More Thoughts on the TOD Debate as the Boom Moves Into Its Next Phase

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Somos Logan Square helped organize a protest against upscale development and evictions last Saturday, drawing an estimated 200 people.  Photo: Bob Simpson

One thing’s for sure: As the current transit-oriented development boom unfolds along Milwaukee Avenue it’s bringing major changes to the affected neighborhoods. Many people agree that adding dense, low-parking development near Blue Line stations is a good strategy for reducing car dependency. But there’s been debate about whether the new wave of high-end TOD buildings is fueling the displacement of working-class residents in these areas, especially Logan Square, or if the increase in housing supply will take pressure off the existing rental market.

A recent article in Curbed provided a snapshot of the changes that are taking place as thousands of new apartments, virtually all of them in TOD buildings, are being built along the Blue Line. It noted that as Wicker Park continues to gentrify, small businesses along Milwaukee are being replaced by chain stores than can afford higher rents.

Meanwhile, hundreds of units are being built in Logan Square with rents ranging from $1,400 for a studio in the Twin Towers to $3,900 for a upper-floor three-bedroom in the “L” building. Ten percent of the apartments in these building will be affordable units, as defined by the city’s standards.

But Curbed noted that, despite the fact that many Chicagoans would never be willing or able to spend thousands of dollars a month on rent, well-heeled folks seem to be lining up to sign leases. A 40-unit TOD at 1515-1517 West Haddon in Wicker Park is over 70 percent leased, two and a half months before it opens, according to developer Mark Sutherland of Wicker Park Apartments.

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Rendering of the TOD at 1515-1517 West Haddon.

The building, located a block from the Division Blue Line station, will have 41 apartments (none of which are affordable units) and 21 parking spaces, and rents are similar to the Logan Square TODs. And like the Logan buildings, the Haddon building will include plenty of upscale amenities and perks to partially justify the high rents, including 45 bike parking spaces and a CTA Transit Tracker screen in the lobby.

One thing that’s important to keep in mind is that the rents in these new TODs are expensive not because of the fact that they’ve got relatively few parking spots but in spite of it. Garage spots cost tens of thousands of dollars each to build so, in theory, by providing fewer spaces developers should be able to pass on the savings to their tenants.

But while we know that new construction is expensive, we don’t really have a way to judge whether the companies are charging premium rents in these buildings because they have to in order to turn a profit, or simply because they want to make as much money as possible. Developers like Rob Buono of the Twin Towers have told me that, were it not for the easing of parking mandates brought about by the city’s new TOD ordinance, they probably wouldn’t be building these projects.

Similarly, when anti-displacement activists like Somos (“We Are”) Logan Square have pushed for the percentage of onsite affordable units in local TODs to be increased from 10 percent to 30 percent and the developers have argued that this would prevent them from attracting investors or making a profit, we have no way to tell if this is true. Somos also wants the definition of “affordable” for these units to be changed so that they’re within reach of residents making 30 percent of the Chicago region’s Area Mean Income, rather than the 60 percent mandated by the city.

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Saturday’s protest. Photo: Bob Simpson

As I’ve written before, Somos Logan says these steps are necessary because the hundreds of expensive new units in the works will lead to an influx of affluent residents and upscale retail. They say this is encouraging profit-focused landlords to jack up rents, and that it will lead to higher property values and taxes, which will force other property owners to sell their buildings or raise rents, displacing more longtime residents.

Somos Logan spokeswoman Justine Bayod pointed me to studies arguing that increasing the amount of luxury housing in communities has raised overall housing costs, such as “Development without Displacement: Resisting Gentrification in the Bay Area,” produced by the local social justice group Causa Justa / Just Cause.

The report links the construction of 6,000 new units in Oakland, most of them market-rate, with the displacement of working-class residents. It states, “With the arrival of residents willing and able to pay a lot more for rent, landlords saw huge incentives in evicting existing tenants as a way to vacate previously occupied units, and bring in higher income residents.” The study says that between 1998 and 2002, the number of “no fault” evictions tripled in Oakland while rents increased by 100 percent.

On the other hand, the study “Perspectives on Helping Low-Income Californians Afford Housing,” published in February by the California Legislative Analyst’s Office, makes the opposite argument, claiming that more market-rate housing is the best way to address the state’s affordable housing crisis.

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Graph from the CLAO report

“Existing affordable housing programs assist only a small proportion of low-income Californians,” the report stated. “Encouraging additional private housing construction can help the many low-income Californians who do not receive assistance. Considerable evidence suggests that construction of market-rate housing reduces housing costs for low-income households and, consequently, helps to mitigate displacement in many cases.”

