Chicago to Use Developers’ Fees to Protect Affordable Housing During COVID-19

The program, paid for through inclusionary zoning opt-out fees, is meant to save affordable-housing landlords from going into foreclosure.

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In the second week of April, as the curve of new cases of COVID-19 in Chicago was just beginning to flatten, Chicago’s Department of Housing began offering $1,000 grants to help tenants who were losing income to pay their rent. The Department allocated enough funding for 2,000 grants, but, like many other cities’, the program was no match for the need: 83,000 people applied, meaning that less than 2.5 percent of applicants would get relief, and only partial relief at that, in many cases.

According to Marisa Novara, the city’s housing commissioner, the Department of Housing is now working on putting out a second round of direct grants to tenants. But it’s also trying something different. Late in April, Novara and Chicago Mayor Lori Lightfoot announced a $3 million proposal called Emergency Relief for Affordable Multifamily Properties Program (ERAMP). The program would offer grants or no-interest loans of up to $75,000 meant to keep multifamily properties that include affordable units from defaulting on mortgages and going into foreclosure. The grants would be directed to projects that have received support from the city previously and that provide affordable units under a covenant, according to Novara. And like the program that gave grants to tenants, the new program is funded through the city’s Affordable Requirements Ordinance — the inclusionary zoning program that requires developers to include affordable housing in new multifamily developments or else pay a fee to the city’s Affordable Housing Opportunity Fund.

“I think we are always concerned about a property running so far aground that foreclosure becomes a next step,” Novara says. “Going into this pandemic we already had an extreme shortage of affordable housing, and so our position is that we can’t afford to lose any of the affordable housing that we have and we need people to be able to stay where they are.”

The program, which was approved by the City Council last week, was designed after the Department of Housing conducted a survey of 80-some property owners who provide affordable housing in Chicago, Novara says. Many of them were concerned not only about a loss of rental income as tenants struggle to pay bills but also “a level of cleaning that was not part of their maintenance in the past” because of fears about the spread of COVID-19.

In response to those concerns, the Department of Housing created the relief program. In order to receive a grant, property owners would be prohibited from evicting any tenants for at least the rest of the year, according to one news report. The Department estimates that the grants could help preserve around 3,400 units in 40 properties. Properties that are likely to receive the grants include a range of projects, from 100 percent affordable housing to mixed-income projects with a handful of affordable units. Because of the survey, the Department already has a sense of what the demand for grants will be, and doesn’t expect the program to be “immediately oversubscribed” the way the direct grants to tenants were, Novara says.

“The ERAMP program gives us the opportunity to help an entire building of tenants in one fell swoop by minimizing the chance that the owners will [go into foreclosure],” Novara says. “It allows us to work at a couple different scales.”

Also, due to some property owners’ concerns, the program includes rules that streamline the process for modifying city loans to affordable housing providers, allowing loan terms to be adjusted in a few weeks as opposed to several months, Novara says.

In addition to the grants, the city is also considering a handful of other measures that might protect tenants during the coronavirus outbreak and after, including ramping up landlord-tenant mediation and lengthening the amount of notice time required (currently 30 days) to terminate leases or increase rents, Novara says.

But some advocates say the city should be doing more. Antonio Gutierrez, an anti-displacement organizer with the Autonomous Tenants Union, says that one “blind spot” of the ERAMP program is that it only targets formal affordable housing that’s been supported by the city. Many of the most vulnerable tenants live in lower-rent housing that isn’t , Gutierrez says, and “that seems to be the community … that really need this financial assistance the most.” They say they agree with Alderman Jeanette Taylor, who argued that the ERAMP money should be given directly to renters instead. Beyond that, says Gutierrez, the Autonomous Tenants Union is supporting the movement to cancel rent and mortgage payments during the emergency.

“We all have to consider that developers and landlords and banks are not going to be able to be profitable during this time,” they say. “I think that’s something they all need to accept.”

Leah Levinger, the executive director of the Chicago Housing Initiative, says that advocates are trying to figure out a legally viable path to cancel rent and mortgage payments temporarily. There are ongoing questions about how much the city can do to suspend rents, given the state pre-emption on rent control. What’s more, no jurisdiction anywhere in the country has so far successfully “canceled” rent. But, Levinger says, “What’s critiqueable is where the city has more resources and power than what they’re using.” For example, the Chicago Housing Authority has hundreds of long-vacant units that could be used to house people experiencing homelessness, Levinger says, and the Lightfoot administration could put more pressure on the Authority to fill those units.

“From a human rights perspective that is not OK. From a public health perspective that is not OK. And from a good government perspective that is not OK,” Levinfer says. “There’s a set of available resources that are just sitting on the sidelines as people die.”

Novara says the city is trying to use the funds it collects locally to help people stay housed during the crisis. Of the 2,000 direct grants it gave to tenants, half were distributed through a random lottery, and half were distributed through community organizations, in an attempt to reach people in need who might not have heard about the program on the news or through social media. The Department of Housing is looking at how it can use federal stimulus money to offer more assistance to renters. And it’s pushing for the federal government to provide much more assistance to cities whose tenants struggling to stay afloat.

“This has to be addressed as a national need that requires a national response,” Novara says.

This article is part of Backyard, a newsletter exploring scalable solutions to make housing fairer, more affordable and more environmentally sustainable. Subscribe to our weekly Backyard newsletter.

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Jared Brey is Next City's housing correspondent, based in Philadelphia. He is a former staff writer at Philadelphia magazine and PlanPhilly, and his work has appeared in Columbia Journalism Review, Landscape Architecture Magazine, U.S. News & World Report, Philadelphia Weekly, and other publications.

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Tags: affordable housingchicagocovid-19

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