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New Program Will Spur Affordable Housing Development in Chicago

In Practice
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New Program Will Spur Affordable Housing Development in Chicago

Image of Chicago Coalition for the Homeless
Chicago Coalition for the Homeless
Acquiring funds to develop affordable housing was never easy, even before the national foreclosure crisis. In the “post-bubble” market, however, creating affordable housing has become even more challenging, particularly in major metropolitan areas. With support from a local coalition, the city of Chicago met the challenge of encouraging development in an uncertain economic climate by passing the Home Sweet Home ordinance in May 2011. This ordinance is expected to spur redevelopment of vacant buildings for affordable housing using tax increment financing (TIF).

Housing Availability and Affordability

Two major impediments for low-income renters are availability and affordability. According to the DePaul University Institute for Housing Studies, Cook County needs 180,000 units of affordable rental housing to meet current demand, a 10-percent increase since 2005. This gap is projected to increase significantly over the next 10 years. In addition, the number of low-income renters (those earning less than $35,000 per year) who are paying more than 30 percent of their income in rent has also increased.

Chicago has been hard hit by foreclosure. Although largely viewed as a problem among single-family homeowners, foreclosure has affected about 81,000 units of multifamily rental housing in Chicago — most of them located in low-income communities.

Home Sweet Home

The Sweet Home Chicago Coalition, made up of community groups and labor unions, worked with the city of Chicago for almost two years to increase opportunities for development of affordable housing. The ordinance is significant because it encourages developers to redevelop multifamily rentals using TIF funds, which can cover purchase and rehabilitation costs. TIF is a tool used by local governments to spur economic growth by redeveloping blighted areas. Property taxes in a designated area, known as a TIF district, are frozen at the time the district is established. Increases in property taxes or tax increments (often resulting from redevelopment efforts within the designated area) are captured by the local government and used to pay down bonds floated to finance new developments or any additional improvements within a TIF district.

To receive TIF funds, participating developers will be required to reserve a certain percentage of units for people who make less than 50 percent of the area median income. The percentage of affordable units in a project will depend on the amount of TIF funding that the developer uses for permissible costs, but will typically be between 30 and 50 percent. The properties must be located in one of the Chicago’s 166 TIF districts.

In conjunction with its community partners, the city of Chicago is currently testing the program. Because of TIF requirements, funds generated in a particular district must return to that same district — a challenge, but not an insurmountable one. Three districts will be chosen in the coming year, and the program will be fully implemented sometime in the next few years. Community groups will continue to work with the city to ensure that properties are available and that developer interest in the program continues.


“You can have all the great ideas you want,” says Eithne McMenamin, senior policy analyst at the Chicago Coalition for the Homeless and one of the conveners of the Sweet Home Chicago Coalition, “but you need the funding to make them happen.” The ordinance, which was modeled on other local TIF-based programs, shows that even cities hard hit by the foreclosure crisis can find flexible funding mechanisms to tackle their housing affordability issues.


The contents of this article are the views of the author(s) and do not necessarily reflect the views or policies of the U.S. Department of Housing and Urban Development or the U.S. Government.