Uncovering Chicago's Affordable Requirements Ordinance: Lessons Learned

Table of Contents

1. Introduction
2. Overview of Chicago's Department of Housing
3. Background and Evolution of Chicago's Affordable Requirements Ordinance (ARO)
4. Goals of the ARO
5. Triggers for ARO Requirements
6. Different Zones and Requirements under the ARO
7. In-Lieu Fee Payments and the Affordable Housing Opportunity Fund (HOF)
8. Impact of ARO on Rental Units vs Homeownership
9. Challenges and Lessons Learned in Administering the ARO
10. Measuring Success: Units and In-Lieu Fee Collections
11. Leveraging Mega Developments to Create Affordable Housing
12. Local Preferences, Gentrification, and Fair Housing Concerns
13. Balancing In-Lieu Fees and Incentives for Developers
14. Managing Off-Site Units in the ARO
15. Conclusion

Chicago's Affordable Requirements Ordinance (ARO): Creating Affordable Housing in a Vibrant City

Chicago, known as the Windy City, is home to a diverse population and a thriving housing market. With the aim of ensuring affordability and inclusivity, Chicago's Department of Housing implemented the Affordable Requirements Ordinance (ARO) in 2003. This citywide ordinance has undergone several overhauls, reflecting the continuous efforts to address the changing housing landscape. In this article, we will delve into the significance of the ARO, explore its goals and requirements, and examine the challenges faced in its administration. Join us as we uncover the impact of the ARO on Chicago's rental and homeownership markets, evaluate its effectiveness, and identify opportunities to further leverage this tool for creating affordable housing.

1. Introduction

Chicago's Department of Housing falls under the jurisdiction of Department C in the municipality. The primary objective of this department is to address the housing needs of Chicago residents and ensure the availability of affordable housing options. The implementation of the Affordable Requirements Ordinance (ARO) has been a cornerstone of the department's efforts to create a more equitable and accessible housing market in the city.

2. Overview of Chicago's Department of Housing

Before delving into the details of the ARO, it is essential to understand the role and responsibilities of Chicago's Department of Housing. This department works diligently to develop policies and programs that support affordable housing, facilitate community development, and promote fair housing practices. They collaborate with various stakeholders, including housing developers, nonprofit organizations, and community members, to achieve their housing goals.

3. Background and Evolution of Chicago's Affordable Requirements Ordinance (ARO)

The Affordable Requirements Ordinance (ARO) has a rich history in Chicago, with its origins dating back to 2003. Over the years, the ordinance has undergone significant revisions in response to changing market conditions and the city's evolving housing needs. In 2007, a major overhaul of the ARO took place, followed by another comprehensive update in 2015. As Chicago prepares for yet another potential overhaul of the ordinance, it is crucial to examine the motivations behind these changes and their impact on affordable housing development.

4. Goals of the ARO

The ARO was implemented with specific goals in mind. Understanding these goals is crucial for evaluating the effectiveness of the ordinance. By leveraging strong housing markets, the ARO aims to create more affordable units in Chicago. Additionally, it seeks to generate additional funding for affordable housing development through in-lieu fee payments. These fee payments contribute to the Affordable Housing Opportunity Fund (HOF), providing essential resources for affordable housing initiatives throughout the city.

5. Triggers for ARO Requirements

To ensure the broadest possible impact, the ARO applies to various types of residential developments that receive public benefits. These benefits include city-owned land, financial assistance, and zoning changes. The ARO requirements come into effect for residential projects consisting of ten or more units. Renovations of existing units are exempt, as the focus is on the creation of new affordable housing units. Furthermore, downtown plan developments and projects receiving direct city financial assistance face higher affordability requirements.

6. Different Zones and Requirements under the ARO

The ARO recognizes the diverse economic factors present in different areas of Chicago. To account for these variations, the ordinance establishes three distinct zones: downtown, high-income, and low-moderate income areas. Each zone has specific requirements to meet the overall goal of creating more affordable housing options. Developers in downtown and high-income areas face higher affordability requirements and increased in-lieu fee payments. In contrast, developers in low-moderate income areas benefit from adjusted fees and lower requirements.

7. In-Lieu Fee Payments and the Affordable Housing Opportunity Fund (HOF)

In-Lieu fee payments play a crucial role in the ARO. Developers have the option to fulfill their affordability obligations by contributing fees to the Affordable Housing Opportunity Fund (HOF). This fund serves as a dedicated resource for affordable housing development and provides subsidies to low-income renters. The collection of in-lieu fees helps bridge the gap between the demand for affordable housing and the available resources. It is essential to examine the impact of these fees and the allocation of funds within the HOF.

8. Impact of ARO on Rental Units vs Homeownership

The ARO has had a significant impact on the rental market in Chicago. With a robust rental market and limited homeownership opportunities, the majority of units created under the ARO are rental units. The high demand for rental housing in Chicago, coupled with strong market conditions, has allowed developers to absorb the costs of compliance without additional subsidies or incentives. This has resulted in a substantial number of affordable rental units being created, addressing the pressing need for affordable housing in the city.

9. Challenges and Lessons Learned in Administering the ARO

Administering the ARO presents unique challenges that require careful management and oversight. One of the key challenges is staffing, as the department responsible for administering the ordinance operates with limited resources. Additionally, ensuring clarity in policy goals and expectations is crucial. Balancing in-lieu fees and incentives for developers poses another challenge, as finding the right balance is essential to encourage affordable housing development without burdening developers. Managing off-site units and maintaining their quality and compliance add another layer of complexity to the administration of the ARO.

