Evanston aldermen Monday night turned down a proposal to have the city loan up to $220,000 toward construction of a coach house behind a home at 1118 Sherman Ave.
The city loan, which was planned to be repaid with 1 percent interest over 20 years, would have included a condition requiring that the coach house, or accessory dwelling unit, be rented at 80 percent of area median income for the 20-year loan period.
The project was envisioned by city staff and the Evanston Development Cooperative as a pilot that would help demonstrate the feasibility of building new, energy-efficient coach houses in the city.
Alderman Cicely Fleming, 9th Ward, said she wanted to encourage ADUs and would like to have one in her own yard for her aging parents.
But she said there are other homeowners who are interested in coach houses and could build them without a subsidy.
Saying the city can't afford to provide a subsidy for all residents, she said she believed the subsidy for the selected property was too high and was concerned about how the property was chosen for the pilot project, without any public notice of the city subsidy proposal to other homeowners who might want a subsidized coach house.
Keeping the unit affordable -- by reducing the projected rent from an estimated market rent for the two bedroom unit of $1,470 to the $1,251 considered affordable for a family earning 80 percent of median income -- would amount to a subsidy of $219 per month -- or $52,560 over the 20 year term of the agreement.
That's equivalent to having the interest rate on the loan reduced from a market rate of 4 percent to the subsidized rate of 1 percent proposed in the agreement developed by staff.
But aldermen focused almost entirely on the up-front cost of the loan, rather than the long-term cost of the subsidy, assuming the loan was repaid.
That may have stemmed at least in part from the city's mixed record of judging the security of loans it has made to stimulate development in the past.
Alderman Judy Fiske, 1st Ward, said she was uncomfortable having the city fund the project "before banks get involved."
"We need to be very careful in protecting funds we have to support people," Fiske added.
Alderman Don Wilson, 4th Ward, said the development cooperative "is a great enterprise" but he doesn't want to put homeowners who would like to build ADUs with their own funds in competition with a publicly subsidized alternative.
The proposal had won the support of the city's Housing and Homelessness Commission at a meeting earlier this month.
Alderman Robin Rue Simmons, 5th Ward, offered a broader critique, saying the city shouldn't subsidize the development unless the owner of the property was low income and claiming that none of the members of the co-op are themselves low-income residents.
"The co-o needs to work harder at finding lending partners," Rue Simmons said. "There are mortage paroducts out there to do rehabs and additions."
Dick Co, president of the co-op, said he planned to come back to the city with another solution to build affordable coach houses.
"I'm happy to work with staff and elected officials to create a public process to expand affordable housing options," Co said, just before aldermen voted 7-0-1 against the proposal.
Alderman Eleanor Revelle, 7th Ward, abstained from the vote and discussion of the issue because she's a member of the co-op. Alderman Ann Rainey, 8th Ward, was absent from the meeting.