In 2021, the Chicago City Council amended the Affordable Requirements Ordinance (ARO), one of the most powerful tools the city has to promote the creation of affordable rental and for-sale housing. Under the ARO, for-profit developers are required to set aside between 10 and 20% of their constructed units for affordable housing, or they can choose to pay an in-lieu fee. They can build affordable units anywhere in the city or repair existing units in addition to what they set aside within their development. While the ordinance has passed, technical rules that govern ARO compliance are still under revision. It is important that the rules support the vision of the new ARO: creating more affordable housing in Chicago. The new ARO resulted from a task force comprised of nonprofit leaders, housing advocates, and market rate developers. The developers reported that the ARO is unclear and difficult to work with, and that managing ARO properties requires a level of expertise that they don’t have. Income-restricted units often come with increased monitoring and compliance that developers are unfamiliar with. Furthermore, developers that primarily build large, new buildings are reluctant to repair existing structures, making the off-site compliance option less popular. Burdensome requirements and management disincentivize the creation of affordable units, counter to the goals of the ARO.
The new ARO resulted from a task force comprised of nonprofit leaders, housing advocates, and market rate developers. The developers reported that the ARO is unclear and difficult to work with, and that managing ARO properties requires a level of expertise that they don’t have. Income-restricted units often come with increased monitoring and compliance that developers are unfamiliar with. Furthermore, developers that primarily build large, new buildings are reluctant to repair existing structures, making the off-site compliance option less popular. Burdensome requirements and management disincentivize the creation of affordable units, counter to the goals of the ARO.
Currently, if a developer does not want to manage the affordable units themselves, they only have two stated partnership options that comply with the ARO:
While the for-sale partnership is quite robust, the CHA partnership is unpopular due to the additional requirements associated with producing public housing, including a minimum number of units to provide, geographic requirements, and an additional CHA approval process.
The DOH should create a clear pathway to becoming an Authorized Agency for non-profit and mission-driven developers, and they should actively participate in connecting those agencies to market-rate developers. Then, the rules should explicitly allow for developers to enter into 30-year leases (the tenure of the mandatory affordability period) with an Authorized Agency, and regain control of the property after the lease tenure ends.
The ordinance allows for partnerships with other Authorized Agencies, but neither the ordinance nor the rules outline a process by which an organization becomes authorized. By creating an on-ramp to authorization, the city will make it easier for developers to find qualified nonprofit partners to develop and manage affordable units. Importantly, the city can publicize this list of partners and provide it to developers during intake meetings, popularizing the partnership option.
City of Chicago
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