The Residential Investment Corporation is just another call from the mayor to hop aboard a glass elevator on a journey to a world of pure imagination
For decades, Chicago progressives have passionately intoned the private market has utterly failed to accommodate the need to furnish sufficient housing. The costs and conditions associated with private real estate development, progressives insist, are morally muddled and tend to leave many unable to afford decent housing.
Traveling under the banner of building a “Better, Safer, Stronger” Chicago, Mayor Brandon Johnson campaigned on a platform of finally meeting the “injustice” of homelessness. However, Johnson’s two overreaches to raise revenue — Bring Chicago Home and a $300 million property tax increase — have failed. Since the spectacular implosion of both initiatives, Johnson has either cynically beat the housing issue drum in public to slake the thirst of his supporters or, with no false modesty, attributed the completion of affordable housing developments effected by his predecessor, Lori Lightfoot, to himself.
Seeking to break his losing streak, Johnson recently revived the housing issue and has cooked up a plan to create a city-owned non-profit housing developer, the Residential Investment Corporation (RIC). While the mayor’s plan sounds appealing, it is a stealth device to direct tax dollars to local non-profit groups. Johnson’s plan to create a non-profit housing developer is a peculiar strategy considering other cities have seen construction flourish through the elimination of obstacles to building and facilitating by-right development. Two cities in particular, Austin, Texas, and Miami, Florida, have both experienced notable drops in rental rates due to the elimination of exacting mandates.
Under Johnson’s plan, yet another government board would be established and led by mayoral appointees. The board would be empowered to grant low-interest three- to five-year loans to affordable housing developers. The non-profit would be financed with $135 million from a $1.25 billion bond measure which passed the City Council in April 2024. Also under the proposal, any project in which costs are expected to exceed $5 million would require the approval of the City Council.
An ambitious proposal, Mayor Johnson believes this non-profit model will result in yearly construction of 400 affordable units.
Fewer affordable housing units will be constructed under the Residential Investment Corporation
While an argument can be made Chicago suffers from a shortage of affordable housing, Mayor Johnson’s prescription to increase the number of affordable units should be consigned to the necropolis of dead progressive ideas.
If Chicago is to realize more affordable housing, the answer is not found in the creation of another panel to coordinate planning, policies, and distribution of tax dollars for the construction of housing. There are myriad reasons to oppose the creation of Residential Investment Corporation. Paramount among the concerns related to the creation of the RIC is the proposal boasts of joint ventures with private developers. However, no specifics are offered over how the joint ventures with other developers are evaluated for suitability to conduct business with the RIC, manage costs or establish mechanisms for it.
No less important is the cost the RIC projects for construction. According to the proposal, costs are estimated to range between $400,000 and $550,000 per unit. While this may seem appealing to some, the cost forecast does not take into consideration the Byzantine complexity of Chicago’s building standards and construction time, which could easily be the impetus for overruns to initial estimates. Moreover, the introduction of Green Housing adds an entirely new set of complications. Though “Green Housing” may appear to be sugar on the table to progressive groups intent on building an environmentally sustainable home, according to the proposal, the total post-financing for construction from Chicago is ambiguous at best.
Equally concerning is the composition of the board administering the RIC. Each member on a mayoral appointed board is expected to serve a five-year term — a condition which by its very nature should raise eyebrows in the Windy City. Thus far, no language in the RIC proposal suggests standards by which panelists’ job performance is measured, nor a device for removal of a board member for unsatisfactory performance.
An unsettling provision in the RIC sanctioning is “tenant governance.” A circumstance which would permit tenant consultation and participation from residents for the purpose of strengthening trust between tenants and landlords, there exists the strong probability tenant boards would devolve in a way which is contrary to the need to meet the objective of management efficiency. While it is essential to be sensitive to residents’ requests, the notion of a tenant board is ceding too much influence to residents under the guise of “empowering stakeholders”, inviting unneeded interference from residents.
Mayor Johnson’s Residential Investment Corporation will contribute little to increasing the development of affordable housing units. Chicago’s problem with providing affordable housing is more a political problem rather than a technical problem. Chicago’s housing gridlock is mainly a complication found in excessive building codes, burdensome inspections from multiple city agencies, and restrictive zoning ordinances. Construction of housing is also hamstrung by a laundry list of regulations — some defensible — but generally punitive city dictums placed on housing providers’ management of best business practices. Lamentably, these endless rules, regulations, and restrictions impose severe restrictions on the incentive to build new housing construction.
Worse, though Johnson’s plan to build affordable housing is ostensibly government administered beneficence, the flywheel which drives the mayor is his compulsion to use government as a pipeline to bankroll non-profit groups. Long a goal of Johnson and his CORE overlords at the Chicago Teachers Union, the problem here, naturally, is the RIC’s purpose of imparting tax dollars into the hands of unaccountable non-profits. Doubly concerning is in the absence of any metric for success, Johnson seems untroubled with the notion of entrusting $135 million — borrowed money — and lending at a substantially discounted rate with no cost controls to groups with little oversight as Chicago faces a yawning budget deficit for the coming year. Johnson’s plan is even more discomforting when we bear in mind the ongoing tax abatement for the housing built under RIC. The true cost of this housing will exceed the exorbitant construction costs.
If Chicago is ever to realize bountiful housing, the city should commit itself to turning housing from a scarce asset back into an abundant commodity. For Chicago to realize more affordable housing, a first step is stripping aldermen of any role in the approval proceedings of zoning permits and handing the application for permits to the Chicago Department of Planning and Development.
A second step to facilitate the construction of affordable housing is the City Council making every effort to roll back the multilayers of onerous regulations which slow the pace, if not outright impede, construction. Many small scale, neighborhood projects face several months (if not more) simply for permit approval. These projects, while more desirable, have less room on their spreadsheets for governmental imposed costs.
Better and more affordable housing is achievable in Chicago. If Mayor Johnson is intent on expanding housing in Chicago, instead of creating a non-profit, perhaps he could learn a lesson or two from Austin or Miami, where a housing boom is taking place.
