Unlocking Affordable Housing: Chicago's ARO Successes and Challenges
Table of Contents:
- Introduction
- Overview of Chicago's Affordable Requirements Ordinance (ARO)
- History of the ARO
- Application and Triggers for the ARO
- ARO Requirements for Residential Developments
- Different Zones and Requirements
6.1. Downtown Zone
6.2. Higher Income Areas
6.3. Low Moderate Areas
- In-Lieu Fee Payments and the Affordable Housing Opportunity Fund (HOF)
- Impact of ARO on Land Costs and Market Prices
- Success and Challenges of the ARO
9.1. Measuring Success of ARO
9.2. Pilot Programs and Results
9.3. Funding Affordable Housing through ARO
- Lessons Learned and Future Considerations
10.1. Articulating Clear Policy Goals
10.2. Balancing In-Lieu Fees and Production of Units
10.3. Managing On-Site and Off-Site Units
Introduction
Chicago's Affordable Requirements Ordinance (ARO) has been in effect since 2003 and has undergone major overhauls in 2007 and 2015. The ARO aims to create more affordable housing units and generate additional funding for affordable housing development through in-lieu fee payments. This article provides an in-depth analysis of the ARO, its history, implementation, impact, and challenges.
Overview of Chicago's Affordable Requirements Ordinance (ARO)
The ARO is designed to leverage strong markets and promote the development of affordable housing in Chicago. It applies to residential projects of ten units or more, triggered by public benefits such as city land, financial assistance, or zoning changes. The ARO requires a certain percentage of units to be affordable and allows developers to pay in-lieu fees instead of building on-site units.
History of the ARO
The ARO underwent significant changes in 2007 and 2015 to enhance its effectiveness. The 2007 overhaul increased the affordability requirement to 10% of units and adjusted the in-lieu fee to $100,000 per unit. In 2015, the ARO introduced three zones based on economic factors and adjusted the in-lieu fee payments accordingly. These changes aimed to address the diverse markets in Chicago and promote affordability in different areas.
Application and Triggers for the ARO
The ARO applies citywide and is triggered by various factors, including city land, financial assistance, and zoning changes. Residential developments of ten units or more are subject to the ARO, except for renovations of existing units. Downtown plan developments and projects receiving direct city financial assistance have higher affordability requirements, reaching up to 20% of units.
ARO Requirements for Residential Developments
The ARO focuses on the production of new affordable units in residential developments. Units must be delivered before or at the same time as market-rate units. Different zones have varying requirements, with downtown and higher income areas facing higher affordability obligations. The ARO also allows the use of density and transit serve location bonuses to encourage developers to build more affordable units.
Different Zones and Requirements
Chicago's ARO classifies different areas into three zones based on economic factors. The downtown zone has its own requirements, while higher income areas and low moderate areas have separate criteria. Each zone has different affordability obligations and in-lieu fee payments based on market conditions and the need for affordable housing.
In-Lieu Fee Payments and the Affordable Housing Opportunity Fund (HOF)
Developers have the option to pay in-lieu fees instead of building on-site affordable units. These fees go into the Affordable Housing Opportunity Fund (HOF), which supports affordable housing development and provides funding for the Low-Income Housing Trust Fund. The HOF plays a crucial role in leveraging in-lieu fees to create affordable housing units and address the demand for affordable housing in Chicago.
Impact of ARO on Land Costs and Market Prices
Chicago's ARO aims to generate funding for affordable housing without burdening developers with additional costs. However, the cost of land in strong markets does not necessarily reflect the ARO requirements. Developers in Chicago's robust market often absorb the costs, relying on the high rental prices to compensate. The market's strength and demand for housing in Chicago give the city leverage in implementing the ARO.
Success and Challenges of the ARO
Measuring the success of the ARO requires analyzing the number of affordable units produced and the amount of in-lieu fees collected. Since 2007, around 800 affordable housing units have been created, with approximately $94 million collected in in-lieu fees. Pilot programs have also been successful in producing additional affordable units. However, administering the ARO, managing off-site units, and addressing gentrification and displacement remain ongoing challenges.
Lessons Learned and Future Considerations
Clear communication of the policy goals of an inclusionary zoning program is crucial to ensure that stakeholders understand its purpose and limitations. Balancing in-lieu fees and production of affordable units is essential to incentivize developers while fulfilling the affordability obligations. Additionally, managing on-site and off-site units requires careful planning and coordination to ensure quality and timely delivery.
Highlights:
- Chicago's Affordable Requirements Ordinance (ARO) aims to create affordable housing units and generate funding for affordable housing development.
- The ARO applies to residential projects with ten or more units triggered by public benefits, such as city land, financial assistance, or zoning changes.
- Different zones in Chicago have varying affordability obligations and in-lieu fee payments based on economic factors and market conditions.
- In-lieu fees collected under the ARO contribute to the Affordable Housing Opportunity Fund (HOF) and the Low-Income Housing Trust Fund.
- The ARO has been successful in producing affordable units, collecting in-lieu fees, and leveraging large-scale developments.
- Challenges include managing off-site units, balancing in-lieu fees and unit production, and addressing gentrification and displacement.
FAQ:
Q: How does Chicago's Affordable Requirements Ordinance work?
A: The ARO applies to residential developments triggered by public benefits, requiring a certain percentage of units to be affordable. Developers can either build on-site affordable units or pay in-lieu fees, which contribute to the Affordable Housing Opportunity Fund.
Q: What are the different zones under the ARO?
A: Chicago's ARO classifies areas into downtown, higher income, and low moderate zones, each with specific affordability requirements and in-lieu fee payments based on economic factors.
Q: What is the impact of the ARO on land costs and market prices?
A: Land costs in strong markets do not necessarily reflect the ARO requirements. Developers in Chicago's robust market often absorb the costs, relying on high rental prices to compensate.
Q: How successful has the ARO been in producing affordable housing units?
A: Since 2007, around 800 affordable housing units have been created under the ARO, with approximately $94 million collected in in-lieu fees. Pilot programs have also been successful in producing additional affordable units.
Q: What are the challenges of the ARO?
A: Challenges include managing off-site units, balancing in-lieu fees and unit production, and addressing gentrification and displacement. Administering the ARO and ensuring compliance with affordability obligations also pose ongoing challenges.
