How Have TIF Dollars Been Used For Housing?
Can TIF Dollars Benefit Existing Homeowners and Renters?
What Protections Exist for Homeowners and Renters?
Housing Impact Study
Chicago Homeowner Assistance (CHAP) Program
What Does The City Mean By "Affordable"?

How do TIFs affect homeowners and renters?

TIFs work by raising the overall property value of a TIF district, which generates more property tax revenues that can then be used to pay for redevelopment projects. In a primarily residential TIF district, property values can rise in one of three ways. First, new housing can be built on vacant land which currently pays little or no taxes. Second, improvements to existing properties can boost tax revenue in the area. Finally, the values of existing houses and apartment buildings can rise as part of a general growth in area property values, forcing residents  and businesses to pay higher property taxes or rents. While renters don't directly pay property taxes, they often see the impact of higher property taxes passed on to them in the form of higher rents or condominium conversions.

There's good news and bad news when it comes to the impact of TIFs on residents. The bad news is that TIFs, particularly in areas that have already begun to experience rising property values, can accelerate the process of gentrification. Rapid development - particularly high-end residential construction - may drive property taxes up throughout the neighborhood, even in areas just outside the boundaries of the TIF. Even more directly, new development can lead to the demolition of existing affordable housing. The good news is that recent changes to State law make it easier to pay for the construction of affordable housing with TIF dollars, and provide some protection to residents who are threatened with displacement.

How Have TIF Dollars Been Used For Housing?

The City of Chicago has long used TIFs to pay for housing development - both affordable and market-rate. There is no written policy at the State level that requires a set-aside for affordable housing, though the City has said in the past that it wants developers to reserve 20 percent of the units in each TIF-subsidized residential project to be affordable. As you can see in the attached list of TIF-funded housing projects, however, the City does not always abide by that standard. Some downtown projects in which office buildings are converted into high-end condominiums are among the worst violators of this unwritten rule.

Still, there has been some affordable housing constructed with TIF dollars. Overall, NCBG can track 25 TIF projects have included some residential development. NCBG can document 4,471 units of housing constructed as part of those projects, 1,832 of which are listed as affordable. A total of $179.7 million of TIF money has been promised to housing development projects (including the $9.1 million in direct rehab grants provided through the Neighborhood Investment Fund program), which has resulted in $549.4 million of additional investment.

Please note: Seven of these projects (in the Central Loop, Near South, Howard-Paulina,  Chinatown Basin, Lawrence/Broadway, and  Lincoln/Belmont/Ashland TIF districts ) are mixed-use projects that include some commercial development, and their $46,850,240 in TIF subsidies is counted in full here.

The State TIF reform law, signed into law by Gov. George Ryan in August 1999, will make it easier for developers to use the TIF program to build affordable housing. In general, TIF dollars cannot be used to pay for the "bricks and mortar" costs of construction. Subsidies to private developers instead come in the form of funds for activities such as land acquisition, environmental cleanup, surrounding infrastructure improvements, building demolition, financing and interest payments, or job training programs. The State TIF reform law allows for up to half of the "bricks and mortar" cost of affordable housing projects to be paid for out of TIF revenues. Developers may also use TIF money to write off up to 75 percent of the interest costs associated with the project. (Think of it like someone paying for the interest on your home mortgage or other loan. In the end, you owe less because you don't have to pay the interest.) These incentives could make it much more attractive for developers to build more affordable housing in some TIF districts.

Can TIF Dollars Benefit Existing Homeowners and Renters?

As with commercial development, the TIF program tends to favor big housing developments - often on large pieces of vacant land - over assistance to existing homeowners. Historically, the City has looked for the biggest "bang for its buck" when it comes to development projects, and it is much easier to give a subsidy to a single developer who will build dozens of units at once than it is to distribute dozens of subsidies to individual homeowners.  The drawback to such an approach is that new residents benefit from the TIF program, while existing residents find it nearly impossible to tap into the money.

