Chicago Tax Credit Program Mostly Produces Affordable Housing In Poor, Black Areas

LIHTC housing in St. Louis
This Jan. 30, 2017, file photo shows new housing under construction in St. Louis. The development is receiving federal low-income housing tax credits. An assessment released Monday shows that most low-income housing tax credit allocations in Chicago have been used in high-poverty and majority-Black areas of that city. Jeff Roberson / Associated Press
LIHTC housing in St. Louis
This Jan. 30, 2017, file photo shows new housing under construction in St. Louis. The development is receiving federal low-income housing tax credits. An assessment released Monday shows that most low-income housing tax credit allocations in Chicago have been used in high-poverty and majority-Black areas of that city. Jeff Roberson / Associated Press

Chicago Tax Credit Program Mostly Produces Affordable Housing In Poor, Black Areas

In the last 20 years, the allocations from a tax credit program to build affordable housing in Chicago have mostly gone to high-poverty majority Black areas on the South and West sides and are underrepresented in more affluent white areas — another sign of stubborn segregation in the city.

The Chicago Department of Housing (DOH) released Monday a “racial equity impact assessment” on how it awards those millions of tax dollars. This type of assessment is a public examination of how racial groups are affected by policies or decisions. And the city’s self critique means changing this program is a huge policy win for advocates of inclusive affordable housing.

“Racial discrimination is this country’s autopilot. We know we have to actively try not to perpetuate racial discrimination. That means we’ve got to put the structures in place to have an ongoing process of examination and accountability of how our programs are functioning,” said Marisa Novara, the city’s housing commissioner.

Low-Income Housing Tax Credits (LIHTC), the largest federal initiative for building affordable housing, started in 1986. Under the program, developers receive tax credits as an incentive to create affordable apartment rentals. The city said its racial assessment of LIHTC is the first such examination of the program in the country.

Since 2000, the city’s LIHTC program has allocated tax credits to develop or preserve approximately 10,000 low-income units across the city. Sixty percent of allocations went to high-poverty areas, according to the city’s assessment. In terms of race, fewer than 20% of LIHTC units are in majority-white neighborhoods and only 6% are in majority Latinx areas. But 50% of all low-income LIHTC units are in majority-Black neighborhoods — a disproportionate share, as the city’s report notes that just 35% of Chicago’s census tracts are majority Black.

To do the racial equity assessment, the newly formed office of community engagement, racial equity and strategic initiatives in DOH partnered with Enterprise Community Partners and Chicago United for Equity. CUE notably conducted the city’s first public racial equity assessment — an examination in which Novara participated — that sparked the reversal of a Chicago Public Schools decision to close a majority-Black school.

For the housing partnership, meetings were held with residents, developers, funders and policymakers. DOH learned that residents wanted to live affordably in highly resourced areas and some people felt marginalized by the screening process.

“It’s important to know the work we’re putting forward and the taxpayer dollars and undoing of systemic harms are getting to the people who need it the most. Receiving feedback from residents really tells the full story for us,” said Sendy Soto, the managing deputy commissioner of DOH’s office of community engagement, racial equity and strategic initiatives.

Now that the assessment is done, DOH has a new set of priorities to ensure that Black, Indigenous, people of color (BIPOC) benefit. That starts with adjusting what’s known as the “Qualified Allocation Plan” or the developer application that determines tax credits for properties.

“Chicago is taking real steps to ensure that the millions of dollars it commits to affordable housing help to dismantle the systems that have denied BIPOC developers and residents the opportunity to create communities that are places of pride, power and belonging,” said Andy Geer of Enterprise Community Partners.

More housing choices and opportunities throughout the city is the goal, whether a renter desires to live in Roseland or River North. “We wanted to see developments in high-income areas, we wanted to see housing in gentrifying areas where we were losing affordability and we wanted to see vibrant investments in long-disinvested, lower-income areas,” Novara said.

A race-neutral approach doesn’t match a racialized reality, Novara said.

“If we’re valuing that we have representation in higher-income areas, we have to allow for higher project costs where the land is more. Therefore, we can’t just apply the same formula to every project we look at,” Novara said.

The city will allocate $61 million for 2022 and 2023 LIHTC developments. A draft of the developer application is online and public comment is open through April 15.

Natalie Moore is a reporter on WBEZ’s Race, Class and Communities desk. You can follow her on Twitter at @natalieymoore.