Chicago’s real estate industry is coming out against an anti-gentrification ordinance for the Northwest Side that charges developers significant demolition fees and gives tenants the right of first refusal before their rental homes hit the market.
The ordinance, which took effect this week, applies to parts of Logan Square, Avondale, Hermosa, Humboldt Park and West Town. It is meant to stem exploding housing costs in areas that began gentrifying rapidly about 10 years ago, when developers started tearing down two- and three-flats and replacing them with luxury homes along the 606 trail. The area lost 6.1 percent of its two- to six-flat buildings between 2013 and 2018, according to the DePaul Institute for Housing Studies.
But the measure’s provision granting the right of first refusal to tenants, which aims to empower tenants toward ownership and prevent displacement or rent hikes during building sales, has some real estate players in a panic.
The right to refusal delays the sale of buildings and could discourage investment, said Michael Glasser, president of the Neighborhood Building Owners Alliance, a lobbying group for Chicago area landlords.
The ordinance requires owners to give 60 days notice to the city and tenants before they put a building up for sale. If they receive an offer, owners must notify tenants, who will have 90 days to form a tenant association and decide if they want to buy the building. If they do, they have another 120 days to get financing for the deal. In other words, a potential seller would have to wait as long as 9 months to let that play out.
Glasser invoked “redlining,” the discriminatory practice that involves denying financial services to people or communities based on their race or ethnicity, in the Neighborhood Building Owners Alliance’s statement of opposition to the ordinance.
“Because this measure makes it so difficult to sell a building, banks will almost certainly not lend on rental buildings in these areas. This measure effectively redlines these neighborhoods,” he said.
That statement undermines the true meaning of redlining, said Christian Diaz, director of equitable community development for Palenque LSNA — one of the community groups that worked to get the ordinance passed.
“This policy is the opposite of that. We’re offering people of color and working class people and poor people who are at risk of displacement, the opportunity of first refusal,” Diaz said. “If there are developers who want to buy 30-unit buildings, evict all the tenants, do a cheap paint job, quadruple the rents and put those units back on the market, they’re going to have to wait, because tenants will have the right of refusal, and that’s what transformative justice looks like.”
In response to the loss of smaller multi-family buildings, the ordinance also allows for the construction of two-flats by right in any areas within the ordinance’s boundaries that are zoned for single-family.
The ordinance’s increased demolition surcharges of $60,000 for single-family homes, townhouses and two-flats, or $20,000 per unit for larger multifamily buildings, are aimed at preserving naturally occurring affordable housing and preventing the displacement of residents.
But the demolition fees “may lower the profitability for owners looking to redevelop or sell to higher-end buyers,” said Sarah Ware, principal and designated managing broker at Ware Realty Group in Chicago, in a LinkedIn post. That could lower property values in the area by inhibiting owners’ ability to “freely sell or redevelop properties,” she wrote.
Palenque LSNA spent almost a decade talking to residents in the affected neighborhoods, surveying the community, gathering signatures for petitions and crafting the two housing preservation programs that formed the basis for the ordinance, Diaz said. Residents spoke of friends and family pushed out by the rising cost of living, air pollution and noise from constant construction, and of the loss of historical buildings in the community.
He said the profit margins of owners looking to redevelop aren’t their concern.
“There are more compelling reasons in the world to develop neighborhoods and cities and communities and housing that are not solely to generate incredible profits for a small group of people,” Diaz said. “As a city, we owe it to ourselves to explore alternatives because pretty much everybody in Chicago agrees that the housing system is not working.”
The Northwest Preservation Ordinance and its long-term impact will be studied to guide future anti-gentrification legislation in the city, he said.
Chicago City Council members overwhelmingly approved the ordinance last month, with just three of its 50 members voting against it. The ordinance was first introduced by Alderpersons Carlos Ramirez-Rosa, Jessie Fuentes, Byron Sigcho-Lopez, Daniel La Spata, Ruth Cruz, Felix Cardona and Rossana Rodriguez-Sanchez over the summer.
Editor’s note: This story was updated to correct the percentage for the decline of buildings with two to six units on the 606 trail between 2013 and 2018.