AFFORDABLE HOUSING PROGRAM PRICES OUT FAMILIES IT’S SUPPOSED TO HELP, NEW STUDY FINDS

Neighborhood Residents Excluded from Housing, Despite policy intended to protect them against rising housing costs; city amasses $1 billion TIF surplus

CHICAGO – A city policy intended to ease the harmful effects of gentrification in Chicago’s controversial Tax Increment Financing (TIF) districts has instead left  families priced out of housing they helped to subsidize, a report released  Thursday has found.

This pattern has occurred even as Chicago has wrestled with an intractable shortage of affordable housing and the city has compiled a staggering $1 billion  surplus in its multiple TIF accounts, according to the report. 

The report is based on a comprehensive analysis of TIF-funded housing since 1995, the first year that the City began collecting full records on such  expenditures.  The data shows that in a quarter of all wards where TIF-subsidized  affordable housing was constructed, for-sale units were priced for households  earning as much as 2.5 times the community’s median income.  In another quarter  of those wards, TIF-funded rental housing cost as much $582 more per month  than the average apartment in the neighborhood. 

“This data shows that the city’s use of TIF funds to construct affordable housing is penalizing the very people who need it the most,” said Julie Dworkin, Director  of Policy for the Chicago Coalition for the Homeless, the chief researcher of the  report.  “Many working families are already stretched dangerously thin by  existing housing costs, and they’re getting priced out of the so-called affordable  housing in neighborhoods where they bore the burden of a TIF District. This is a  gross inequity, and it exemplifies the need to reform the way the City spends TIF dollars on housing.” 

Under current city policy, 20 percent of the units in residential developments  subsidized by TIF funds must be designated as “affordable housing,” which is targeted to families living within prescribed income limits.  The policy was intended to curb displacement of lower-income families in neighborhoods where TIF districts fuel gentrification. 

But the report’s findings suggest that the policy has exacerbated the problem it was ostensibly designed to alleviate. Released by Sweet Home Chicago, a coalition of community and labor organizations seeking to reform TIF policy, the analysis shows that for-sale housing subsidized by TIF was priced for families of four earning $75,000, despite the fact that in seven of the 28 wards where those units were created, the median household income ranged from $58,550 to as little as $29,027.  

The record on TIF-funded rental housing reveals a similar gulf between the cost of the units and the incomes of the people squeezed the most by existing housing costs.  Under city policy, affordable rental housing bankrolled by TIF must be targeted to households earning 60 percent of the region’s median income, which is $45,000 for a family of four. 

That income threshold translates into a monthly rent of $1,019 for a two-bedroom apartment, which is dramatically higher than the average cost of an apartment in at least a quarter of the wards where TIF-funded rental housing was created.  In fact, nearly a quarter of TIF-funded affordable rental units built in Chicago reside in wards where the average costs of existing apartments is far less than the monthly lease for the units bankrolled by TIF. 

In a TIF district, property tax rates are frozen, and as the value of property increases over time, the added revenues, which would normally be distributed to local taxing bodies, are instead funneled into a special TIF account to support redevelopment projects. 

The study estimates that 243,000 Chicago households earn annual incomes of less than $20,000.  More than 213,000, or 88 percent, of those households pay more than 30 percent of their income on rent, a measure of financial distress known as “cost burdened.”  Yet only 27% of the units created with TIF funds target this income level.  By contrast, only 14 percent of households earning $75,000 a year – the income standard for for-sale housing funded by TIF – are cost burdened. 

“These numbers indicate that a policy that is supposed to prevent lower-income residents from getting priced out of TIF districts is, instead, making the neighborhood even less affordable,” said Mimi Harris, a leader with Jane Addams Senior Caucus.  “Seniors and families throughout Chicago are struggling to maintain housing in the neighborhoods they have lived in for years.  The city should institute new affordable housing standards that dedicate more TIF funds to developments that would be affordable to the residents living in the TIF district.” 

Meanwhile, the report found that, despite the city’s chronic shortage of affordable housing, only four percent of total TIF revenues collected since 1995 have been used to alleviate that problem. During the same time period, there was a significant investment in market rate residential developments that only have a small percentage of affordable housing for much higher incomes than the units in affordable housing developments.   The per unit investment was also more than twice as much in market rate developments than in affordable developments.

“Using TIF funds to subsidize market-rate developments is clearly an inefficient means to create affordable housing, particularly for households earning what our members earn,” said Jaquie Algee, Director of External Relations, SEIU Healthcare Illinois/Indiana.  “Our analysis shows that the city spends far more money to get far fewer affordable units when it bankrolls market rate developments with TIF funds. If the city invested more TIF funds in developments that are exclusively affordable, more housing would be created for people working to provide essential services in our neighborhoods like home care and child care workers.

The report was released in a climate of unprecedented scrutiny over the city’s oft-maligned TIF policy.  According to recent reports, a staggering $1 billion aggregate surplus has accumulated within Chicago’s 158 TIF accounts, and those resources continue to mount even as the City has raised the specter of further layoffs and service reductions to cover budget deficits. 

Based on these findings, the Sweet Home Chicago campaign has recommended that the City adopt two key reforms:

 Designate 20 percent of TIF funding generated each year for affordable housing.  The foreclosure epidemic and the resulting collapse of the mortgage market have only compounded the city’s preexisting scarcity of affordable housing.  The report recommends that the city taps TIF accounts, which have diverted tax revenues from other public services, to help expand its desperately needed inventory of affordable housing.

 Revise affordability standards to serve households with the greatest need.  To eliminate the gap between TIF-funded affordable housing and the incomes of those who need it most, the campaign calls for the targeted 20% of funds to have new income limits:  

Standards for Rental Housing
Units should be affordable to households earning no more than $37,700 for a family of four (50 percent of Area Median Income), with 40 percent of those apartments priced for similar-sized households earning $22,600 (30 percent of Area Median Income).  

Standards for For-Sale Housing:
Homes should be affordable to households earning less than $60,300 for a family of four (80 percent of Area Median Income).

The report ushered in the launch of the Sweet Homes Chicago campaign, which unites the following organizations: Action NOW, Albany Park Neighborhood Council, Bickerdike Redevelopment, Chicago Coalition for the Homeless, Jane Addams Senior Caucus, Kenwood Oakland Community Organization, Lakeview Action Coalition, Logan Square Neighborhood Association, Organization of the Northeast, SEIU-Healthcare Illinois/Indiana, SEIU Local 1, and United Food and Commercial Workers Local 881

The campaign plans to hold actions and events in local Chicago neighborhoods to raise awareness about the need to reform TIF housing policy. 

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