Johnson’s relocation fee threatens affordable rentals

A proposed ordinance would force landlords to pay tenants thousands to end a lease. The mandate risks higher rents and fewer affordable units.

A provision in Chicago Mayor Brandon Johnson’s proposed “Protecting Renters Ordinance” could trigger higher rents and fewer affordable units.

The provision would require a landlord to pay a tenant $10,000 (or more) simply for the landlord declining to renew a lease or the tenant rejecting a rent increase. That would likely hurt the small, family-owned buildings that make up most of the city’s affordable housing.

The measure would rewrite the city’s 40-year-old Residential Landlord and Tenant Ordinance, adding a rental registry, a new city bureau, a taxpayer-funded eviction counsel program and a “just cause” requirement for eviction.

Part of the proposed ordinance details the levels of relocation assistance that would be required of landlords:

• If a landlord ends a tenancy for a no-fault reason, such as moving in a relative or converting a unit to a condominium, the landlord must pay the tenant the greater of five months’ rent or $5,000.
• If the landlord cites an “other reason” for ending the lease, or if a tenant simply rejects a rent increase in their offer for a lease renewal, the payment jumps to the greater of 10 months’ rent or $10,000.
• Owner-occupied premises with six units or fewer would have to pay the greater of $3,000 or three months’ rent.

The change may be well-intentioned, but it is misguided. The majority of Chicago’s affordable housing is not produced by the city or affordability mandates. It comes from “naturally occurring” affordable housing: two-flats, three-flats and small apartment buildings owned by families and individuals who charge less because they can, not because a subsidy program requires it.

These owners tend to run thin margins. Landlords who understand the risk of an ordinance like this would likely stop renting out their units or not seek out more real estate opportunities in the city. Owners would have an incentive to build a large cushion of profits for the day a tenant says “no” and the large bill comes due. That means higher rents or fewer services, upkeep and repairs that add costs.

Neither outcome helps renters.

Also, threatening a landlord with a five-figure penalty for raising rents is just another attempt to skirt Illinois’ statewide ban on rent control. Rent control has a long track record of discouraging new housing, prompting landlords to convert rental units or sell buildings and leaving fewer, older units for the renters left behind.

City council members who support protecting tenants but oppose the more drastic elements of the Protecting Renters Ordinance have introduced the Fair and Accountable Illinois Rental (FAIR) Ordinance. This ordinance maintains the “protections against illegal lockouts, retaliation, unsafe living conditions, and security deposit abuse” but does away with “just cause” eviction and the relocation mandates.

The answer to more affordable housing is not a mandate that raises the cost of owning a small rental building. It is encouraging the production of more housing. That means cutting the permitting delays, zoning restrictions and red tape that make it slow and expensive to build or renovate multifamily housing.

A family that owns a handful of rental units and wants to keep rents low needs fewer barriers, not an ordinance that punishes them for choosing not to renew a lease.