More Than Just Shelter: Why The Public Housing Of The Future Will Require Private Buy-In

The laundry list of landmines surrounding multifamily development and management in Chicago are well-documented: A challenging capital markets climate. Soaring insurance rates. Limited new starts.

But developing and managing public housing properties in the city adds further wrinkles, Chicago Housing Authority CEO Tracey Scott said at Bisnow’s Property Management Summit. Unique challenges for public housing like even higher insurance premiums and more restricted funding sources have Scott looking to reimagine the way public housing functions in the Windy City. 

“Public housing as we've known it is not the future,” Scott said at the event, held at the Radisson Blu Aqua Hotel. “It is about mixed-income housing.”

The CHA serves about 65,000 families in the Chicago area, with 47,000 of that group also utilizing Section 8 vouchers, which help very low-income families, older adults and people who have disabilities afford private market housing.

Scott said her vision features developments that bring together a variety of funding sources and offer housing to a diversity of family income levels and eligibility statuses under the same roof. 

Historically, affordable housing meant building a cinder block space and hoping that people were grateful to have shelter, Scott said. Now, instead of siloing people in traditional housing, conversations increasingly center on market-quality housing, which is made up of people who receive subsidies for their rent from the CHA and market-rate renters, she said. 

But financing that vision isn’t an easy task, given the current financial climate and additional limitations funding sources for public housing impose on agencies like the CHA. Federal regulations on how the CHA has to construct buildings also add to the cost of a deal even before it can open the doors to a development, Scott said. 

“If you have affordable housing tax credits, public housing vouchers and so on, you're sort of dealing with the operational costs with one hand tied behind your back,” Scott said. “There's a limit on the federal subsidies and other things that can come into a deal as well as regulatory issues.”

That’s where private partners come in.

The city has stepped up to help make affordable development easier on the private side through zoning changes and new ordinances, said Mike Ryan, principal architect at Chicago Roof Deck + Garden. Ryan said city ordinances loosening parking requirements have led to an increase in transit-oriented development that utilizes existing transportation infrastructure and makes it easier to build affordable housing. 

But Ryan said he hopes to see more opportunities to revitalize commercial spaces and create new housing infrastructure in the city.

That's something the city can’t do alone.

Even where it can move ahead with public housing options, insuring properties is becoming increasingly difficult, Scott said. The CHA executive said insurance companies are charging high rates to cover properties that include affordable housing. 

“We are hearing directly from these insurance and reinsurance companies that if it has affordable housing in it, they are also adding a premium to that, even with the low claim history,” Scott said. 

Some housing authorities across the country have been unable to get insurance for their properties at all, Scott said. In the long term, it’s unclear what an inability to insure properties will do to the public housing industry, she said. 

The multifamily supply crunch in the city is hitting lower-income renters harder as well. Unlike other major cities facing a surplus, Chicago has the opposite issue. Scott said incomes on the lower end of the spectrum haven’t caught up with rising rents, and it's difficult to pair those renters with housing they can actually pay for. 

The expectation was that this trend was a pandemic-related disruption, but it doesn't appear to be easing up. The industry will have to deal with this issue to ensure the population it serves can access housing, Scott said. 

“When we think of this industry, we talk about supply in a very generic way, but families … cannot afford the housing,” Scott said. “They may be working, they may have two incomes, and they cannot afford the housing. Then affordability is not just whether or not you get subsidies from the housing authority or whatever. It's just the absolute ability to pay, and that tension is increasing. It's not going away.”