10. Measuring Success: Units and In-Lieu Fee Collections

To assess the effectiveness of the ARO, measuring success is essential. By analyzing the number of affordable units created and the in-lieu fee collections, policymakers can evaluate the impact of the ordinance. Since its implementation in 2007, the ARO has facilitated the production of approximately 800 affordable housing units in Chicago. Furthermore, the collection of in-lieu fees has reached around $94 million, providing critical resources for affordable housing development and support programs.

11. Leveraging Mega Developments to Create Affordable Housing

Mega developments, such as the Lincoln Yards project, present an opportunity to leverage the ARO and create a significant number of affordable housing units. By negotiation during the plan development process, developers can commit to a percentage of affordable units and in-lieu fee payments, contributing to the city's affordable housing stock. Exploring the successes and challenges faced in these major developments can provide valuable insights into maximizing affordable housing opportunities.

12. Local Preferences, Gentrification, and Fair Housing Concerns

Addressing gentrification and preserving the socioeconomic diversity of neighborhoods is a critical aspect of the ARO. However, local preferences and fair housing laws present challenges in achieving this goal. The ARO's efforts to prioritize existing residents and targeted marketing are steps towards ensuring affordable housing is accessible to those facing displacement. An ongoing dialogue is necessary to strike a balance between local preferences, fair housing laws, and addressing the challenges of gentrification.

13. Balancing In-Lieu Fees and Incentives for Developers

The determination of in-lieu fees is a delicate balancing act. While the fees play a vital role in funding affordable housing development, setting them too low may discourage developers from building affordable units. Finding the right balance is crucial to incentivize developers to create affordable housing while maintaining the financial viability of their projects. By ensuring fees align with the cost of producing affordable units, the ARO can better encourage developers to fulfill their obligations through housing creation.

14. Managing Off-Site Units in the ARO

Off-site units present unique challenges in terms of quality, location, and timing. Developers often seek cost-effective solutions, which may compromise the overall quality of off-site affordable units. Close monitoring, rigorous inspections, and clear guidelines are essential to maintain the integrity and compliance of off-site units. By effectively managing the off-site unit process, cities can achieve a more equitable distribution of affordable housing while upholding quality standards.

15. Conclusion

Chicago's Affordable Requirements Ordinance (ARO) has played a crucial role in creating more affordable housing in the city. Through its various requirements, triggers, and in-lieu fees, the ARO has leveraged strong housing markets and generated resources for affordable housing development. However, challenges in administration, responding to gentrification concerns, and finding the right balance of incentives and fees remain. By continuously evaluating and refining the ARO, Chicago can continue to address the pressing need for affordable housing and create a more inclusive and vibrant city.

🌟 Highlights

• Chicago's Affordable Requirements Ordinance (ARO) aims to create affordable housing by leveraging strong housing markets and generating resources through in-lieu fee payments.
• The ARO applies to residential developments receiving public benefits, with requirements triggered by zoning changes, financial assistance, or city-owned land.
• The ordinance distinguishes between downtown, high-income, and low-moderate income areas, each with specific affordability requirements and corresponding in-lieu fees.
• The majority of ARO units created in Chicago are for rental housing, with developers absorbing costs without additional subsidies due to the strong rental market.
• Administering the ARO presents challenges such as limited staffing, balancing incentives and fees, managing off-site units, and addressing gentrification concerns.
• Measuring success involves evaluating the number of affordable units created and the collection of in-lieu fees, which provide crucial resources for affordable housing initiatives.
• Mega developments offer opportunities to maximize affordable housing through negotiation, commitment to affordable units, and in-lieu fee payments.
• Striking a balance between local preferences, fair housing laws, and addressing gentrification challenges remains an ongoing endeavor.
• Balancing in-lieu fees to incentivize developers while covering the cost of affordable unit production is crucial for the success of the ARO.
• Effective management of off-site units requires close monitoring, inspections, and adherence to quality standards.

🙋‍♂️ FAQs

1. How does the Affordable Requirements Ordinance (ARO) impact homeownership in Chicago? The ARO primarily focuses on rental housing, with limited impact on homeownership units. Market conditions, demand, and cost considerations make it challenging to create affordable homeownership units under the ARO. However, the Lincoln Yards development is an example of leveraging the ARO to include affordable homeownership units.

2. What role do in-lieu fees play in affordable housing development under the ARO? In-lieu fees contribute to the Affordable Housing Opportunity Fund (HOF), which supports affordable housing development and provides subsidies to low-income renters. Developers have the option to fulfill their affordability obligations by paying these fees, which help bridge the gap between demand and available resources.

3. How does the ARO address the challenges of gentrification in Chicago? The ARO aims to mitigate the effects of gentrification by prioritizing existing residents in targeted neighborhoods. Strategies include targeted marketing and ensuring access to affordable units. However, fair housing laws present challenges in implementing local preferences, and ongoing dialogue is necessary to address gentrification concerns effectively.

4. Does the ARO allow for off-site units, and how are they managed? Yes, the ARO permits off-site units within specific parameters. Managing off-site units is crucial to maintaining their quality and compliance. Rigorous inspections, clear guidelines, and monitoring processes are essential to ensure the integrity of off-site units and uphold quality standards.

5. How does Chicago measure the success of the ARO? Chicago measures the success of the ARO by evaluating the number of affordable housing units created and the collection of in-lieu fees. Since its implementation, the ARO has facilitated the production of approximately 800 affordable housing units and collected around $94 million in in-lieu fees, contributing to affordable housing initiatives throughout the city.