A panel of housing experts described the tough economics of producing affordable housing at a city-sponsored event at Evanston’s Civic Center Wednesday night.
Al Weel, senior vice presdient at Wintrust Bank, presented a chart showing the difference in cost to a developer of providing 14 on-site affordable units in a hypothetical 140 unit rental development, versus making a $1.4 million in-lieu payment to the city’s affordable housing fund, as required by the city’s inclusionary housing ordinance.
Bottom line, he said, the on-site units would strip $4.4 million, or about 11 percent, from the value of the project, assuming a 6 percent capitalization rate.
It would also, he said, reduce the developer’s return on investment from the project from 8.13 percent to 6.48 percent.
Mark Muller.
Mark Muller, president of Fulton Developers, says he’s been building projects with an affordable housing component in Highland Park for several years.
So far he’s completed one project, Laurel Court, and is working on a second, Laurel Apartments. He said he’s just received approval from the city for a third, Oakwood Residences.
Laurel Court, at left, and the first phase of Laurel Apartments, center, in a November 2017 image from Google Maps
Muller said Highland Park’s ordinance offers density bonuses to developers which help offset the cost of providing on-site affordable units.
It can be difficult to make use of the bonuses because of community opposition to buildings more than three stories tall, he said, but he’s managed to include a fourth story in some developments by using mansard roofs or having the upper floor units not have windows facing the street.
A rendering of Fulton’s Oakwood Residences project.
Muller’s 52-unit Laurel Apartments project has eight affordable units.
But overall, Muller said, Highland Park has added very few affordable housing units in recent years.
Here’s a video of the full panel session:
Get real about affordable housing
In policy discussions, I see citations regarding a proportion of residents who are financially stressed due to their housing cost. It would be a mistake to think that this proportion will go down as a result of building affordable units. The effect of building affordable units is to increase the supply of housing which will bring in more population. Some of the new new population will have to spend more than 30% of their income on housing. The other effect is that it will keep a certain amount of middle income people living in Evanston, but many of them will still have to stretch to pay their cost of housing.