Crain’s Chicago Business | “A better solution than rent control”

A better solution than rent control

Let’s simply amend the zoning laws to allow garden-level apartments to be added to existing apartment buildings, provided the rents for those apartments are set at affordable housing levels.

As widely reported, the efforts in Springfield to lift the state ban on rent control were recently defeated. While it was determined that rent control is not a practical solution, the affordable housing problem nevertheless remains. So, rather than focusing on what doesn’t work, we must now ask ourselves if there are other solutions that can work to correct this problem. In fact, there is one very cost effective and readily available alternative gaining grass roots support that affordable housing advocates, apartment building owners and city officials can all support.

Before explaining the details, it’s important to understand that these above camps all agree that we need far more affordable housing in order to make the city function more efficiently. Hence, the affordable housing issue is clearly a supply issue.

Supporters of rent control were stymied by two critical problems. First, the consequence of placing legislated caps on rents would be that developers would materially cease building new apartments. This, of course, would only make the problem worse. Second, implementing rent control places the responsibility of solving the affordable housing problem on a select group of business people—apartment building owners. This is like requiring just grocery stores and restaurants to pay for school lunch programs. Both are serious issues, but the solutions must be shouldered by everyone and not merely the responsibility of a select group of business people.

Historically, solutions have been shared collectively through programs like providing tax credits for developers to build affordable housing. While this program remains critically important, these developments move very slowly and are met with strong NIMBYism. In addition, they surprisingly end up costing more to build than traditional market rate housing because of the high transaction and regulatory costs. While we should continue to support and improve this solution, it has proven insufficient as an answer.

One solution that can work and can be easily implemented is simply to amend the zoning laws to allow garden level apartments to be added to existing apartment buildings, provided the rents for those apartments are set at affordable housing levels. For example, an owner of a two-flat might add a third unit. An owner of a 40-unit building might have space to add three units.

However, current zoning does not allow adding apartments to existing buildings unless additional parking is also added. Obviously, adding parking spaces is problematic in a city like Chicago. And while parking congestion remains a real issue, with the advent of ride sharing in the past five years and the fact that many affordable housing residents do not have cars, the impact on parking would likely be nominal. It is estimated that as many as 100,000 affordable garden apartment units could be added to Chicago using this program. That is the equivalent of building 500 two-hundred unit high-rises, without changing the landscape.

The advantages of this program are numerous. First, this would quickly add a desperately needed supply of affordable apartments. Constructing a garden apartment can take just two or three months once permits are obtained. This is in steep contrast to the new construction cycle that can take years to complete. Second, apartment building owners would be incentivized to add affordable units. Building a garden apartment in an existing building costs a fraction of constructing an apartment in a new building, so apartment building owners can increase the value of their property and earn a reasonable profit even while charging affordable rent levels.

Additionally, apartment building owners across all neighborhoods and building sizes could participate. This allows affordable renters to live in many neighborhoods in which they previously could not afford. Rather than concentrating affordable housing in one building or in one area of the City, this solution brings together people of different socio-economic backgrounds. Moreover, this program could be used to incentivize creating housing for people with physical disabilities or for veterans, two groups that also desperately struggle with housing needs.

Most important, this solution requires no tax credits or shared costs. The cost is borne entirely by the apartment building owner.

Some concerns have already been raised that this solution increases density in certain neighborhoods. But critics are unable to explain how to create more affordable housing without some effect on density. All camps can agree that few complicated problems can be solved with a single policy. But rarely can a single policy make such a meaningful impact in such a cost-effective way.

If you are one of the many who believe Chicago needs more affordable housing or are looking for the next solution beyond rent control, this solution warrants your support. Please contact your alderman to voice your support.

Doug Imber is a 30-year veteran of the apartment industry. He is president of Essex Realty Group and is a director of the Rogers Park Builders Group.