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Affordable Requirements Ordinance

Mon, Apr 13, 2015

By Suzanne Hanney

The Chicago City Council March 18 passed a new Affordable Requirements Ordinance that will demand 10 percent set asides of affordable housing from developers who receive rezoning or City-owned land and 20 percent set asides from those who receive financial assistance from the City.
A new facet of the revised ordinance, or “ARO 2015,” is a three-tiered fee that developers may pay instead of creating the affordable housing units. Proposed by Mayor Rahm Emanuel, the fee is highest in the central business district, which the ordinance calls “the fastest developing downtown area of any major US city,” with an expectation of nearly 5,000 new residential units over the next two years.
Downtown, developers will pay $175,000 for each affordable rental unit they choose not to build and $225,000 for each for-sale unit. Outlying downtown and in “higher income areas” the in-lieu-of fee will be $125,000, while in “low-moderate income areas” the fee will be $50,000.
The ordinance also requires developers to build at least one-quarter of the affordable units on-site. However, developers will be allowed two exceptions: substitutes for downtown rentals and any units in higher-income areas could be built within two miles; downtown condo substitutes could be built anywhere in the city.
Ald. Walter Burnett Jr. (27th ward), chief sponsor of the ordinance, said that developers would not want to put a $200,000 unit downtown because it could mean a loss of as much as $800,000 to them. “Instead of building that affordable unit in that building [downtown], he can build on the West Side, the South Side, somewhere else in the city and will get more bang for the buck building in those communities.”
Burnett projected that the ordinance will yield $95 million and 1,200 new affordable units over the next five years.
The original ARO passed in 2003 and was updated in 2007; it resulted in 189 on-site affordable rentals in market-rate developments and $53 million in in-lieu-of fees that subsidized 2,500 rental units, according to the Chicago Tribune.
ARO 2015 is an improvement because under the old ordinances, developers often chose to opt out of building affordable units in exchange for a uniform $100,000 fee across the city, said Diane Limas and Deirdre Graziano. The two community leaders worked on the revision along with members of Emanuel’s staff, Access Living, Chicago Coalition for the Homeless, Business and Professional People for the Public Interest (BPI) and the Logan Square Neighborhood Association. Limas is president of Communities United, (formerly the Albany Park Neighborhood Council) and Graziano is a member of ONE Northside.
“Developers saw the loophole in the ordinance,” Limas said. “It was a lot cheaper to give $100,000 into the in-lieu-of fund rather than build the actual affordable units, which in some places like downtown would automatically cost three or four times as much.”
“Developers can’t opt out even downtown they way they used to be able to opt out; they have to make a commitment,” Graziano said. “If they don’t want to do affordable for-sale ownership downtown, the units can be offered in areas that very much need that stable anchor of home ownership.”
Graziano also referred to the increased cost of the in-lieu-of fees, which will go into an Affordable Housing Opportunity Fund. Half the money in this fund will go toward construction, rehabilitation or preservation of affordable housing and half to the Chicago Low-Income Housing Trust Fund, which provides rental subsidies.
“The housing advocates feel this is a heck of a lot stronger ordinance than what we had,” Limas said. In her areas of Belmont-Cragin and Albany Park, there is not much new development but a need for preservation of affordable rental units. The higher in-lieu-of fees will provide the revenue to get the job done.
“The area is starting to gentrify and we are losing long-time residents, low-income families who made these areas diverse,” Limas said of Albany Park and Belmont-Cragin. “What we’re seeing is foreclosed two- to four-flats, investors are coming in and paying cash and converting them to single-family luxury homes that people who lived in those apartments before could never afford to rent.”
Limas and Burnett said that what made the ordinance stronger was Emanuel’s direction. The mayor put together housing advocates and real estate interests, called on best practices from around the nation and “supported the ordinance 100 percent” through the election fundraising season, Burnett said.
Real estate interests pressured aldermen to vote against the ordinance until they learned of Emanuel’s total support for it. As a result, the ordinance passed the City Council with the votes of all those present, he said.
“I commend the mayor on his help with this,” Burnett said. He actually worked with us, he worked with us on the SRO ordinance, the TIF rehab purchase program and the troubled building initiative. I’ve gotten more out of him with these affordable housing policies, five times more than I was able to get with Mayor [Richard M.] Daley. With Mayor Daley I had to fight to get things happening with affordable housing so this mayor’s been good.”
“I have to say, just being able to meet with the mayor’s people to negotiate on this was huge, because trying to negotiate with the past [Daley] administration, there’s no way that would have happened,” Limas said. “They never would have sat at the table with the housing advocates. To be able to sit at the table with people that worked with the City, that have the background and knowledge on the issue was huge for the housing advocates. That’s what did it, going back and forth. There were times we were at the table and voices were raised and faces were red but we were able to come up with a pretty good ARO that will make a difference for a long time.”
The new ordinance will take effect in one year as part of a last-minute compromise. Developers wanted a two-year phase-in period and housing advocates wanted it immediately, saying that delay would cost them too much potential rehab money.
However, Burnett said that the developers sought the added time so that they could plan for the new rules when they approached banks for money. “They had already negotiated and didn’t include this in their budgets, so they thought they would be put at a disadvantage. They wanted to do the phase-in so that when they started going to banks everyone would be on an even field.”AROmap.docx

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