Emanuel leaves behind a city flush with development, mounting problems

The outgoing mayor exits with a mixed legacy on new development, property taxes and affordable housing
By Alex Nitkin | May 10, 2019 11:00AM

Outgoing Mayor Rahm Emanuel (Credit: Getty Images and iStock)

Outgoing Mayor Rahm Emanuel (Credit: Getty Images and iStock)

Mayor Rahm Emanuel has a thing for construction cranes.

The mayor was known to ask for regular reports from the city’s buildings department on the running tally of cranes hoisted over the city’s construction sites, including where the number stacked up against rival cities like Seattle, according to a former City Hall staffer.

Emanuel seized on cranes as “an economic indicator, highlighting thousands of new construction jobs, billions of dollars in private sector investments and a city that continues to ‘make no little plans,’”’ according to a statement sent by an Emanuel spokesperson when asked about the reports.

The sentiment sums up not only the mayor’s famously competitive drive, but his perennial role as a cheerleader for more building, no matter how controversial or costly the proposal.

During his eight years as mayor, Emanuel pushed just as hard for plans that flopped — like the Lucas Museum for the Arts along the lakefront — as he did for those whose futures still hang in the balance, like the Obama Presidential Center and a redevelopment plan for the former Michael Reese Hospital site. But his drive to see through the approvals of Sterling Bay’s and Related Midwest’s respective visions for Lincoln Yards and The 78 is most likely to define his complicated legacy on real estate and development.

“The mayor rode the crest of a robust economy at the upper end of the market, and he challenged the conventional wisdom on the size and scope of the developments that he embraced,” said Brian Bernardoni, lobbyist and policy director for the Chicago Association of Realtors. “The net result was a memorable mark on the skyline, and huge benefits to the hardworking men and women of organized labor.”

That, and plenty of business for developers and brokers. Industry leaders returned the favor with frequent and generous donations to Emanuel’s political organization, with real estate giants like Sam Zell and Barry Malkin ranking among his top donors, election records show.

But the gains were not equally felt. Already wide economic inequality grew to a chasm since 2011, spurred in part by a purge of affordable homes all over the city.

And massive new ground-up campuses like Lincoln Yards and The 78 could “change the way the city looks and feels” if they bring in entire new populations instead of helping existing residents who are struggling to pay rent, said Peter Hughes, a housing organizer with Chicago’s politically ascendant chapter of the Democratic Socialists of America.

“The changes that have happened on a lot of parts of the North Side have created a solid wall of housing for high-income people, and that’s going to be hard to undo,” Hughes said. “People are worried about a Manhattan invasion of Chicago, and I think people are going to look back and think that Rahm is the person most responsible for that process.”

On a host of other issues related to real estate, Emanuel offers a mixed record for the history books. The mayor stung Realtors by shepherding a historic property tax increase in 2015, and he helped juice the city’s hotel industry by building up the city’s tourism infrastructure. But most of all, an array of industry leaders said, Emanuel may be remembered for his up-and-down track record on white-collar job growth, transit and affordable housing.

Raking in the relocations

The city saw just under 5 million square feet of new office space built during Emanuel’s two terms, representing an expansion by about 4 percent, according to CBRE. And the mayor cast himself in a central role in making sure the space was filled.

After his 2011 election, the mayor took over as chairman of the nonprofit World Business Chicago, which aims to grow the city’s job base, and oversaw a more than threefold expansion in its budget. It notched an early win the following year, when Schaumburg-based Motorola Solutions announced it would uproot one of its suburban divisions and take 600,000 square feet in Vornado Realty Trust’s Merchandise Mart.

“When Motorola came, that got everyone’s attention … and it ended up being a key driver for more relocations,” said Karin Kraai, senior managing director of landlord advisory services for Newmark Knight Frank. “They recognized that they had done it to recruit the workforce that’s here, and because Chicago was becoming the tech hub of the Midwest.”

Dozens of other globally-recognized corporate brands followed, including Google, McDonald’s, ADM, Conagra, Caterpillar and GE Healthcare. Since 2008, about 5.8 million square feet of city office space has been taken just by companies that moved from the suburbs, according to NKF.

Emanuel rarely missed a chance to welcome each relocation with a press conference, touting his city’s “world-class” transportation network and growing pool of talent. Late last year, the mayor said he began to “hound” Salesforce CEO Mark Benioff two years before the software giant announced it would take 500,000 square feet and the naming rights to a skyscraper planned on Wolf Point in River North.

Since Emanuel took office, 59 corporations have relocated their headquarters to the city, according to a city spokesperson.

New rules for development near transit

Developers embraced one of the signature policies of Emanuel’s first term: his introduction of transit-oriented development zones, which allowed builders to scale up their plans and shrink their parking allotments in areas close to CTA train stations. Emanuel and his allies in the City Council introduced the policy in 2013, then expanded it in 2015.

Noah Gottlieb, a principal of New York-based development firm Property Markets Group, called the relaxed parking rules a “responsible and pragmatic long-term development strategy.”

“You lose money on parking, and it got to the point where you were building parking that the market didn’t even want,” Gottlieb said. “So by building with no parking around transit nodes, you’re able to boost the tax base of the city and boost affordable housing at no cost to the taxpayer.”

But four years after the amended rules took effect, its impact is far from certain. One widely-circulated study earlier this year found the designated zones raised property values without creating much new housing, potentially accelerating displacement in gentrifying neighborhoods.

Emanuel announced last summer the city would expand the rules one more time to cover some high-traffic bus routes.

Affordable housing rules

Emanuel did not create the city’s Affordable Requirements Ordinance, which required developers seeking zoning changes to help fund affordable housing initiatives starting in 2003. But updates in 2015 and 2017 sharpened the rule’s teeth, and drew a backlash from builders who say they’ve made new apartment proposals nearly impossible in some areas.

Some housing advocacy groups and political leaders, like Alderman-elect Byron Sigcho-Lopez (25th), are calling to raise the affordable inclusion requirements even higher in some parts of the city, from 20 percent to 30 percent or beyond.

But for some apartment and condo developers, like Belgravia Group Chairman Alan Lev, the rules may be the last straw in an environment already beset by political economic headwinds.

“There has to be some carrot to meet the stick in rezoning to create affordable housing … because the [affordability requirements ordinance] does not work,” Lev said. “Between ARO, high land costs and out-of-control taxes, most developers are having a hard time sorting things out on paper.”

Elizabeth Hozian, a senior vice president at Associated Bank who oversees construction lending, agreed the affordability rules “created major challenges for multifamily development” and put “constraints” on the city’s capacity for growth.

But taken overall, considering Emanuel’s enduring effort to stake out the city as an international tech hub, “no one could say that he was not pro-business,” Hozian added.

“Some neighborhoods have had their respective challenges, but the city has been very supportive of development,” Hozian said. “It’s obvious, when you look at all the cranes in the air.”