Chicago’s City Council has approved an amendment to the existing affordable housing ordinance (the 2015 ARO) which will change, and in most cases increase, affordable housing requirements applicable to residential projects throughout the City.

Below is a summary of some of the key provisions of the 2015 ARO, approved by the Council on March 18, 2015.

Affected projects

As with the existing code, the 2015 ARO applies to all residential projects  with 10 or more units that: (1) are permitted through a zoning change that increases floor area ratio (FAR) or allows residential use where not previously allowed, (2) include land purchased or obtained from the City of Chicago, (3) obtain financial assistance from the City of Chicago or (4) are rezoned to a planned development (PD) in a downtown zoning district.  

In addition, the 2015 ARO expands the scope of affected projects.  The 2015 ARO extends to existing PDs that are amended to allow more FAR and/or dwelling units and to residential projects that make use of transit-served location floor area premiums.

Requirements

The basic 10 percent affordable requirement remains unchanged.   (When the City provides TIF or other financing, the  requirement remains at 20 percent.)  However, developers will no longer be able to completely satisfy affordable requirements by paying a flat $100,000 “in lieu fee.”  Except for downtown owner-occupied projects, 25 percent of the required affordable units must be provided on-site or at a qualifying off-site location subject to the approval of the Department of Planning and Development (DPD). If developers satisfy the requirement with qualified off-site affordable units, an additional $5,000 administrative fee is assessed against each off-site unit.

The in lieu fee, which may be paid to satisfy the remaining 75 percent affordable unit requirement, will change from a flat fee to a range between $50,000 and $225,000, and will increase in all but the low-moderate income areas as follows:

Downtown rental projects

  • 25 percent mandatory on-site or off-site affordable units within a two-mile radius and within a higher income area or downtown district
  • In lieu fee is increased to $140,000 per unit through the first anniversary of the 2015 ARO publication date and $175,000 per unit thereafter (or if at least 25 percent of the required affordable units are sold or leased to an authorized agency, $115,000 per unit through the first anniversary of the 2015 ARO publication date and $150,000 per unit thereafter)

Downtown owner-occupied projects

  • No mandatory on-site (or off-site) affordable unit requirement.
  • If election is made to include at least 25 percent of the required affordable units on-site, the in lieu fee is increased to $140,000 per unit through the first anniversary of the 2015 ARO publication date and $175,000 per unit thereafter (or if at least 25 percent of the required affordable units are sold or leased to an authorized agency, $115,000 per unit through the first anniversary of the 2015 ARO publication date and $150,000 per unit thereafter).
  • If election is made to not include at least 25 percent of the required affordable units on-site, then the in lieu fee is increased to $160,000 per unit through the first anniversary of the 2015 ARO publication date and $225,000 per unit thereafter.
  • If election is made to provide affordable off-site units, the units may be located anywhere in the city, subject to DPD’s approval.

Higher income area

  • 25 percent mandatory on-site or off-site affordable units within a two-mile radius and within a higher income area or downtown district.
  • In lieu fee is increased to $125,000 per unit (or $100,000 if at least 25 percent of the required affordable units are sold or leased to an authorized agency).

Low-moderate income area

  • 25 percent mandatory on-site affordable units.
  • In lieu fee is reduced to $50,000 per unit.

Relationship to affordable housing FAR bonus

Payment of fees for the affordable housing FAR bonus available in downtown zoning districts will no longer be available as a method of “alternative compliance” with mandatory affordable housing requirements, although such payments may be credited against in lieu fees payable under the 2015 ARO.

Affordable housing transit bonuses

Projects that qualify as “transit-served locations” under the Chicago Zoning Ordinance in B, C and D “dash 3” districts may qualify for additional FAR increases, height increases, and parking reductions if at least 50 percent of the required number of affordable housing units are provided on-site.

Applicability to pending zoning and TIF applications

The 2015 ARO will apply to all new zoning applications and TIF applications filed after the 2015 ARO is effective, which will be 180 days after publication of the 2015 ARO.  Zoning applications that have been filed and introduced to City Council prior to the effective date of the 2015 ARO and TIF applications that have been received and accepted by DPD prior to the effective date of the 2015 ARO will have a grace period of nine months after the effective date to obtain final approval before such projects would be subject to the 2015 ARO.

What’s next?

The 2015 ARO adds additional layers of complexity to an already complicated affordable housing process. The ability to reduce in lieu fees through a collateral transaction with the Chicago Housing Authority, and the ability to provide off-site affordable units, to name just a few of the new provisions, provide opportunities as well as potential pitfalls for developers.

See the 2015 ARO here