After a whirlwind week of public meetings, Chicago real estate leaders are voicing concern about a new anti-gentrification ordinance that gives some South Side tenants in buildings with 10 or more units the right of first refusal when property owners look to sell.
As a result, City Council plans to host hearings on the ordinance, known as the Jackson Park Housing Pilot Program, next month, according to sources familiar with the city’s plans.
“We oppose the Jackson Park Housing Pilot Program ordinance and its onerous provisions for a tenant right of first refusal, but we are pleased that the City Council, under the leadership of Alderman Gilbert Villegas, will hold hearings on this policy. We are confident the hearings will lead to meaningful reforms,” said Michael Glasser, president of the Neighborhood Building Owners Alliance lobbying group.
Villegas did not respond to requests for comment regarding specific details of the hearings.
City council on Thursday passed the program that gives tenants in buildings with more than 10 units the right of first refusal, among other features aimed at preventing resident displacement. The new policies apply to much of the South Shore and Woodlawn neighborhoods.
Critics have said giving tenants 180 days to form a union and purchase a building will slow down the sale process regardless of whether or not they’re interested in banding together to buy the property. The possibility could deter future investment as well, opponents added.
“I imagine banks would not like that. Banks don’t really like anything new and that provision is only going to kind of make it a little harder to get a deal done, and deals are already hard to get done,” said Craig Yarbrough of South Side-based Click Development.
The new ordinance is similar to another anti-gentrification effort that recently took effect in some Northwest Side neighborhoods known as the Northwest Side Housing Preservation Ordinance. Villegas requested that his ward be removed from its purview, as did Alderman Felix Cardona Jr.
“If a prospective buyer needs to wait 180 days from an offer, there will be no buyers. Owners will not invest and banks will not lend with this obstacle and why would they? It limits liquidity for the parties,” David Goss, co-founder of multifamily brokerage Interra Realty, said on social media. “Look no further than the northwest side of Chicago where this ROFR has been such an abject failure that two aldermen removed their wards.”
So far, no South Side aldermen have opposed the Jackson Park ordinance.
But at least one developer has cited the Northwest Side Preservation Ordinance as reason not to build in the area.
“As the person that does acquisitions, that’s probably an area we wouldn’t really target right now because of that. It just adds complication … and we operate at very low margins. We’re a nonprofit. We’re not maximizing rent,” said Russell Rydin, COO of nonprofit affordable housing development firm Chicago Metropolitan Housing Development Corporation.
Proponents of the Jackson Park plan, which also calls for the sale of vacant city-owned lots for redevelopment into multifamily housing, say it’s a necessary backstop ahead of the opening of the Obama Presidential Library, which is expected to drive investment to the area that could raise property values and, thus, taxes that burden low-income households and lead to their exits from the neighborhood.
“Anybody who does not want to support this or be a part of the solution, you are part of the problem,” Alderwoman Jeanette Taylor of the 20th Ward said at a Wednesday committee meeting reviewing the ordinance.
While the new rule identifies 184 city-owned lots for potential redevelopment into multifamily residences, the right of first refusal could give some developers pause.
“Instead of addressing supply challenges, policies like this only make the problem worse. Chicago doesn’t have a demand issue, it has a supply issue,” KMA Properties president Devin Rowland wrote on social media. “Until policy shifts toward encouraging development and investment, affordability and growth will remain out of reach.”