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SOLUTION ORIENTATED LOBBYING: AN ILLINOIS ASSOCIATION OF REALTORS/CHICAGO ASSOCIATION OF REALTORS APPROACH CASE STUDY “MAKING CHICAGO HOUSING AFFORDABLE BY MAKING THE CHICAGO BUILDING CODE AFFORDABLE” Brian A. Bernardoni Governmental Affairs Director – CAR Illinois Association of REALTORS® The City of Chicago Possible home of the 2016 Olympiad Home of America’s Most Powerful Mayoral Family Richard M. Daley Richard J. Daley Iconic… Architecturally significant Internationally renown Historic… …but changing And for the GADS in the room… the home of the 2006 GAD Conference… It’s a city of neighborhoods… Lakeview Mt. Greenwood Bridgeport University of Illinois - Chicago Taylor Street – Little Italy Englewood Uptown Humboldt Park And over seventy more… Land is available… Opportunities for rehab exist But in Chicago…you can’t do much without City Hall In some cases government has failed.. In other places…succeeding But there are vacant lots….thousands of them just like this one – and they are City owned And in those lots…we see opportunity for all of Chicago The Facts: City of Chicago Total Population Median Income Per Capita Income US Census Data (2000) 2,896,016 $38,625 $20,175 So what can the average Chicagoan afford? A family making the median income for Chicago ($38,600) can afford a home in the City of Chicago of $131,484 assuming a 12.6 % down payment of $16,552. As of last Thursday; only 2,122 listings out of the over 32,733 listing on realtor.com met that criteria. That’s less than 0.06. Source: REALTOR.COM The Facts: City of Chicago 2005 Type 1 – Single Family Detached Properties sold: 12,324 Median: $246,000 Average: $315,632 Market Time: 74 Source: Chicago Association of REALTORS® The Facts: City of Chicago 2005 2005 City of Chicago condos/townhomes Units sold: 24,598 Median price: $285,000 Average price: $330,453 Market Time: 97 Source: Chicago Association of REALTORS® The Issue The lack of affordable housing in the Chicago metropolitan region is a problem of enormous proportions. Housing costs continue to escalate while the supply of rental housing has declined. Gentrification is beautifying many areas, but pushing long-time residents out. The Protagonists Community Organizations Churches Politicians Civic groups Labor unions REALTORS® Inclusionary Zoning Movement (2003 – Current) Mayor Daley opposed 21 of fifty Chicago Alderman support the proposal The Pro-inclusionary housing mandate ordinance (2003) Would require the citywide construction of inclusionary housing. Developers of 10 or more units, whether for rent or sale, would be required to make 15% of those units available to low earners. For rentals, this would include families with incomes that do not exceed 50% of the Chicago-area median, which is just above $50,000. For buyers, incomes must be less than 80% of the median. Developers unwilling to build affordable housing may choose from several alternatives: 1) pay a fee of $100,000 for every required unit to the Chicago Low Income Housing Trust Fund, 2) develop 1.5 times the number of affordable units off-site, or 3) rehab twice the number of affordable units off-site. Thanks to REALTOR® Efforts… DEFEATED (RPAC MATTERS) Mayor Daley’s Proposal (2003) The City of Chicago’s Affordable Requirements Ordinance In July 2003, the city council adopted an ordinance setting minimum requirements for affordable housing in residential developments that receive city assistance. The basic provisions of the ordinance are as follows: Applies to for-sale and rental developments with 10 or more units. Requires that 10% of the units be affordable in developments built on city land purchased at a discount. Requires that 20% of the units be affordable in developments that receive TIF assistance. In for-sale developments, units must be affordable to and purchased by households with incomes at or below 100% of the area median household income. The City of Chicago’s Affordable Requirements Ordinance In rental developments, units must be affordable to and occupied by households with incomes at or below 60% of the area median household income. Affordable units are required to remain affordable for 30 years. Developers can meet the affordability requirements by providing the affordable units as part of the development project or by paying a $100,000 fee in lieu of each required affordable unit. For additional information, the following two documents can be downloaded. One provides a description of the affordable housing ordinance and the city’s implementation policies. The other provides a guide for estimating affordable prices for for-sale developments. Note that the Department of Housing will determine the maximum affordable price. In Chicago the issue has been temporarily resting… But…after years of debate; testimony and challenges…we asked one question…. Has this made Chicago more affordable? NO! And we know the issue will not go away…. 2007 is an election year in Chicago Mayor Daley’s administration is under federal investigation Two sitting Congressmen are eyeing the job While “housing bubble” discussions are throughout the industry – Chicago is not feeling it – (7.5% growth expected in 2006) CAR took steps to re-engage the issue. We went back to the basics.. We formed a multi-discipline task force of lenders, developers, academics and REALTORS® from across Chicago. We looked into what really went into the cost of housing in Chicago. We assessed development costs And we assessed the opposition WHAT DID WE FIND OUT IN OUR ASSESSMENTS? Development Costs Land Costs are higher in Chicago than anywhere in the region Material Costs are higher in Chicago than anywhere in the region Labor Costs are higher in Chicago than anywhere in the region Bureaucratic Delays Costs are higher in Chicago Yet wages were lower than the region. What can we control? Present Tax Reform ideas.. Work with the City to