ADUs in Chicago – Will they Resolve the Affordable Housing Crises?

June 3, 2020

Considering the nationwide affordable housing crises, Chicago is attempting to make homes more readily available for low and moderate-income groups. One of the first effective steps in this direction is the rolling back of the 1957 law which made ADUs illegal in the city. Along with the new five-year housing plan, the city hopes to bring stability to the housing sector.

THE NEW ZONING ORDINANCE WILL BE PRESENTED FOR FINAL VOTING IN JUNE OR JULY

Depending on the Chicago City Council decision, the zoning ordinance will come into effect on August 1st. Accordingly, people will be allowed to construct and develop Accessory Dwelling Units (ADUs). By approving the ordinance, the city will increase the number of moderately costing rental units available in the city without significantly changing the existing landscape or altering the overall appearance of the community.

ADUS ARE AFFORDABLE SECONDARY UNITS

Typically, accessory dwelling units are smaller secondary homes constructed within the existing structure of residences. Coach houses that are built over garages and individual cottages built in the backyards of properties are all considered secondary units. The ordinance will permit property owners to convert basements of existing buildings into apartments that can be leased out to provide relatively affordable housing to those who need it. The Urban Land Institute has released a report in which it has identified close to 77,000 buildings with basements fulfilling the necessary criteria for residing. These structures each have two or four apartments.

BOTH PROPERTY OWNERS AND RENTERS STAND TO BENEFIT

Homeowners can build and rent out apartments to raise additional income that can be used to cover property taxes and other living expenses. The ULI estimates that as long as the basement spaces need minimal structural work and comply with the requirements of building codes, they are likely to cost around just $75,000. Of course, if structural changes are needed along with other renovations, the cost could rise to $150,000. With more ADUs becoming available, low and moderate-income groups will have more homes to rent. Once the new units are ready, as mandated by the city’s ordinance, half the number will be leased at affordable rates.

THE QUESTION REMAINS – WILL THE RENT BE AFFORDABLE?

While constructing ADUs does not cost a lot, chances are that they will be offered for higher rents than the market rates. Further, in case the existing ADUs are not compliant with the new codes, property owners may have to evict renters to conduct repairs and renovations. As a result, renters may find that they have nowhere to go. Legislators may also want to keep in mind that owners investing in constructing or renovating basement apartments will want to get back their investment. The only way to do that would be to pass the cost to renters by way of higher rates. Low-income people may not be able to afford these hiked rents.

While legalizing secondary units is a step in the right direction, council members would want to examine the costs of constructing these units and how property owners are going to raise the necessary finances. Without the availability of capital, it is unlikely that owners will want to take advantage of the new ordinance. A lot more needs to be done to resolve the affordable housing issues. Hopefully, these hurdles and challenges will be covered when the ordinance is finally passed.

Author

Darren Flynn

Managing Principal

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