Balanced Development | Affordable Housing Investment | Rental Housing Assistance | Public Housing | Ending Homelessness
Housing Grades
“The private market works well for people who can afford to pay several hundred thou- sand dollars for a home, but, unfortunately, hundreds of thousands of people in our cities are not in that category. And, it’s not just the poor, it’s union members, teachers, police officers, retired people, and young families getting a start in life. It’s millions of Americans, who were once called middle class, but are now referred to as working families. All across America, in cities like ours, in suburbs and in rural communities, hard-working families are struggling because it costs too much to keep a roof overhead. That’s not fair to them, and it’s not good for our country. I truly believe that every American deserves a safe, affordable home ; a home that is a long-term commitment, where their children can study, play and grow up.”
Mayor Richard M. Daley, US Conference of Mayors February 4, 20021
Despite the mayor’s public concern, Chicago’s housing crisis has deepened over the past decade to such a degree that activists and policymakers have begun to describe the situation as a “perfect storm.”2 Unaddressed, these conditions could push hundreds of thousands of people out of the city.
Affordable is a relative term when we talk about housing. According to the U.S. Department of Housing and Urban Development, housing is affordable if you pay no more than 30 percent of your income for your housing costs (rent or mortgage, taxes and utilities). So, someone working at the federal minimum wage earning about $10,000 a year should pay no more than $250 a month while someone earning $100,000 a year should pay about $2,500 a month for housing. Of course, there is a big difference in what is leftover (the 70 percent remaining for non-housing expenses) when comparing the two income levels.
In Chicago, there are about 133,000 households (about 13 percent of households in the city) who can afford no more than $250 month for housing but only about 37,000 apartments that rent for that price.3 This means we are short nearly 100,000 units affordable to poor households—many with individuals working full-time, living on social security, or disability assistance. This also means that most of these household pay too much for the housing they have, which means they have little left for groceries, medical care and transportation.
In contrast, a household bringing in $100,000 or more has about 500,000 rental units to choose from.4 As a result Chicago families earning $100,000 or more tend to be affordably housed, and most put less than 30 percent of their incomes toward housing.5 Providing them yet more options, signs for condos and new homes in many Chicago neighborhoods show prices geared to this high-income household.
Confusing matters, a recent UIC study found that only 20 percent of current and potential Chicago homeowners could afford the city’s median home price of about $250,000.6
So, where do middle-income families—those earning $40,000 to $50,000—find an affordable home in the $125,000-150,000 range? The loss of nearly 100,000 people in Chicago between 2000 and 2005 suggests they aren’t finding it here. It is believed that most moved to the far suburbs where new homes can still be found in that price range.7 The tradeoff for these families is that they may see their cost-savings diminish as a result of increased travel, especially with increased fuel prices.8
For families remaining in Chicago, increasing property values also mean higher taxes, so a greater proportion of a family’s paycheck goes for housing.9 2005 Census data showed one of every three homeowners paying more than 35 percent of income for housing, as opposed to 2000 when that number was one in five.10 This may explain the significant numbers of foreclosures in many communities. In September 2006, Chicago’s foreclosure rate was more than twice the national average.11
Renters often are overlooked despite making up 55 percent of Chicago households. They also feel the pressure of rising housing values. Since 2000, the percentage of renter households that were “burdened” (spending more than 35 percent of their incomes on housing) increased to nearly 50 percent, a 13 percent increase over five years.12 Instead of increasing rents to cover rising taxes and costs, some property owners choose to convert their buildings to condominiums or sell them to condominium developers. Data from the Cook County Assessors Office suggest that Chicago lost half its inventory of apartment buildings with seven or more units between 1984 and 2004. The same time period saw a 94 percent increase in the number of condominiums.13
In a rapidly changing housing market like Chicago’s, the people suffering the most from a lack of affordable housing are those without any housing at all. In FY 2005, the Chicago Department of Human Services served 18,873 people in homeless shelters. But in that same year, they turned away 14,476 adults seeking emergency beds, 5,000 seeking safety in domestic-violence shelters, and 738 young people from youth sanctuaries.14 Most agree that the actual number of homeless individuals and families in Chicago is higher if we count those who are doubled-up or living on the street. The face of homelessness in the 21st century is seen in the growing number of Chicago children who are homeless. Last year, the Chicago Public Schools counted 10,516 homeless students, a 17 percent increase over the previous year.15
One way to change the growing mismatch between housing prices and income in Chicago is to promote balanced development. An affordable-housing “set-aside” requirement is used throughout the country to increase development of affordable rental and owner-occupied units.16 This typically works through a local or state law requiring a percentage of units in all new developments to be af fordable and, therefore, set aside for lower-income families.
