How Chicago’s affordable-housing mandates make housing less affordable

How Chicago’s affordable-housing mandates make housing less affordable

Affordable-housing mandates are sold to voters as a way to balance development with the need to build housing for the least well-off. In reality, these mandates add to the barriers that prevent developers from making housing more affordable and give rise to corruption in Chicago.

The cost of living in Chicago is rising. Increasingly, fewer Chicagoans can afford a middle-class lifestyle. For many, housing is their biggest expense – driven in part by a lack of supply. Strict city zoning requirements are preventing developers from responding to higher costs by building more units.

A recent example in Pilsen, on the Lower West Side of the city, shows how those “affordable-housing” mandates, which require developers to set aside a portion of units in every new development for low-income buyers, actually stand in the way of making housing affordable and also create opportunities for corruption.

The Pilsen community has one of Chicago’s most stringent affordable-housing mandates. Any new development with more than 10 units that requires a zoning change must set aside at least 21 percent of units to be sold for less than market value to low-income buyers. This requirement halted a project in which a developer aimed to refurbish a nearly eight-acre vacant lot, building approximately 500 apartment units on the site. Requiring the developer to devote such a significant portion of the new complex to affordable housing – more than 100 units at less than market value – made the project unsustainable.

In response to the stringent mandate, the developer abandoned the plan for 500 units and instead proposed a much smaller development that did not require a zoning change. But now Alderman Danny Solis, 25th Ward, has vowed to block the redevelopment altogether by rezoning the lot as industrial. And because of Chicago’s system of aldermanic privilege, it is likely that the alderman, who is also chair of the zoning committee, will get his way. Nothing will be built, Pilsen residents will lose the possibility of new housing options, and the cost of housing will be higher as a result.

Aldermanic privilege gives aldermen substantial sway over their own wards. If developers wish to build a project above what current zoning restrictions allow, as they did in Pilsen, they must get the alderman’s permission. This system gives aldermen incentives to zone their districts below what they wish to allow as a negotiating tool so they can later force developers to make concessions. In many of the most desirable areas of Chicago, the city only allows expensive single-family homes. But in many cases like Pilsen, developers will choose to only build what is allowed under existing zoning, making the most desirable neighborhoods affordable for only a limited few.

Affordable-housing mandates may be sold as a way of increasing the availability of affordable housing, but in practice they raise the cost of new developments, which ultimately means less housing gets built. And like all zoning rules, these requirements expand the power of aldermen to control development and create bad incentives for aldermen to pass excessively restrictive zoning rules as a bargaining chip against developers who wish to build bigger projects.

Building less housing means less supply and higher prices for everyone. Affordable-housing mandates benefit the small number of people who get to buy below the market rate, but the mandates do nothing to make housing more affordable for the majority of middle-class families who struggle to buy a home in Chicago. It’s quite the opposite in communities such as Pilsen, where these mandates reduce housing supply by making new projects uneconomic.

If aldermen really want to make housing affordable for everyone, they will relax zoning laws and the affordable-housing mandate, and allow developers to build more housing.

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