Hoping to maintain the dwindling supply of low-cost housing, the city intends to float zero-interest loans to developers who sign 30-year affordability guarantees on multifamily properties. Mayor Rahm Emanuel announced the pilot program on Thursday, at least the fourth housing initiative he has unveiled in the last week.
The latest, called the Preservation of Existing Affordable Rental program, targets companies that buy or refinance an apartment building with existing affordable units. It would be administered through the city’s planning and development department, with money from the Affordable Housing Opportunity Fund.
City leaders did not provide details on how many loans would be provided or the amount range, but they pointed to at least one builder who has already made use of it. The nonprofit Chicago Metropolitan Housing Development Corp. secured a $2 million loan to renovate 42 residential units scattered around the North and Northwest Side. In return, the firm signed a commitment to charge below 80 percent of the area median income on 15 of the units.
Developers say the program could work as a kind of opt-in rent control for homes in struggling or up-and-coming parts of the city, but it’s unlikely to have much impact in the kinds of neighborhoods where tenants are getting priced out right now.
“If you have a building where rents aren’t much more than affordable rents would be anyway, then this could be a great idea,” said Alan Lev, CEO of the Belgravia Group. “But if you’re building a high-rise in the West Loop with rents at $3 per square foot, you’re not going to take a zero-interest loan to bring that down to $1 per square foot.”
The announcement is the latest in a rapid-fire series of proposals Emanuel has introduced in his lead-up to a major speech on preserving affordable housing. The issue is expected to become a major plank in his bid for a third term.
Developers last week applauded Emanuel’s move to ease parking requirements for new construction along major bus routes. That came one day after the mayor touted the launch of a $30 million fund he said would provide low-cost financing for residential developments whose owners set aside at least 20 percent of the units as affordable.
And on Monday, Emanuel unveiled plans for an new city department that would oversee a “Five-Year Housing Plan” to preserve affordability.
The City Council has been cranking up pressure on developers to prioritize affordable housing since 2015, when Chicago passed a mandate for owners to set aside at least 10 percent of its residential units as affordable or pay a penalty. Last year, the Council required developers in the burgeoning West Loop and Near Northwest Side to designate 20 percent of residential units as affordable.
The most recent round of sweeteners on existing buildings could ultimately create more affordable units than the requirements call for, which may scare developers away from new construction, according to Paul Colgan, the director of government affairs for the Homebuilders Association of Greater Chicago.
“There’s a misconception that penalties are the best way to get more affordable units built, but in reality, incentives are the way to make it happen,” Colgan said. “It’s a numbers game. If developers can find a way to make the numbers work, they’ll build affordable units all day.”