AFFORDABLE REQUIREMENTS ORDINANCE (ARO) ISSUE SUMMARY
The City of Chicago’s Affordable Requirements Ordinance requires residential developments that receive city financial assistance including upzoning or involve city-owned land to provide a percentage of units at affordable prices. The ordinance applies to residential developments of 10 or more units and requires that developers provide 10 percent of their units at affordable prices, based on the Area Median Income (AMI). The ordinance also applies if:
- A zoning change is granted that increases project density or allows a residential use not previously allowed
- The development is a “planned development” within the downtown area
Since the 2015 revisions, the Department of Housing has unveiled a dashboard to provide transparency for both the ARO units built and how they are occupied, which can be viewed here.
Post-2015 changes being advocated for include:
- Each zone contains slightly different requirements for the percentage of affordable housing which must be included in a development:
- The Near North Zone requires 20 percent affordable housing, with the first 10 percent on-site or within two miles and in the same pilot zone and/or higher income ARO zone; 10 percent additional may be built anywhere in the same pilot zone;
- The Near West Zone requires 15 percent affordable housing, with the first 10 percent on-site or within two miles and in the pilot zone and/or higher income ARO zone; five percent additional may be built anywhere in the same pilot zone;
- The Milwaukee Corridor requires 15 percent affordable on-site units or 20 percent off-site units within the same Pilot zone; and
- Each of the pilot zones will require 20percent on-site if the project receives TIF funding.
These new requirements will affect new residential developments in the respective zones that contain 10 or more units and a zoning change, or new residential developments in the respective zones that involve a city land sale or receive city funding.
As of November 2019, the Mayor convened an Inclusionary Housing Task Force. The task force consists of 20 individuals, as well as elected and unelected co-chairs. The elected co-chairs are Aldermen Walter Burnett (27th), Harry Osterman (48th) and Byron Sigcho-Lopez (25th). The unelected co-chairs are Stacie Young of Community Investment Corporation, Juan Sebastian Arias of Metropolitan Planning Council and Tony Smith of PNC Bank.
The task force will release results by June of this year and is expected to recommend modifications to the ARO, including increasing the in-lieu fee and the on-site minimums. While there are no real estate, homebuilders or apartment associations on the task force, the city will be holding focus groups to hear other industries concerns.
Meanwhile, a new ruling from the city has reduced developers’ cash flows even more. Developers are reporting the city is requiring personal obligation bonds to ensure ARO units are actually built and offered to affordable tenants. To date, no paperwork has been offered to substantiate this, and the Building Commissioner has no knowledge of this requirement. The REALTORS® may submit a FOIA to substantiate the claim.
UPDATE 9/29/2020: On Monday, September 14, the City of Chicago Department of Housing released the Affordable Housing Task Force Report, which can be read in full here.
The report makes a point of identifying other jurisdictions with similar ordinances and provides a synopsis. The highlighted cities include Boulder, Colo.; Cambridge, Ma; Los Angeles, Calif.; San Francisco, Calif.; and Seattle, Wash. It will be important to do everything possible to learn what works and what’s lacking in these various cities.
One of the recommendations most exciting to REALTORS® is the idea of a centralized leasing and marketing system. A significant complaint of the current way the ARO functions is builders have affordable units that sit vacant for long periods of time and conversely, potential renters and purchasers do not know how to be certified as affordable housing candidates. A centralized leasing office may provide solutions to these problems. A recommendation noticeably missing is a call for increasing the in-lieu (penalty) fee, which is encouraging. An increase of in-lieu fees will be fought vigorously by this association and others.
A proposed ordinance revising the 2015 Affordable Requirements Ordinance may be submitted as early as December, but it is more likely to be submitted in February 2021.
CAR is hosting an ARO Focus Group to discuss these matters and ensure the city understands our position. We remain committed to ensuring Chicago is an environment where private property rights are important. The Task Force is expected to submit a report no later than July 2020. The report will be studied and modifications to the 2015 ARO will be offered. Changes to the Ordinance could be voted on by the end of the year.
Traditionally, REALTORS® oppose any increases in real estate-related taxes and/or fees that will increase the cost of a transaction. When costs prevent housing developments to be built, problems arise because demand is high while supply has been restricted.
- September 29, 2020: Initial Reaction to the City of Chicago’s ARO Task Force Report
- March 9, 2020: Chicago REALTORS® Meet with Representatives from the ARO Task Force
- March 18, 2015: Aldermen OK New Affordable Requirements Ordinance
- May 28, 2015: Navigating the New Affordable Requirements Ordinance (ARO)
- City of Chicago ARO Dashboard
- Full list of Task Force members
- December 11, 2019: Crain’s Chicago Business: Aldermen get an earful on eve of affordable task force’s first meeting
- January 21, 2020: Curbed Chicago: The debate over how Chicago should build affordable housing, explained
- February 26, 2020: Curbed Chicago: Want to live downtown? Renters will have thousands of options. If they can afford it.