CITY HALL — Alderman voted Monday to lend another two years to a controversial demolition fee package designed to slow displacement in two of the city’s most rapidly gentrifying areas, signaling that opposition to the measure has cooled since it went into effect a year ago.
The demolition fee extension was one of a handful of initiatives approved by the City Council Committee on Finance, sending them to the full council for a final stamp on Wednesday. The committee also green-lit $625,000 in legal settlements tied to police crashes and more than $22 million in tax-increment financing payouts, including about a $2.5 million loan to fund infrastructure work around the Morton Salt theater renovation on the Near Northwest Side.
The City Council in March 2021 passed a one-year pilot program (O2021-746) charging a fee of $15,000 per building — or $5,000 per unit, whichever is more — on any residential demolition permit in Pilsen or a nearly 2-square-mile area surrounding the 606 Bloomingdale Trail in Bucktown, Humboldt Park and Logan Square.
Making demolitions more expensive has been a priority for the Logan Square Neighborhood Association since at least 2015, when teenage organizers held a rally demanding city-backed demolition fees as a tool to slow the destruction and replacement of naturally affordable housing stock in their neighborhood. Ald. Daniel La Spata (1), Ald. Carlos Ramirez-Rosa (35) and Ald. Byron Sigcho-Lopez (25) picked up the mantle for the cause and worked with the Chicago Department of Housing to put the policy into practice — first by legislating a temporary freeze on demolitions in the areas, and then by codifying the fees.
“We are solving for the two- to four-unit loss in many of our communities in Chicago,” Department of Housing Comm. Marisa Novara told the committee on Monday. “They are a major source of what we call naturally occurring affordable housing. We especially see that in gentrifying areas we lose a lot more two- to four-unit buildings. They’re either torn down completely and remade or reconverted from more units into a single-family home.”
The demolition fees were designed to overlap with a pair of ordinances (O2020-6206, O2020-6207) passed months earlier that set a floor on zoning density within the same boundaries in an attempt to slow the trend of deconversions that were replacing naturally affordable two-flats and three-flats with lavish single-family homes.
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But unlike the anti-deconversion ordinances, which were written as permanent rule changes, the demolition fees were designed as a one-year pilot program. They went into effect last April and are due to expire on April 1.
Nearly a dozen aldermen voted against the demolition fee pilot in March 2021, as many predicted the rules would face a challenge in court on the grounds that they represent a “takings” of private property. One developer did sue to scrap the ordinance, but the lawsuit was dismissed without prejudice last fall.
And Novara said Monday that “it seems the surcharge is doing what we hoped it would,” as demolitions have dropped by more than 20 percent in Pilsen and by more than 80 percent in the 606 area compared to a similar period before the COVID-19 pandemic hit. And the fees have raised more than $120,000 for the Chicago Community Land Trust, a city-backed affordable homeownership program.
“If the purpose of the surcharge was to deter some demolitions and, where we can’t deter them, raise some funds for affordable housing, then it seems to be doing some of both,” Novara said.
Still, the most steadfast critics of the policy renewed their opposition on Monday. Ald. Raymond Lopez (15), a frequent ally of Chicago’s real estate industry, said the decline in demolitions is “having a real impact on the generational wealth of the owners of these properties that have been there.”
“When you have individuals who have been in communities 20, 30, 40, 50 years and decide to try to cash in on their equity…fees like this steal that equity from underneath them,” Lopez said.
Paul Colgan, a lobbyist with the Homebuilders Association of Greater Chicago, urged aldermen to pump the brakes on the pilot, saying during the meeting’s public comment period that “we don’t know the full impact of this ordinance” on home sales and property values.
Housing officials say they have hardly seen a lull in real estate values or sales in the gentrifying neighborhoods.
“It’s not accurate to say that this necessarily hampers the equity that a long-term owner would have if they tried to sell their property,” Novara said. “The surcharge only comes into play if there’s a demolition occurring. So if they are only selling their property, that would proceed as normal.”
But the policy has led to changes in development patterns, as more builders have opted to rehab existing homes than to demolish them, La Spata said.
“Does it shape market conditions? Of course it does — that’s the intent,” the alderman said. “But I would argue to you all, it shapes it for the better.”
Lopez was the only aldermen who voted against advancing the measure out of the committee on Monday.
Morton Salt shed infrastructure funding
The finance committee on Monday also approved $2.54 million in tax-increment financing (TIF) to furnish a loan for which developers R2 Companies and Blue Star Properties, who are working to convert the Morton Salt shed at 1357 N. Elston Ave. in the 27th Ward into a 4,000-seat, 97,400-square-foot concert venue and restaurant space.
The loan will pay for the developers to rebuild Blackhawk Street, resurface Magnolia Avenue, add a traffic signal where the streets intersect Elston Avenue and “add pedestrian enhancements” at the intersection of Elston and Division Avenue, Department of Planning and Development Deputy Comm. Tim Jeffries said.
Together, the infrastructure work is designed to “reduce the impact of the development, mitigate congestion and improve pedestrian safety,” Jeffries said.
Ald. Walter Burnett (27) extolled the deal, noting that the development is projected to drum up an additional $6 million in property tax revenues for the Kinzie Industrial Corridor TIF district during the next decade, and that the developer is on the hook to repay the infrastructure loan with interest.
“We’re going to make money off our money by loaning them our TIF,” which is more often disbursed as grants, Burnett said. “And we’re going to get some free infrastructure put in…for the lights and the concrete and other things in this area.”
The plan to remake the four-acre salt shed site while keeping the iconic exterior structure intact marched through a series of city approvals last year, including by achieving historic landmark status so that the “Morton Salt” logo and umbrella girl illustration remain to greet concertgoers. The developers also scored Class L historic tax credits from the city worth $7 million in tax savings.
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The theater renovation project is set to be completed by the end of the year, officials said.
The finance committee also approved all other items listed in The Daily Line’s preview of the meeting, including a $450,000 payment to settle a lawsuit brought by the family of Jack Burris, who was killed after being struck by an unmarked Chicago Police squad car that was engaged in a chase in 2017.