Affordability Plan for Pilsen

April 18, 2016

What to do

The first step in solving a problem is recognizing there is one. Virtually all known analyses, plans and proposals coincide on the fact that Pilsen is gentrifying. By gentrification we mean development which results in the displacement of low income families, usually due to a decrease in affordable housing options. Agreeing on whether gentrification is a problem or simply the way the world is another challenge.

This proposal recognizes that gentrification is happening and that it is a problem. Gentrification in Pilsen should be of particular concern to all those who manifest that Mexican culture and heritage should remain to be essence of the community. Under the current conditions, keeping that essence will face huge challenges.

These proposals are aimed at “regulating gentrification” by diminishing the profitability of property speculation and indiscriminate development.

The zoning process has a big role in making or braking gentrification. To implement a number of these proposals in Pilsen all that is required is the alderman’s support. In some cases the alderman can take action on his own, while in others he could make demands of developers as they submit their projects for permitting. In the case of Pilsen, the alderman’s leverage on the zoning process is even greater since he happens to be extremely close to the mayor, but also the chairman of the City Council Zoning Committee.

The gentrification of Pilsen is technically the result of actions regulated by municipal government. Without appropriate zoning designation and municipal permitting, a project cannot move forward. One of the reasons for the displacement of thousands of Mexican families from Pilsen is the decrease in the number of affordable housing units available to them. This decrease is the result of demolitions, gut rehabs and other projects that have transformed formerly available units into less affordable rehabbed units and studios or vacant lots.

Public officials and the government are not powerless in the face of gentrification. Had there been adequate policies to address gentrification in Pilsen, at least some of the displacement could have been avoided. Some of following proposals aim to provide a set of tools that, given the political will, can become policy of the city of Chicago for communities going through processes similar to those taking place in Pilsen.

Disincentives to gentrification

Immediate Actions under the Authority’s Prerogative

  • Stop all demolitions in the neighborhood until proper surveying of the latest assessment of vacant property and land
  • Charge a fine/tax to property owners who tear down buildings and leave an empty lot for speculation purposes
  • Developers of buildings above a certain threshold have to donate into a fund to address the problems of congestion, green space and other externalities
  • Demand that 30% of units in new developments be affordable
  • New projects must incorporate affordable rental options for families, as opposed to prioritizing studios and one bedroom apartments
  • Demand a transparent and inclusive zoning approval process where there is real community input rather than informing residents after projects are approved.

Protections for current residents

To implement the previous proposals in Pilsen, virtually all is required is the alderman’s support. The following proposals, however, may require a larger consensus, since they involve larger taxing jurisdictions and citywide agencies.

  1. Create meaningful tax incentives or a tax freeze to benefit long-term homeowners whose property values may be affected by new high density, market rate construction.
  2. Assess property taxes on the basis of income
  3. Tax deferral until sale
  4. Having CHA waiting list for current Pilsen residents to ensure that at least 50% of affordable housing beneficiaries are from the neighborhood

Community Land Trust

Community Land Trusts have become another strategy to fight the displacement of working families from urban neighborhoods. The creation of a Pilsen CLT aims at providing an extra community tool that can impact the preservation of affordability though the acquisition, development and management of land and structures for the purpose of keeping them affordable and under community control in perpetuity.

A local non-profit Community Land Trust will be established through the formation of a board. Once constituted, this board’s sole mission will be to keep the land and property affordable and making sure the operation runs in a sound and transparent manner.

Any type of building may exist in the CLT; the goal is to keep the value of the land steady to keep the housing or commercial uses on it affordable. The CLT leases the land and/or housing to users through long-term leases, typically 99 years. Sale of CLT property is limited by a resale formula to keep it affordable. Even when property is sold, the CLT retains ownership of the land.

The greatest challenge in creating a CLT is acquiring land. Historically, CLTs were often started with city-owned land in disinvested neighborhoods. Fewer and fewer of these are available.

Other options for land acquisition are federal HUD/CHA funding to purchase land or donations from banks and other property owners. The acquisition of housing facing foreclosure from banks is the method planned by the Casas del Pueblo CLT in Albany Park, because often, banks lose more money by proceeding with foreclosure than they would if they donated the house to a non-profit (Casas del Pueblo Community Land Trust, 2013). The CLT model could help single-family homeowners and tenants in multi-family buildings facing foreclosures stay in their homes, and in the process create affordable housing in perpetuity.

Not all CLTs are created equal. A CLT’s governance structure will reflect whether its main goal is community empowerment or simply preserving housing. The two most vital aspects to the sustainability of a CLT are active community participation and a strong stewardship framework.

CLTs are but one aspect of a larger policy framework encouraging affordability which might also include mandatory inclusionary zoning and higher taxes on warehoused vacant land.