Since 2002, advocates have pushed for passage of a Chicago set-aside ordinance introduced by Ald. Toni Preckwinkle to require developments of 10 or more units to make 15 percent of those units affordable to low-income households earning up to 80 percent of the Chicago Area Median Income ($59,600 for a family of four).17 In return, developers would receive cost offsets such as density bonuses, parking reductions and fee waivers. Developers choosing not to set aside affordable units would be required to (1) pay a fee to the Chicago Low Income Housing Trust Fund to provide rent assistance for low-income families, (2) develop 1.5 times the number of affordable units off-site, or (3) rehab double the number of affordable units off-site. In any case, the affordable units would be required by law to remain affordable for at least 30 years.
The proposed set-aside ordinance has never been called for a vote on the floor of City Council.
However, if passed as originally proposed (a 25 percent set-aside with a 5 unit threshold), the ordinance might have generated 13,000 affordable units bet ween 1998 and 2003. Even a modest ordinance, (10 percent with a 10 unit threshold) would have generated 5,000 units during the same time period. Either would have resulted in millions of dollars for the Chicago Low Income Housing Trust Fund.18
Instead, Mayor Daley responded in 2003 with a weaker ordinance that required only 10 percent of units to be affordable when city land is used when sold below market value, and 20 percent in Tax Increment Finance Districts, and then only in city-owned land or financed projects. (Most of these already must be affordable and usually surpass the 10 percent mark). More recently, on October 10, 2006, Daley announced a new initiative to require a 10 percent set-aside in all new developments of 10 or more units either 1) developed on land purchased from the city or 2) requiring a zoning change to increase density, or 3) designed as a planned-unit development.19 The “affordable” units would be for families earning up to 100 percent of the Chicago Area Median Family Income (AMFI), currently $72,400.20
While this action is a minor move for ward, its limitations are serious and its exemptions are many. If a development is not a planned-unit development or in need of a zoning change, then it is exempt unless it is on city-owned land, another challenge given the limited number of sales of publicly owned land in recent years. Perhaps most limiting is allowing developers to build at 100 percent of the AMFI, which virtually ensures that nearly all the affordable units will target people who have other rental options, and very few—if any—will go to those households that need it most.
Releasing his FY 2007 budget, Mayor Daley told the City Council: “This budget offers the new steps we’ll take to help secure Chicago’s future for everyone, especially those who most need our support.”21 Ald. Billy Ocasio (26th) later was quoted as saying “The fact that the mayor mentioned affordable housing 26 times in his speech means he is recognizing that there is an affordable housing crisis in the City of Chicago…it means he’s saying no longer will the burden rest with the African-American and Latino community and that he is going to deliver on affordable housing.”22
Mayor Daley has made many public commitments about affordable housing during his tenure in office and of ten has referred to himself as the housing mayor. Yet he hasn’t put the city’s money where his mouth is—even as development and increasing home prices have generated more tax revenue.
So, while “transaction tax” rates (from real property, personal property leases and motor vehicle lessors) grew 34 percent in the past five years, the city’s financial commitment to affordable housing increased only 7.2 percent.23
When it comes to affordable housing, Chicago is far from being the second city, ranking 22nd out of the 51 largest U.S. cities for funds invested in affordable housing and community developments.24 It spends substantially less than its counterparts on a per-capita basis—less than 40 percent of what’s spent by New York City.25 Current allocation for the Department of Housing is about $15 million. Although the city may argue that leveraging funds from other sources is fiscally responsible and not as costly to Chicago taxpayers, current tax policy clearly points to the fact that affordable housing is not a high priority in the city’s budget. In housing, as in many areas highlighted in this report, the city has made clear its focus on projects and programs that benefit more affluent individuals and communities, rather than those most in need—the poorest of the poor.
Chicago could address its affordable housing crisis by allocating its vast number of vacant lots to affordable housing development. For example, the city owns well over 1,000 units in West Garfield Park, Englewood and West Englewood alone.26 And every month the city reaps large profits by selling more of these lots to developers. Rather than addressing the needs of the poor, the city has chosen to become a major player in the development of market-rate real estate.
When Mayor Daley was first elected in 1989, he quickly pushed for creation of the Chicago Low-Income Housing Trust Fund (CLIHTF) to help to meet the housing needs of Chicago’s poorest residents. The CLIHTF funds and operates the Rental Subsidy Program, which provides annual subsidies that allow rental-property owners to reduce rents for tenants with annual household incomes of no more than $15,850 for a single person and up to $29,600 for a family of four (cannot exceed 30 percent of area median income).27 During its first 16 years of operation, the fund has distributed more than $113 million to subsidize rents in 26,000 units for low-income families and individuals.28 More than half the Trust Fund’s beneficiaries earn $10,000 or less (15 percent of the area median income). The program al lows landlords or tenants to request trust fund subsidies for a unit or a number of units in a building. Subsidies are renewed annually unless an eligible tenant leaves, the units fail to meet building codes, or the landlord opts out. There is no limit on how long a unit or tenant may be subsidized.
