By Steve Cain
If you were asked to guess which group of local politicians were the strongest supporters of affordable housing, you would probably say the Aldermen and women who identify as Progressives. Maybe you would single out the six members of the Democratic Socialist Caucus since these individuals have been especially vocal in their calls for more affordable housing.
You might say that two developers is not much of a trend. But you would be wrong. These are not isolated incidents. If anything, this pattern is widespread.
But, a quick review of the track record of some of these Aldermen yields a surprising result. The often dismissive and combative stance they have shown to housing developers has resulted in multiple missed opportunities and failed developments. This, despite the diligent efforts of many builders to forge relationships with these Aldermen and to work toward compromises that would result in much needed affordable units. The surprising truth is that there is a major disconnect between the rhetoric and the results of these politicians.
This article looks at the experiences of two housing developers in three neighborhoods, all of whom tried, but ultimately failed, to develop new housing with affordable units. In every case, these proposals met or exceeded the city’s stated affordable housing requirements. To date, none of these proposals has been built. Two died a quiet death. The only property that may break ground will be built “as-of-right.” As a result, the development will be much smaller than originally planned, and will include NO affordable units since no zoning change was granted. (Even this property may never see the light of day, as the pandemic has now thrown its future into question.) This is hardly a record to be proud of for a group of politicians who have put affordable housing at the top of their agendas.
You might say that two developers is not much of a trend. But you would be wrong. Numerous other developers report similar experiences, but are not willing to go public with their stories, either because they were still working with their Alderman, or were simply not willing to risk calling out these politicians whose support they will need for future projects. And this is likely just the tip of the iceberg. Talk to just about any developer in the neighborhoods in which far-left Aldermen hold sway, and you will hear similar stories.
The city is losing scores of affordable housing units in the very neighborhoods that need them the most. This is due, in no small part, to the increasing hostility of these Aldermen toward our industry.
The impact of these decisions is cumulative. The city is losing scores of affordable housing units in the very neighborhoods that need them the most. This is due, in no small part, to the increasing hostility of these Aldermen toward our industry.
Aldermanic prerogative enables this behavior, but does not fully explain it. A bigger reason seems to be the growing disdain the political class has for the business community and the market system more generally. This disdain has grown exponentially among the far left of the Democratic Party.
It should not be lost on anyone that, by denying builders the ability to build, these Aldermen are perversely limiting the supply of housing even as demand continues to grow. The predictable result is that home prices and rents will keep rising. As always, the heaviest burden falls on low and moderate-income households. Here are just a few of the stories that shed light on this problem. Although space is limited, make no mistake – these are not isolated incidents. If anything, this pattern is widespread.
Rogers Park:
Sam Goldman, a Director of RPBG, got a lot of attention when he acquired the Heartland Café site and announced plans to build a mix of retail and apartment units, including six affordable, on-site units. This affordable component met the city’s requirements for 10% of the total new units, but went even further by promising to put all of those units on-site. The City’s ARO requires just 25% of the affordable units to be built on-site, allowing an in-kind cash contribution for the other 75%. Sam worked hard to win the support of freshman Alderwoman Maria Hadden (49th Ward). That support never materialized. (Alderwoman Hadden is a member of the City Council’s Progressive Reform Caucus, but is not a member of the Democratic Socialists.)
Ultimately, Sam elected to move forward with an as-of-right development that would produce fewer units, but require no affordable component. The current ARO only requires affordable units if the city grants a zoning waiver, or provides some other public funding. Sam required neither of these to build, and so settled for fewer units with no affordable set-aside. Ironically, the pandemic now threatens to derail even this scaled-back development. For now, the Heartland Café site remains vacant.
Logan Square:
In Logan Square, developers have never had an easy time working with Carlos Ramirez-Rosa (35th Ward), the original Democratic Socialist City Council member, and now one of six Aldermen in the Chicago City Council who identify under this banner. A developer who wishes to remain unnamed put a property under contract in the summer of 2019 that included a six-unit building, a vacant two-story commercial building and a small, single-family-zoned lot. This developer initially proposed a rezoning that would have created 21 co-living units on these three separate, but contiguous, parcels.
Ramirez-Rosa’s message seems to be, high-density development is fine if all the units are affordable, but market-rate developers need not apply.
Initially, Alderman Ramirez-Rosa indicated he liked the plan since co-living creates “naturally occurring” affordable units, but stated he would not allow a rezoning of the single-family lot. As a result, the developer revised his plans to just nine additional units plus the existing six-flat, believing he had the preliminary support of the Alderman. But, as the developer describes it, Ramirez-Rosa “went silent” as the purchase option ran against the clock.