The availability of new high-end units may also reduce the likelihood that higher-income newcomers will buy existing houses and multiunit buildings and replace them with luxury single-family homes.

The perspective of the anti-displacement activists may be colored by their passion for the cause, fueled by witnessing the human toll when low-income and working-class residents are forced to leave their homes due to rising housing costs and evictions. But it’s also possible that the theory that increasing the market-rate housing supply – even with luxury units – is the best strategy for keeping the rents of existing apartments stable is a case of wishful thinking by politicians, developers, and TOD advocates.

It’s a complex issue, and it seems that the jury is still out as to whether the new high-end developments along Milwaukee, enabled by the city’s TOD ordinance, will slow or speed displacement in neighborhoods where rising rents have been an issue for years.

A February blog post by the Metropolitan Planning Council’s Marisa Novara, written after she appeared on a panel on community change along with reps of organizations that are fighting gentrification, including Somos, identified the crux of the matter:

If rising housing costs and displacement are [already] happening, the neighborhood is not going to stay as it was. My top questions then become, How can we shape the outcome of a process that is happening? How can we keep as many longtime residents as possible? And most fundamentally, how do we more effectively get out ahead of these processes in the future?

She notes that, unlike New York or San Francisco, in recent years Chicago has been losing population. A 2014 study by UIC’s Vorhees Center found that only nine of our city’s 77 community areas have gentrified since 1970, so while much of the city faces an affordable housing shortage, there are only a few areas of the city where there’s a housing unit shortage regardless of income.

Although Novara helped lobby for the city’s 2015 changes to the Affordable Requirements Ordinance, she acknowledges that in parts of the city where aldermen mandate that 10 percent of units in new building be affordable, that will have limited impact on the housing shortage. As Daniel Hertz wrote last year, even if that requirement was bumped up to 50 percent in Logan Square, more than 90 percent of units in the neighborhood would still be market-rate.

“So most neighborhoods in Chicago are not growing, and our tools for affordability are inadequate and shrinking,” Novara writes. “Again, what is the outcome we want? We need more neighborhoods to be in growth mode. And we need more affordable housing in all 77 community areas.”

Novara points to the proposed Xavier building in the former Cabrini Green area as an example of a good approach to providing affordability in a growing area. It would combine dense new construction (240 units plus retail) with 10 percent affordable units and 10 percent Chicago Housing Authority units. “This example combines all arguments: We need units in high-demand areas to keep rents from escalating further and to encourage the growth we need as a city, and we need creative solutions to provide as much affordability as possible,” she writes.

Hopefully a similar approach can be tried soon in Logan Square.

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  • The funny thing is that in my neighborhood (Noble Square) people worried that dense buildings would lower their property values. Which is a shame, because our neighborhood is very close to the city core, which is why I’ve resisted leaving even though housing costs here have skyrocketed, since I like to bike to work.

    I have noticed that for me and the few people I know still here, rent increases are finally flattening out and I think some of that is because of new construction. It’s hard for landlords to raise a decrepit old place to 1300 when Kenect down the street has new amenities closer to the train starting at 1500.

    My thought on Logan Square is the areas these TODs are in were already pretty expensive to live in and had already attracted fairly wealthy people leaving neighborhoods like mine. People I know who are working class who lived in those parts of Logan Square have largely left because rents there have been rising a lot in the past five years.

  • ohsweetnothing

    Still waiting on the Somos protest against the luxury SFHs and 3-flat deconversions happening across Logan Square…

  • madopal

    Again, two ways to deal with this problem: build near transit (which leaves the financials up to the developers) or build more transit. If Chicago truly wants to be a world class city, we’ll figure out that everyone, regardless of neighborhood, should have good access to transit. Expecting new construction to be affordable in a transit-starved city seems like a pipe dream, especially when trying to harness for profit organizations to build it for you.

  • Patrick F

    How in the world is adding housing, displacing current people?

    And are homeowners really complaining about their neighborhood becoming more desirable? Isn’t that what any person would want?

    Renters also have limited rights, if you want to control where you live and how much it costs, otherwise you are at the mercy of a landlord. That’s how renting works.

  • ardecila

    This. Increasing supply in Logan Square won’t directly stop displacements in Logan Square. What it will do is prevent or at least slow middle-income folks from moving up the Blue Line into Avondale and starting a displacement process there.

    Studies have definitely shown that a development boom and large increase in rental units will slow or halt the increase in rents. What it won’t do is make housing CHEAPER. The only way to really do that would be to abolish zoning entirely and building codes to make new construction dirt-cheap. Plus, usually the slowdown only occurs once the truly poor residents have all been priced out.

