I am writing as a follow-up to the community meeting I hosted about a week and a half ago on the proposal for a seven-story mixed-income and mixed-use development on the 6400 block of N. Sheridan Road that would include market rate and affordable rental housing and a small “flexible format” Target store.
Over a hundred residents attended the meeting, which lasted three and a half hours, the lengthiest community meeting I ever have held on any topic. Representatives from the lead developer, Three Corners Development, the Chicago Housing Authority (CHA) and Target stayed the entire time and attempted to answer every question.
Answers to a few of the questions required further explanation. Other pertinent questions were asked by those who were unable to attend the meeting, but corresponded with my office. I want to make sure everyone in the community is fully informed about every aspect of the proposal. Accordingly, allow me to respond to those additional questions here.
I have divided the questions into three categories–housing, the Target, and the Carolyn Hedger Senior Citizen building:
The proposed project includes 111 residential units. Approximately 60 percent of the units will be affordable CHA housing and 40 percent will be market rate.
What is the nature of the affordable units?
The affordable units in the proposed development will be CHA Project-Based Voucher (PBV) units under the new Rental Assistance Demonstration (RAD) Program.
Frustrated with the unwillingness of the Republican-controlled Congress to provide adequate federal support for affordable housing, the Obama Administration created RAD to give public housing authorities, such as the CHA, a tool to preserve and improve public housing and allow for the ongoing maintenance of those properties.
First, at a time of dwindling and uncertain federal support for affordable housing, RAD provides the CHA with a steady and reliable revenue stream, allowing the agency to secure non-federal funds needed to complete additional improvements at its properties and expand affordable housing elsewhere without requiring additional federal dollars.
This is critical given that the CHA has been unable to secure enough money from the federal government to address the millions of dollars of deferred maintenance, and future federal support for public housing is, at best, uncertain with Trump in the White House and the Republicans in full control of Congress.
Second, RAD ensures that the units created under the program remain permanently affordable to low-income households. In RAD, the affordable units move to a Section 8 platform with a long-term Project-Based Voucher (PBV) contract for 20 years that, by law, must be renewed. CHA residents in a RAD development pay 30% of their income towards their rent, just as they do in traditional public housing, and maintain all their tenant rights and protections.
CHA residents in RAD developments also enjoy enhanced choice and mobility. In traditional project-based developments, the subsidy remains with the unit and the tenant may move only to another CHA or project-based building or risk losing their subsidized housing. Residents living in a RAD development, may request a tenant-based Housing Choice (a/k/a Section 8) voucher after meeting a minimum one-year residency requirement. They can use that voucher to move to any housing unit that is eligible to receive a Housing Choice voucher.
Moreover, the project-based unit they leave will remain affordable for the next income-eligible tenants, thereby expanding the number of public housing units.
Since the CHA owns the property, why doesn’t the CHA simply build a development that is devoted entirely to public housing?
As noted above, federal support for pubic housing has declined over the years and likely will continue to decline under the Trump Administration and Republican-controlled Congress.
The RAD program gives the CHA the ability to access stable and reliable funds from the private debt and equity markets to maintain existing public housing and create additional public housing units without having to rely exclusively on federal funds. To do so requires the CHA to enter into partnerships with private developers to provide it with much-needed revenue.
Securing private financing through the private developer and accessing revenue from the Target lease (see below) gives the CHA the ability to create and, equally important, maintain units of affordable housing, without having to resort to limited and dwindling federal funds. In short, the RAD program allows the CHA over time to build and maintain more affordable housing than if it simply relied solely on traditional federal sources of funding.
Further, the federal court decrees in Gautreaux vs. the Chicago Housing Authority require the CHA to mix public housing with market-rate units and distribute the public housing throughout each development. In other words, the CHA likely would violate these court decrees if it simply constructed over 100 units of public housing in a single building with no market rate housing.
That said, this proposed development will have a far greater percentage of public housing than any other CHA mixed-income housing development. The vast majority of mixed-income developments contain one-third public housing, one-third below-market-rate housing and one-third market rate housing.
In contrast, 60 percent of the units in the proposed development will be set aside for public housing, nearly three times the usual percentage of public housing.
What percentage of 49th Ward housing units are CHA units?
Of the 27,869 housing units in the 49th Ward, 1,140 (or 4.1 percent) are CHA public housing units. This includes Scattered Site, Senior, and Project-Based housing units and Housing Choice (Section 8) vouchers. This puts the 49th Ward on par with other far north side wards.
In comparison, our neighbor to the south–the 48th Ward–has 33,695 housing units of which 1,582 (or 4.7 percent) are CHA public housing units, and our neighbor to the west–the 50th Ward–has 20,575 housing units of which 805 (or 3.9 percent) are pubic housing
What are the projected rents for the market-rate units?
The estimated range for market rents for one-bedroom, one-bath units is $750 to $1,000. And for the two-bedroom, two-bath units, it is $1,425-$1700.