The City is gradually recognizing this problem, and has established a pilot program called the Neighborhood Investment Program (or "TIF NIP") that provides a way to give existing homeowners direct grants for exterior repairs and safety upgrades.

A single-family is eligible for grants of up to $10,000. Multi-unit buildings can receive grants of between $12,500 and $50,000, depending on the number of units. The programs are administered through two private agencies under contract with the City - Neighborhood Housing Services (for the single-family program) and the Community Investment Corporation (for the multi-family program) - which are in charge of selecting who gets the grant money. Households who benefit from the program must be low- to moderate-income.

So far, five communities have taken part in the TIF NIP program - Woodlawn, Bronzeville, Lawrence/Kedzie, South Chicago, and most recently the large Midwest TIF district in the Garfield Park/Lawndale communities, where a combined NIP and SBIF (small business improvement fund) program was instituted in 2001.   In each of those communities, the City borrowed from $1 million to $4.9 million from local banks which it will repay with TIF revenues as they become available. While the program shows some promise for broadening the range of people who benefit from TIF, it remains small - both in terms of the number of neighborhoods it impacts, and how much assistance it can provide to those neighborhoods.

What Protections Exist for Homeowners and Renters?

In order to truly provide better protection for residents in TIF districts, the program would have to change in at least two major ways:

Unfortunately, these protections do not exist yet. In the meantime, there are two public policies that can provide some protection for homeowners and renters.

As a result of the 1999 State TIF reform law, the City now must measure the impact a TIF will have on residents before it is voted on by the City Council or the Community Development Commission. This new "housing impact study," usually conducted by the same consultant that does the TIF eligibility study, is designed not only to identify the effect of the TIF on existing housing, but also to require the City to submit a plan for relocating affected residents.

The City must conduct a housing impact study if:

If the City wants to increase the number of individuals who are displaced by even one household, it must hold a public hearing on the plan and get the approval of the Community Development Commission and the City Council.

Chicago Homeowner Assistance (CHAP) Program

One of the biggest potential problems for long-time residents who have found themselves living in a TIF district is the threat of rising property tax bills. In some cases, development in the area drives property values so high that people can no longer afford to live in their own homes. To help fight this problem, the Cook County Assessor's Office runs the Chicago Homeowners Assistance Program, or "CHAP" for short.

CHAP makes reduced-interest loans (currently 3 percent) to homeowners to help them pay a portion of the increase in their property tax bill at a reduced interest rate. Homeowners do not have to pay back the loan until they sell their homes. The expectation is that sellers will get a higher price for their home and use a part of the increase to pay back the loan.

To be eligible for the CHAP program you must:

Critics say the CHAP program is inadequate because it relies on loans instead of direct property tax exemptions or reductions. Others have criticized the program for applying only to those who already fully own their homes, and for not helping renters.

For more information, contact the CHAP Hotline (in English and Spanish) at 312-745-CHAP or the Cook County Assessor's Office at 312-443-7550. To request a presentation about CHAP to your community group, block club, or church, call the CHAP Program Coordinator, Vince McFallar, at 312-747-7591.

What Does The City Mean By "Affordable"?

Once a neighborhood gets the City to agree in principle to support "affordable" housing, then the next question is, "What is 'affordable' housing?" Unfortunately, agreeing on what constitutes affordable housing is often a major challenge in itself.

A generally accepted rule of thumb is that an affordable rent can be no more than 30 percent of a person's income. For an individual making $22,000 per year, for example, an affordable rent would be $550 per month. For a family of four making $31,000, an affordable rent would be $775, according to this definition.

When the City is defining affordability in terms of a TIF deal, it compares a family's income to the average income for the Chicago area. As part of its official "Application Checklist" that the Dept. of Planning and Development distributes to developers seeking TIF subsidies, the City states that it "requires developers who receive TIF assistance for market rate housing [to] set aside 20% of the units to meet affordability criteria established by the City's Department of Housing." Those affordability criteria, the policy goes on to say, are: