affordable housing by developing a strategy for accelerating the construction of new housing citywide and controlling property tax increases for existing residents in all gentrifying areas.
We must unleash the power of the housing market by removing obstacles to affordable housing development while aggressively incentivizing the construction of new affordable housing units and the conversion of existing property to create new units. In the long term, the only way to meet demand and mitigate the adverse effects of gentrification is to make it much easier to build more housing in Chicago. More housing development will lead to more competitive housing pricing.
Regardless of the number of initiatives to expand available funding for new housing, the creation of sufficient, affordable housing to address the city’s long-term needs cannot be accomplished without removing the obstacles and barriers currently restricting approvals for new construction and/or conversions.
We must also cap the growth of property taxes for current homeowners and landlords in gentrifying areas to keep existing housing affordable for homeowners and renters who have lived in communities for generations. This means not only helping property owners participate and renewing participation in existing property tax relief programs, but also enacting new, more potent programs to protect homeowners and renters. Without such relief, the neighborhood would become unaffordable for too many homeowners and landlords. This will force them to raise rents and drive out too many good families and tenants.
The following are potential components of a comprehensive affordable housing plan that could address the long-term affordable housing needs in Chicago neighborhoods:
- Aggressive financing of new affordable housing
We need a much more aggressive affordable housing production program. The city should partner with developers to provide property, grants, and residential property tax abatements to incentivize the building of affordable housing for middle and low income families. According to the City of Chicago website, today there are almost 15,000 city-owned vacant lots and thousands of other parcels that the City could easily acquire. Imagine if developers could acquire those lots at discount or for free and be provided with grants or low-cost loans and property tax abatements that are conditional on keeping the housing costs affordable.
The City would also partner and support organizations like the Preservation Compact, the Community Investment Corporation, the Chicago Community Loan Fund, and Neighboring Housing Services in their efforts to acquire and improve the thousands of vacant buildings to bring more one-to-four rental units back into the market. Helping expand the pool of available loans, providing temporary property tax abatements and streamlining the approval process would be critical components of that support. The City could also create financing vehicles that support mission-driven developers to acquire and maintain affordable units. By preserving currently affordable units and maintaining existing tenants, potential displacement of vulnerable residents can be minimized.
- Incentivize private sector landlords to create new affordable housing.
Large numbers of existing landlords could expand the number of affordable housing units citywide through conversions of unfinished or unproductive space, without the need for public funding. The additional income would be incentive enough if the impediments were removed for such conversions and the approval process was streamlined and less costly. According to analysis as 130,000 apartment buildings, ranging from two-flats to multi-unit buildings of 24 apartments or more. The overriding majority of those properties have unfinished garden-level space that is ideally suited for conversion into additional housing units.
While a smattering of garden units have been created around the city over the decades by entrepreneurial property owners, city zoning and building codes create major impediments to readily turn these unused spaces into quality housing units. Specifically, sections of the City Code will need to be overhauled to facilitate expansion of garden units.
Initially, the focus of the conversions could be on City’s Transit-Oriented Development (TOD) zones around mass transit stations. Traditionally, parking availability has been the greatest concern for aldermen and residents when discussions of increasing housing density are proposed. By initially limiting these units to TOD zones, we can assess the impact this program has on communities and adjust as needed as we proceed. The benefits of the City’s current TOD policy generally accrue to major developers, typically building larger developments of 25 units or more. The Vallas Proposal will help spread the financial benefits of TOD to a large number of smaller property owners.
- Streamline the process for reviewing and approving new housing
In the long term, the only way to meet demand and stop gentrification is to make it much easier to build more housing in Chicago. The more housing, the more competitive the pricing. A critical obstacle to unleashing the full force of the housing economy is overly burdensome, extremely cumbersome, and expensive. It is the process by which developers, both large and small, go about securing approval for their projects. Regardless of the number initiatives to expand available funding for new housing, it is critical to streamline the process for securing approval for new affordable housing construction and/or conversions.
- Cap the growth of local property taxes in rapidly gentrifying areas
Major cities and states have enacted tax programs to help retain long-time homeowners in at-risk neighborhoods and even businesses. Enactment of a cap would not have the adverse impact of shifting the tax burden to other non-residential property owners, as increasing the homeowners exemption has often done. This is because the cap does not reduce the taxable base, but merely limits the tax increase to an affordable level.
- Senior Citizen property tax relief
A major problem in gentrifying neighborhoods is that low and moderate-income seniors choose to sell because they cannot afford rising property taxes in gentrifying neighborhoods or the upkeep of their homes. The City should allow seniors to freeze their property taxes or cap the increases until the property is sold. An existing State of Illinois Senior Citizen Property Tax Deferral Program, available for low-income seniors, could be expanded and vigorously marketed in gentrifying neighborhoods. The program could also be extended to seniors at higher income levels who own and live in two and three member households in at-risk areas, who keep their rents affordable. Foreclosures of senior citizen homes is a major issue in gentrifying communities. The foreclosure statutes also need to be modified to protect seniors from losing their homes. The priority should be to offer alternatives to home foreclosure for seniors who have been in their homes and have resided in the community for a lengthy period.
- Create a stabilization voucher by more flexibility to the fair housing rules
Some community development advocates propose that the federal government or individual states create a new type of housing voucher. Or, better yet, they propose either of these governments create a housing tax credit to be awarded to long-time residents of low-income communities to help them stay when gentrification poses a risk. In order to provide federal resources disproportionately in at-risk majority-minority neighborhoods, such as the stabilization voucher, the Fair Housing Rules need to be amended to broaden application. Traditional fair housing rules can discourage equitable investment in at-risk neighborhoods, based on policies opposing concentrations of poverty and favoring relocation to suburban “opportunity communities.” Fair housing, instead, should affirmatively promote equitable investment in emerging urban opportunity communities—the neighborhoods at risk of gentrification.
- Carefully manage large scale luxury development in at-risk and working-class communities
The single biggest cause of displacement is large-scale, high-cost housing development. Such development poses a greater immediate threat to existing working-class and even more affluent neighborhoods than poor communities which are most often ignored by developers. Chicago should accordingly promote small and medium-scale, mixed-income development in at-risk neighborhoods and carefully assess the impact that new, upscale housing development will have on any neighborhood.
High demand for market-rate housing in these areas of development also create opportunities for policies leveraging that demand to build and preserve affordable units. The City should support policies, such as inclusionary zoning, that can provide some economic integration in a high-cost market and support the production of new, affordable units, even as the naturally occurring affordable housing stock disappears.
- Simplified access to available tax relief programs
There are an array of programs designed to reduce the impact property taxes through exemptions, credits, grants, or deferrals. The process for accessing these programs can be cumbersome and confusing and the programs must be renewed annually. This imposes a particular hardship on the elderly. A simple, one-stop process should be established to access available and eligible programs and to secure renewals.