  • It can through property tax increases. That the perverse reality of our property tax system. A nice new building that benefits the entire neighborhood goes up, the benefits mean the property around it is valued more, some retired person who has owned a house on the next block for 50 years and isn’t exactly making more money gets hit with a $$$ property tax bill. I have been heartened to see more activism that deals with the tax issue rather than trying to stop new development.

    Of course if that retired person decided to sell they’d make money, but they’d technically be “displaced.”

  • JacobEPeters

    The argument is that the factors that are already causing displacement will be increased in their intensity. Here are the dominoes:

    1. New luxury housing replaces an empty lot, improving the aesthetics of the neighborhood, increasing property values & increasing the rents that can be demanded in units that formerly overlooked a trash strewn lot.

    2. Those new residents of the new luxury housing create demand for luxury oriented businesses (cocktail bars w/ $10 “cheap” cocktails, designer boutiques, etc.) causing landlords to think that they can charge higher retail rents, pushing out long time businesses.

    3*. National chains & very high end establishments are the only retailers that can afford these new average retail rents (see what Wicker Park/Bucktown is experiencing currently).

    4*. Proximity to these national chains & high end retail increases property values (and rents) further while simultaneously removing affordable services that existing residents relied upon.

    *Simultaneously to steps 3 & 4 former residents move to an adjacent neighborhood that they can continue to afford & start to cause rents to increase in those nearby neighborhoods, as demand increases & empty storefronts turn into new bars, restaurants, & stores.

    These are real cycles that are experienced by a neighborhood, but they are already occurring in Logan Square & not building market rate housing will only cause the luxury market to take over existing 2 flats & 3 flats, causing displacement & reducing population density. Somos is complaining when we are already halfway through the process of gentrification. If we want to disrupt the dominoes falling as described above then we need to take steps to build new affordable housing through non profit developers on the many empty lots & strip malls in Humboldt Park, West Logan Square, Avondale, & Irving Park. Because the proximity of these neighborhoods to central Logan Square, park amenities & the Blue Line will cause them to experience the same evolution in the coming decade.

    Adding housing is entirely needed, but if you add the housing before the pent up demand causes luxury pricing to be justifiable, then you can manage growth across the entire city rather than protesting necessary sustainable growth in neighborhoods where land prices have already been driven through the roof.

    Remember the lot where the 2 towers are being built was a building until 2011 when it was torn down so that the property owner could sit on the land until it appreciated enough to justify the price that they thought the land should be worth.

  • JacobEPeters

    but if we eliminated zoning & building codes entirely we could end up with some really poor quality buildings that could be a danger to residents or which could be entirely wasteful from an energy and land use standpoint. See Houston, housing may be cheap, but quality of life from a walkability & land use standpoint is lagging behind other high growth metros.

  • I think we should reevaluate zoning and trim it down to things that are evidence-based quality of life rules.

    Building codes should also probably be reevaluated, but are certainly more critical in general than most zoning.

  • ardecila

    Apples and oranges. Houston may not have zoning per se, but they do have strict minimum parking requirements and as a city they underinvested in transit and urban street design for decades. The results were predictable. Chicago already has a robust network of high quality streets with sidewalks, a comprehensive transit system and a culture of walking and transit use.

    On the other hand, due to lack of zoning, Houston is one of the most affordable cities in the US. Popular neighborhoods in the Inner Loop have been allowed to densify, with townhomes and apartments replacing single family homes. The result sometimes feels like photos of Chicago from the 1920s (y’know, before we had zoning), with a diverse and flexible mix of building types on many blocks.

    As far as poor quality goes – cheaper building systems like PVC pipe, Romex electrical conduit and PEX water lines are demonstrated and safe. Our building code just doesn’t allow them, to protect tradesmen from competition. We all pay the price for this protectionism through higher housing costs.

  • JacobEPeters

    Its affordability is also due to large swaths of suburban tract housing that does not cover true transportation or environmental costs (see houston flooding issues) of their “cheap” development.

    I am not arguing against an overhaul of zoning, I am just saying that a lot of those codes are based on lessons we’ve learned from bad development in the past.

  • johnaustingreenfield

    Here’s the old Max Gerber Building that used to stand on the Twin Towers site.

  • JacobEPeters

    Yep, I lived across from the loading bays on Belden near the multi-story portion. When it was torn down the noise from Milwaukee Ave. increased drastically. Glad to finally see the site going back to a productive use. I just wish that new apartments had been built on the site in 2011 when I still lived there.

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