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Housing: How much ‘affordability’ would halt development?

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Evanston’s inclusionary housing ordinance subcommittee meets again tonight to wrestle with a range of questions — including how much the city can squeeze the new construction market to build affordable units before it breaks.

At the committee’s first meeting last month, the only for-profit developer on the panel, Kent Swanson, said the cost of adding affordable units ends up reducing what a developer will pay for the land the project is built on.

Last June the City Council approved a nine-story, 242-unit rental apartment development at 831 Emerson St. which, when completed, will provide a $2.4 million contribution to the city’s affordable housing fund.

When the property sale to the developer closed in October, the tax stamps on the deed indicated that the selling price for the land was $5.1 million, or about $124 per square foot.

Based on Swanson’s formulation, the affordable housing contribution could be said to have cut the value of the property by nearly one third.

What’s not clear is at what point the owner of a low-rise commercial property who wanted to sell would just look for a buyer who planned to continue the current use, rather than dealing with a developer who — as in the case of the Emerson project — might have to go through a two-year approval process with the city before being able to close the deal.

The city’s inclusionary housing ordinance currently requires developers to make one of every 10 units in a development affordable — or pay a $100,000 fee-in-lieu instead.

Some affordable housing advocates have argued that the ordinance should be changed to require that the full 10 percent of affordable units be provided on site.

With costs for high-rise construction running in the neighborhood of $300,000 per unit, that, using Swanson’s rationale, would have reduced the value of the 831 Emerson property to the vanishing point.

And killing off new development would be exactly what some residents — who intensely oppose new high-rise construction — would prefer.

Another example: Property for the most recent planned development approved by the City Council, the 15-story, 273-unit Albion Residential project at 1450 Sherman Ave., was purchased by the developer in December for a total of $7.8 million, or about $211 per square foot.

Albion had proposed making a $2.7 million fee-in-lieu payment or providing 15 on-site affordable units — and the aldermen opted to go with the on-site alternative.

If the the cost of providing an additional dozen on-site units — to hit the target called for in the inclusionary housing ordinance — had come out of the sellers’ pockets, it would have cut their take by nearly half.

What might a seller get selling downtown land for a low-rise redevelopment? One example — the 1026 Davis building that housed the Tom Thumb hobby shop changed hands in 2014 for $1.52 million, or roughly $130 per square foot, and became the site for the new two-story LuLu’s and Taco Diablo restaurant complex.

The subcommittee will also be trying to decide whether a revised ordinance should allow creation of affordable units at alternative sites and whether fees-in-lieu should be used to fund other affordable housing strategies, like rental assistance or acquiring and rehabbing affordable housing.

And it will try to address issues of how to equitably distribute new affordable housing in different parts of the city — when the vast majority of new construction is happening in only a handful of neighborhoods.

The meeting is scheduled for 6 p.m. in Room 2404 at the Civic Center.

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