Chicago City Council introduces draft affordable housing ordinance amendment

At this writing, it appears the 2015 ARO, in substantially the current form, is on a fast track for adoption in the near future.

Below is a summary of some of the key provisions of the 2015 ARO, which was introduced on December 10.

Affected projects.  As with the existing code, the 2015 ARO applies to all residential projects  with 10 or more units that: (1) obtain a zoning change that increases allowable floor area (FAR), (2) include land purchased or obtained from the City of Chicago, (3) obtain financial assistance from the City of Chicago or (4) are rezoned to a planned development (PD) in a downtown zoning district.   

The 2015 ARO also appears to extend to existing PDs that are amended to allow more FAR and/or dwelling units and to downtown zoning residential projects that make use of available density bonuses, even where there is no change in the underlying zoning district.

Requirements. The basic 10 percent affordable requirement remains unchanged.   (When the City provides TIF or other financing, the  requirement remains at 20 percent.)  However, developers will no longer be able to satisfy affordable requirements by paying a flat $100,000 “fee in lieu.”  In most cases, 25 percent of the required affordable units must be provided on-site or at a qualifying off-site location. 

The fee in lieu, which may be paid to satisfy the remaining 75 percent, will change from a flat fee to a range between $50,000 and $225,000.  The amount of the fee in lieu will depend on several factors including (1) the location of the project in terms of  downtown zoning districts, low-moderate income census tracts or higher-income census tracts, (2) in the case of downtown zoning districts, whether the project will be rental or owner-occupied and (3) whether at least 25 percent of the required affordable units will be leased to an “authorized agency” (e.g., the Chicago Housing Authority).  The fee in lieu will increase in all but the low-moderate income census tracts.   

The following is a summary of key 2015 ARO requirements:

Downtown rental projects

• 25 percent mandatory on-site or off-site within a one-mile radius.
• Fee in lieu increased to $175,000 per unit, or $150,000 if at least 25 percent of the required affordable units are leased to an authorized agency. 

Downtown owner-occupied projects

• There is no mandatory on-site (or off-site) requirement.
• If the developer elects to include at least 25 percent of the required affordable housing units on-site, then the fee in lieu is $175,000 per unit, or $150,000 if at least 25 percent of the required affordable units are leased to an authorized agency.
• If the developer elects not to include at least 25 percent of the required affordable housing units on-site, then the fee in lieu is $225,000 per unit.

Higher income census tracts

• 25 percent mandatory on-site or off-site within a one-mile radius.
• Fee in lieu increased to $125,000 per unit, or $100,000 if at least 25 percent of the required affordable units are leased to an authorized agency.

Low-moderate income census tracts

• 25 percent mandatory on-site or off-site within a one-mile radius.
• Fee in lieu reduced to $50,000 per unit. 

Relationship to affordable housing FAR bonus.  Payment of fees for the affordable housing FAR bonus available in downtown zoning districts will no longer be available as a method of “alternative compliance” with mandatory affordable housing requirements, although such payments may be credited against fees in lieu payable under the 2015 ARO.

Affordable housing transit bonuses. Projects that qualify as “transit-oriented development” under the Chicago Zoning Ordinance in B, C and D “dash 3” districts may qualify for additional FAR and height increases and parking reductions if at least 50 percent of the required number of affordable housing units are provided on-site. 

Applicability to pending zoning applications.  The 2015 ARO will apply to all new zoning applications filed after the 2015 ARO is effective, which shall be 90 days after approval and publication of the new ordinance by City Council.  Applications that have been filed and introduced by City Council prior to the 2015 ARO effective date will have a grace period of nine months to obtain final approval before such projects would be subject to the 2015 ARO.  We are continuing to monitor the progress of the 2015 ARO in City Council committees.

Pitfalls and opportunities

We expect the ARO in substantially this form to be adopted early in 2015. 

The 2015 ARO will add several additional layers of complexity to an already complicated affordable housing structure. The ability to reduce in-lieu of fees through a collateral transaction with the Chicago Housing Authority, and the ability to provide off-site affordable units, to name just a few of the new draft provisions, provide opportunities as well as potential pitfalls for developers.

Please do not hesitate to contact the authors or any other members of the Land Use Team at DLA Piper if you have any questions or would like to learn more about the 2015 ARO.