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  • Joe Cahill On Business

    A better remedy for Chicago's affordable housing shortage

    How about rewarding developers for building outside the hottest neighborhoods?

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    79彩票注册网址Time was, people generally didn’t worry too much about housing affordability in Chicago’s swankiest neighborhoods.

    Sure, glitzy 79彩票注册网址 Coast penthouses and gracious Lincoln Park townhomes were out of reach for average working stiffs. But middle-class renters and homebuyers could afford homes in many other neighborhoods around town.

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    In recent years, however, that’s started to change. Gentrification is driving up housing costs in areas like Logan Square and Pilsen, as developers convert humble two-flats and bungalows into high-end homes of the type you expect to see in Chicago’s most exclusive enclaves.

    As moderately priced homes disappear from more neighborhoods, people of modest means have a harder time finding a place to live. A percolating affordability crisis threatens to put Chicago on the path of cities like New York, Boston and San Francisco79彩票注册网址, where surging housing costs are crushing low-to-middle income families.

    79彩票注册网址Predictably, the emerging shortage of affordable housing has triggered the interventionist impulses of city politicians. Earlier this month, some aldermen called for a 14-month moratorium on new home construction in rapidly gentrifying neighborhoods around the 606 trail. Mayor Lori Lightfoot last week agreed to a shorter six-month ban on new demolition permits in the area.

    As my colleague Alby Gallun reported in Crain’s this week, the next front appears to revolve around Chicago’s Affordable Requirements Ordinance79彩票注册网址 (ARO), which requires developers seeking zoning waivers for new residential projects to offer a percentage of the units at prices affordable to people making 60 percent of the area’s median income. The required number of affordable units ranges from 10 percent in most cases to 20 percent in designated “pilot zones.”

    The ARO comes into play most often in relatively affluent areas that are attracting new development. It’s complicated and has loopholes that allow developers to set aside far fewer than the ostensibly required number of affordable units. Lightfoot’s affordable housing task force, along with a bloc of progressive aldermen, seems intent on tightening those exemptions and raising the minimum number of below-market units.

    I’m all for clamping down on loopholes in the ARO. It’s perfectly appropriate for the city to ask developers who want zoning relief to help advance an important public interest like affordable housing.

    79彩票注册网址But Lightfoot and the City Council should beware of raising the set-aside too high. As Gallun reports, there’s a point at which higher ARO requirements reduce a project’s profitability so significantly that developers will take a pass. That discourages development, defeating the city’s purpose of creating more affordable housing.

    79彩票注册网址ARO is only one tool for advancing that goal, and its effectiveness is limited to areas where developers already want to build. Beefing up ARO requirements might increase racial diversity in expensive parts of town—a clear goal of Lightfoot’s—but won’t have much impact on a major cause of Chicago’s affordability gap: disinvestment in outlying neighborhoods across the city.

    79彩票注册网址Acres of affordable housing have fallen into disrepair or disappeared altogether as capital flight and population loss decimated vast swaths of the South and West sides. Jacking up ARO levels might provide a few more tickets out of those areas, but won’t create large numbers of new affordable units, or serve Lightfoot’s broader aims of reducing inequality and reversing the overall population decline in Chicago.

    What’s needed are policies that reward developers for building outside the hottest neighborhoods. Tools such as low-income housing tax credits and low-cost home loans help spur rehabilitation of older homes and new construction in areas ripe for redevelopment. ARO alone, by contrast, largely leaves those neighborhoods to their fate.

    79彩票注册网址Investment in affordable housing would bring people back to places like Englewood and Lawndale, . Initiatives such as the Renew Woodlawn program show the potential for rebirth in areas long abandoned by traditional developers.

    79彩票注册网址Yes, many of those neighborhoods suffer from high crime, failing schools and poverty. But investment in housing is an important first step toward addressing those problems.

    Economics also favor construction of affordable homes in neglected areas, where builders can get real estate at prices that reduce development costs. Lower costs allow developers to build lots of homes and make a profit selling them at affordable prices. More affordable homes, faster—that’s the way to defuse a housing affordability crisis.

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