A recent comprehensive report on how tax increment finance (TIF) districts are being used to meet the city's demand for affordable housing finds Chicago's strategy is simply not helping enough low-income households, given the tremendous demand for affordable housing. According to the report, since 1995 only 4% of TIF revenues have gone to support affordable housing in Chicago. This is for-sale housing affordable to households earning up to 80% of area median income and rental units affordable to households earning up to 60% of area median income. Lakeside is working with a number of groups in Rogers Park, led by Northside Power, to offer an alternative tax increment financing model, which addresses some of the major shortcomings of current TIF approaches.
The new TIF report was produced by the Chicago Coalition for the Homeless for a coalition of organizations called the Sweet Home Chicago Coalition. The report, which is available online, finds two primary failings with the way TIFs are used, including:

• TIFs subsidize the production of housing that costs much more than what low-income residents can afford. In a quarter of all TIFs with for-sale housing, the housing produced cost 2.5 times more than what a low-income family can afford, for example.

• TIFs subsidize housing that rents far above area median rents, which can contribute to upward inflation on rents and place subsidized units out of reach for households in need. The study finds that in 25% of TIF rental projects, resulting rents were on average $582 more than median rents in the surrounding area for the same kinds of units.

In Lakeside's service area, we have looked at how TIFs are used and have similar concerns as those reported in the study, which was produced by the Chicago Coalition for the Homeless and the Sweet Home Coalition. This is why Lakeside was pleased to join an effort being spear-headed by North Side POWER, a Rogers Park-based organizing coalition, to develop a new "Rogers Park Rental Improvement Fund", or RIF. The RIF, which was conceived by Lakeside and developed in concert with NSP and the Rogers Park CDC, is modeled on a TIF, but offers some useful improvements.

The Rental Improvement Fund would create a pool of funds generated from incremental increases in property taxes collected within a defined boundary. The RIF would then make grants available to rental property owners within that area to make improvements on their properties. This is very much like how a neighborhood improvement fund, or NIF, is used within a tradition TIF. Other uses, such as economic development, commercial improvements, etc. would not be permitted. All funds would support housing-related uses, though the RIF could also be used to support complimentary purposes, such as job creation, skills building in the construction trades, or green improvements.

As it is currently conceived, the RIF would provide grants up to $10,000, provided owners agree to maintain rents on improved units as affordable to households earning no more than 30% of Chicago area median income. For households earning 60% of Chicago area median income, which is roughly equal to the neighborhood median income for Rogers Park households, the grants would be $5,000 per unit. The RIF agreements would remain in effect for 10 years and include a recapture agreement in case property owners accepted funds, then raised rents above agreed-upon limits. In that case, property owners would have to repay a pro-rated portion of the RIF proceeds. Every property 2-units and larger would be eligible, which could help the more than 1,000 small property owners in Rogers Park.

Lakeside has conduced an analysis of how much money the RIF could generate, using current Rogers Park property tax revenues and the state's published formula for calculating TIF proceeds. Our estimate suggests it could generate as much as $54 million in new funds for rental housing improvement over the next 23 years, without including areas already under a TIF. Already, the idea has been presented at a community meeting attended by more than 70 residents. At that meeting, Alderman Joe Moore, whose ward comprises most of Rogers Park, agreed to work with NSP to create and pass an ordinance creating the RIF. Lakeside is also working with NSP and other partners to disseminate information to and get feedback from community organizations, property owners, and community residents. Feedback collected will help us refine the concept, to ensure we are able to maximize the community benefits for as many residents as possible.

In the meantime, Lakeside supports the TIF reform goals proposed by the Sweet Home Chicago Coalition. TIFs can be a great tool for community improvement, but there is great room for improvement in how they are used. We are optimistic that the Rogers Park Rental Improvement Fund can provide a useful alternative and make a lasting impact on the availability of high-quality and affordable rental housing in Chicago.

For more information on the Rental Improvement Fund, contact Brian White at Lakeside CDC. You can also download a fact sheet on the RIF by clicking this link.