The Real Deal Chicago

Pilsen apartment project’s affordable housing controversy should be solved with city money, experts say

Property Markets Group and local advocates are at odds over how many affordable units should be included on-site
By Alex Nitkin | July 27, 2018 01:06PM

25th ward alderman Danny Solis and the Property Markets Group’s Pilsen property

How do you reach compromise between neighborhood groups who demand affordable housing and a developer who claims he can’t afford to build it? A group of independent observers thinks it has the answer: Get the city to pay for it.

That’s one of several recommendations set to be presented next month by seven out-of-town development gurus who were flown in by the city to examine the contested site of Property Markets Group’s 8-acre property in Pilsen.

At issue is a mandate by Alderman Danny Solis (25th) that any new developments in the area set aside 21 percent of units as affordable housing, well above the citywide minimum of 10 percent.

New York-based Property Markets Group said its 465-apartment “Parkworks” project would meet the 21 percent requirement, but some of the affordable units would be built off-site.

Unsatisfied, Solis in 2016 got the City Council to downzone the sprawling property to block the Parkworks project, leading Property Markets Group to sue the city in February, calling Solis’ maneuver illegal.

Between unsuccessful attempts by the city to get the lawsuit thrown out, the Chicago Department of Planning and Development this spring paid $135,000 for the non-profit Urban Land Institute to convene a group of real estate experts to spend a week sniffing out ways to break the stalemate.

The group’s top-line suggestion is for city taxpayers to throw in whatever it takes — whether it’s tax credits or direct payments to the developer — for at least one in five apartments at the new complex to be rented at affordable rates, according to Tom Eitler, a Washington-based senior adviser who oversaw the institute’s week-long study.

Panel members thought it unreasonable to make Property Markets Group single-handedly pay for 21 percent on-site affordable housing. But if that’s the only way to honor a prior commitment by city leaders, then the city should step in to follow through, Eitler said.

“There’s a dollar amount involved here, and ultimately the question is where the money is coming from,” Eitler told The Real Deal. “But I think the city has it. I think they know they have it.”

He said the panel is also open to the developer’s proposal to build some of its affordable units off-site, but only if they are nearby enough to be “made available for Pilsen residents,” he said.

The institute typically convenes about a dozen advisory panels each year across the country, sending in outside experts to offer a take on sensitive developments. The group brought panels to Chicago in 2010 and 2012 to help shape redevelopments of Navy Pier and the Wilson Red Line station, respectively.

The group that came to Pilsen included developers, urban planners and non-profit directors. It was chaired by Tony Salazar, president of the Los Angeles-based McCormack Baron Salazar.

In June, the group spent three days meeting with a few dozen neighbors and community activists, along with representatives of the developer, Solis and the city planning department.

It then drew up some suggestions, including that Property Markets Group redesign its layout to incorporate an “open space for civic gatherings and cultural expression,” Eitler said.

“There’s more work to be done if you want Pilsen to be part of the development, and the development to be part of Pilsen,” Eitler said, adding residents saw the proposal as “a wall.”

The developer should especially focus on a more open design at the site’s southwest corner, which faces the planned beginning of the Paseo bike-and-pedestrian trail. City leaders announced the potentially 4-mile Southwest Side rails-to-trails project in 2016, but they’re still working on buying the track from BNSF Railway.

The Urban Land Institute panel will recommend the developer carve out a slice of its retail space to be leased exclusively by Pilsen-based tenants, potentially at reduced rents, Eitler said.

“You have to have some space for local merchants, and entrepreneurs who are able to commit to local employment,” Eitler said. “Just having 1,500 or 2,000 square feet out of 10,000 square feet could make a big difference in how people feel about the stores opening in there.”

Principals of Property Markets Group declined to comment on the recommendations. But an attorney for the firm said they strengthen its case against the city by signaling that Solis’ 2016 designation of the site for manufacturing was “wholly irrational.”

“The suggestion by the Urban Land Institute that our clients need to sit down and negotiate the specifics of the project is welcome to us, and we have we always open to sitting down and discussing the parameters of this development,” attorney Dan Feeney said.

The preemptive downzoning of the site by Solis, who’s also chairman of the City Council’s zoning committee, came after intense pressure from neighborhood groups like Pilsen Alliance for Solis to stand by his 21 percent mandate.

The institute panel spoke to some members of alliance during its interviews last month. But alliance director Byron Sigcho called the outside group’s recommendations “irrelevant,” saying guidelines for the property need to be drawn from a more open process.

“For the city to bring in these so-called experts just seems like a disingenuous attempt to justify the developer’s arguments and push this project through,” Sigcho said. “To start this process without a transparent public meeting, where the community can offer feedback, doesn’t seem like an adequate way of approaching this.”

Eitler said the observers, who worked pro bono aside from the costs of their plane tickets and hotel stays, were able to draw on years of combined experience mitigating the drama of gentrification in other cities.

“You can hire a consultant to study the property for weeks and weeks, but at the end of the day they’re going to be pressured to come to whatever conclusion their client wants,” Eitler said. “We’re not consultants. [The city] is paying for us to come in and say whatever we say, and if they don’t like it, too bad.”

The panel doesn’t have any binding power over the site, but their report will “help inform ongoing discussions between the property owner, community stakeholders and other interested parties,” according to planning department spokesman Peter Strazzabosco.

Solis declined to comment, but a spokesman wrote in a statement the alderman “looks forward to ULI’s findings in their community outreach.”

The next hearing in Property Markets Group’s lawsuit against the city is scheduled for Aug. 15, one day before the Urban Land Institute panel presents its recommendations.