Low-income housing fund teams with developer on subsidized rentals
Chicago Tribune (IL), 2014-07-23
July 23 --A Chicago developer that has been among the most active firms behind the conversion of dilapidated, very-low-income housing into market-rate apartments is teaming with the city to offer more than four dozen subsidized units to Chicagoans who make no more than $15,200 a year.
The 58 small studio units in four of Cedar Street Cos .' FLATS Chicago buildings in the Uptown and Edgewater neighborhoods represent fewer than 10 percent of the apartments that will be in the buildings, only one of which is open. Still, the program represents the first cooperative effort of its kind between a for-profit developer of several properties and Chicago's Low-Income Housing Trust Fund . It is intended to serve as a pilot for additional collaborations.
The subsidy program comes as Chicago grapples with the thorny issues of gentrification and a loss of affordable housing in some neighborhoods. On Wednesday, the Chicago City Council's housing committee will consider a proposed ordinance that would effectively put a six-month moratorium on redeveloping single-room-occupancy hotels and residential hotels while aldermen devise a long-term solution to maintain housing options for Chicago's very-low-income residents.
The city also has formed a task force of developers, housing advocates and aldermen to consider reforming a long-standing ordinance that allows developers to address affordable housing in their buildings by writing a big check to help those units get built or be preserved elsewhere.
Cedar Street will receive $4.3 million from the fund over 10 years. The quarterly payments will be used to cover the difference between the monthly rent of $255 that qualified low-income renters will pay for a studio in one of the buildings and the market-rate rents of more than $800 for those units.
So far, 13 residents of Lawrence House, an Uptown building that Cedar Street bought and is rehabbing, have relocated to a FLATS Chicago building a few blocks away. When Lawrence House's rehab is complete next year, they will have first dibs on moving back into the building at the subsidized rent level. Two other building rehabs, at 1325 W. Wilson Ave. and 5718 N. Winthrop Ave. , will be completed this fall.
"If it works as we suspect it's going to, we'll be a little more aggressive touching base with landlords," said Tom McNulty , president of the trust fund. "Most of the landlords in that area don't even bother talking to us. They just take their units right to the market.
"Nobody is really happy when that happens, except for the landlord, who understandably is in it for profit," he added. "This collaboration allows for some folks who have been in that neighborhood for a long time to stay there."
Financial support for the trust fund comes from an ordinance that requires many new residential project developers to either set aside affordable units in their buildings or pay an in-lieu fee of $100,000 per required affordable unit into the Affordable Housing Opportunity Fund . As a result, the trust fund has $14.5 million in subsidies budgeted this year, providing about 2,700 units in 600 buildings to very-low-income city residents, according to the city.
But Chicago is considering changing the ordinance to spur development of additional affordable rental units, either by raising the in-lieu payment or requiring development of affordable units.
"There's an ongoing and growing need for affordable housing," said John "Jack" Markowski , president of the Community Investment Corp. and one of the task force's co-chairs. "The question is, how can you use healthy market activity to help address the affordable housing needs without discouraging or depressing market-rate activity, which is important for the city overall."
For Cedar Street, the program is a bit of positive publicity for a company that has been in the cross hairs of community groups seeking to preserve affordable housing in communities like Uptown, rather than watching gentrification displace tenants from cheap yet dilapidated housing. The company began meeting with the trust fund last fall.
"The big part is, we had to convince our banks, our investors," said Jay Michael, Cedar Street's managing partner. "I don't see any downside. It's the right thing to do."
But Michael doesn't support efforts by local community organizations to craft an ordinance that would force developers that convert residential hotels or single-room-occupancy hotels to keep them very affordable. "This is like a taking of rights without any upside to the owner," he said.
Renters find out where subsidized units are located from social service agencies, aldermen and the trust fund. For the FLATS units, potential renters will be screened the same as market-rate renters, but for a rental payment of $255 . Tenants will pay their own utility bills.
The trust fund is constrained by its budget, but McNulty said he hopes that other developers will follow Cedar Street's lead.
"We're convinced it's going to work," he said. "There's nothing wrong with making a little money while achieving social justice."
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