Pilot ADU Ordinance Approved
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After a lot of talk followed by a period of relative inaction, the City Council approved a limited, three-year pilot program providing a framework for the legalization of coach house and “conversion units” in small residential structures in restricted areas of the city. This Ordinance was approved last December and will take effect May 1.
Like a lot of new legislation in recent years, the passage of this Ordinance took the housing industry by surprise. Urban Land Institute (ULI) spent a considerable amount of time and effort studying the feasibility of legalizing accessory units (garden, coach house and attic conversions) in 2019 and 2020, and released a terrific report with results and recommendations on how to get the most benefit from such a program. You can take a look at the article from last summer’s RPBG Newsletter for more information on the ULI effort and recommendations.
The passage of the current pilot program Ordinance is best described as a glass half-full and half-empty situation.
Like a lot of new legislation in recent years, the passage of this Ordinance took the housing industry by surprise.
Starting with the half-full, it is exciting and encouraging that the City has finally come around to the idea that accessory units can be beneficial to Chicago, increasing the supply of housing in neighborhoods across the city at a far lower cost than equivalent new construction units, and at rents that are almost always less than adjacent units in the primary residential building.
In Chicago, the creation of accessory units has been illegal since 1957. This ban was a not-so-subtle reaction to the rapid demographic change that was occurring in Chicago at the time it was enacted as a rapidly expanding African-American population was moving into previously all-white neighborhoods. The ban was a bad idea then, and it remains a bad idea today. The City Council is to be commended for approving even a limited lifting of this ban with the passage of the “Affordable Conversion Unit Ordinance.”
But then there’s the half-empty side of the equation.
Let’s start with the excellent ULI recommendations – and the fact that so many of them were completely ignored by the authors of this Ordinance.
Perhaps the most important conclusion of the ULI study was that accessory dwelling units, if broadly permitted, have the potential to create significant numbers of new “naturally occurring affordable units.” This is because these units are typically in smaller and less desirable spaces within a residential building and, therefore, tend to rent at some discount to upper and full-floor units in the same or adjacent primary residential building.
Of course, “naturally occurring affordable” is not nearly enough for the increasingly militant and demanding Progressive and Democratic Socialist members of the Chicago City Council. To these legislators, affordable is only really affordable with lots of City-imposed restrictions on what property owners can do, and what rents they can charge.
It is exciting and encouraging that the City has finally come around to the idea that accessory units can be beneficial to Chicago.
The good news is that owners can do what they want with their property without City restrictions (beyond basic building code health and safety issues) on the first coach house or conversion unit at any given property that qualifies under the terms of the Ordinance. Well, actually, property owners are not allowed to put that unit on the short-term (i.e. AirBNB) market, but they can at least rent it at a market rate on a typical longer-term basis.
But if that same owner has a building that would accommodate two or more conversion units, then all the extra restrictions kick in. The new Ordinance requires that 50% of the newly created units be restricted to households earning no more than 60% of area median income (AMI), and these restrictions must be recorded and enforced for a minimum period of 30-years. This 30-year restriction is unprecedented and completely outrageous.
The new Ordinance requires that 50% of the newly created units be restricted to households earning no more than 60% of area median income (AMI), and these restrictions must be recorded and enforced for a minimum period of 30-years.
Partially compensating for these restrictions, the Department of Housing has committed to offer some subsidies to qualified renter households through the Chicago Low Income Housing Trust Fund to secure subsidies that support tenants who make 30% of AMI or below.
Other restrictions in the pilot program include large and seemingly arbitrary geographical restrictions, with about 90% of the city’s land area excluded from the program. The pilot program is not available at all in Rogers Park, which is a shame, given the large number of multifamily buildings in the neighborhood and the many opportunities for conversion that the neighborhood could offer.
Five pilot areas are created in this Ordinance on the North, Northwest, West, Southwest and Southeast Sides of the city. The North area includes parts of Lakeview, Edgewater and Uptown. The Northwest area is a narrow sliver of land that runs roughly from the Humboldt Park area north to the Old Irving area.
A further restriction is that the West, Southwest and Southeast zones will only permit the conversion of two units on any given block. Anything beyond this two-unit limit is subject to additional Aldermanic approval.
RPBG fully supports the concept of legalizing and expanding the supply of accessory dwelling units and recognizes this Ordinance as a first step in that direction. But RPBG just as strongly opposes the use of income restrictions and legally recorded affordability requirements as an unnecessary and obtrusive impediment to unleashing the full potential of this program. The fact that these restrictions last 30-years is, in our view, an unconstitutional taking of property without compensation.
RPBG fully supports the concept of legalizing and expanding the supply of accessory dwelling units and recognizes this Ordinance as a first step in that direction. But RPBG just as strongly opposes the use of income restrictions and legally recorded affordability requirements as an unnecessary and obtrusive impediment to unleashing the full potential of this program.
As the ULI report clearly indicates, other cities that have tried similar programs have realized the best results when governmental interference and affordable requirements were minimal. Cities that imposed layers of restrictions and affordable requirements on ADU’s saw the creation of significantly fewer units than in cities with more open-ended requirements. There is every reason to believe that Chicago will see fewer benefits from this program due to the restrictions that have been imposed.
Still, this is a start. The program will be evaluated at the end of the three-year period. It is our hope that it is both expanded across the city, and allowed to occur without these onerous and counter-productive affordability requirements. Only then will the city see the greatest benefit, and the creation of large numbers of new, naturally occurring affordable units.
