Coming to a block near you: CHA subsidized housing?

The Chicago Housing Authority is trying to obtain 2,500 housing units in city neighborhoods where it has a tiny footprint or none at all, the final stage of a plan to scatter low-income residents across the city instead of segregating them in housing projects.

Agency officials face a real test in meeting the goal, which would pressure even the most nimble property investor. To put the 2,500 number in context, at the end of last year the agency had just 2,482 occupied units in its "scattered-site” program, one of its primary efforts to spread public housing tenants across the city.

Obstacles include higher development costs in its targeted neighborhoods, which range from wealthy sections of the North Side to the working-class Southwest Side, and skepticism from real estate firms the agency wants to partner with. NIMBYs undoubtedly will try to stop the CHA, too, fearing any increase in the number of low-income or minority residents in their neighborhoods. 

In short, the initiative raises the question of whether the agency has the political will and internal capacity to pull off one of its most ambitious attempts to boost its low-income housing portfolio in years.

“A lot has changed since the '70s and '80s, but there's still a whole lot of resistance to introducing new populations into existing communities,” says D. Bradford Hunt, a professor and dean at Roosevelt University in Chicago who has written about the housing authority.

Under its Real Estate Acquisition Program, the CHA wants to offer investors and developers equity, loans or other rental subsidies to help pay for new housing or rehab projects, according to a contracting request the agency is circulating. In exchange, developers would lease or sell units to the CHA, which would rent the residences to public housing tenants. Over the summer, the agency took out a $20 million loan to help fund the program.

The agency aims to put these units in "opportunity areas,” defined as communities with crime rates less than the city's average, that offer public transit access and where existing subsidized housing units make up less than 15 percent of the residential stock, according to the agency's contracting document. 

Andrew Niewiarowski, a Chicago investor who owns about 200 rental units in Uptown and Edgewater, most subsidized through the CHA or the state's housing authority, likes the certainty of so-called affordable housing, which provides a steady stream of income backed by public agencies. Yet most apartment owners prefer finding tenants through the private market rather than tying a unit for the long haul with a public agency, he says. 

“I don't think there'd be tremendous interest in that type of program because demand is so strong for market-rate tenants as it is,” Mr. Niewiarowski says.

But Brinshore Development LLC wants in, CEO David Brint says. The Northbrook-based real estate firm has emerged in recent years as one of the CHA's go-to developer partners, remaking the former Henry Horner Homes near the United Center on the West Side, for example, into Westhaven Park.

Choosing whether to lease units through public programs is “really a function of what the upside of your rents are,” Mr. Brint says. Yet affordable-housing developers can earn a 9 percent fee for each subsidized unit they develop, he notes. “The affordable-housing business is more a fee-driven business.”

A CHA spokeswoman declines to make CEO Charles Woodyard available for an interview. The agency “firmly believes that this program will succeed in delivering quality, sustainable subsidized housing in underserved neighborhoods and throughout Chicago,” it says in a statement. 

Spurred by a desegregation case named after former housing authority tenant Dorothy Gautreaux, the agency long has tried to acquire units outside of the city's African-American neighborhoods. Between 1989 and 2000, Chicago-based Habitat Co. managed a development program for the agency that delivered 1,602 units spread around the city, according to court records.

In recent years, though, the authority has had a hard time buying properties outside its traditional neighborhoods on the South and West sides. A 2009 effort that is now ending produced just 30 housing units.

For complete coverage of Chicago-area real estate, visit ChicagoRealEstateDaily.com.