Proposal: Put an eligible house into the Chicago land trust to lower its taxes and preserve affordability
The Chicago Department of Housing and the Chicago Community Land Trust (CCLT) want to start a novel pilot program to preserve existing affordable housing in community areas that are at risk of gentrifying. The Department of Housing asked for City Council’s permission on Wednesday at the regular Housing & Real Estate committee meeting, but was rebuffed due to insufficient engagement with community organizations.
One of the pilot program’s unique aspects is to encourage homeowners in six targeted community areas to opt in and “put” their houses in the land trust in exchange for significantly lower property taxes and access to a $30,000 grant for home repairs and energy upgrades. All while continuing to own the house.
The ordinance is entitled “Affordable Homeownership and Housing Pilot Program”, or AHHP (O2019–5555).
Here’s how it would work
The owner of an eligible property (single-family, condo, townhouse, two-flat, vacant lot) would apply to “opt in”. The CCLT would conduct a fair market appraisal to determine the property’s market value. It would also calculate an “affordable value”, an amount roughly equal to something affordable to someone earning 100 percent of the area median income (AMI) spending no more than 30 percent of their income on housing (mortgage, taxes, and insurance). The affordable value would become the new assessed value, the value upon which the house is taxed. Additionally, a “maximum resale value” would also be set (the formula wasn’t available before publishing this).
The fair market value and the affordable value would be written into an irrevocable covenant and deed restriction attached to the property that would last for 30 years. If the owner decided to sell the property while the covenant and deed restriction is active, it could only be sold to someone whose household income doesn’t exceed 100 percent of the AMI up to the “maximum resale value”, and the seller could only receive 1/5th of any appreciation in the property’s value upon sale.
The selling point is this: Make your house affordable for the next person in exchange for drastically lower property taxes for the next 30 years.
How much savings? Alder Pat Dowell (3rd) asked that question, and Anthony Simpkins, the Managing Deputy Commissioner at the Department of Housing, said the property tax reduction was “anywhere from 30 to 60 percent”.
On top of the lower taxes, the homeowner could apply for up to $30,000 in grant money to correct health and safety hazards, replace the roof or porch, and install energy efficiency upgrades.
A lower assessed value and a limit in homeowner cashout ensures long-term affordability. The opt-in program isn’t for people with expensive houses or those who want to profit off of selling their house.
Simpkins said, “Folks that are interested in cashing out, this is not an option for them.”
The six initial community areas would be (click on each for a map):
The committee deferred the ordinance
The opt in program is only one part of the ordinance. Most of the $3 million funding that the Department of Housing was asking to be allocated, out of an already existing budget of $7.4 million derived from developer’s paying the ARO in lieu fee, would be spent acquiring and rehabilitating properties.
Many alders were upset that community organizations were left out of the discussion in designing the ordinance. Several mentioned Logan Square Neighborhood Association, in particular — based on what some of the alders said, it seemed that LSNA devised the same or similar idea, but was not included in developing or administering this ordinance.
Jennie Fronczak, the director of development for Latin United Community Housing Association (LUCHA), said that the proposed ordinance needed revisions and also asked for the committee to defer a vote. “We’ve been asking to co-create effective tools that will preserve homeownership in our communities. We are asking to delay this vote until the next meeting, so that we can sit down and go over the logistics, so that the resource that’s created can be effective.” One change Fronczak suggested was using the more stringent ground lease rather than deed restrictions on houses that opted in.
Additionally, Fronczak told me afterward, the ordinance’s maximum resale value formula should not be based on the market value, but on a flat rate or indexed to the Consumer Price Index (inflation) or Area Median Income “which prove much more resilient during market crashes”.
Simpkins had explained earlier that the Department’s conversations with LSNA staff had brought out a useful way for LSNA to help, by identifying properties for the CCLT to acquire. Simpkins stressed that the vote should happen so the CCLT can get started right away. Alders, Simpkins, and people giving public comment all agreed that gentrification was a timely issue: Properties in Hermosa were said to be listed for 30 to 40 days before closing.
The insufficient engagement with community organizations was enough for Alder Maldonado (26th) to make a motion to defer the ordinance. Alder Osterman (48th) decided to table the ordinance to avoid the need for a vote on the motion, effectively deferring discussion on the ordinance.
Notes
The CCLT is a land trust in name only. Refer to Inspector General Joe Ferguson’s report from February 2019 about concerns that the Land Trust wasn’t fulfilling its mission effectively. This ordinance, however, would move CCLT into the territory of real land trusts that acquire property and keep housing costs low by taking away the financial burden of owning land.
Other land trusts have formed recently, but we’re still learning about them:
- LSNA, LUCHA, and the Spanish Coalition for Housing formed the Here to Stay Community Land Trust this year in Hermosa and West Logan Square.
- The Chicago Owners Land Trust (COLT) was created two years ago by the Chicago Anti-Eviction Campaign with support from the Chicago Community Loan Fund (CCLF, which is a big supporter of cooperative businesses and housing as well), Action Now Institute, and Greater Southwest Development Corporation.