The Trust Fund has been a model program, highly successful with tenants and landlords alike. Last year, the State of Illinois duplicated Chicago’s model when it created its own rental-assistance program. When fully operational in 2007, the state initiative will add about $12 mil lion to the CLIHTF. This additional funding will enable Chicago’s Trust Fund to expand rental assistance to another 3,000 rental units, and to initiate a pilot program to house 100 homeless men and women currently living in Chicago’s parks and other outside spaces. This pilot will supplement CLIHTF funds already used to prevent homelessness.29
The Chicago Housing Authority’s Plan for Transformation is the result of a federal mandate that required all housing authorities to determine whet her it was more cost-effective to rehab their deteriorated units or tear them down, provide families with vouchers and send them out to rent apartments in the private market.
The plan guaranteed the CHA $1.6 billion in federal funds to demolish 51 high-rise buildings over a 10-year period and to replace them with lower-density, mixed-income housing. When completed, the plan will have a total of 25,000 units—13,000 less than Chicago had when the plan was approved in 2000.30 Based on the number of occupied units at the time and not the number of families in need, the CHA plan falls well short of the estimated need for 153,000 affordable housing units for people earning less than $20,000 a year, a figure determined by a city-supported study completed before the plan was approved.31
While there was a commitment to provide housing to the 25,000 CHA families when the plan was approved, the CHA has changed its policy. Tenants now must meet stringent tenancy requirements, including regulations mandating that the head or co-head of the household work 30 hours a week. In addition, anyone considered in default of a CHA lease, anyone owing money to a utility company, or ex-offenders with drug offenses are prohibited from occupying new public-housing developments or Section 8 homes. This last exemption reflects the national “one-strike” policy t hat can result in eviction of entire families if one member or a visitor is convicted of a drug-related offense on CHA property. This policy, upheld by the U.S. Supreme Court in March 2002, places entire families in jeopardy for the transgressions of one family member, even if the offense didn’t take place in the CHA apartment.
The CHA announced in September 2006 that it was 60 percent done with the Plan for Transformation. This meant some 8,798 units had been rehabbed for senior citizens, along with creation or renovation of 2,536 units of scattered site housing for families and 915 units in family developments. The CHA claims another 1,940 units of new “mixed-income” family housing were built; however, this number is deceptive since most of the so-called replacement housing was built as the result of court cases settled prior to the plan’s approval.33
While the CHA has been quick to demolish nearly 19,000 units, it has been slow to rebuild.
The process now will take even longer. In September, the CHA also announced that most new replacement housing wouldn’t begin construction until 2009 and wouldn’t be completed until 2015—five years later than planned. This means many families provided vouchers and temporarily relocated—of ten in housing with lead and other code violations—must wait several years longer to return to new public housing. Of course, this assumes that CHA and the city get the funding needed to build these new units. From the start, many public-housing residents were concerned that the plan was overly ambitious.34 A key issue was relocation and early research pointed to potential problems.35 Now, nearly six years into the plan, evidence confirms that many families remain without housing or have been re-segregated into very poor and underserved neighborhoods.36 Many have moved into housing with lead contamination and other problems.37
But this has not happened without a response from public-housing residents and advocates. Well before the Plan for Transformation was conceived, CHA tenants, supported by a broad base of religious and social-justice groups, organized to speak about tenant rights and to demand a seat at the table where a new vision for public housing in Chicago was being conceived.38 Instead, residents learned they were unwanted guests. CHA’s practice, if not policy, is to speak only with the elected representative of each public-housing development, thus effectively excluding thousands of people from speaking for themselves and participating democratically in the decision-making process. Meanwhile, the CHA has ended its contracts with nearly all the Resident Management Corporations that had allowed tenants to manage and maintain their homes. Instead, many of these contracts were handed over to private companies, often within days after they made campaign contributions to the 17th Ward Democratic Organization.39 As noted in the section on corruption, Terry Peterson, former CEO of the CHA is also former 17th Ward alderman. While residents have protested and even sent complaints to the city’s Inspector General and the U.S. Department of Housing and Urban Development, no formal charges were filed and the CHA stays the course wit h its demolition plan.
In 2003, Mayor Daley signed on to a 10-year Plan to End Homelessness in Chicago. The plan aims to transform the homeless service system from one based on shelter to one based on permanent housing and homelessness-prevention.
