Chicago Developers Are Pushing Back Against Affordable Housing Rules

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Shared By Deborah Goonan


Home builders in Illinois have filed suit over a Chicago city ordinance that requires a portion of new residential development to be set aside as Affordable Housing. The city says the ordinance is in the public interest. Developers are calling the requirements of the ordinance unconstitutional. 

Does the US Constitution guarantee absolute maximum profit potential for developers or any other business? Or does it allow two parties negotiating over land use to engage in the process of making agreements, where both sides compromise a little to arrive at mutual benefit? 

Here’s a little irony. Developers certainly don’t mind creating one-sided property use contracts known as Declarations of Covenants, Conditions and Restrictions (CC&Rs) or Declarations of Condominium, and then selling homes or condominium units to buyers, who must then fully comply with the terms of those so-called contracts. In fact, the vast majority of new construction is burdened by deed restrictions and encumbered by Association Governance — usually as a homeowners or condominium association.

Homeowners do not get a chance to negotiate – they have absolutely no role in creating the terms of those Declarations. Yet if an owner violates any terms of the agreement, the Association will likely fine or otherwise penalize the owner. The owner is obligated to pay assessments, and if payments are delinquent, it will result in a lien on the home and possibly even foreclosure by the Association. The Developer is allowed to write all sorts of provisions into the CC&Rs that benefit the homebuilding and owners association corporations, to the detriment of property owners. A home buyer’s only “choice” is to take it or leave it. 

Do Chicago homebuilders think that’s unconstitutional, too? 

Chicago Developers Are Pushing Back Against Affordable Housing Rules

As Chicago prepares to enter a new era of ramped-up affordable-housing development, a key question is whether private developers will go along with the city’s new guidances. A lawsuit filed, in part, by the Home Builders Association of Greater Chicago last Thursday shows signs of possible peril for the city’s low-income housing agenda. At the heart of the lawsuit is the Affordable Requirements Ordinance (ARO), which is part of Chicago’s five-year “Bouncing Back” plan for increasing affordable housing. Mayor Rahm Emanuel believes it will help produce as many as 1,200 affordable units over that span of years.

Developers involved in the lawsuit say the ordinance is unlawful and that it will actually depress low-income housing construction.

Under the ARO, any developer building a new housing project of 10 or more units on land that has been rezoned for residential use must designate as much as 20 percent of the new units to below-market rates. Developers who don’t want to include the affordable units can choose instead to donate a fee currently set at $100,000 “per averted affordable unit” to the city’s Affordable Housing Opportunity Fund (AHOF), which non-profit developers can use for building affordable housing. The ARO was created in 2003, updated in 2007, and again this past March.

For Hoyne, its plan to redevelop a former car dealership into a three-building, 14-unit housing complex was forced under the ordinance to include two affordable housing units—or else pay the fees. Hoyne disputes that it should not qualify under the ordinance, because it counts each of those buildings as a separate project, with fewer than 10 housing units in each. But it’s not just suing the city to have its project reclassified—it’s saying that the entire ordinance violates the Constitution by allowing government to, as they perceive it, claim private properties for its own use.

The Chicago and California cases ask whether cities can force private developers to integrate low-income housing into their projects.

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