Unshackle the private sector and release their animal spirits
The usual “solution” to finding or developing affordable housing is to turn to the public sector. It doesn’t matter that such a path has resulted in one failure after another. There is a better way that doesn’t include the Federal Housing Administration (FHA), the Chicago Housing Authority (CHA), or the slightly more palatable TIFs and Enterprise Zones. The solution is to turn to the authority of the free market using the laws of supply and demand. The supply is currently outstripped by the demand for affordable housing. Rather than turning to another catastrophic stab at urban renewal, lifting existing regulations will increase the housing supply, resulting in a much better path to success.
Since the early 20th century, cities like Chicago have implemented restrictive zoning practices aimed at preserving single-family residential character. These included:
- Mandating single-family homes across vast areas;
- Prohibiting unrelated individuals from cohabitating;
- Imposing large minimum lot sizes and setbacks;
- Requiring expensive off-street parking spaces;
- Outright banning boardinghouses and multi-tenant dwellings
These measures were often rooted in exclusionary planning philosophies, creating vast zones of static housing types and pushing more flexible, affordable housing forms to the margins or into illegality. Over time, this patchwork of rules suppressed natural infill development and kept housing supply artificially low in high-opportunity neighborhoods. Reformers today are challenging these defaults, arguing for a lighter regulatory touch to allow the private market to meet demand.
ADUs, such as backyard coach houses, garage conversions, or basement apartments offer a low-cost, low-footprint way to expand housing stock. Chicago’s pilot program currently limits ADUs to five zones and imposes restrictions like owner-occupancy and unit caps. A citywide expansion would eliminate many of these constraints. It would allow homeowners throughout RS-1 to RS-3 zones to build or convert space into rentable dwellings.
RS-1 is the most restrictive single-family residential zoning designation in the City of Chicago. It is part of the broader "RS" category, which stands for Residential Single-Unit Districts. The minimum lot area is 5,000 to 7,500 sq. ft. The minimum width is 50 ft. A 50 ft. by 100 ft. lot would be 5,00 sq. ft. and a 50ft. by 150 ft. lot would be 7,500 sq. ft.
Buildings are restricted to single family dwellings (SFD). RS-2 is slightly less restrictive with a minimum square footage of 4,500 with a minimum 40-foot width and is likewise restricted to SFD. RS-3 is the least restrictive designation with minimums of 3,125 square feet and a 25-foot width. Two flats as well as SFD are allowed. ADUs offer passive income to property owners and housing options to young adults, seniors, and moderate-income renters.
If you’ve watched movies from the 1930s and '40s, boardinghouses were a staple. Given the state of today's affairs, one wonders if they were an invention of the movie makers. However, history shows before their decline in the mid-20th century, boardinghouses served tens of thousands of Chicagoans, offering private rooms with shared kitchens and bathrooms. These buildings filled a vital niche between homelessness and high-rent apartments.
The Federal Housing Administration’s 1936 standards excluded boarding or rooming houses from being considered dwellings, defining a “proper home” as having a private kitchen and bath. This made boarding houses financially and legally unattractive to maintain or build. In Chicago, more than 80 percent of SRO units were lost between 1960 and 1980. Many were demolished for redevelopment (urban renewal) or converted to offices and hotels, leaving former residents homeless or pushed into shelters. Building and fire codes became stricter, targeting common SRO problems like poor ventilation, lack of private baths, inadequate exits, and unsafe structures.
Health codes also played a role: in Chicago, tenements, lodging houses, and boarding houses came under Department of Health enforcement starting in the early 1900s, increasing oversight and costs for operators. Many older buildings simply failed to comply and were shut down. There might have been some validity in these reforms. As usual once the regulators started, they overshot their legitimate targets.
Today, a regulatory revival could include:
- Lifting occupancy caps that prevent more than three unrelated people from living together;
- Modernizing building and health codes to permit shared kitchen and bath facilities safely;
- Creating a new zoning use class for co-living or rooming houses with streamlined approval
Private landlords could reconvert large single-family homes or vacant buildings into rooming houses with four to eight units each. A model already exists in cities like Tokyo and Berlin, where micro-units and co-living are normalized housing options. Every parking spot required by code adds between $25,000 and $50,000 to development costs, depending on site conditions and whether the car park is structured or underground. In low-car or transit-rich areas, these spaces often sit empty.
Chicago repealed parking minimums near transit in 2025, a major win for housing advocates. The next step is eliminating these minimums citywide, allowing developers to build what is economically justified and what tenants demand. In neighborhoods like Logan Square or Pilsen, this could unlock small infill projects that were previously infeasible due to parking mandates.
Streamlined zoning and permitting should be next on the list. Even when a project complies with zoning, developers must often seek aldermanic approval, triggering delays, design revisions, the outstretched palm ($$$) of the alderman, or outright denials based on local political pressure. This uncertainty discourages smaller developers who can’t afford delays. Time is money.
The right zoning reforms would guarantee approvals for proposals that meet code, cutting permitting times by months, reducing housing costs, and enabling faster construction. In Chicago, where political prerogative is deeply embedded in zoning, such a shift would be transformative. Many Chicago zoning districts require minimum dwelling unit sizes of 300+ sq. ft. and mandate private bathrooms and kitchens. These requirements, while well-intentioned, prevent the creation of smaller, affordable housing units like micro-studios, single-room occupancy (SRO) units, and dormitory-style apartments.
Reformers argue for reducing size minimums to 180–220 sq. ft. and legalizing shared facilities in appropriate building types. This would open the door to low-cost private housing solutions for students, service workers, and seniors on fixed incomes. The major pushback from the quasi-suburban neighborhoods like Sauganash, Beverly, Edgebrook, Mount Greenwood, and Edison Park will be intense. These homeowners are politically active, particularly about their property values. Reform does restore freedom to homeowners. The freedom to build a coach house, convert an attic, or add a unit for income. New housing types (like duplexes or backyard units) are ways to keep families together across generations. Caregivers or adult children can live on the premises while preserving their privacy.
Reform will change some things, but the benefits should outweigh the costs. The alternative is to go the public sector route. In that scenario the costs will substantially outweigh the benefits. There is one area where the public sector must be the leader. That is in the restoration of law and order. We can’t have mini warlords keeping the peace. If the police are allowed to do their jobs and the courts forcefully apply the law the private sector will be able to build even more housing units in more neighborhoods. That is a separate conversation for another day, however.
