Affordability ordinance could ease Chicago’s housing segregation

In a city known for its segregation, Chicago’s inclusionary housing policy hasn’t always lived up to its name.

Last week, a new version of the Affordable Requirements Ordinance, based on inclusionary housing policy, went into effect. Critics hope that the revised policy will make it easier to create housing for nurses, teachers, retail workers and other people being priced out of the local housing market.

Despite its billing as a tool to promote affordable housing, they say the old law reinforced racial and economic segregation. In exchange for public assistance or a zoning variance from City Hall, a developer had to include affordable housing in his developments or pay into a city fund that subsidizes housing elsewhere. But elsewhere was often in places that already have an abundance of affordable housing like the middle-class Uptown or the predominantly black North Lawndale. Developments in high-income predominantly white areas like Lakeview and Lincoln Park rarely included affordable units.

From 2008 to 2013, developers paid $36 million in fees to escape the requirement. The city housing fund has invested about $19 million on nearly 20 projects since 2003, when the ordinance was enacted. Most projects were on the South and West sides.

Under the new law, developers have to create more housing and to pay more into the city’s housing fund, which could result in more affordable housing across Chicago. Some developers have sued the city, claiming the ordinance is unconstitutional and will increase their cost and stifle construction of new affordable units.

The high concentration of affordable housing in certain communities has exacerbated segregation, said Marisa Novara, director of housing and community development at the Metropolitan Planning Council.

The ordinance is only a recent example of how Chicago’s housing policies have encouraged segregation by asking low- income areas in the city “to be the predominant recipients of what should be citywide and region wide investments in affordable housing,” she said.

Novara cited redlining in the mortgage industry and government policies that concentrated public housing in black and poor areas. Research suggests that segregation increases and concentrates poverty in black neighborhoods, which contributes to high crime rates, low-school completion rates and weaker job networks.

Opponents of inclusionary housing policies argue that people should only live where they can afford to pay rent and that governments overstep their boundaries when they attempt to regulate the housing market for social outcomes, Novara said.

“It’s interesting,” she said, “that [critics] call it social engineering when we try to undo the negative impacts of previous policies, which were the boldest social engineering on record, made predominantly under the auspices of sanctioned government action.”

History of affordable housing law

Chicago enacted the affordable housing ordinance in 2003.

It required developers of new housing projects of 10 or more units to set aside 10 percent of the units for below-market rates if they were building on land rezoned for residential use or if they were building planned developments, large developments that have to be negotiated with city planners.

Developers had to set aside 20 percent of the units at below-market rate if they were building on city land or receiving a public subsidy. Those who opted not to include affordable units could choose to pay a $100,000 fee per unit to a city housing fund. Many developers in high-income areas found that it was more profitable to pay the $100,000 fee and charge higher rents than create affordable units.

The new law requires developers to build at least 25 percent of the affordable units on site before paying into the fund. Instead of a $100,000 fee, developers have to pay between $50,000 and $175,000 per unit based on the location of the development. They pay more to create housing in higher income areas than they do in lower-income areas.

Developers in high-income areas and downtown can meet the affordable housing requirements by building, buying or rehabbing affordable units within two miles of the development. The fee for downtown projects will increase to $225,000 per unit in April.

Two major forces drive where affordable housing goes, said Constantine Kontokosta, deputy director for academics at New York University’s Center for Urban Science and Progress: The city wants to maximize the number of units built, so low-income markets make sense, and community opposition to affordable housing.

“A major challenge is this ‘not in my back yard’ attitude where people fight an affordable housing project,” Kontokosta said. “In some cases the city knows it’s not going to win those fights so they take the housing where there won’t be as much of a battle.”

Novara said a lot of opposition is based on the notion that affordable housing is for poor people and negative reactions to them. The city ordinance defines affordable rent as reasonably priced for households earning up to 60 percent of the area median income, and the city sets maximum rents.

In reality, the high cost of rent in Downtown, Lincoln Park and even the less well-to-do Uptown ensure that many teachers, full-time workers at restaurants and bars and non-profit workers in those areas can’t live there.

If you’re among the poorest of the poor, paying nearly $900 for a one-bedroom apartment might sound steep. But $855 rent for a person making about $32,000 a year, or $1,300 rent for a family of four with a $45,000 a month income, might be a bargain. Yet the ARO has still sparked controversy in some areas, despite the benefits to working lower-middle and middle class households, Novara said.

“Sometimes people don’t realize that people who may need subsidized housing are already living in their area,” Novara said. “There isn’t a neighborhood in Chicago that doesn’t have people who are housing cost-burdened.”

A tool for integration

Inclusionary housing, also known as inclusionary zoning, emerged in the 1970s as a tool to help foster mixed-income, racially integrated communities as the federal government’s contributions to cities dwindled. The zoning has experienced a huge uptick in the past two decades, according to Kontokosta. Cities were forced to become more self-reliant and saw the laws as a way to capitalize on increases in real estate values, he said. More than 200 jurisdictions have such laws, he added.

Kontokosta said the policies work best as part of a broader toolkit to address housing issues, including zoning and land use laws, community development and efforts to deal with social issues affecting homeless people and low-income households.

Another inclusionary housing law, the Downtown Affordable Housing Zoning Bonus, enacted in 2004, has only resulted in five affordable units downtown.

Novara stressed that reforming the ARO isn’t a silver bullet for the city’s housing problems. In a 100-unit building where 10 percent of the units have to be affordable and only a quarter of those have to be built on site, that means only a few affordable units.

“It’s a necessary but not sufficient step,” Novara said about the changes to the ordinance. “There’s no one thing that’s going to solve this problem of the amount of separation in how we live by income and race. It’s definitely a step in the right direction, but it’s just one tool. We need many more.”