Emanuel & the Preservation Compact propose new loan fund to increase the affordable housing stock…

In exchange for the low interest rate, the owner must make 20 percent of the units in the buildings in the deal affordable for at least 15 years. Young said that “the fastest way to get affordable units in your building is to use Housing Choice Vouchers or project-based vouchers, and contract with the Chicago Housing Authority.”

Young said there are also a couple of other options: vouchers subsidized by the Veterans Administration, or reducing profit margins and subsidizing the units with the other rents. The units would be available to households earning less than 50 percent of the area median income (AMI), and rents would be set by the City’s existing mechanism.

One of the reasons that this new fund focuses on existing buildings is because renovation is faster and cheaper than new construction, but also that landlords in these “strong markets” have high occupancy at market rate rents.

Housing authorities are very eager to place HCVs and project-based vouchers (PBVs, which are subsidies that attach to a building) in strong markets. Yet many market rate owners in strong markets are seeing near 100% occupancy, and would not have a reason to enter into a PBV contract.

The Chicago Housing Authority is a slow-moving housing creator, and it also works with private developers to build its mixed-income projects. This fund could accelerate that in areas with greater opportunities than CHA and the city’s affordable housing fund typically work in, despite their own policies.

Young said that CIC prefers “larger” deals, “bigger than 24–32 units, that would be great, but we have to see what’s available on the market.” Young said 10–12 units is another target deal size. Any deal, however, must be six units or greater, according to Emanuel’s proposed ordinance.

For some clients and deals, it might be possible to refinance a building through this fund.

The $30 million loan fund is expected to preserve 1,500 units of mixed income housing, twenty percent of which would be 300 affordable units. It would be impossible to create 300 new affordable homes for $30 million, but Young and the Preservation Compact believe it can help acquire, renovate, and bring 300 affordable units to the market. It’s possible that some units in existing buildings are already affordable, for now, but use of this fund ensures they will remain affordable for 15 years more.

The City’s $5 million share of the fund would come from the Affordable Housing Opportunity Fund, which property developers pay into when they don’t build affordable residential units on-site. Other lenders so far include MB Financial and the U.S. Department of Treasury’s Capital Magnet Fund.