CLTs have been enacted nationally and the foreclosure crisis has spawned increased interest in them. They have been promoted by major policy organizations like the Lincoln Institute, the National Housing initiative, the Ford Foundation, the MacArthur Foundation, the Federal Reserve, and the CLT Network. The CLT model’s flexibility and adaptability make it an appropriate solution to a range of problems, from gentrification and displacement to foreclosure, housing discrimination, and the loss of social capital.

Making CHA work for Pilsen

The Chicago Housing Authority has a historic debt with the Latino community. CHA has already been required by the courts to more effectively advertise its services to the Latino community in order to increase this community’s participation in public housing.

In addition to Latinos’ huge underrepresentation in all CHA services, now the agency can’t even claim bankruptcy: it sits on $440 million it must spend. This money is in addition to the $900 million yearly CHA budget, in which, as mentioned earlier, Latinos are chronically and grossly underrepresented. The following actions will not redress the suffering of thousands of Latino families that struggled as hard as anyone, but could not access a right to which they were entitled. However, they could start turning the page by having a tremendous impact in the future of Chicago’s most emblematic Latino community.

  • Acquire Additional Scattered Site Housing (via Real Estate Acquisition Program (REAP)

CHA can directly constructs new scattered site housing, but it is cheaper to acquire existing properties, particularly vacant multifamily housing.

According to the Conditions report, vacant housing units represent about 1,800 units in Pilsen. Some of these units are new and have never been occupied.

CHA should buy at least half of these units, concentrating on two and three bedroom apartments so that they can accommodate families.

A development partner should help assemble scattered buildings. “Gautreaux Court” would need to sign-off on the development, after assessing it wouldn’t violate Gautreaux’s de-segregation / de-concentration mandate.

Housing would be publicly owned and/or operated and kept permanently affordable.

Since the goal is to offer affordable opportunities to current neighbors, there shall be a community-based waiting list for scattered site housing. This is the only way to enable scattered site housing to serve as an anti-displacement tool for existing Pilsen families

A development partner should help manage the properties under the agreed conditions.

  • Construct Additional Scattered Site Housing

Currently, there are at least 75 vacant lots in Pilsen. Some of these lots are owned by the city. Some of these lots have been open for years, we can only assume, for speculative reasons.   Allowing this situation to go on in a community with ever shrinking affordable options, does nothing to address gentrification.

We are proposing that at least the lots owned by the City be immediately place in a Community Land Trust in order to keep the land affordable in perpetuity

This land shall be used to build additional affordable housing.

  • Create CHA set-asides in new market developments coming online (via Project-Based Vouchers (PBVs) / Property Rental Assistance (PRA)

Historically, high density developments have not been welcomed in Pilsen. The reason is directly related to the desire of local residents to protect themselves from displacement by accompanying increases in property values, taxes and rents. An open lot on the corners of 18th and Peoria has been proposed as site for massive development. An attempt in 2006 to build almost 500 unites was met skepticism by the community, which responded opposing the development through the Pilsen Alliances’ “Pilsen Not For Sale”. When the housing market crash came, the developer behind the project went bankrupt.

Currently, a new proposal reminiscent of 2006’s has surface at the same spot pushing for the construction of 500 new studio rentals. Additionally, a new development is being proposed at 19th and Sangamon for 111 condos. Both properties are a couple of blocks away from each other, connected by a discarded rail track that the City has proposed to make into a promenade (“paseo”). This area is in the most rapidly gentrifying part of the neighborhood.

CHA agrees to subsidize a 30 % of units in private developments getting constructed

Developers must agree to a CHA set aside   Under the PBV and PRA programs, private developers receive market level rents for apartments set aside for CHA residents, so there is no ‘hit’ to their profitability involved in setting aside units as low-income housing using these CHA programs.

An additional incentive to these developers should be the fact that owners with CHA units experience lower vacancy rates / less vacancy loss and have government-guaranteed rental income for decades. In other words, a very stable investment with guaranteed returns.

CHA would not have to spend major capital resources to deliver units as CHA does through construction it sponsors itself; This instead is leveraging the “energy” of the market to produce apartments

An additional guarantee to the developers is that the housing would be privately owned & affordable for a guaranteed term of only 15-30 years.

These units should be made available primarily to local residents, since the purpose of bringing these units online is to increase the opportunities to local residents. (There is no consistent precedent for community-based waiting lists for PBV buildings, making it uncertain whether preferential treatment could be given to current Pilsen residents; CHA opposition to this notion likely)


Other revenue possibilities

  • Affordable housing fund (“in-lieu-of” money): where is it, who, what etc. Can we get transparency/influence on how this money is spent?
  • Local TIF (500 apartment proposal at 18th and Peoria on TIF)
  • Creating additional adjoining TIFs
  • City-wide TIF surplus
  • Tap into CHA almost $500 million surplus
  • City renegotiation of remaining toxic swaps
  • La Salle street tax, tax on financial transactions
  • Private investors