A rare win for all sides in the affordable housing debate

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Here’s how it would work: Real estate developers could receive a 30-year reduction in their property tax assessments and lower taxes as a result, if they agree to set aside 20 percent of units in their buildings to tenants who earn 60 percent or less of the median income in the area. The bill also includes tax breaks designed to spark construction or preservation of affordable housing in less expensive neighborhoods and in areas that are gentrifying.

Another benefit of the state bill: It creates an incentive for developers to include all the affordable units on-site, running counter to the common practice of building a chunk of affordable units at an off-site location or, worse, paying a fee to a city housing fund in lieu of building any affordable units at all. To advocates who want to see affordable housing built in prime areas close to jobs and transit, that’s a win.

The state legislation takes a carrot approach to the affordable housing problem, while the city of Chicago has wielded a stick, in April strengthening the Affordable Requirements Ordinance, or ARO. That rule requires developers who seek a zoning change from the city to offer as many as 20 percent of their units at prices or rents affordable to low- or moderate-income residents. Developers argue that such requirements are counterproductive, reducing the financial feasibility of many projects and thereby exacerbating the affordable supply problem.

Curt Bailey of Related Midwest, one of the most prominent developers in the region, argues that the city and state approaches could work in concert: Yes, he argues, the city’s ARO cuts the rents developers can charge on some units, but the state legislation will balance out that effect by reducing a key cost, property taxes.

If these programs operate as designed, the end result could be more diverse neighborhoods that provide better access to all the amenities a world-class city like Chicago can and should offer to all its residents and the creation of housing that’s worth a lot more than what was there before the incentives were put in place. Gov. J.B. Pritzker is expected to sign the bill when it hits his desk—and with all sides cheering for it, who can blame him?

via Crain’s Chicago Business

June 4, 2021 at 09:11PM

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