An anti-gentrification ordinance that gives tenants the right of first refusal in certain South Side neighborhoods took effect this month, rattling some industry insiders.
The Jackson Park Tenant Opportunity to Purchase Act requires landlords to notify tenants when they plan to sell an apartment building and wait 180 days for tenants to make an offer on the property, if they choose to do so.
Opponents say the process is unnecessary because tenants have the right to buy a building without the waiting period, and it only delays sales and gives lenders and buyers cold feet.
“By layering a highly technical and time-sensitive process onto already complex transactions, the policy introduces additional uncertainty for tenants, nearby residents, sellers and buyers already faced with the rising cost to own property in Chicago,” Tom Benedetto, Illinois Realtors’ Senior Director of Local Advocacy, said in a statement. “These are real market dynamics that should have been addressed upfront through discussions with the industry, before implementation.”
The mandatory waiting period is the main concern for industry players who say it will stymie lending and cause unnecessary delays where the ordinance applies in South Shore and Woodlawn.
Proponents of the measure, which was passed by City Council in October but underwent an administrative period before taking effect in April, say it will help slow down displacement of longtime residents on the South Side, especially around the forthcoming opening of the Obama Presidential Library.
“While owners are required to take additional steps throughout the sale, we believe the [Tenants’ Right to Purchase] provides vital opportunities for displacement prevention while maintaining a property owner’s ability to sell at a fair market value,” Michael Cox, a public relations representative for the City of Chicago’s Department of Housing, said in a statement.
Rich said he thinks it will have unintended consequences. Lenders are likely to hesitate to issue debt to both inexperienced buyers and experienced buyers in the ordinance’s coverage area, he said. For tenants, who may be inexperienced in commercial real estate, lenders may choose not to issue mortgages at all or attach strict stipulations like higher down payments or interest rates. A lender might apply a similar mentality to outside buyers pursuing a building in the area, which would result in higher rents and potentially hinder the re-sale process later on.
“You’re going to start to see this separation where you have these units that are renting higher than they were last year and the year before, and then next door, you’re going to have units that are blighted and abandoned or boarded up,” said Stephen Rich Jr., a South Side landlord who is board member of the Neighborhood Building Owners Alliance.
The South Side, especially South Shore and Woodlawn, saw an influx in investment in the wake of the pandemic. But many of those deals have fallen into distress, as out-of-state buyers got in over their heads. As a result, banks are foreclosing on properties and ending up with the deeds to the distressed properties. Trying to sell a property within the pilot area can also slow down the process of banks offloading such buildings and give them cold feet in the future.
A better approach, Rich said, would be to allocate resources to educating renters about the process for buying a building if they are interested, without requiring the waiting period for sellers.
“If we have people that are living in these properties that do want to be owners, then great. We at the NBOA would welcome helping them out with that process,” he said. “But it’s not a flip of a switch. There’s a lot of things that go into learning these things.”
Policy déjà vu
A similar ordinance known as the Northwest Side Housing Preservation ordinance was passed in 2024 but soon faced pushback from property owners and Alderman.
Last year, City Council removed parts of the 31st and 36th wards from the Northwest Side ordinance’s coverage area, at the request of the aldermen of each ward.
So far, only one instance of tenants taking advantage of the waiting period has been widely publicized.
In late March, landlord Francisco Miranda listed for sale a five-unit apartment building at 2648 North Francisco Ave. for nearly $1.4 million. Tenants responded by forming a tenants union with an aim to influence who buys the building without buying it themselves, Blockclub Chicago reported.
Still, at least one non-tenant buyer has navigated the purchase process successfully on the Northwest side.
In December, CRG’s Tom Shanabruch said the company faced a “frustrating process” to comply with the ordinance, which required notifying all 134 tenants of the AM1980 apartments in Bucktown via certified mail and securing signatures via DocuSign to prove they declined to form a union or purchase the building.
The group ultimately sold the apartments at 1980 North Milwaukee Avenue to CedarSt for $35 million. But the sellers are still subject to a $38 million lawsuit filed by Bradford Allen that alleges that, among other issues, a failed deal to buy the building went south in part because the right of first refusal added another complicating factor to the process.
The Department of Housing has since developed a process for helping sellers comply with the ordinance’s notification requirements, Cox said.
“We recently implemented updates to the Northwest Side Preservation Ordinance — including clearer forms, expanded language access, and an online portal for submission. The Jackson Park [Tenants Right to Purchase Act’s] initial rules aligned with those updates,” he said.
A separate policy was passed this month that is also aimed at helping existing tenants.
The ordinance requires landlords to issue advance notice to renters if they choose not to renew lease agreements, typically due to a sale or renovation process. Renters who have lived at the property for less than six months must receive 30 days notice, renters who have lived at the property for less than three years must receive 60 days notice and renters who have lived at the property for more than three years must receive 120 days notice, the ordinance reads.
Initially, Jon Kozlowski, the government affairs director for the Chicagoland Apartment Association, said he had concerns that the ordinance would hinder landlords’ ability to evict tenants for nonpayment of rent or other issues. But he said that the latest version of the ordinance has a narrow enough scope to avoid such outcomes.