Department of Planning and Development Affordable Requirements Ordinance Administration Follow-Up Inquiry

The City of Chicago Office of Inspector General (OIG) has completed a follow-up to its March 2017 audit of the Department of Planning and Development’s (DPD) administration of the Affordable Requirements Ordinance (ARO). Based on the Department’s responses, OIG concludes that DPD has implemented some corrective actions, while others are partially implemented or not implemented at all.

The purpose of the March 2017 audit was to determine the geographic outcomes of ARO-created and -financed affordable units, to assess the City’s historical use of ARO in-lieu fees, and to evaluate the role of the Chicago Community Land Trust (CCLT) with respect to ARO-created, for-sale affordable units. Our audit found that, historically, the City neither appropriately accounted for all ARO and Density Bonus fees nor utilized best practices in the administration and investment of these fees. Additionally, OIG determined that CCLT has never been sufficiently funded to achieve its mission of acquiring land for the creation of affordable housing units. The scope of the audit included the 2003 and 2007 versions of the Ordinance, but it did not include the 2015 ARO amendments. Some of OIG’s recommendations had already been addressed by the amended ARO.

Based on the results of the audit, OIG recommended that DPD develop defined goals relating to the geographic distribution of affordable housing, and that, as part of this work, the Department assess and formalize the city’s high opportunity areas for affordable housing development. OIG recommended that DPD incentivize affordable housing development in these areas and monitor outcomes on an ongoing basis to ensure that it meets its geographic distribution goals. OIG also recommended that DPD ensure the restoration of $4.5 million in ARO and Density Bonus fees to the Affordable Housing Opportunity Fund (AHOF) so that those monies could be used for the creation of affordable housing.

Regarding CCLT, OIG recommended that DPD and CCLT work with City Council and the Office of Budget and Management (OBM) to secure the financial resources necessary for CCLT to function as a community land trust. OIG also recommended that, if CCLT continues to employ deed restrictions as an affordability mechanism, the City and City Council collaborate to revise the 2015 ARO to allow for the reintroduction of 99-year deed restrictions. Alternatively, OIG recommended that DPD and CCLT work with City Council to explore the possibility of sunsetting CCLT and integrating its existing functions into DPD’s operations.

In its response to the audit, DPD described corrective actions it would take regarding some of the audit recommendations, while declining to commit to corrective action on others.

In November 2018, OIG inquired about corrective actions taken by DPD and CCLT in response to the audit.

Based on the Department’s responses, OIG concludes that DPD has partially implemented corrective actions related to the audit findings. Specifically, DPD, working with the DePaul Institute for Housing Studies, used household income data from the U.S. Census Bureau to define three categories of housing zones—Higher Income, Low-Moderate Income, and Downtown—pursuant to the 2015 ARO.  It also worked with OBM to create a dedicated fund to receive and spend ARO and Density Bonus monies, but declined to restore $4.5  million previously diverted from affordable housing program use and disagreed that it had been diverted. DPD also reports that 363 ARO units will be developed in Higher Income and Downtown zones, although the units may not have been built yet. Additionally, the Chicago Low Income Housing Trust Fund (CLIHTF) has now designed a point system to prioritize its investments but has yet to put it to use because there is more funding available than projects.  

The Chicago Community Land Trust has now hired an executive director, increased the number of units in its portfolio, and made efforts to fundraise externally.  However, it has declined to undertake additional steps OIG recommended to better align its operations with its organizational name and mission. We again urge DPD to implement 99-year deed restrictions rather than 30-year deed restrictions and to take actions to change the name of the Chicago Community Land Trust to reflect its activities, or to alter its activities to include acquisition of land as a traditional land trust does.