Potential remakes of residential hotels pose concerns
Chicago Tribune (IL), 2014-05-28
May 28 --They're called single-room-occupancy hotels or residential hotels, and the frequently dilapidated structures are often the housing of last resort for those down on their luck, a step away from homelessness or a shelter.
The buildings also are a slowly vanishing breed in Chicago , which is why efforts are underway to preserve, and possibly improve, the stock of affordable housing for Chicago's most financially struggling residents.
At the same time, though, such a move could thwart private investment in neighborhoods.
In the past three years, more than 2,200 rooms in residential hotels have been converted by developers into higher-priced apartment buildings. Now, a coalition that includes community groups and aldermen is fine-tuning a proposal that could require developers to either keep most of the units for the very-low-income or write a check. Also, tenants required to move could receive relocation assistance.
Chicago would not be the first city to enact laws to ensure the existence of this form of housing. Regulations are in place in San Francisco , San Diego and Los Angeles .
Efforts to preserve Chicago's residential hotels, which aldermen are expected to outline Wednesday and then introduce as an ordinance as soon as June's City Council meeting, go to the heart of how much government can regulate private sector developers to think socially, assisting consumers like Tim Mahnke .
The 41-year-old has called Milshire Hotel Chicago in the city's Logan Square neighborhood his home for the past three years. Unable to find a full-time job after a string of jobs in shipping and receiving, Mahnke tries to pick up hourly manual labor jobs for cash while standing at a corner in the Avondale neighborhood.
His evenings are spent at Milshire, where the rent of $160 a week gets him a room of his own with a microwave, a small refrigerator and a shared bathroom. Some places rent by the week, some by the month, but none requires a long-term lease.
"I consider it home," he said. "It's a roof over my head and it beats sleeping out on the street or in the park. If I had a steady income each week, I would have moved already, but until I do, I have to do what I have to do."
Last month, he and other residents received a notice that the building was to be sold and they must leave by Saturday. No sale deed has been recorded with the county, but M. Fishman & Co. , an apartment developer and manager heavily invested in Logan Square , has registered an entity with the state that has the same address as Milshire. Company representatives could not be reached for comment.
The uncertainty that Mahnke faces has been experienced by hundreds of other local residents who say they can't afford to pay more if their buildings are remodeled and repositioned to serve more-affluent tenants.
If the early wording of a proposed ordinance circulated among aldermen and community groups is any indication, the business model may no longer be so attractive.
In that early draft, a developer could not obtain a building permit connected to the conversion of a residential hotel unless 75 percent of the redeveloped units were made available to very-low-income individuals. That would equate to a maximum monthly rent of $663 for a studio rented to someone with an annual income of $25,350 . Studios at the newest apartment towers in downtown Chicago , by comparison, have starting rents of about $2,400 a month.
Otherwise, the developer could be required to contribute a fee amounting to 75 percent of the building's replacement cost to a city-administered fund that would be used to preserve and improve existing residential hotels.
Also, displaced tenants who had lived in a building for at least 30 days could receive relocation assistance amounting to either three times their monthly rent or $2,000 per unit, whichever was greater.
"This doesn't prohibit any of the conversions," said Ald. Ameya Pawar , 47th, who is among the aldermen expected to be lead sponsors on the proposed ordinance. "What it does is put a process in place. At the end of the day, if the city only becomes an island for wealthy people, that's not sustainable. You need people from all levels of income to be able to live in the city, or it doesn't work."
Such a law would most assuredly alter the strategy of for-profit buyers like Cedar Street Cos ., which has bought eight buildings in Chicago and is renovating them into market-rate housing under its FLATS Chicago brand, renovations that come with free Wi-Fi, washers and dryers in every unit and higher rents.
At 4875 N. Magnolia in the Uptown neighborhood, units that rented for $600 per month under previous ownership now are priced for as much as $830 . The firm has a transition team that helps tenants in the residential hotels find alternative housing, but some tenants say the alternatives aren't realistic.
"So many of these tenants, the majority, are in much better situations now than they ever were prior," said Cedar Street co-founder Jay Michael. "If organizers and anyone else doesn't like it, OK. Anyone has the right to buy these buildings. These have been such dilapidated housing structures for so long."
Outside the potential regulation, Michael said he has been working with the city to help house very-low-income residents. He has seen the early draft of the ordinance, and if it stands, "it would change what we're doing," he said. "It will change the landscape, but I don't think it's going to solve what they want to solve. The housing isn't livable. Just to keep people in housing because it feels like it's the right thing to do isn't right."
FLATS is about to embark on its most ambitious project, the gut renovation of Lawrence House, a 1920s Uptown building it purchased last year with about 370 units that racked up building code violations over the years that included "unsanitary and offensive condition caused by animals," according to city records.
Brian Packard , a six-year resident of the building, moved out of Lawrence House three weeks ago and is looking for a permanent home, one that wouldn't cost more than $600 a month. Like some other tenants in residential hotels, he receives federal disability payments and doesn't work, so higher rents aren't a realistic option.
If an ordinance passes, "it'll slow them down, the market-rate developers," Packard said. "It'll improve the conditions. I think it will make them take care of their buildings instead of going to court and paying thousands in fines."
Kenae Martin has been down this road before. Previously a resident of Astor House, which also was sold to developers, he and his roommate moved a year ago into a large studio at Lawrence House that rents for $550 a month with no credit check or deposit required. They are among the last tenants in the building.
Now Martin, a 39-year-old disc jockey still weakened from the effects of a stroke six years ago, and his roommate, an employee at a package delivery company, are waiting to see if they are accepted into a building nearby that will rent for $650 a month. That much they can afford, but $800 would be tight, he said.
"They call it the working poor," Martin said. "It's hard to prove in this city that just because you're low income, you're still good people. A lot of companies don't want to deal with that. There is such a thing as low-income people that have their (stuff) together."
Ald. Walter Burnett , 27th, another expected lead sponsor of an ordinance, said he has six residential hotels in his ward at risk of conversion. Some of the tenants are veterans, others are working people.
"We don't mind you all coming to these neighborhoods, doing development, making some money," Burnett said. "Help yourself, but don't leave people behind. Nobody is against folks making their money, but at the same time, if you're going to make several millions of dollars, help those poor people living there so they aren't homeless."
(c)2014 the Chicago Tribune
Visit the Chicago Tribune at www.chicagotribune.com
Distributed by MCT Information Services