Chicago’s housing policy still promotes exclusion

Granny flats and basement dwellings could help with housing affordability, but Chicago’s outdated zoning rules make them nearly impossible to build. Those rules were created to promote economic and racial segregation. They need to be changed

Many of Chicago’s housing policies are stuck in an era of exclusion, when rules were created to maintain racial and economic segregation by pricing out working-class families.

After the Supreme Court struck down explicitly racial zoning in 1917, cities turned to other tools: minimum lot sizes, parking mandates and unit limits. That legacy is intact today – Chicago remains the most segregated city in America.

Rather than seeking to undo the regulations that help maintain that segregation, Chicago’s housing remains choked in red tape. Nowhere is that clearer than in the city’s restrictive approach to one of the simplest, cheapest and most popular forms of new housing: additional dwelling units.

Additional dwelling units are small, independent residences such as basement apartments, coach houses or granny flats built on the same lot as a larger primary residence. They’ve become popular in cities across the U.S. as an opportunity to add density in a way that doesn’t drastically alter the character of existing neighborhoods.

A report from the Illinois Policy Institute found that if allowed to flourish, these dwellings could offer: affordability and flexibility, enabling families to support aging parents or adult children; an additional source of income as rentals; and an increase in home values, boosting household wealth for minority families.

In Chicago, these dwelling units were once a standard part of urban housing. Then in 1957 the city banned them outright as part of a broader zoning shift meant to de-densify neighborhoods.

The issue is Chicago’s zoning practices and land-use approval system still reflects that mentality of discouraging density and preserving exclusivity, which makes housing less affordable. Chicago has 41% of its land zoned exclusively for single-family homes. In many neighborhoods, even modest proposals for multi-unit buildings or coach houses trigger layers of approvals, community meetings and aldermanic prerogative – the city’s practice of essentially handing aldermen veto power over what happens in their wards.

As long as these barriers remain, Chicago will continue to pay the price. Housing costs have surged 8% in just two years, seniors struggle to downsize near their families and over 438,000 residents live in poverty – most of whom are spending more than 30% of their income on housing.

Chicago’s 2020 Additional Dwelling Unit Ordinance started letting some people build the units again, but the policy has made an incredibly small dent because of all the restrictions. Rather than legalizing the units citywide, it established five small pilot areas in which residents could apply to build them. Even then, the ordinance layered on excessive regulations that make development harder in predominantly minority communities on the South and West sides. Those include:

• Owner-occupancy requirements: In most of the city’s South, West and Southeast sides, homeowners are required to live on the property to be eligible to add a unit – taking away options for small-scale developers.
• Permit caps: In those same neighborhoods, only two additional dwelling unit permits are allowed per block per year.
• Vacant lot bans: Coach houses can be built on empty lots prior to building a main home, but only on the North and Northwest sides. This rule effectively blocks unit development in neighborhoods with the most vacant land, many of which are in historically Black communities on the South and West sides.

As a result of these restrictions, fewer than 300 units have received permits for construction since 2020 in a city with 92,000 eligible properties. By contrast, Los Angeles has issued over 27,000 permits for the units since legalizing them in 2016.

Additional dwelling units represent an easy win. They are supported by 71% of Chicagoans and they’re cheaper to build than a new, full-sized home.

Chicago doesn’t need more pilot programs. It needs a new additional dwelling unit ordinance that encourages their development as well as removes discretionary interference and arbitrary restrictions in all the city’s neighborhoods.