With a goal of creating at least 1,000 new Loop residential units—including 300 that are affordable—over the next five years, the city will be soliciting proposals from developers and will support the effort with funds from the LaSalle Central TIF District, a controversial pot of money that has effectively been off-limits to new developments downtown since former Mayor Rahm Emanuel froze its use for private projects in 2015.
Vacancy-ridden office properties along LaSalle Street are said to be the focal point of the effort, though several details remain unclear such as the number, types and sizes of properties will be eligible, as well as how much TIF money could be dedicated to them. A Lightfoot spokeswoman declined to comment.
The initiative stands to be Lightfoot’s most impactful move since the onset of the COVID-19 pandemic to revitalize LaSalle Street and its Loop environs. The corridor struggled with big departing office tenants before the public health crisis and has since grappled with a loss of vibrancy on its blocks that has devastated nearby retailers, some of whom have shuttered their stores. Some office landlords along the historic thoroughfare have surrendered properties to their lenders, while others are staring down dire debt troubles while soft demand for office space weakens their bottom lines.
Lightfoot is hoping public subsidies will help breathe new life into the corridor and add to the recent momentum generated by Google, which announced in July that it intends to renovate, buy and bring thousands of jobs to the James R. Thompson Center, LaSalle Street’s severely outdated northern anchor.
Using TIF money to spur downtown development could stir controversy for a mayor that has prioritized development in disinvested neighborhoods over the urban core. TIF districts, which accrue property tax revenue above a baseline number in a designated area for a period of 23 years, are meant to target projects in blighted areas that wouldn’t be redeveloped without TIF assistance. Earmarking such funds for downtown development could be a lightning rod for criticism.
But Lightfoot is acknowledging the need for the city to play a financial role in bringing life back to the Loop. And the move to offer taxpayer funds is in line with a recent city-commissioned Urban Land Institute panel recommendation on how to restore LaSalle Street’s vitality.
The LaSalle Central TIF District, which was created in 2006 to help revive severely outmoded Loop buildings, has been used to fund public infrastructure improvements since 2015. The district’s fund balance as of the end of last year was nearly $197 million, according to its most recent annual report.
One big question facing Lightfoot’s new program is whether it will entice real estate investors to bet on the future of LaSalle Street and the Loop. Residential developers have grumbled about the city ordinance passed last year requiring at least 20% of units in new residential projects to offer rents well below market rates, arguing such units whittle away the financial benefits of such deals. The 30% affordable component would be even tougher to swallow, but help from the city through TIF could help offset construction and other costs.
The city is also bringing public subsidies to the table to try to ensure that affordable units are incorporated into residential conversions at all. The zoning designation for LaSalle Street buildings like Bank of America’s distressed former office tower at 135 S. LaSalle St. already allows for those buildings to be converted into apartments. That means a developer could do so without having to commit to providing affordable units like it normally would to get the city to sign off on a zoning change. In the only residential conversion to date on LaSalle, a Florida developer turned a 13-story office building at 29 S. LaSalle St. into a 216-unit apartment building called Millennium on LaSalle that opened last year with no affordable units.
Apartment redevelopments look good to developers these days amid an apartment construction boom in the city and a cloudy future for other asset types like offices, hotels and retail space. Fueled by a strong job market and growing demand for rental units, average apartment rents downtown hit an all-time high earlier this year, according to research firm Integra Realty Resources.
The ULI panel, which included local developers, architects and urban planners, was tapped by the city earlier this year for ways to draw new types of users to LaSalle and assess what role financial incentives might play in bringing that vision to life.
The panel published a 36-page report in June encouraging the city to create the “LaSalle Landmarks Innovation District” with a framework plan to turn the office-heavy financial district into a more pedestrian-friendly mixed-use destination with residential units, office space that services entrepreneurs and small businesses and service-oriented tenants like grocery stores, medical offices, cafes and restaurants, as well as visitor attractions like art galleries.
The report said financial incentives from the city would be crucial to getting private investors to buy into that vision, especially if any of the properties are to include affordable housing. The panel suggested Cook County’s Class L tax designation, Federal Historic Preservation Tax Credits, Low-Income Housing Tax Credits and Illinois’ recently-passed affordable housing property tax incentive should all be leveraged to help revive older buildings.
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September 21, 2022 at 07:09AM