Affordable Housing: Quantitative Problems
Evaluating Chicago's recent investment into affordable housing
Housing is back! At the dawn of the substack I wanted to have a keen eye to housing politics in the State of Illinois and the City of Chicago and in today’s piece I am presenting an examination of the progress and results of public housing investments in Chicago over the past few years.
Everyone in politics, if asked, would probably tell you that we are in a housing crisis. And then, if they lean towards the progressive side of the political spectrum, they will point to an affirmative vote to this or that investment into public housing projects or a budget that includes such funding. Public housing is a very important part of solving the housing crisis in the City, State, and country. It is hard to see a path forward for housing of low income people, homeless, and migrants in an exclusively private sector approach. But unfortunately, the present utilization of public housing has been a disappointment. And it is also a woefully inadequate approach that doesn’t solve the underlying problems.
In 2021, the City of Chicago passed a historic investment of more than $1 billion, translating into 28 new housing projects, to the tune of 2428 units. Whoa! What an enormous amount of money into a critical program with four digit numbers of units to produce! Only problem is that it isn’t enough and far too expensive to follow through with to actually solve the full gap.
What do you mean gap? The Institute for Housing Studies reports that Chicago has an approximate gap of 120,000 units of affordable housing. That is because of several factors. Disrepair, gentrification resulting in higher rents, the conversion from rental to mortgage property, or the conversion of multi-family to single family housing removing stock. This alongside the failure to keep production of new housing up to replace these losses and keep up with population and job growth has resulted in a shortage of available units.
How does this work in reality? In the hot real estate market of Logan Square, modest estimates state that 20,000 Latino residents have been displaced by gentrification. And these estimates are more than 5 years old, and I would speculate that the minimum has grown. Losses of affordable housing to gentrifying conversions, higher rent, and disrepair coupled with a failure to mass produce new housing in the community, people were priced out and forced to leave or forced into worse quality housing with what they could afford.
And where did the people go when they left? We have newcomers who want in and longtime residents who want to stay. But a solution involving building tens of thousands of new places to live to absorb the impact of new residents and to keep existing ones in place? Not even in the realm of discussion. It is strictly a debate between letting the status quo fester or save a handful with expensive, bespoke solutions.
And I do mean expensive. The City’s investment amounts to $411,861/unit! Using this recent investment as a baseline and taking the IHS shortage of 120,000, it would take the City approximately $49.4 billion to fill that gap. For comparison: the entire budget of the State of Illinois for this upcoming fiscal year was $50.5 billion. According to Block Club, the Chicago Housing Authority has a waitlist of 50,000 people for rental assistance and apartments. Even this lower shortage places the total public sector cost at $20.5 billion. It is not realistic to propose an exclusively public sector approach to the development of affordable housing nor does it solve the shortages of middle and working class housing.
Taking a look into recent developments here in my neighborhood of Albany Park, the cost issue is more granularly broken down.
As we can see, 2 of these project’s cost per unit is higher than the overall cost per unit in aggregate so my methodology of simply multiplying dollar/unit with the shortage may actually be underestimating the fiscal problem. This is a very expensive route to pursue and while it may be tempting to think that these excess costs are solely due to administrative burdens, this is not the case. For example, in the proposed Irving Park development, the cost of construction is $27 million outside of any financing, interest, or fees. While these costs could theoretically be brought down by any number of reforms, there has been little activity from policymakers to make that so.
Furthermore, none of these developments have delivered triple digit units and I likely suspect they couldn’t, politically speaking. As of recent reporting on the Irving Park development, one of the chief complaints of “impacted” residents at the most recent community hearing was that too many are being built and the units will be too tall compared to surrounding buildings. These kinds of complaints are not valuable criticism nor are they democratically necessary inputs. If the number of units were to be cut, the funding tax credits would be lost and the project would be canceled. Nor are these “impacted” residents particularly impacted. As someone who is only a few blocks from both the Oso and Maria Elena developments, their comings and goings are entirely unnoticed. It’s just another apartment building on the street. We make so much space for uninformed, peanut gallery comments heckling a low turnout public meeting for ultimately 0 lasting effect. “375 filled out the comment form with a 73% positive response rate”, hailed by advocates of this development model as a great sign for a project in a neighborhood close to 54,000 residents. By what possible metric are either of these proceedings democratic? I’ve personally attended these organizational meetings and seen these advocates lament that they couldn’t attract even more response and the tiresome work it was to accomplish this. But I see a different lesson. Most people are largely approving of this construction and public housing generally, as seen both by the limited community participation and the election and re-election of Rossana Rodriguez. But more importantly, most people in this area have absolutely 0 idea that it is even happening nor particularly care too. So why not capitalize on this and eliminate these anti-democratic barriers to development? We’ve seen the results of community engagement and the benefits are non-existent.
These housing investments are also extremely limited in applicability as well. Low income housing is needed but how many people are just above the line to qualify? Or well above the line? It is quite taboo to discuss the shortage of middle class and working class housing construction. As current chair of the Chicago Zoning Committee Alderman Carlos Ramirez-Rosa happily admits, people of means can win the price war. So what to do with those people then? Hope they stay in the white flight suburbs? That seems to be the only plan. There is no recognition of a shortage for housing outside the bottom tier of incomes. And this limited, narrow approach therefore cannot solve the underlying problems.
We have a slow, expensive process to bring new affordable housing into existence. We have a shortage at all levels for housing in the City and State. No one with any power is capable of solving the first problem; because the pro side can barely muster a majority to bring it into existence in the first place and the anti side fundamentally disagrees on its existence so will not contribute to the project. And no one in power is interested in solving the second problem. Hundreds of thousands of new single family homes, row houses, and apartment buildings of all shapes and sizes are needed in this City and State. But allowing this level of construction and this level of variation of land usage is not just resisted by the usual quarters of NIMBYs but by progressives as well. These progressives, such as the zoning chair, are of the view that these community participatory events and individual aldermanic control over variances and development money are a good thing. So it is not just neighbors complaining about lost parking or aesthetics, it’s also earnest and well meaning progressives who aren’t grasping the quantitative side of the problem.
That to me is the chief problem: the quantity problem of number of units, cost per unit, and the rate of production of these units isn’t being solved by the progressive movement in Chicago or in Illinois. I hope my presence can change this and awaken more Democrats into Build More Housing.
I’ll see you in the next one.