A committee of the Chicago City Council last Wednesday approved a $2 million increase for affordable housing.

The Chicago Department of Housing’s ‘New Homes for Chicago’ program uses

business incentives to reduce housing development costs so lower-income Chicagoans can buy homes of their own. More than 2,000 new homes have been built under the program since it began in 1990.

The 50 percent increase to the program’s budget will be funded by the Downtown Density Bonus, which gets its money from developers who want to skirt zoning codes ?” by constructing taller buildings, for example – but do not want to incorporate affordable housing units into their projects.

The bonus fund money is used for affordable housing elsewhere in the city. The fund has $10 million committed for approved projects, according to Molly Sullivan, director of communications for the Department of Housing.

Housing Commissioner John Markowski said the additional funding and other changes approved by the council’s Committee on Housing and Real Estate will allow his department to build new affordable homes, while maintaining high quality. The changes now go to the full council for action.

The proposed changes include increasing development cost limits from $165,000 to $195,000 for single-family homes, and from $230,000 to $265,000 for two-flats.

“What we’ve seen is that in order to participate in this program, developers have been scaling down their homes with reduced square footage, no basements or shallow foundations,” said Markowski.

Michael Burton, development supervisor for Bickerdike Redevelopment Corp., said his firm has built 18 new homes under this program, but that it is no longer financially feasible. He said nearly all construction costs – from land to steel ?” have increased because of the building boom in Chicago and the economic impact of Hurricane Katrina, making it difficult for firms like his to build high-quality homes at the program’s current development levels.

“If we’re really going to be building mixed-income communities in Chicago, I think this new program will help that work better,” Burton said.

Another proposed change to the program will redirect assistance to families who need it most. The department will continue to grant $10,000 of assistance to single-family homebuyers who are at or below 100 percent of the median income of families in the area, currently $75,400 for a family of four.

An additional $30,000 of assistance is available for single-family homebuyers who are below 80 percent of the median income, which is $59,400 for a family of four.

However, under the proposed changes, when families sell a home purchased with program assistance money, they have to pay back the amount they were lent.

“Now what we’re saying is when you sell your home, you need to re-circulate that money to other buyers,” Markowski said.

Markowski said the proposed changes to the program will help his department reach more families and more neighborhoods.