Chicago’s ‘Teardown Tax’ Slowing the Loss of Two-Flats

A demolition fee designed to preserve affordable housing in older buildings has had some impact on the city’s housing supply.

2 minute read

December 15, 2022, 6:00 AM PST

By Diana Ionescu @aworkoffiction

Row of brick townhomes in Chicago

CHRISTIAN DE ARAUJO / Chicago townhomes

Writing for Bloomberg CityLab, Mackenzie Hawkins describes an innovative tool wielded by anti-gentrification activists in Chicago’s Logan Square neighborhood: “a pilot ordinance that charges developers a fee of at least $15,000 for tearing down existing buildings.”

The ordinance is part of a larger group of policy recommendations being pushed by community organizers aimed at preserving affordable housing, much of which is found in Chicago’s iconic “two-flat” homes, a classic example of affordable ‘missing middle housing.’ According to Hawkins, “The loss of those units is a key displacement indicator,” making their preservation more urgent.

The demolition fee is now one of two long-term measures enacted by Chicago aldermen to preserve affordable housing. The other is “a permanent anti-deconversion ordinance” that requires developers to maintain density and apply for a permit to build single-family homes on blocks with two-flats.

The policies have yielded some positive results. “In the year after the anti-deconversion ordinance went into effect, followed two months later by the fee, the city found no deconversions in permit applications in the covered areas, compared to a reduced rate in other parts of the city. And there was a substantial drop in residential demolitions: almost 90% in The 606 area, and 40% in Pilsen, slightly outpacing slowdowns in other areas.”

The article outlines other challenges to preserving affordable two-flats, including the high cost of repairs that drive many property owners to sell and developers to demolish old buildings. Meanwhile, city programs to assist with repairs are unable to meet demand. Hawkins notes that the city is also encouraging ADU construction as another avenue to building more housing units, but much of ADU development is concentrated in the city’s wealthier neighborhoods.

Wednesday, December 14, 2022 in Bloomberg CityLab

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