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Newly approved demolition fee pilot program is a positive step to stem the loss of 2 to 4 flats

Published on Mar. 24, 2021 by Chas Sirridge

By Chas Sirridge

On Monday, the Finance Committee of the Chicago City Council approved by a 20–11 vote a new pilot program that would impose a surcharge on demolition permits of $15,000 for a detached house, townhouse, or two flat (defined as two units on a single lot with a common wall/floor/ceiling), and $5,000 per unit for multi-unit buildings in two pilot areas:

Today, the pilot program received full council approval by a 37-12 vote.

Many small apartment buildings in Logan Square, Humboldt Park (pictured), and Pilsen have been converted to single units or torn down and replaced by single units, reducing the availability of “naturally occurring affordable housing”. Photo by Steven Vance.

Background on the demolition surcharge ordinance

The ordinance builds upon two minimum-density ordinances passed earlier this year which create special overlay districts to which the boundaries of the demolition surcharge correspond. In the Pilsen Multi-Unit Preservation District, by-right construction of single family homes and two flats is disallowed in RT-4 and all RM-4.5 to 6 districts, unless more than 50 percent of zoning lots on that block contain single family homes or two flats. In the 606 Preponderance of the Block District, by-right construction of single family homes is eliminated on blocks in RS-3 and RT 3.5 districts where more than 50 percent of zoning lots have been legally improved with multi-family buildings. In RS-3 districts in the pilot area, the minimum lot area per unit is reduced from 2,500 to 1,500 square feet, to allow by-right construction of (two unit) two flats on a standard (3,125 square foot) Chicago lot.

Exemptions to the demolition surcharge are allowed if a building has been found to be unsafe or if the demolished building is to be replaced by one in which 50 percent of units are legally restricted to households making no more than 60 percent of the area median income.

Funds generated from the surcharge will be deposited in the Affordable Housing Opportunity Funds and then transferred to the Chicago Community Land Trust.

The pilot program will run through April 1, 2022;150 days before the pilot’s expiration, the Department of Housing will make a report to the City Council Committee on Housing and Real Estate on the observed effects of the pilot.

Why the demolition surcharge is needed

This pilot program has been a long time in the making. A much more aggressive ordinance, the result of a collaborative effort with the Logan Square Neighborhood Association (LSNA) was introduced in mid 2017 by Alds. Rosa (35), Maldonado (26), and then 1st Ward Ald. Joe Moreno, in recognition of market/development pressures following the opening of the 606. These new pilots have the potential to be innovative tools that can be modified and built upon to protect Chicago’s large stock of small multi-family “naturally occurring” affordable housing.

The loss of two and three flats in Chicago and its implication for Chicago’s housing affordability is the subject of the masters project I am currently working on as a Masters of Urban Planning student at UIC.

The following is a letter I submitted as a written comment to the Committee on Finance on the importance of preserving this housing stock in preventing the displacement of Latinx families from the Logan Square, Avondale, and Hermosa communities:

Dear members of the Chicago City Council Committee on Finance,

My name is Chas Sirridge. I am a Masters of Urban Planning student at UIC currently working on a masters project about the importance of preserving Chicago’s two and three flats. I would like to share some preliminary data I’ve collected for my project that I feel speaks to the importance of protecting these housing types, through policies like the Demolition Surcharge Tax Pilot Program. All data, unless otherwise noted, is from the 2012 and 2019 American Community Survey Public Use Microdata Surveys (PUMS).

Two to four unit buildings make up just under a third (~30 percent) of the city’s housing units — ~350,000 units. Just under one-third (~32 percent) of Chicago’s population live in two to four unit buildings — ~820,000 people. ~Forty percent of Chicago’s renter population live in two and three flats.

The vast majority (nearly 80 percent) of residents of two and three flats are people of color. Latinx people make up the largest racial/ethnic group in two and three flats at ~40 percent. Just under 30 percent of residents of two and three flats are Black.

The majority of two and three flats are what planners refer to as “naturally occurring affordable housing (NOAH),” meaning that they rent for less than market rate despite receiving no government subsidy. The recent Citywide Affordable Rental Housing Analysis by DOH and DPD found that 26 percent of units in Chicago are NOAH, compared to only 10 percent that are legally restricted. A 2016 profile of Chicago’s multifamily housing market by Rachel Scheu and Margaret Garascia of Elevate Energy found that 70 percent of units in 2–4 unit buildings (more than 250,000 units) fit this description. A 2020 report by Miriam Zuk, Diane Limas, Charisma Thapa, and Andy Greer for the Metropolitan Planning Council found that nearly 40 percent of the city’s affordable housing units are in 2–4 unit buildings.

Two and three flats are not only an important source of NOAH but an important source of family-sized NOAH. Nearly a third (30 percent) of housing units with three or more bedrooms in Chicago are in 2 to 4 unit buildings; more than half (57 percent) of rental units. Almost 60 percent of affordable 3+ bedroom units are in two flats and three flats.

But the number of units in 2 to 4 flats has been in decline over the past decade. From 2009 to 2019, the number of units in 2 to 4's decreased by ~40,000 units — from nearly 400,000 units in 2009 to just over 350,000 in 2019 — a 10 percent decrease.

During this period the population in two to fours decreased by ~80,000 people — a difference of nearly 10 percent. When broken down by race, only the Black and Latinx populations saw a net decrease. The Latinx population declined by ~35,000 people, or just under 10 percent. Meanwhile the Black population declined by nearly 60,000 people — nearly 20 percent. The number of families with children declined by almost 20 percent — or ~20,000 families.

In the Logan Square, Avondale, Hermosa communities, just under half of the ~56,000 housing units are in two and three flats. Just over 60 percent of Latinx residents live in two and three flats. More than 40 percent of the neighborhood’s family-sized (3+ bedroom) units are in 2 to 4’s; 76 percent of family-sized rental units, housing 45 percent of families with children in these communities (SFH’s house the next largest share at 38 percent, followed by 5 to 9 unit buildings at 12 percent).

From 2012 to 2019, the number of units in two and three flats in these communities has declined by ~6 percent — just over 1,500 units. During this time, the Latinx population in two and three flats fell almost 35 percent — a difference of almost 20,000 people.

Meanwhile, there have been 2,886 new units built since 2012. Of these units, half are in SFH’s and just under a third are in 50+ unit high rises. Rents in family-sized units built since 2012 are $700 more on average than those in buildings built before 1939. The average value of a new SFH is ~$1.3 million — twice that of a SFH built before 1939.

This data, in my opinion, demonstrates the necessity of preserving the stock of old two and three flats if we want to address the displacement of working families. The loss of old two and three flats threatens to exclude families who can’t afford to buy from neighborhoods like Logan Square, Hermosa, and Avondale, as well as neighborhoods like North Center, Lakeview, West Town, and Pilsen.

I’d be more than happy to share more of my research, discuss this research further, answer any questions, or discuss potential solutions further should any policy makers wish to do so. I can be reached at [email protected].

Newly approved demolition fee pilot program is a positive step to stem the loss of 2 to 4 flats was originally published in Chicago Cityscape on Medium, where people are continuing the conversation by highlighting and responding to this story.

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