Declining two-flats mean less diversity, affordability

by Timothy Inklebarger

Experts discuss the decline of 2- to 4- flat buildings at a public forum sponsored by Northcenter Neighborhood Association on May 30 at Sulzer Regional Library in Lincoln Square.

The neighborhood of North Center is losing its stock of two- to four-flat rental buildings to single-family home conversions and teardowns, following a citywide trend that is making the neighborhood and the city less affordable, according to speakers at a public forum on May 30.

Sarah Duda, deputy director of the Institute for Housing Studies at DePaul University, opened the Northcenter Neighborhood Association-sponsored forum with a presentation showing the stark decline in two- to four-flat rental buildings in the area. She told the audience of about 100 people that from 2012 to 2017, Chicago lost about 26,000 rental units in two- to four-flat buildings, which is about 11 percent of the rental-unit stock.

“That’s had a big impact on affordability,” she said, noting that two- to four-flat buildings tend to support low- and moderate-income households. Between 2012 and 2017, the neighborhoods of North Center, Lincoln Square and parts of West Ridge collectively went from a 36 percent affordable rate to 21 percent.

Duda was joined by newly elected 47th Ward Alderman Matt Martin; Paul Shadle, a partner with law firm DLA Piper; John Zachar, a North Center-based architect whose focus is on two-flat renovation and conversion; and Steven Vance, founder and CEO of the real estate development-focused website Chicago Cityscape.

Two- to four-flat buildings are in decline in the area in part because of market pressure to convert the rentals to single-family homes. From 2012 to 2015, North Center had the highest single-family conversion permit activity of any neighborhood in the city, Duda said. Roughly 1.8 single-family home conversion permits were active for every 100 two- to four-flat buildings in North Center from 2012 to 2015. That’s compared to a rate of 1.3 for both Lincoln Square and Irving Park; 1.2 for Edgewater; 1.0 for both Logan Square and Avondale; 0.9 for Lincoln Park; and 0.8 for West Town.

The conversion of two- to four-flats to single-family homes is driven largely by the increasing value of those homes over the last 15 years, according to Duda. She noted that there’s been a divergence between property types in recent years; the median sales price of about $600,000 for a single-family home was about the same as a two- to four-flat building up until 2004, when single-family homes began to outprice their multi-unit counterparts. Today, single-family homes have an average median sales price of about $1 million in the area, while two- to four-flats have remained at about $600,000. Another factor is the deterioration of existing buildings.

But some of the conversion is being driven by choices made at city hall, according to Vance. He said rezoning that took place about 20 years ago in Lincoln Square and North Center caused parcels of land that contained two- to four-flat buildings to be rezoned RS-3 for single-family homes. That meant that if two- to four-flats were torn down, they must be replaced with a single-family home. He said that change to the zoning ordinance made it impossible to build additions onto two- to four-flats and also makes some renovations difficult. “It makes sure any future building is a single-family house,” he said. Vance suggested the city eliminate the practice of allowing spot-zoning changes.

This conversion of housing stock has led to a “dramatic shift” in the profile of people who live in North Center between 2010 and 2017, Duda said, showing that about 1,500 households earning less than $100,000 a year were replaced over that time period with households that make more than $100,000.

And it’s not just a shift in wealth, but also household type; the data appear to show that families are replacing single individuals in North Center. Between 2010 and 2017, the neighborhood increased in population by about 2,000 people “but virtually all of them were children,” Duda said.

Shadle noted that some are concerned that getting rid of single-family-only zoning could damage their home values, but Duda said that worry may be unfounded. “The jury’s out to the degree of which it affects property values,” she said. “It has to do more with demand than restrictions on supply.” She added that the desirability of the neighborhood is going to continue to have an outsized impact on single-family home values.

The panel also discussed the impact of the city’s affordable housing ordinance and whether increasing the 10 percent affordable rate some developers are now required to meet would help generate more housing options. Shadle said that in some areas of the city, a pilot program requiring 15 to 20 percent of units to be affordable has contributed to a dramatic decline in building activity.

Martin, who is part of a new group of aldermen recently elected to the Chicago City Council, said construction costs could be contributing to the problem. Nonlabor construction costs are among the highest in the city “and no one can say why,” he said. Martin said he was appointed to the council’s Housing Committee and plans to pursue the issue. Another possible fix is an increased focus on housing vouchers, he said. “When we talk about a 10 percent [Affordable Requirements Ordinance], what would the cost be if we wanted to subsidize on top of that using vouchers?” he asked, adding that such an approach could be more cost-effective.

Vance said loosening restrictions to allow more accessory dwelling spaces, such as basement and attic units and coach houses, could also boost the supply of rentals in the neighborhood. Basement units can cost as little as $30,000 to build out in a two- to four-flat building, he said, while coach houses can run as much as $150,000 or more. “That could be the fastest way to generate affordable housing,” he said.

Zachar expressed wariness over the coach house idea, noting that the structures can make it more difficult for emergency vehicles to access residential buildings. They also reduce the size of backyards and permeable space in the neighborhood, which can lead to increased flooding, Zachar said. He advised approving taller buildings to increase rental housing stock and allowing residential units in ground-level space that would typically be zoned commercial.

Editor’s note: This story initially indicated that North Center had lost around 26,000 rental units in two- to four-flat buildings, when that figure should have been attributed to Chicago as a whole. The story has been updated and we regret the error. 

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