Ordinance would require TIF funds to be used for affordable housing

Backed by scores of city residents, Chicago aldermen introduced an ordinance at Wednesday’s City Council meeting that would allocate 20 percent of the city’s TIF funds to affordable housing.

The proposed ordinance could be a boon to Chicago’s Northeast side, which has been hard hit by foreclosures. Rogers Park saw 401 foreclosure filings in 2009, up more than 44 percent from 2008, a report from the Woodstock Institute, a research and policy organization that tracks foreclosures, showed.

A draft of the ordinance circulated Wednesday listed a dozen aldermanic sponsors including 49th Ward Alderman Joe Moore. “I have always been a staunch advocate of doing whatever we can to provide affordable housing,” Moore said, adding that he supported the ordinance because it was “pushing the envelope and thinking outside the box.”

“This ordinance will help me preserve our residential housing stock and help us keep it affordable to middle and working class families,” Moore said. “By having different pools of money to draw from, the alderman’s job becomes a little easier.”

Alderman Walter Burnett, 27th, is the lead sponsor of the proposal that is designed to rectify the city’s foreclosure crisis. At a press conference and rally sponsored by the Sweet Home Chicago Coalition and attended by members of a number of community organizations, Burnett said that Chicago had many empty houses because of foreclosure, eviction and the high cost of home ownership.

“We need to stabilize our communities by getting people in these houses. And the only way to do that is by subsidizing the cost with TIF dollars,” Burnett said.

The affordable housing ordinance’s lead sponsor is 27th Ward Alderman Walter Burnett (center). 28th Ward Alderman Ed Smith (left) and 49th Ward Alderman Joe Moore (right) also sponsored the ordinance.

The ordinance would require the city to designate at least 20 percent of TIF funds generated each year for the development and preservation of affordable housing.

The ordinance defines affordable rental housing as having at least 50 percent of the housing units affordable to households at or below 50 percent of the area median income, adjusted for household size. The Sweet Home Chicago Coalition calculated this value as $37,000 for a family of four. Affordable for-sale housing must be affordable to households at or below 80 percent of the area median income, $60,300 for a family of four. The ordinance also requires at least 40 percent of housing units developed with TIF funds be affordable at or below 30 percent of the area median income, $22,600 for a family of four.

Developers would apply for the affordable housing funds through a Request for Proposal Process administered by the Department of Community Development. The funds could be used to construct new housing units or to rehabilitate existing housing.

TIF, or tax increment financing, is a tool to help strapped local governments attract private development and new businesses . This financing method works by establishing special TIF districts. Public investment is used to encourage private investment in the district. The investment is intended to raise property values and encourage further development. Higher assessed property values would generate additional tax revenue. The difference between the tax revenue raised before an area receives the TIF district designation and the higher revenue gained after the designation is called the tax increment. This increment is used to recover public investment in the district.

The ordinance would not require every TIF district to use 20 percent of its yearly revenue for affordable housing. Instead, the city would draw 20 percent of its total yearly tax increment revenue from a combination of TIF districts.

Sweet Home Chicago’s analysis of Department of Housing statistics shows that, as of 2008, Chicago TIF districts had collected $1.3 billion, but just 4 percent of the funds had been used for affordable housing development.

Introducing the ordinance to the council, Burnett said there was a lack of state and federal funding for affordable housing, making TIF funds an attractive option. “I see it only fitting that the city of Chicago use the tools that we have at hand in order to make it possible not only to put some of the foreclosed properties back on the tax roll but also to put more affordable housing back in the community,” said Burnett.

Calling the ordinance “our own stimulus package”, Burnett said affordable housing could spur other development. “Traditionally we have seen that in most communities throughout the city of Chicago, affordable housing has been the initiative and the spark to start development in those communities,” Burnett said.

Burnett recommended that the ordinance be passed to the council’s finance and housing committees for further review.