There’s some good news coming out of City Hall! And chances are, you never heard about it.
Recent changes proposed were low-key, but their potential impact is not.
The City of Chicago recently released a new approach to how they will evaluate proposals for affordable housing. The changes, part of an updated draft of Chicago's 2017 Low Income Housing Tax Credit Qualified Allocation Plan (QAP), establish the expectation that developers will provide affordability across the entire city—from low-income to high-income and everything in between. For a city that’s infamous for its high levels of racial and economic segregation, this is a big and—from our perspective—very welcome deal.
The City's current QAP includes a number of significant changes to their prior year’s QAP, including establishing the following priorities:
- Encouraging investments in transitioning and opportunity areas (defined as areas undergoing rapid economic and demographic shifts, along with a loss of affordable housing, and low-poverty, high income areas, respectively)
- Investing in redevelopment areas as part of comprehensive community revitalization efforts
- Preservation of existing affordable housing stock
- Encouraging accessible, single room occupancy (SRO) and supportive housing units; and
- Inclusion of mixed-income projects across a range of incomes, as well as public housing.
What are Low Income Housing Tax Credits and what’s a Qualified Allocation Plan?
Low Income Housing Tax Credit (LIHTC) funds are the largest and arguably most effective source of funding for the acquisition, rehabilitation and new construction of rental housing for low-income households, representing almost $8 billion annually. Created in 1987, LIHTC allowed the federal government to remove itself from directly funding affordable housing and instead fund it through tax credits for equity investors. Essentially, it’s housing policy via the tax code. (There are many reasons why this is problematic, including that a promised halving of the corporate tax rate would decimate the tax credit’s value, but that’s another blog post). The City of Chicago’s Department of Planning and Development (DPD) is among a select few municipalities that receive a direct allocation of LIHTC resources; in most places, only the state receives an allocation of credits based on its population size.
The QAP is the roadmap for how these credits will be allocated. In recent years, the Illinois Housing Development Authority (IHDA) has been a leader in turning its QAP into an actual policy tool for how and where it believes affordable housing should occur; since making this shift, it has been approving affordability across communities of all income levels. In the past three years since IHDA sought to balance development across historically disinvested and opportunity areas in their QAP, the percentage of developer proposals submitted for projects in opportunity areas increased almost twofold from the first year to the third, from 28% to 44%. In the five years prior to introducing opportunity area metrics, they funded a total of 11 developments in opportunity areas, compared to the 12 developments they approved in these areas for 2016, alone. It is important to note that even with this attention to opportunity areas, IHDA continues to invest in revitalizing areas, striking an important balance between the two.
The City’s change to its own QAP earlier this year is a similarly important step.
For a variety of reasons, the majority of Chicago’s affordable housing funded through LIHTC has been on the South and West Sides of the city. Part of the reason comes from a strong history of community development corporations, which are mostly based in South and West Side communities to fight the disinvestment, deindustrialization, and racism that these neighborhoods have experienced for decades. These neighborhood-based groups rightly seek to build quality, affordable housing in the areas where they are based, and South and West Side communities have benefitted tremendously from their efforts.
The other reason has more to do with economics, supply and demand and, again, racism. Simply put, it’s cheaper to build affordable housing where land values are low, there is plentiful vacant space, and neighbors are less likely to protest. Time is money, and when projects are delayed by political and/or community resistance to affordable housing in areas that lack it, it can hamper the project itself as well as discourage other developers from attempting the same (Ald. Pawar (47th Ward) said as much in a recent press conference, referencing community resistance to Ald. Arena's (45th Ward) support of affordable development in his ward). In light of this, the fact that the City’s draft QAP lays out the expectation of affordable units in high-income areas as well is a welcome step toward ensuring a more balanced approach to expanding affordable housing options across the City.
We would like to explore ways that in the future, the City’s QAP could also strengthen support for projects located along or near established public transit lines, stations and hubs within ½ mile of transit, and couple investments in affordable housing in opportunity and transitioning areas with community support building to combat NIMBYism (the need for which has been on painful display of late in Jefferson Park).
MPC’s Cost of Segregation report examines the results of community investment strategies that concentrate low-income people in certain neighborhoods and in doing so, reinforce economic and racial segregation across our region. In the next phase of our work, we’ll be exploring specific policy strategies that get to the heart of some of the challenges in this region that make low-income households more vulnerable to displacement as a result of changing neighborhoods and rising values, as well as challenges of historical disinvestment, particularly in communities of color.
As we’ve written about before, we err when we make disinvested communities of color the predominant recipients of what should be city-wide and region-wide investments in affordable housing. Doing so not only further entrenches poverty and segregation, but it is also damaging to our overall economy. The City’s recent draft QAP sets the expectation for developers and communities that affordability belongs—and is expected—everywhere. Similarly, the recent commitment from a group of North and Northwest Side Aldermen to support affordable housing in their wards is a promising response to address housing segregation and to ensure that communities reflect the rich diversity for which this City has come to be known.