streamline permitting and to improve the beleaguered Department of Construction and Permits and the Department of Buildings Challenge the City to make the Building Code more cost effective. City Reaction to CAR’s efforts When it came to reform of taxes, the Building Department and DCAP – well; “Chicago ain’t ready for reform yet…” but they are interested… Ald. Paddy Bauler When it came to the Building Code… The City of Chicago told us to “not go there” Why Not? Chicago is a union town and the building trades in Chicago are among the most powerful and best paid in the nation…and they want to keep it that way. We learned about the Unions We found that plumbers, electricians, pipe fitters and brick layers made considerably more than… Janitors Teachers Policemen Firemen Healthcare Professionals And yes…most REALTORS® We also found out… Many non building trade labor leaders had never looked at the fact that they had major divisions on this issue within union ranks And we found out by just talking with them that they were VERY interested in working with those that were looking at solutions We looked at community advocates and found… Most Community/Housing Advocates Organizations have small budgets. Many Community/Housing Advocates Organizations are backed by many large banks…which has kept Banks from being a focus of the debate but still in line with CRA. Community/Housing Advocate - Organizations are backed also by unions – in Chicago - the SEIU especially (a non-building trade union). What we also found out about our opposition in Chicago… They wanted to put people into homes They wanted to decrease the cost of housing They wanted homes to be safe and well constructed And they wanted people to OWN their homes and to build communities… In other words….. MANY NON BUILDING TRADE UNION WORKERS AND COMMUNITY LEADERS WANT THE SAME THINGS REALTORS® WANT IN CHICAGO! The Challenge To have these groups; once hostile to REALTORS®; which know our issues as well as we know theirs to work with us and not against us. To convince the unions in Chicago who need housing to put real pressure on the unions that build housing to be part of the solution. To extricate REALTORS® from being the blame. To find solutions and to build well constructed homes affordably. And to stay on the good side of City Hall How are we doing this? We are now working with the primary group in Chicago “Housing Illinois” We argued that the building code, labor and materials were of larger impact than REALTORS® were. We have asked them to stand up with us on building code issues We are looking at building code/material issues with housing affordability as a criteria We are calling upon the building trades to act responsibly and to be pro-housing; not just pro-union. What has this achieved? CAR has built formidable allies on building materials issues from both manufacturers and from housing advocates We halted a mandate on brick for all new construction as a recent example. We succeeded in passage of an ordinance for the use of CPVC for fire sprinkler installation over union opposition. This is all based on the simple premise.. If materials are less expensive to purchase or install housing is made less expensive. But we didn’t stop there.. CAR decided to take it one step further… CAR Affordable Housing Development Project This is Roseland.. CAR Affordable Housing Development Project CAR Affordable Housing Development Project CAR Affordable Housing Development Project CAR Affordable Housing Development Project CAR Affordable Housing Development Project CAR Affordable Housing Development Project CAR Affordable Housing Development Project CAR Affordable Housing Development Project CAR Affordable Housing Development Project Through a 501(c) 3 structure CAR has negotiated with the City of Chicago to acquire 30 City Owned Lots through a program called “New Homes for Chicago” at a cost of $1 per lot. We have drafted a RFP and have found a developer (Jerome Wade) who is also the incoming President of the Homebuilders Association in Chicago. CAR Affordable Housing Development Project We have put together a team of lenders, State agencies, the local Alderman, and the City of Chicago’s Department of Housing to bundle opportunities for buyers. IAR will be spearheading pre and post counseling for buyers to prevent foreclosure. Banks are lining up to lend for construction financing. CAR Affordable Housing Development Project WHAT ARE WE BUILDING? Single Family Homes of about 1400 sq.ft. with a slab for a garage in the City of Chicago for less than $160,000 With City incentives for first time buyers; and provided they are City of Chicago employees – the purchase price can go down another $30,000 in incentives. CAR Affordable Housing Development Project Who is the market? CAR Affordable Housing Development Project Why is CAR doing this? To learn first hand why developers are not taking advantage of these programs and to be protagonists of reform to make it work. CAR Affordable Housing Development Project What will CAR learn? Either we can build at $160,000 on a city owned lot… Or we can’t. CAR Affordable Housing Development Project If we can build at $160,000…we are prepared to go from the South Side to the West Side with Phase two. If we can’t…we will document why; what barriers there are; and will work to reform it. CAR Affordable Housing Development Project As of today we are in final acquisition mode for the first thirty. We have fast track permitting and a blessing from the Alderman… Final Thoughts.. Mayor Daley on the 2016 Olympics for Chicago… “We will need to have ambition, passion and partnerships with the business community and the public to bring the Olympics to Chicago.” At CAR, we say we will bring that to the table and a lot more to solve this issue. Its all about the future of Chicago And for the White Sox fans… The only team in baseball history to have thrown a World Series…the 1919 White Sox.