This is a joke, right?

Right? Surely that’s the only explanation for this:

Mayor Emanuel and Alderman Ray Suarez (31st ward) today announced the establishment of an Affordable Housing Task Force consisting of community leaders, aldermen and developers to make recommendations to reform the City’s Affordable Requirements Ordinance (ARO) [more commonly known as inclusionary zoning – DKH] and add 1,000 affordable housing units over the next five years.

One…thousand. Units. Of affordable housing.

Over five years.

To put this in perspective, there are one million, sixty-one thousand nine hundred and sixty-four households in the city of Chicago. Although it’s not the best metric, the standard “housing should take up 30% of your income” rule of thumb suggests that somewhere around half of them need some sort of affordability relief.

Half of one million, sixty-one thousand nine hundred and sixty-four is five hundred and thirty thousand nine hundred and eighty-two.

This is what that number looks like, compared to one thousand:

Oh, but wait! I forgot:

This would represent a fivefold increase over the 187 units created by the ARO since 2007 and ensure that more affordable housing options are offered in high growth neighborhoods.

Great news! They’ve already created 187 units over the last…seven years. So let’s update that chart:

Cool. Looks like we’re well on our way.

There are two major reasons why Chicago’s inclusionary zoning ordinance is so worthless. The first is that developers who trigger IZ have the option of paying $100,000 per unit into the city’s affordable housing trust fund in lieu of actually producing subsidized apartments; given the average price of real estate in city neighborhoods where development takes place, paying that $100,000 “fee” is almost always cheaper than actually giving up revenue on market-rate units.

The second is that IZ only applies to projects with at least ten residential units. Unfortunately, Chicago has made it illegal to build projects with more than ten units in the vast majority of the city outside of downtown. Shockingly enough, if you make it illegal to trigger IZ, then not very many people will trigger IZ.

In combination, these two issues cripple what could be a semi-promising program. They’re why it’s produced only twenty-five affordable units a year since 2007, and why it’s taken over a decade for IZ to produce a single unit of affordable housing in Lincoln Park, a neighborhood that needs them more than almost anywhere in the city.

Actually, though, it’s worse than that. Because once that $100,000 per unit is given to the city, the money is spent on subsidized housing projects that are almost uniformly built in segregated neighborhoods with high concentrations of poverty. In effect, our IZ ordinance is encouraging economic – and racial – segregation. On the one hand, that’s obviously the opposite of what it’s “supposed” to do. On the other hand, Chicago has a long and storied history of promoting racial segregation, so it’s sort of hard to see this as an aberration.

Unshockingly, subsidized housing is extremely concentrated in low-income neighborhoods.
Unshockingly, subsidized housing is extremely concentrated in low-income neighborhoods.

If Mayor Emanuel and Alderman Suarez are serious about turning this ordinance into something that might make even a small difference to Chicago’s affordability and segregation problems, they will either raise the “fee” dramatically, or – better yet – remove the option of paying a fee entirely, and just make everyone build the actual units. They’d also legalize larger developments – ten to twenty-five units, say, or roughly the size of a traditional Chicago courtyard building – in large swaths of the city’s more desirable neighborhoods, since IZ only works by piggybacking off of mid-size to large private development. (They could also, of course, lower the unit threshold to trigger the ordinance – but there’s probably some limit to how small the development can be and still pencil out to be profitable. Besides, if the goal is more affordable units, you’re not going to get there by holding down the size of new projects.)

Then again, if they were serious about this, they wouldn’t have announced a goal of 1,000 units over five years.

More broadly, though, things like this are why I’m generally pessimistic about making traditional affordability programs like inclusionary zoning the centerpiece of housing policy: they’re just vanishingly tiny, compared to the need. And while Chicago has a particularly pathetic version, recall that Los Angeles, which had one of the most ambitious affordable housing programs in the country (a trust fund, in their case), produced only 10% of its needed units before the Great Recession – a number that has since fallen to about 2%.

