“Your View” column by Jack Markowski
The lack of lending in Chicago’s low- and moderate-income neighborhoods is a troubling trend for the region’s affordable rental housing (see Crain’s story: “Study: Landlords on South, West sides can’t get loans”). As DePaul University’s Institute for Housing Studies report shows, downtown and North Side neighborhoods have more than recovered from the recession. Meanwhile, low- and moderate-income communities on the South and West sides continue to struggle.
Multifamily loans in low- and moderate-income neighborhoods typically finance small, five- to 49-unit rental properties that are affordable and house our region’s workforce. Most of Chicago’s multifamily housing stock is more than 75 years old, and a lack of access to financing to rehabilitate and maintain these buildings will lead to their permanent loss. The longer these lending trends continue, the greater the threat to our region’s affordable-housing stock.
We must preserve these buildings to keep up with increasing demand. In Cook County, more than 400,000 renter households earn less than $33,000 annually, and the gap between the supply and demand of affordable rentals is 176,000, according to a report by the Preservation Compact.
PRESERVATION IS THE ANSWER
Yet it is impossible to build our way out of this problem. New construction of affordable rental housing requires significant public subsidies, and those subsidies are shrinking. Preservation is the necessary and efficient approach.
Unfortunately, the challenges to preserving the stock go beyond the lack of credit described by DePaul. Rising rents and property values threaten the subsidized affordable rental stock in strong markets. In the depths of the crash, very few government-assisted affordable rental properties opted out of their government contracts. Today, a booming real estate market in many areas again threatens to squeeze out these affordable units.
In strong markets, government-assisted buildings are likely the only affordable rental in the area. Owners, government agencies and community groups must work together to keep government subsidies in place or help to find viable new buyers who will preserve the building’s affordability.
On the flip side, affordable rental buildings in struggling markets cannot survive if neighborhood deterioration depresses values and demand. Targeted efforts by government, nonprofit and for-profit players to focus resources and investment in concentrated areas will bolster neighborhood vitality and strengthen affordable rental buildings. Finally, building owners in all markets wrestle with high operating costs. Owners can lower energy costs with multifamily retrofits and cut property taxes by appealing their taxes.
Access to credit is a vital component of preservation, but it is not the whole answer. Only a multifaceted arsenal, with neighborhood-specific strategies, will ensure that affordable rental housing in strong, healthy neighborhoods is preserved for years to come.