The proposal calls for a 23,000-square-foot “flexible format” Target store on the first floor.
Will Target pay rent at the proposed development and what portion of the rent will go to the CHA?
Target will pay the market rate rent for commercial space in the area as part of its lease agreement with the developer. The lease calls for a term of 15 years with four five-year options to renew. Thus, the total potential length of the lease is 35 years.
Three Corners and the CHA are still working out the final terms of the lease, but the CHA will receive a substantial percentage of the net proceeds from the rent, probably in the range of 30 to 40 percent.
Why Target? Why not an assemblage of small, locally-owned businesses? Or simply no retail at all?
In order to obtain the requisite financing from banks and other financial institutions, and support the RAD Program, the development requires a retail anchor that has the financial capacity and credit of a Target or similar national “credit tenant.”
By definition a credit tenant is a tenant that has been awarded an investment grade rating based on its size and financial strength. Moody’s, Fitch, and Standard & Poor’s are the three major credit rating agencies.
An investment grade rating is significant to potential lenders because it indicates the tenant will most likely have the means to continue paying rent, even in a volatile economy, and ensures the CHA will receive a steady revenue stream to support its mission.
The presence of a Target not only helps ensure the financial viability of the project, but it is in keeping with the goals of the Gautreaux court decrees, which recognize that planning for new mixed-income developments must go well beyond housing in an effort to build sustainable, complete communities. Retail amenities, such as a Target, and the jobs they bring, help achieve those goals.
Did the CHA and Three Corners consider other retail tenants in the planning phase?
Several potential tenants were vetted during the project planning phase and two were able to provide the necessary credit to get the project entitled and financed. The CHA and Three Corners selected Target as the retail tenant that would best fit with the project as proposed and provide neighborhood residents with retail amenities, such as apparel and housewares, that are not currently available in the vicinity.
The other potential retail finalist would have required a two-story retail footprint, engendered far more vehicular traffic, and offered products that competed directly with nearby merchants.
Won’t the Target compete with the Devon Market?
Devon Market is a full-service grocery store that offers a wide range of ethnic foods, appealing to our very diverse constituency. In contrast, Target is planning a store of convenience, not a location to “stock-up” for weekly or bi-weekly grocery shopping. It plans to devote only 15 to 20 percent of its flexible format floor space to fresh/organic food stuffs, prepared foods and “grab and go” items.
Undoubtedly, Devon Market may lose a few food sales to Target, but Target in no way can be considered a direct competitor to Devon Market’s full-service offerings. The Aldi’s, which opened on Broadway a few years ago, and the Whole Foods, which opened just recently in Edgewater, provide far more direct competition to Devon than Target will provide.
Finally, the potential of a new flexible format Target in the neighborhood has not deterred another nearby locally-owned full-service grocer, who just informed me this week of his plans to expand his footprint and offerings. Look for an announcement later this year.
Carolyn Hedger Senior Building
The proposed project would be built immediately north of the senior building.
Are the residents of the Hedger building losing their community room?
The proposed development calls for the demolition and replacement of the existing community room. The proposed new community room (see far left side of the rendering) will be 5,000 square feet, which is slightly larger in size than the current community room.
The CHA has pledged to give the residents of the building the power to determine how the room will be configured and equipped. And Three Corners has pledged to provide a temporary community room at their building located one block west of the Hedger Apartments for the seniors during the construction of the development.
Additionally, the development calls for an outdoor roof-top terrace above the community room (see far left of rendering). The CHA has promised to give the residents a great amount of input on how the roof-top terrace will be laid out.
Were the Carolyn Hedger residents informed of the new development and given an opportunity to provide input?
The residents of the Hedger building were the very first to know of the potential development and among the first to provide input on the proposal. CHA Chief Executive Officer Eugene Jones personally informed the residents of the Hedger Apartments at a building meeting last May that the CHA was negotiating with a developer to potentially bring a mixed-income apartment building and Target to the area just north of their property. He assured them at the time that they would receive a new community room.
After the CHA, Three Corners and Target reached a tentative agreement, the residents of the Hedger Apartments were among the first to see the plans. I held a meeting at their building at which Three Corners presented the plans and solicited the input of the residents. Once again, the residents of the building were assured they would receive a new and improved community room that they would help furnish and design.
Of the 325 residents who currently reside in the Hedger building, a nucleus of about 20 Caroline Hedger residents continue to speak out against the project and attended the January 30th community meeting. Most of the 120 residents who attended their building meeting earlier in January, however, expressed support for the proposal, especially once they found out they would continue to enjoy a community room and receive more parking spaces than are currently offered to them.
I hope this helps clarifies some of the outstanding issues that may not have been fully addressed at the community meeting. I am continuing to receive input on the proposal and welcome any further questions and comments. Please feel free to reply to this email or call or email my office at email@example.com.
I hope to make a final decision on the proposal in the next few weeks.