Johnson’s Housing Bond Promises to Succeed Where TIFs Fall Short

As Chicago prepares to welcome the Democratic National Convention next week, Mayor Brandon Johnson is ready to highlight his administration’s track record so far—particularly around common disparities that receive national attention.

Chicago’s tale of two cities has long centered on the disparate investments between the North Side and the South and West Sides. Access to affordable housing, economic development to create thriving commercial corridors, and policies to spur the two are often the subject of political agendas aimed to improve the areas.

Former Mayor Lori Lightfoot sought to address these issues by launching the INVEST South/West initiative in her first six months in office. The initiative, operated through the Department of Planning and Development, sought to be a “spark for equity” by using an initial $250 million of DPD funds to stimulate commercial developments and create affordable housing on the South and West Sides. This injection was meant to encourage public and private investors to contribute towards generating equitable developments. In 2021, the Department of Housing under Lightfoot also announced the then-largest investment in affordable housing—more than $1 billion dedicated to 24 developments and 2,428 units.

As time passed in Lightfoot’s term, the reception to INVEST S/W was mixed. Three years after the initiative was launched, a 2022 Crain’s Chicago Business report showed that no project through the initiative had broken ground on construction or been granted city approval. A 2023 Sun Times opinion piece by developers working on the United Yards project in the Back of the Yards defends the initiative’s goals needing to “take time, hard work, collaboration and a lot of patience.”

Lightfoot’s policies sought to affirm affordable housing and economic development through legislation such as the revised Affordable Requirements Ordinance (ARO) in 2021, to secure affordable units and dollars for other equitable development. 2020’s Fair Notice Ordinance worked to protect tenants from sudden lease terminations and evictions. The anti-deconversion ordinance of 2021 sought to slow gentrification by limiting the conversion of apartment buildings to single-family homes, though only in certain areas like Pilsen. 

Lightfoot’s term as mayor ended with INVEST S/W continuing, though direction for the program was not clear. The Sun Times reported in September that Johnson was to end the program, but not its goal of rejuvenating the South and West Sides. 

As Johnson emerged as a leader in the Chicago mayoral race against Paul Vallas, he quickly made affordable housing a focus of his politics. Johnson’s campaign promised to hold the Chicago Housing Authority accountable, make building affordable housing easier to build, and heavily promoted the Bring Chicago home real estate transfer tax—which was voted down by the public in a ballot referendum in the March primary.

“We can create a prosperous city which no one is too poor to live in,” Johnson said in his inaugural address in May 2023. “I’m talking about a Chicago where 65,000 people don’t wake up on the streets or in a shelter, where public housing and affordable housing and a pathway to homeownership exists for everyone.”

In February, Johnson announced a $1.25 billion Housing and Economic Development Bond to work throughout the next five years (2024-2028), which would capture the revenues from expiring TIF districts to create a more flexible funding stream for development around the city. Previously through TIF districts, property taxes were used by local municipalities to fund economic development and commercial corridors. This model largely depends on raising property values and taxes in an area to create a positive feedback loop of community investment, though it does not favor areas with depreciating property values. TIF’s have also been criticized for contributing to gentrification.

“TIF in itself is not predictable nor is it equitable, particularly in areas where you don’t have a strong tax base,” Chicago Deputy Mayor of Business and Neighborhood Development Kenya Merritt told the Weekly. “What ends up happening is a cycle of disinvestment that perpetuates some of our neighborhoods on the South, Southwest, and West Sides.”

Merritt and her Business and Neighborhood Development team worked closely with Johnson upon him taking office to research how to institute an equitable funding model throughout disinvested areas, and learned that Chicago was unique in its reliance on TIFs.

“Chicago has been an anomaly in that TIFs have been our main funding source,” Merritt said. “What you’ll see from a lot of major cities is that they use bond funding because it gives you the flexibility and, most importantly, it gives you the ability to plan strategically and long term around your investment. With the Housing and Economic Development Bond, we now know that we will have a reliable resource over the next five years.”

“We now have a tool that allows us to go into neighborhoods where we may have a significant amount of vacant lots or we may have commercial corridors that need investment, but may not have a healthy TIF that allows for us to do that,” Merritt continued. “Now we have bond funds that are flexible enough for us to do that development. So now you’ll see that we have a commitment of being able to do 5,400 housing units…We’re able to serve over 500 businesses to build back our commercial corridors.”

The commitments included in the bond are split evenly between the Chicago Department of Planning and Development and Department of Housing, with each department receiving $625 million. The Bond Allocation Plan outlines that the DPD will focus on providing community development grants, small business capacity building through loans and grants, and jobs and workforce training grants.

