City's effort to fight gentrification touches Austin

The Preservation of Existing Affordable Rental housing program launched last spring

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By Igor Studenkov

Contributing Reporter

In the spring of 2018, the City of Chicago's Department of Planning & Development quietly launched a program designed to help developers keep apartments affordable.

The Preservation of Existing Affordable Rental (PEAR) housing program uses city funds to help developers who may not be motivated strictly by profit buy up properties they might not otherwise be able to afford. 

The developers that receive the funding are legally required to keep at least 20 percent of the apartments affordable for at least 30 years. Even if the property passes into the hands of another developer, the requirement will remain in place. 

So far, the program has only helped one developer — the Chicago Metropolitan Housing Development Corporation, which committed to keeping 15 of 42 units it has acquired over the years affordable. 

In exchange, the city's Affordable Housing Opportunity Fund gave the developer a $2 million, interest-free loan to help refinance the debt it took on acquiring the units. The 42 units are in 18 buildings located on the West, Northwest and North Sides—including a two-unit building at 1811 N. Lotus Ave. in Austin.

The PEAR program took a cue from Renters Organizing Ourselves to Stay (ROOTS), a program operated by Communities United, an Albany Park-based community advocacy organization. That program, in turn, was designed to address an issue in Albany Park and other neighborhoods going through gentrification. 

Developers bought up two-flats and other smaller rental buildings and converted them into single-family homes, usually jacking up the prices in the process. So, not only were the neighborhoods losing affordable housing, but they were also losing rental units.

Diane Limas, Communities United's board president, explained that, while there may be mission-oriented developers who weren't simply out to make the biggest bang for their buck, the more profit-driven developers have usually been able to offer a better price. To address this problem, Communities United teamed up with a non-profit lender to help Chicago Metropolitan buy properties it wouldn't normally be able to afford.  

The PEAR Program follows a similar model. It draws upon revenue generated through the Chicago Affordable Housing Opportunity Fund, which collects the fees that developers pay the city in order to avoid designating in their developments the minimum amount of affordable units that the city requires. 

The city uses the funds to help developers buy buildings. In return, they must keep at least 20 percent of all units in the acquired buildings affordable to renters earning no more than 80 percent of the area median income (AMI) for at least 30 years. 

Last year in Chicago, 80 percent AMI was $47,400 for a single person, $54,200 for a two-person household and $60,950 for a three-person household.

According to a City of Chicago press release, all units include "new kitchens and baths, refinished hardwood flooring, painting, and updated building systems, in addition to other improvements."

While some of those buildings are in the neighborhoods that have already seen rising rents, others are located in the neighborhoods that may experience gentrification in the future. According to planning department documents, the loan will save the developer $125,000 per year.

Research done by the Institute for Housing Studies at DePaul University, which was used as a basis for the city's 2019-2023 housing plan, divided all Chicago neighborhoods into three groups. 

The section of Austin north of Division Street, as well as all of Galewood and West Humboldt Park, have been designated "moderate-cost" markets – areas where rising property values are either already causing increased rents and higher property taxes or may reach that point in the next few years. 

During a meeting of the Chicago City Council's Committee on Housing and Real Estate in August, Ald. Walter Burnett (27th) said that he fears that gentrification is already happening in East Garfield Park and is likely to happen in Austin.

CONTACT: igorst3@hotmail.com    

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