Rental vs. Home Ownership

For years Chicago has confronted a disparity within available housing stock and the ability of individuals and families to acquire affordable housing. The Chicago model of real estate development is one that focuses on the construction of single-family housing and the conversion of rental housing and office space into condominium units. In spite of the growing gap in the number of units being constructed and the number of units sold, the Chicago model has been used increasingly by other major cities.

Current City of Chicago records indicate that between 1989 and 2008, the City of Chicago created 4,354 affordable housing units and 29,437 affordable rental apartments.1 Since 2000, the reported Area Median Income - $45,505 per year in 2007-decreased while more than half of the rental units available for $750 per month or less disappeared.2 The result is that nearly 40 percent of all households, renters and homeowners included, dedicate more than one-third of their total income to housing.3 In 2008, the city decreased its affordable multi-family rental unit stock by 2,419 units,4 thus reflecting the increasing trend of providing more for those whose income is 80 percent or more above the area media income rather than those on the lower end of the spectrum.5

But the picture the city paints of itself is much rosier. According to Pia Hermoso Heslip of the Community Renewal Society, the City of Chicago counts pre-existing but somewhat updated housing as "new" and allows the same unit to be counted multiple times per year. The same goes for creating new "energy efficient units." The city will claim that a new energy efficient unit has been built after offering a pre-existing unit energy efficient light bulbs. As a result, substantially fewer units are new than the city claims. Chicago reports that "13,000 units of [affordable] rental housing were created" in 2008, but according to assessments done by the Community Renewal Society, there were 2,419 units created that year.6

There are two instances in which developers are required to construct affordable housing. Under the Affordable Requirement Ordinance, developers must make 10 percent of units affordable if the project: receives any city land; zoning changes increase project or residential density; the development is "planned"; and if the project receives financial assistance from the city, in which case 20 percent of the units must be affordable.7 Second, if a developer is applying for assistance through the Tax Increment Financing (TIF) districts, they are required to set aside 20 percent of their units at affordable rates. The TIF districts were originally created during the Mayor Harold Washington administration but have been expanded substantially under Daley. TIF revenue is presumably generated to stimulate economic growth in low-income communities that might not otherwise receive revenue for improvements. However, the 2007 audit indicates that although the city of Chicago has generated nearly $1 billion through its 158 TIF districts, the city has invested more in the downtown area than in the surrounding neighborhoods.8 Furthermore, the Sweet Home Chicago Coalition reports that between 1995 and 2007, "only 4 percent of TIF funds were targeted for development of affordable housing," and "in 50 percent of the wards in which TIF-funded housing was built, at least half of the units were too expensive for current residents."9

The city does ostensibly encourage affordable housing development in the downtown area within its TIF districts and through tools such as the Downtown Density Bonus ProgramBut while a developer is able to apply for the tax subsidies and other amenities during construction, he may "opt out" of having to deliver on the actual provision of subsidized or reduced-rate units by paying a fee before the issuance of the Building Permit.10 Thus, builders receive the benefits of the programs without actually having to make the units for which the programs were designed.

The City of Chicago is eager to assess the needs of its corporate friends but less invested in accurately accessing the needs of the people, as evidenced by the city's income targets in constructing affordable housing. When the Department of Community Development calculates the area median income to determine affordable rent requirements, it uses the six-county metro area as its basis, including a majority of the suburbs, which skews the average income far above the urban reality. According to Julie Dworkin of the Chicago Coalition for the Homeless, the households in Chicago that are most in need of affordable housing make less than $22,000 per year, compared to the $45,000 income the city uses as the standard for its requirements for rental housing.11

Additionally, property values and the cost of housing in Chicago have increased without a corresponding increase in income. In 2009, market rent for a one-bedroom apartment averaged $894 per month, meaning that an hourly wage of at least $17.19 was needed to afford it. According to the Center for Housing Policy, the majority of people that make up Chicago's workforce earn less than $17 per hour, and thus even an individual without children is unable to afford the standard rent. Comparably, the median home price in Chicago was $262,000 per year, signifying that an annual income of $85,000 was needed to afford a home.12