Toothless: Illinois path to builder’s remedy prompts little affordable housing

An Illinois law aimed at increasing affordable housing across the state has been mostly ineffective the past 20 years. The state agency that tracks compliance with the policy blames the inaction on the law’s lack of enforcement measures.

“There are no teeth in this legislation — there are no punitive measures,” said Andrew Field, deputy director of communications for the state housing agency. “It’s more educational.”

The Illinois Affordable Housing Planning and Appeal Act requires the IHDA to compile a list every five years of towns with over 1,000 residents where affordable housing makes up less than 10 percent of the overall housing stock.

In 2003, there were 49 towns in Illinois that failed to meet that threshold. Twenty years later, there are 44, including big suburbs like Naperville.

Chicago suburbs out of compliance with affordable housing mandates

States across the country have similar laws on the books but different ramifications for municipalities that fail to increase their share of affordable housing.

A similar measure in California has been more effective. It unleashed a frenzy of affordable development proposals in the last two years. That’s because it allows developers of projects with at least 20 percent affordable units to surpass most government zoning approvals, if the town where the property is located hasn’t met certain growth objectives. The law speeds up the approval process and hamstrings local governments’ ability to squash such proposals.

The concept is known more broadly as builder’s remedy and it’s typically invoked when housing markets are deemed to be stuck. It plays out much differently in Illinois.

Illinois in 2003 created a new state board meant to serve as a check on municipalities. Developers of projects with at least 20 percent affordable units can file an appeal to the board if local municipalities reject their proposal. If the appeal is granted, they can override the town’s decision and begin construction anyway.

But Chicagoland developers haven’t tested it out. Since the law took effect 20 years ago, no developer has requested an appeal before the board. Currently, three of the board’s eight seats are vacant. The governor’s office is tasked with filling them.

For many affordable housing developers, it’s easier to stick to the status quo and build in areas of Chicago where objections to projects gain less traction, rather than trailblazing with an appeal to the state board.

“Affordable housing gets a lot of people’s nerves agitated as it is,” said Jeff Head, vice president of development for Habitat Affordable Group. “If there is a big education process and a significant political argument involved, it increases the financial cost and the emotional cost of going in and digging into an argument for a project that a significant portion of people don’t want.”

As a result, towns that don’t meet Illinois’ affordability standards face few consequences for their inaction.

Suburban stagnation

Suburban towns — Winnetka, Hawthorne Woods and Lincolnshire, among others — have seen their share of affordable housing stagnate. Like many towns on the list, none of those three have seen their proportion of affordable dwellings top even 5 percent of their overall housing since 2003, or half the amount they’re required to hit under the law to avoid potential appeals from developers.

In Winnetka, where the current median home price is about $1.5 million, according to Redfin, the percentage of affordable housing dropped from 4.1 percent in 2003 to 3.6 percent in 2023.

In the Chicago MSA currently, the law’s threshold for housing affordability is $1,681 a month in rent for a family of four. For owner-occupied dwellings, it stands at $2,243 on a mortgage, taxes and other housing costs for a family of four.

A handful of towns such as Gilberts, Oakbrook Terrace and Sleepy Hollow have crossed the 10 percent threshold in recent years, but a similar number have been added to the list, offsetting the policy’s overall effectiveness.

“When [the act] passed in 2003 people thought this was going to change things overnight,” said Martin Cozzola, housing counsel for Chicago-based advocacy group Impact for Equity. 

When that didn’t happen, “it stole the wind from folks’ sails,” he said.

Different enforcement methods for the same type of law can have significant impacts. 

Builder’s remedy was first tested in California in 2022, when the city of Santa Monica missed its deadline for a plan to meet state-mandated targets for affordable housing. That opened a window for a backlog of requests to proceed without certain local approvals.

Roughly a dozen such applications were filed. They totaled more than 4,000 units — more than twice as many as were built in the city over the previous two decades.

It hasn’t been all smooth sailing. Developers of such projects have still been met with legal challenges and other stumbling blocks.

Meanwhile, a slate of amendments to Illinois’ version of law passed last year is meant to increase its success rate. So far, it is unclear if it will make a dent in the shortage.

Changes ahead

New tweaks to Illinois’ version of the law aim to make appeals more likely — and could also give developers some political cover from angering suburban city councils, should one of their projects move to appeal.

Under the latest version, developers aren’t the only ones who can protest the denial of an affordable housing proposal. Local housing nonprofits and any potential resident of the development can try to get the state to intervene and require its approval.

Potential residents and local housing nonprofits have less to lose in that process than developers, Cozzola said.

“If I am a housing developer looking to build in Northbrook, Wilmette or Winnetka, I’m probably the same person building market-rate there, too,” he said. “I wouldn’t want to tick off a community that I am trying to do business with.”

Leaders of towns that don’t meet the 10 percent threshold of affordable housing will also have to write out a report to the IDHA about what specific obstacles are preventing the town from meeting the standard.

A problem that remains with the Illinois approach, said Yale Law professor David Schleicher, is that when a town does meet the state’s threshold of 10 percent affordable housing stock, it loses the incentive to allow any more growth at all. Allowing more market rate construction will lower the town’s ratio of affordable to market rate housing.

“It’s not well-targeted at solving the housing crisis,” Schleicher, who specializes in land use law, said. “It penalizes market rate housing.”