You need either a truly massive non-market program – taking a third, half, more, of the entire city’s housing out of the market – or you need to allow fairly massive private construction, plus a smaller subsidized program. (The latter, to recap, increases affordability by 1) Allowing lower-cost housing, like apartments, to be built where now only single family homes can be; 2) Increasing the supply of housing; and 3) Allowing the kinds of private projects that generate inclusionary zoning-mandated affordable units.) To be honest, I don’t know that I have a preference between those choices; they both have fairly obvious downsides. But given the political realities of 21st century America – not to mention the financial realities – spending many billions of dollars in a single city to take large amounts of housing off the market seems unlikely, to say the least. If that’s not a realistic option, then the more-private-development-plus-strong-IZ-type-programs seems like the only remaining viable strategy.

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4 thoughts on “This is a joke, right?

  1. “If that’s not a realistic option, then the more-private-development-plus-strong-IZ-type-programs seems like the only remaining viable strategy.”

    This is depressingly true, but the problem with the strategy is that IZ isn’t free. It’s essentially providing subsidized units based on a tax on new development. Meaning that only new development incurs that cost, driving up the cost of building and therefore requiring a higher price to make new development pencil out.

    This has been a problem in DC where they’ve pushed to use IZ more aggressively to add subsidized housing, yet DC’s height limit and other zoning restrictions limit the potential for density bonuses. The law is also applied evenly to rental and for-sale housing, which creates all sorts of problems in trying to re-sell the deed-restricted IZ units: http://www.washingtoncitypaper.com/blogs/housingcomplex/2012/06/16/inclusionary-zoning-pipeline-still-not-exactly-gushing/

    In short, it’s the quid without the pro quo; IZ, but without the ‘more private development’ part.

    As far as the best use of funds, another big problem is the underlying purpose of these ‘affordable housing’ programs. Vague language gets everyone on board with the concept, but the details can be fuzzy and often housing advocates are asking for very different things. In DC, IZ proponents want to build a stock of permanently affordable units in otherwise wealthy areas as a check against gentrification and displacement. Other advocates want to use subsidies to get individuals into ownership and start building equity – recapturing some subsidy via a later market-rate sale and reinvesting that in new units. Both groups take up the mantle of ‘affordable housing,’ but are often working against one another.

    As for the in lieu fees, there’s a strong case to be made that the most efficient use of funds would be to preserve currently affordable housing where it is, rather than try to force things into expensive new construction. IZ can help, but it can’t really provide the heavy lifting for housing subsidies all alone.

    1. These are all really good points. Inclusionary zoning isn’t, of course, free: like you say, it’s basically a tax on new development. There’s no reason that new developers – and the people who buy from them – should have to shoulder the entire burden of these units. And, yes, it does drive up the cost of the private units.

      Unfortunately, those economic and policy vices are also IZ’s political virtues: the money spent on those units never shows up as a line item in the city’s budget, and so politicians can claim that they’re not really spending or taxing. That’s an enormous advantage over other types of affordable housing programs, especially in a financially distressed city like Chicago.

      The point about conflicting goals is also really important. I’m primarily coming at this, as I come at a lot of urban policy, from an inequality perspective that says that economic and racial segregation is one of the primary drivers of bad things in American cities. But I also think that the basic mechanism of IZ – that affordable units are tied to new construction – suggests that it’s one of the best policy levers for getting a bulwark “in otherwise wealthy areas as a check against gentrification” – although I would replace “gentrification” with “segregation.” It’s not my area of expertise, but it’s my impression that there are other levers, like land trusts, that are better for building equity. Both goals, certainly, are important; but if you’re using IZ for something other than creating affordable units in relatively high-income areas (or areas that will soon be relatively high-income), then I think you’re missing one of the few clear opportunities to meet the desegregation objective.

      That last point is related to my forthcoming response to Payton Chung’s really excellent response to this post.

  2. In spirit, I agree with everything you’re saying, but that Chicago Rehab data seems too inadequate and lightweight to serve as the basis for these conclusions.

    1. Yeah, like I said, I don’t even know that I subscribe to the whole 30% of income thing – but I also don’t think the argument here revolves around the precision of Rehab’s numbers. If they were off by a factor of two, and there are only 250,000 units of housing needed, it doesn’t really make a difference re: the effectiveness of inclusionary zoning here.

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