Chicago needs to incentivize, not mandate, affordable housing, developers say

The burden of creating more affordable housing should be shared by the city and developers, panelists said
By Joe Ward | May 30, 2019 04:00PM

From left: Ben Brichta, Peter Ousley, Shaylyn Cullen, and John McLinden

From left: Ben Brichta, Peter Ousley, Shaylyn Cullen, and John McLinden

After years of a booming multifamily market in Chicago, the political headwinds toward such development may be changing.

Housing advocates like Byron Sigcho-Lopez and Daniel La Spata are now aldermen, and new Mayor Lori Lightfoot was no darling of the real estate industry as a candidate.

But instead of working to keep things they way they were, developers will benefit from working with the city to solve its housing issues, panelists at Bisnow’s Chicago Construction & Development forum said Thursday.

“There’s been a shift in Chicago,” said Peter Ousley, business development director at local construction firm d’Escoto Incorporated. “Those changes should create more opportunity for development outside the central business district.”

One of the biggest issues facing the real estate industry and Lightfoot’s new administration is how to boost affordable housing. Developers have been vocal about their opposition to Chicago’s affordability requirements, saying affordable housing can be boosted only if the city is willing to help out.

“We need to have more affordable housing, but who pays for it?” said John McLinden, managing partner at Hubbard Street Group. “The entire burden is on the developer.”

McLinden said other municipalities, like in Arizona and Washington, D.C., have offered tax incentives for affordable housing, programs that could be a model for Chicago.

Ben Brichta, managing partner at Property Markets Group, said city officials should get more creative with ways to boost density. And he doesn’t mean just residential density. Allowing for dense office uses also will boost neighborhoods, he said.

“The focus needs to be on ways to add density, especially in currently low-density neighborhoods that are feeling the pressures of gentrification,” Brichta said. “Any way you are able to bring office density to what has traditionally been more of the neighborhood environment, I think those are really really valuable.”

Not all changes or initiatives the city undertakes to boost affordable housing will be painful to developers.

Bisnow’s forum was held Thursday at the new Skender modular factory on the city’s Southwest Side. The facility, which opened this week, will construct pre-fab housing units that can be assembled on site. Skender has partnered with Sterling Bay to construct pre-fab three-flats as affordable housing units on the West Side.

Increased use of technology in construction and design, plus better project planning and management, will make development of housing more affordable, said Shaylyn Cullen, founder of Cullen Construction Management.

“We’re seeing a larger trend of getting the right people to the table early on,” she said. “That’s become increasingly important.”

Use of new technology and building practices in Chicago is being boosted by the city’s first overhaul of the building codes in more than 70 years. On top of allowing for new building methods like pre-fab construction, the new building codes seek to remove the financial and bureaucratic hurdles to neighborhood development, said Judy Frydland, commissioner of the Chicago Department of Buildings.

“The code … allows companies like Skender to make good, safe housing,” Frydland said. “We want to make it easier for people to build here.”