Dive Brief:
- In September 2015, the Home Builders Association of Greater Chicago and a Chicago developer challenged the city's Affordable Requirements Ordinance requiring residential developers of new or rehabbed projects with 10 or more units needing a zoning change, on city land or receiving city funding to include affordable housing or else pay into a city fund for affordable housing. The lawsuit was dismissed earlier this month.
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The HBA and Hoyne Development said the ordinance, which took effect in October 2015, is unconstitutional because it allows the government to take property from an owner without just compensation.
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The judge dismissed the case, writing that the ordinance isn't unconstitutional because it gives housing developers zoning for a bigger project in return for providing affordable housing.
Dive Insight:
Cities across the United States are grappling with a lack of affordable housing. Similar inclusionary-zoning plans are in the works in other cities like New York and Los Angeles. Seattle, Portland, OR, and San Francisco recently passed affordable housing regulations.
A record-high number of people (21.3 million) are allocating more than 30% of their income to rent, according to the 2016 State of the Nation's Housing report from the Joint Center for Housing Studies at Harvard University. Among the lowest income earners, 70% were spending more than half of their monthly income on rent. Affordable rental housing, in particular, is needed to maintain established communities, attract young people and increase diversity. Minority and foreign-born households account for half of renter households, compared with just one in four homeowners, the JCHS reported.
Inclusionary housing rules can make it difficult for developers to turn a profit and, in some cases, continue with a project. In the case of Chicago, many developers have paid the city's $100,000 opt-out fee instead of including affordable units. The new, more stringent version of the ordinance that went into effect in October 2015 raised the fee to as much as $225,000. Chicago’s original ARO (created in 2003 and revised in 2007) led to 189 on-site affordable rentals in market-rate developments and $53 million in-lieu-of fees that subsidized 2,500 rental units, according to the Chicago Tribune.