Ramirez-Rosa’s unwillingness to negotiate in good faith made renewal of the purchase option untenable. As a result, instead of 15 to 21 new and renovated naturally occurring affordable units in a high-demand area, the neighborhood got nothing. The six-flat, vacant office building and single-family lot remain undeveloped and unproductive.
The proposed development was within walking distance of the Logan Square Blue Line station, exactly the type of location in which the City wants to create higher density development under TOD (transit-oriented development) zoning. But Ramirez-Rosa has gone the opposite direction, downzoning a stretch of Milwaukee Avenue between Kimball and Central Park soon after he got elected, effectively holding hostage any new development that does not give him what he wants.
And what does he want? One indication would be the much larger and denser, all-affordable development of city-owned land adjacent to the Logan Square L-station. His message seems to be, high-density development is fine if all the units are affordable, but market-rate developers need not apply.
Pilsen:
In Pilsen, where Byron Sigcho-Lopez (25th Ward) defeated disgraced Alderman Danny Soliz in the last election, developers are reporting similar challenges. The same developer who ran into a wall in Ramirez-Rosa’s 35th Ward experienced similar difficulties in this booming South Side community.
Another opportunity for new rental housing with a significant affordable component was lost to the inattention, if not outright hostility, of Alderman Sigcho-Lopez.
About a year ago, this developer put a two-acre property under contract which included a school, a church and other under-utilized or vacant buildings. The developer planned to keep the school, deed the church back to a religious organization, and redevelop the remaining buildings and land with 138 new and renovated units that would have included 28 on-site affordable units (20% of the total). Like Sam Goldman’s Heartland proposal, this offer more than met the City’s affordable requirement. For the Pilsen site, the ARO requires a 20% set-aside. But only one-quarter of these units would have been required on-site.
The most likely explanation is the complete lack of trust left-leaning politicians appear to have in market economics. This anti-business mindset only seems to grow from year to year.
The Chicago Department of Planning and Development loved the concept and was fully supportive of the plans. But not so, Alderman Sigcho-Lopez, who would neither commit to nor even discuss the proposal after fitful and inconclusive initial conversations. As with his Logan Square project, the developer had to let the purchase option expire. Another opportunity for new rental housing with a significant affordable component was lost to the inattention, if not outright hostility, of the local Alderman.
The Problem Remains:
Looking at these examples, one can reasonably ask – why would these Aldermen oppose reasonable development proposals that would benefit their communities and help the constituents they purport to represent?
There are probably different answers for different politicians. It may be that some see political advantage in maintaining the social tensions between different ethnic, income and racial groups. Less cynically, it may simply be a function of ego and opportunity. Aldermanic prerogative is alive and well in Chicago, and Aldermen have long enjoyed broad authority in their Wards.
Declaring that something is a human right does not solve the problem of how to pay for it.
But the most likely explanation is the complete lack of trust left-leaning politicians appear to have in market economics, and their conviction that they can orchestrate better outcomes than the market, if left to its own devises. And let’s face it – these politicians are ascendant in Chicago and other large cities around the country.
The medium to long-term impact on the business community is concerning. It is likely no coincidence that the rise of the anti-capitalist political class corresponds with growing unfunded pensions, rising real estate taxes and an increasing movement of people out of the state.
This anti-business mindset only seems to grow from year to year. The far left seems to believe that social justice and market economics are fundamentally incompatible, and that there can never be a just society as long as market forces and a capitalist system prevail.
This is the biggest problem we face as business people, and as housing developers and providers. The far left believes housing is a human right. That may be true. But declaring that something is a human right does not solve the problem of how to pay for it.
One part of any solution to the lack of affordable housing is to allow builders to build. Politicians’ belief that they know better than the market what is needed is pure hubris and ego. Russia and Cuba provide two cautionary tales of where this mindset, taken to its logical extreme, can lead.
An objective view of outcomes in the Wards represented by these three Aldermen strongly suggests that government oversight has run amok while market forces are being suppressed and ignored. The predictable result, at least for now, is that everyone is losing.
In Chicago, this mindset is demonstrably contributing to the problem. These politicians may have the power to block our housing developments. But what does this really accomplish, and what are the real impacts on real people?
There are always going to be differences of opinion about the right balance between government oversight and market forces. But an objective view of outcomes in the Wards represented by these three Aldermen strongly suggests that government oversight has run amok while market forces are being suppressed and ignored. These stories are hardly unique. In fact, they have become the rule.
The predictable result, at least for now, is that everyone is losing. Everyone, that is, expect the politicians.
– Steve Cain edits, writes and publishes for the Rogers Park Builders Group’s quarterly newsletter The Builder. The RPBG is an affiliate of the NBOA.