Chicago’s latest housing ordinance will make affordability worse

By imposing costly delays, intrusive financial disclosures and pushing up demolition fees, the Northwest Side Preservation Ordinance will drive rents even higher and hurt the residents it aims to help.

The Northwest Side Preservation Ordinance is the latest blunder in Chicago’s long history of policies that make it harder to maintain affordable housing in the city.

The policy, adopted in September and implemented in March, was pitched as a way to protect housing that qualifies as affordable without government subsidies. Instead, it just makes those properties harder to buy and sell.

The ordinance applies to certain Northwest Side neighborhoods, including Logan Square, Avondale, Humboldt Park and West Town. It will invariably increase prices because people won’t want to buy and sell in these areas – the opposite of the ordinance’s intention.

It grants tenants the “right of first refusal” when a property is put up for sale. That forces building owners to give their tenants a heads-up of their intention to sell up to two months in advance of it being listed. Once notified, tenants have the right to match a third-party offer for up to an additional three months. If they choose to move forward, they are then granted up to four more months to secure financing and close on the sale.

That means building owners might need to wait nine months to sell a property, simply because of the long process this ordinance creates.

During this time, owners are required to share detailed financial records, including rent rolls, vacancy rates and income statements. They must share these not just with tenants, but also with any third parties to whom tenants may assign their rights.

This is a significant burden. Owners who need to sell quickly – whether because of financial hardship, retirement or other personal reasons – will be stuck waiting on the terms decided by their tenants. Buyers who might invest in preserving and improving naturally affordable housing will be deterred by the uncertainty and delays.

On top of these restrictions, the ordinance dramatically raises demolition fees. Originally set at $5,000 per unit, the surcharge has now been hiked to a staggering $20,000 per unit or $60,000 per building – whichever is greater. That means a small building with just three units would face a $60,000 penalty, while a six-flat could be forced to pay $120,000 just to demolish and redevelop. These crushing fees are a deliberate attempt to pressure property owners into compliance with the city’s vision for housing, regardless of whether that vision makes sense for the people who own properties there.

In theory, the law is meant to keep longtime residents in their neighborhoods. In practice, it punishes small landlords, discourages investment and reduces the overall housing supply.

When supply shrinks, prices rise. This leads to fewer affordable rental units, less neighborhood development and higher rents.

Chicago owes 70% of its affordable housing stock to independent property owners – often family-run businesses. They invest in and maintain rental properties at an affordable rate without government subsidies.

This ordinance creates a big disincentive for them to keep doing this.

If an owner knows their property’s value will be tied up in months-long negotiations, they may be forced to raise rents preemptively to offset potential losses. Others may sell only to deep-pocketed, corporate buyers who can afford the risks and delays – shutting out the smaller, local landlords who have historically provided these units.

Ironically, this ordinance may accelerate displacement. If the only landlords who can operate in these neighborhoods are large developers and hedge funds, rents won’t be going down anytime soon.

Chicago needs more housing, not more red tape. If the City Council wants to keep housing affordable, it should focus on policies that encourage development and investment – allowing more units to be built, reducing costly regulations, and streamlining the buying and selling process.

The Northwest Side Preservation Ordinance does the opposite. By creating more barriers for sellers and buyers, it makes the housing market more complicated, expensive and restrictive. That’s the last thing Chicago renters need.