The Policy Shop: Cut bureaucracy, build homes

This edition of The Policy Shop is by Director of Fiscal and Economic Research Bryce Hill.

The Illinois Policy Institute was very clear about just how wrong Chicago Mayor Brandon Johnson was to push a hike in the real estate transfer tax to generate $100 million to address homelessness and affordable housing.

Bad idea, with great potential to drive up housing costs and reduce the jobs that could truly get people off the streets. Voters listened and the “Bring Chicago Home” tax failed.

So now institute experts have a different message for Johnson: You got it right with Plan B.

His “Cut the Tape” report contains promising proposals that would benefit Chicagoans and property developers to actually make Chicago real estate more affordable. The plan correctly states the way to fix the problem is to increase supply by making it easier to build.

Housing affordability is a big problem in Chicago, where almost 90% of low-income households face housing costs of at least 30% of their income. Two-thirds are severely burdened – paying over 50% of their income for housing, according to data from the U.S. Census Bureau.

The report published April 5 contains more than 100 proposals for the city to streamline the administrative process governing housing and commercial development. Johnson highlights “10 Big Bets” to most drastically improve the process, including:

• Create a new director of process improvement in the mayor’s office.
• Convene a working group to evaluate the feasibility of streamlining the Community Development Commission and Chicago Plan Commission.
• Create online “city wallet” accounts to improve options for customer billing, online payments and debt checks.
• Design a process to initiate expedited reviews of affordable housing development projects.
• Launch a working group to update and streamline the Department of Housing’s Architectural and Technical Standards Manual.
• Reduce the number of Department of Planning and Development’s internal design review meetings from three to one and reassess the role of the Committee on Design.
• Eliminate Phase 1 and 2 environmental reviews as a requirement to sell environmentally cleared, city-owned parcels.
• Launch a working group to determine how to reduce the administrative burden of the city’s economic disclosure statement, working toward expanding expiration dates, allowing exemptions for low-income housing tax credit projects and more.
• Advance legislation to make transformational changes to the city’s zoning code, including eliminating minimum parking requirements, streamlining special use and more.
• Expand the pilot program for cash advance payment options.

Johnson’s plan has a lot of ideas Minneapolis used to overhaul its zoning and land-use codes. Minneapolis’ housing supply is growing far faster than Chicago’s while rents are growing far slower, increasing affordability.

“Cut The Tape” represents a stark departure from the “Bring Chicago Home” initiative in attempting to solve the city’s affordable housing crisis. Most importantly for Chicagoans, the plan does not call for tax hikes but instead seeks to make Chicago a friendlier environment for developers to build housing and commercial properties.

There is risk involved with any bold initiative: the city will need to ensure the proposals don’t discourage market-rate housing or commercial development because many items are directed towards “affordable housing” developments.

Chicago’s not the only city that could benefit from a serious reconsideration of how it does business with developers. Phoenix, Arizona, made changes to its development bureaucracy that often delivers approvals for residential and commercial construction in a day rather than after months. Other Illinois cities should look at those changes, which put review and permitting in private experts’ hands.

In 2012, Phoenix started allowing registered architects or engineers with approved credentials and training to certify a construction project complies with municipal building codes, rather than relying on city inspections.

“Getting permits quickly to do construction and improvements saves time and money,” Phoenix City Councilman Sal DiCiccio said after the measure passed. “We also have greater predictability, so they will know when to lease, when they can build and when they should hire employees, for example.”

After the changes, Phoenix became one of the fastest-growing cities in the nation, with the population increasing by nearly 16% between 2012 and 2022. Phoenix’s housing supply also grew by 10% during the decade, outpacing comparable neighboring municipalities, with the self-certification process helping to add 60,473 new dwelling units to the city.

Cities in Illinois could copy Phoenix and significantly reduce the burden of developing homes and businesses within their jurisdictions.

A Harris Poll from December 2022 showed 78% of Chicagoans agreed the city lacks sufficient affordable housing. Three in 10 residents even considered the situation unstable. Chicagoans were pessimistic about the future, as 45% of respondents thought the situation would be worse in five years.

A 2020 report from the Chicago Department of Housing found the city has an “affordable housing gap” of “nearly 120,000 homes.”

A 24-hour self-certification ordinance would allow Illinois municipalities to produce more new housing and commercial spaces in less time, driving down overall housing costs and increasing opportunity for residents.

Johnson is right to prioritize housing affordability. Now that he’s got a promising plan to cut through Chicago’s notorious bureaucracy and get things done, other city leaders and the community need to join the effort.