Community development grants are where the majority of DPD’s bond funds will be allocated, set to total between $400 million and $500 million of the department’s $625 million. DPD says that the grants are to “support real estate development projects that result in rehabilitation or new construction of commercial, industrial, or mixed-use properties.” Grant dispersal prioritizes majority-Black and majority-Latinx neighborhoods on the South and West Sides that have historically experienced significant disinvestment. Mayor Johnson stated that $5 million in bond funds would be allocated to the recently announced quantum computing campus, per reporting from Block Club Chicago. Projects funded by the grant can use the funding to acquire property, rehab or demolish sites or further development costs.

“A game-changing aspect of the bond is its availability for economic developments projects anywhere in the City and for vertical construction,” said Peter Strazzabosco, deputy commissioner of the Department of Planning and Development. “Until the bond, most support for economic development projects was limited to the geographies of healthy TIF districts and for site prep only.”

Strazzabosco says the bond has given DPD a jumpstart on economic developments across the city in lieu of shrinking TIF funds as districts are to expire.

“[The bond] is approximately commensurate with the amount of TIF revenue in recent years, but TIF revenues are expected to shrink by approximately 50 percent as districts expire over the next ten years,” Strazzabosco said. “In terms of a citywide jumpstart, DPD is working on proposals to eliminate all parking minimums for new development that would make new construction projects easier to finance and foster more pedestrian-friendly construction, allow ground floor-residential as of right in business corridors to reduce vacancies, and activate underutilized spaces.”

“There are also approximately 175 active grant-assisted economic development projects in the pipeline that will have catalytic impacts upon completion in coming months.”

With bond funds, the Department of Housing is allocating their funds primarily to providing affordable rental housing and empowering residents towards homeownership. $360 to $390 million of the funds is aimed at construction and preserving 600 to 1,000 affordable rental homes. Additionally, these funds contribute to a Green Social Housing Revolving fund that provides loans to developers with the intention that the developers sell newly constructed affordable housing back to the government. This fund looks to yield more than 600 rental homes every five years. These funds also are expanding on preexisting programs to lower greenhouse gas emissions for 250 multifamily affordable housing units throughout the city via the installations of modern, low-carbon HVAC, heat pumps, and water heaters.

Homeownership support accounts for $210 to $240 million of the departments’ bond funds and comes in the form of down payment assistance, home repair, and other support programs. The Building Neighborhoods and Affordable Homes program provides buyers with forgivable grants up to $100,000 towards purchasing residences that are newly constructed single-family residences containing no more than four units. These funds are to be used towards appraisal costs, down payments, and closing costs.

“The bond issue isn’t meant to reject TIF, but to enhance it. It’s innovative because it’s a more equitable approach to funding housing. DOH can really focus on communities that need safe, affordable housing now because it’ll be able to spread funds outside of TIF districts,” DOH public relations representative Takiesha Taylor said. “The bond is aimed at increasing both housing and economic opportunity across the City, and Cut the Tape is aimed at shortening processes and obstacles to these goals. They work hand in hand. DOH’s goal is to increase housing options all around, from investing over $20 million dollars in Single Room Occupancy (SRO) units via the bond to supporting the expansion of Additional Dwelling Units (ADUs).”

Working alongside Johnson’s Housing and Economic Development Bond is the Cut the Tape Initiative, a plan to fast track housing and commercial development. Stemming from a December 2023 executive order, the initiative is to back Johnson’s strategic priorities of “build faster,” “build everywhere,” “build together.”

“We have three goals for Cut the Tape and a focus of our plan was to be able to build faster by streamlining our processes that will hopefully accelerate development. And that makes it easier for our emerging developers that are looking to do development particularly on the South and West Sides,” Merritt said. “Streamlining the process in terms of working through the building department and making sure that if you’re doing a build of several houses on a specific block that we can make the process easier for you.”

As Johnson’s administration works to implement these housing and development plans throughout the coming years he must navigate the chaos that seems to inevitably cloud Chicago politics. The influx of new arrivals, aldermanic conflicts, and ongoing Community Benefit Agreement kerfuffles all provide added layers of complexity to the administration’s ambitions to create an equitable Chicago. Still, both the Housing and Economic Development Bond and Cut the Tape initiative have great potential to create a lasting legacy for Johnson and further the goals previously tackled by Lightfoot and mayors past.

Michael Liptrot is a staff writer for the Weekly and the Hyde Park Herald.