Developed in conjunction with hundreds of public- and private-sector stakeholders, including homeless people and service providers, the plan calls for sweeping changes. It is a “Housing First” model, focusing on three main tenets: prevention, housing and wraparound services.40 The prevention component aims to reduce the number of people who become homeless because they can’t pay their rent or utilities—the situation that forces an estimated 10-15 percent of people into Chicago’s homeless system. It provides targeted financial assistance to keep people from losing their homes. However, because some people still become homeless, the “housing first” component aims to re-house homeless individuals and families into appropriate and affordable permanent housing within 120 days. Studies have shown that the quicker homeless people move into permanent housing, the more likely they are to succeed and keep that housing. Wraparound services focus on stabilizing homeless households and connecting them to housing and community-based social services. Besides a place to live, many homeless people need medical care, addiction services, mental health services, job counseling and training, income support and a stable community. Emphasis is placed on supportive services that address the root causes of their homelessness, to help maintain their stability and promote community integration once they find permanent housing.41
While this approach to ending homelessness is considered noteworthy and replicated around the country, many have concerns that the plan cannot work without a realistic assessment of the need, as well as significant new resources. Currently the plan has neither.
The city severely underestimated the number of new permanent housing units needed because it only counts people currently in the shelter system, ignoring people on the street and in other precarious situations.
Also, the city has yet to commit resources to create even the limited number of new housing units needed. In 2005 t he total budget for the 10-year plan to end homelessness was $128 million. Only $16.3 million (13 percent) of the total was to be city-funded—the rest is expected to come from other public and private resources.42 Further, only $3 million of this is a new commitment of city resources since 2003, the start of the plan. This is about enough funding to create 18 units of affordable housing and far less than what is needed if Chicago is serious about ending homelessness within 10 years.43 To offset the limited city support, an additional $40 million came from private, non-profit organizations serving t he homeless. Overall, this does not represent an increase in money dedicated to the Plan to End Homelessness from these sources and only a small percentage of these dollars are spent maintaining the existing homeless service system. Finally, the city plans to eliminate more than 1,200 shelter beds by 2012, a 32 percent reduction. Without significant new prevention and permanent housing resources, that reduction will have a devastating effect on vulnerable Chicagoans and stand in the way of any significant accomplishment in eradicating homelessness.
Affordable Housing Investment
Chicago ranks 22nd out of the 51 largest U.S. cities in investing funds in affordable housing and community development, spending 60 percent less per capita than New York City. The city also sells its vacant lots to developers, instead of designating that land for affordable housing development.
Rental Housing Assistance
Chicago has established the Chicago Low Income Housing Trust Fund, which has become a model program across the nation. In its first 16 years of operation, CLIHTF has distributed more than $113 million to subsidize rents for singles and families. More than half of its beneficiaries earn $10,000 or less.
Public Housing
The CHA Plan for Transformation has resulted in demolition of 18,997 units, whereas only 1,964 units have been rebuilt—despite CHA’s commitment to rebuild units for 25,000 families. The plan clearly has benefited developers far more than it has public housing residents, as seen in the many problems with relocation, the overall lack of rebuilding, and the corruption typified by Terry Peterson’s 17th Ward Committee scandal.
Ending Homelessness
The city’s ambitious Plan to End Homelessness in reality makes no attempt to address the root causes of the problem, and fails to adequately assess the needs or commit the resources to create even a limited amount of the new housing stock required to alleviate this massive problem.
Affordable housing has been a so-called priority for the city for many years. Yet looking at the state of housing now, and what it will probably look like in the near future, it becomes clear that the city’s housing policies tend to benefit developers, creating high-end housing rather than true affordable units for those lacking other options. Little money is going to the preservation of existing housing affordable to lower and middle class families. As a result, they will continue to be displaced, forced to find affordable options in t he suburbs and elsewhere. Whereas rental assistance is available through the Chicago Low Income Housing Trust Fund, these monies are limited in t heir ability to offset a continued loss of affordable units for people who don’t qualify for rental assistance. Furthermore, despite a plan to end homelessness, t he need for emergency assistance likely will grow rat her than dissipate. Ending homelessness clearly will be an uphill battle.
Chicago is saved from a failing grade by the positive impact of the Chicago Low Income Housing Trust Fund. The City of Chicago earns:
The City of Chicago earns: D+
For t hose who need it most, Chicago’s housing market is becoming more formidable each day. Public housing is being eradicated, project-based section 8 buildings that house thousands of people are set to expire, homelessness in on the rise, condo conversions have saturated the market, and private low income and affordable housing options have virtually disappeared. The city of Chicago must make the creation and preservation of low-income and affordable housing a priority, before it is no longer possible for those that make this city work to reside in the city that works.