Preservation Compact Leads Efforts to Preserve Affordable Housing
The Preservation Compact has led efforts to lower operating costs in multifamily buildings to help maintain their affordability. Photo Courtesy of The Preservation Compact, Copyright John Booz. The twenty-first century has been a tumultuous time for those seeking affordable rental housing. The market has been stressed by limited supply and rising demand. The housing boom slowed the construction of new rental units, including multifamily rental units. The conversion of multifamily apartments to condominiums combined with rising costs took many rental units out of service. Meanwhile, the recession in 2008 created a growing number of families in need of affordable housing as foreclosures crippled households and communities across the country. Cook County, Illinois is emblematic of these national trends. From 1990 to 2005, the region lost 138,000 units of affordable rental housing, and by 2009, the gap between the number of affordable housing units available and those in need stood at nearly 180,000.
To stem the loss of affordable housing units in Cook County, a coalition of public and private sector leaders formed the Preservation Compact (Compact) in 2005. With funding from the MacArthur Foundation’s Window of Opportunity Initiative, the Compact has seven key focus areas to support preservation and respond to local needs:
- Expand the availability of energy retrofits
- Improve consistency in property taxes
- Develop preservation strategies for 2-4 unit buildings
- Streamline government processes
- Collect and analyze rental housing data
- Coordinate with public agencies on at-risk properties
- Extend preservation resources to suburban Cook County
The Institute for Housing Studies (IHS), a research center funded by the MacArthur Foundation and affiliated with the Real Estate Center at DePaul University, provides critical technical expertise for the Compact. The IHS identifies key trends in the local housing market and provides data support and technical assistance to organizations and local governments working towards the Compact’s mission.
The Compact has had success in making progress towards lowering operating costs in multifamily buildings. Through the Energy Savers Program, administered by the Center for Neighborhood Technology (CNT) and the Community Investment Corporation (CIC), the Compact is leading efforts to build the market for energy efficiency retrofits. To date, the program has provided over 27,000 audits to apartment buildings resulting in 8,800 retrofits and $10,000 in annual average savings for a typical 24-unit building. According to the Compact’s director, Stacie Young of CIC, nearly two-thirds of retrofits have been privately financed following an Energy Savers audit. CIC recently received $8.5 million from Bank of America’s Energy Efficiency Finance Program to expand the efforts of the energy savers program. The Compact also spearheaded efforts throughout Cook County to lower operating costs from property taxes. Prior to 2011, property taxes for multifamily buildings with more than six units were assessed at a higher tax rate than other residential properties, and the system was complicated and unpredictable for property owners The reclassification brought the tax rate down from 20 percent to 10 percent for these multifamily properties, with significant cost savings for building owners and their renters.
Identifying and Responding to New Challenges
Housing market conditions in Cook County have necessitated a strategic refocus of the Compact’s efforts. In 2011, the CIC assumed the coordination of the Compact’s work to address the growing need to preserve the stock of 2- to 4-family housing units. In 2011, the Community Investment Corporation assumed the coordination of the Compact’s work to address the growing need to preserve the stock of 2- to 4-family housing units. These units, which comprise approximately 33 percent of all rental units in the county, have been hit hard by the foreclosure crisis and disproportionately affect low-income communities. A recent analysis of residential property sales by the IHS revealed a large spike in the percentage of 2- to 4-unit properties purchased with cash since 2005, signaling barriers to credit for those looking to finance the purchase of small multifamily properties. While the study did not identify cash purchases as a negative, the researchers indicated that the lack of financing options represented a challenge for the residents of those housing units and that alternative financing options would be an appropriate response.Through CIC’s leadership, the Compact is currently working to develop strategies, including financial products, to facilitate strategic investments in 2- to 4- unit buildings in hard-hit areas. As Mijo Vodopic, Program Officer with the MacArthur Foundation, notes, the detailed picture of local real estate conditions provided by IHS could potentially lead to further support from public, private, and philanthropic sources to stabilize the 2-to-4 family rental market.
The Compact is a unique initiative that focuses exclusively on preservation of affordable housing. Its successes are based on its ability to coordinate existing preservation efforts, identify emerging issues, and adapt its leadership and resources to the rapidly changing housing market. As a result of its successes, the Compact has become a model for facilitating preservation efforts across the United States. So much so that, in 2009, through its Window of Opportunity Initiative, the MacArthur Foundation sponsored preservation programs in an additional 12 states and cities that included some of the initiatives in Cook County.