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Chicago's Affordable Housing Requirements | New and Stricter Rules for Developers

Posted by Chicago Condos on Monday, October 26th, 2015 at 3:24pm.

Beginning October 14, 2015, real estate developers are required to adhere to a stricter version of Chicago’s Affordable Requirements Ordinance (ARO). In March, the Chicago City Council approved changes to the ARO to push developers to build more affordable housing in affluent and desirable neighborhoods with the goal of making 10-20% of market-rate housing units in those areas more reasonably priced.

Created in 2003, the ARO was designed to encourage developers to create affordable units in private-market developments. Developments subject to the ARO were generally required to set aside 10% of residential units as affordable housing. Prior to the 2015 changes to the ARO, developers could pay an opt-out fee of $100,000 per unit of affordable housing that they were required to build. The amended ARO now requires that many developers build at least 25% of the required affordable units on-site or off-site. The remaining 75% can be satisfied by paying a now steeper fee.

Since its enactment in March, Chicago’s Affordable Requirements Ordinance has predictably been unpopular among developers. Despite a downtown-specific 180-day grace period before law enactment plus a one-year grace period before the new fee system took hold, developers rushed to file applications for new buildings before the October 2015 deadline. Sixty-nine Chicago zoning applications were filed in September alone - nearly three times the monthly average. In addition, the Home Builders Association of Greater Chicago filed a state court lawsuit in August, arguing that the ARO amounted to an unconstitutional “taking” of private property.

Opposition to the construction of affordable housing is hardly limited to Chicago developers. In north suburban Deerfield, the Zion Lutheran Evangelical Church planned to use Low Income Housing Tax Credits to build homes on their property targeting low-income working families, with rent at about $900 per month. This prompted a strong “Not In My Backyard” response from local residents when the project was initially proposed in spring 2015. They expressed concerns about falling property value, increasing crime, and existing residents moving out of the neighborhood. Supporters of the church’s project cite the overall lack of affordable housing supply in Deerfield and in other North Shore communities, noting that many lower-paid service industry workers in those areas struggle to find housing close to their jobs.

The debate among Chicago residents, business leaders, and government officials about the ARO mirror the arguments expressed by residents of Deerfield and in communities across the country. Meanwhile, cities like Chicago implement policies designed to encourage development benefiting residents of all income levels, to varying degrees of success. Chicago has worked hard to move away from its policy of concentrating its poorer residents in high-rise public housing projects like Cabrini–Green or Robert Taylor Homes. The recent amendments to the ARO are more evidence of the city’s hope that private developers will shoulder more responsibility for building affordable housing options. Mayor Rahm Emanuel and the aldermen who supported the ARO amendments hope that increases in affordable housing options in affluent city neighborhoods will help ease income disparity in Chicago, and boost the economy in the next five years. This strategy relies on developers’ continuing enthusiasm for constructing major residential projects to completed a projected 1,200 new affordable housing units and bring in an estimated $90 million in revenue generated for other new housing projects.

--Written by Evelyn No



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