By Miguel Medina
Associate Editor, Vol. 25
Anyone from Chicago knows quite well that construction is booming. With 33 new high rises in progress, Downtown continues to boast an increasingly packed skyline .”[i] As a summer associate at a large Chicago law firm earlier this year, I made a few trips to the South Loop. The area is lauded by those who live there as diverse, surrounded by neighborhoods such as Chinatown, Pilsen (a predominantly Mexican neighborhood), and University Village (Chicago’s Little Italy). Visiting the homes of fellow law students, associates, and partners, I was amazed at how much the area had changed. In fact, not much residential construction existed in the area ten or fifteen years ago.
Historically, the South Loop was a vice district, with factories and large swarths of undeveloped land. It was also the site of one of the largest homeless shelters in the city, the Pacific Garden Mission, which from 1923 to 2007 was located at State and Balbo until it was moved.[ii] As a child, I remember passing through there and not noticing much beyond the Target on Clark and Roosevelt. Now the South Loop has been actively developed with single family homes as well as high rises for the urban middle and upper middle class. While at the same time, low income housing is scarce in the South Loop.[iii]
It is also not news that Chicago is rapidly gentrifying. Logan Square, Humboldt Park, Lake View, Wicker Park, and the list goes on, have changed dramatically since I was a child. Rising home prices in East Garfield Park, Austin, and South Lawndale point to continued displacement of mostly working-class Black and Latino families.[iv] The purpose of this blog post is not to outline why gentrification is harmful to poor communities of color. Rather, it simply asks the question: who will the current construction boom benefit?
This question was brought up implicitly in one of my classes. This semester I am taking Professor George Kimball’s Negotiations class. Like the name suggests, it’s a class where we are taught on how to be effective negotiators. Most people in the class are slated to be at a Big Law firm post-graduation. A requirement of the class is to write a paper and present on a real negotiation. One of my classmates chose to focus on the purposed construction of Chicago’s Lincoln Yards and the bitter talks between Mayor-elect Lori Lightfoot and developers Sterling Bay.
The proposed Lincoln Yards development project will be located on the North Side between Lincoln Park and Bucktown. It will include apartments, condos, office, and other types of space.[v] The land to be developed is the site of a former manufacturing plant and is not currently in use. The total cost of construction will be $6 billion. There is no official completion date, but it is expected to take about a decade to develop.[vi] The project has incited backlash in the city.
One source of controversy is the $900 million Tax Increment Financing (“TIF”) subsidy from the city of Chicago. TIF is a financial tool that is used by municipalities to promote redevelopment projects by diverting future property tax revenue increases towards the project.[vii] TIF works by having a set tax base in the planned area that is used to fund schools and other services. Once property value rises, the city does not divert the increased tax revenue to schools, rather it uses it to pay off bonds it sold to pay for the upfront costs of the development project, or to “pay as you go.”
Community activists sued the city to stop the development of Lincoln Yards. They contended that the city misuses TIF to invest in communities that are already well off and in doing so the city “promotes racial disparities in struggling neighborhoods,” and that such allocation is a violation of Illinois civil rights laws.[viii] The lawsuit was dismissed with prejudice by Judge Neil Cohen because he found that the plaintiffs had no standing for they had not shown that they had suffered a “distinct and palpable injury” by the City of Chicago.[ix] The project is slated to begin next year.
A major reason why plaintiffs brought the suit in the first place was because Lincoln Yards did not provide enough affordable housing. In order to acquire TIF status, the project would need to ensure that 1,200 of the 6,000 units planned to be built will be affordable housing. Sterling Bay stated that they intended to build 300, and according to my classmate’s presentation, the finalized number was 600 affordable units on the site itself. [x] It would then pay into a housing fund through fines and fees to support the other 900 units offsite.[xi] Ultimately, the proposal calls for a segregated development of affordable housing – adding to Chicago’s painful history of segregation.
So, the question remains, what will stop the affordable housing units from becoming too expensive? Professor Kimball did not have a reassuring answer. A former dirt lawyer (also known as a land use lawyer), his answer boiled down to complex contracting that would likely have limited success. Illinois doesn’t have rent control, nor do I think that’s necessarily the answer.[xii] Yet, TIF only works if property value of the developed sites rises. It seems oxymoronic to subsidize a project that depends on the eventual gentrification of the area. I raised this concern to my classmate after presenting. My classmate stressed that no one is being displaced by the construction of Lincoln Yards, the land is just idly sitting there. Like with the South Loop, if past is prologue, it would not be too surprising if most of the working-class people in Lincoln Yards will be those who come to work and go home to the suburbs. Nor would it be shocking, when young urban professionals, like those of us who graduate from an elite law school, swarm in and reap the benefits of this hip new neighborhood.
[i] Jay Koziarz, Mapping the 33 High-Rises Under Construction in Chicago, Curbed Chicago (Oct. 18, 2019, 9:48 AM), https://chicago.curbed.com/maps/high-rise-tower-skyscraper-construction-map.
[ii] Community Contributor, Charles Gomez, John Hancock College Prep Senior—a Voice for Civic Responsibility—Honored With Democracy in Action Award, Chicago Tribune (Feb. 20, 2015, 10:45 PM), https://www.chicagotribune.com/suburbs/daily-southtown/chi-ugc-article-charles-gomez-john-hancock-college-prep-seni-2015-02-21-story.html.
[iii] Low Income Housing US, “Low Income Housing in South Loop Chicago,” (available at https://www.lowincomehousing.us/nbhd/il-chicago-south_loop).
[iv] Corilyn Shropshire, Chicago Gentrification Fears Rise as East Garfield Park, Austin, South Lawndale Housing Prices Increase, Chicago Tribune (Dec. 20, 2018), https://www.chicagotribune.com/business/ct-biz-chicago-housing-costs-gentrification-worries-20181219-story.html.
[v] Sterling Bay, Lincoln Yards, https://www.lincolnyards.com.
[vi] Matt Holmes, Lincoln Yards by Sterling Bay [Maps, Timelines], BuildCentral (Aug. 19, 2019), https://www.buildcentral.com/lincoln-yards-chicago-development-map-timeline/.
[vii] City of Chicago, Tax Increment Financing (TIF), https://www.chicago.gov/city/en/depts/dcd/provdrs/tif.html.
[viii]Srivera3, Community Groups File Lawsuit to Stop Lincoln Yards Project, Chicago Tribune (Apr. 17, 2019, 12:37 PM), https://wgntv.com/2019/04/17/community-groups-file-lawsuit-to-stop-lincoln-yards-project/.
[ix] Alex Nitkin, Judge Dismisses Lawsuit To Block Lincoln Yards TIF, Says Groups Lack Standing, Book Club Chicago (Sep. 16, 2019, 2:37 PM), https://blockclubchicago.org/2019/09/16/judge-dismisses-lawsuit-to-block-lincoln-yards-tif-says-groups-lack-standing/ .
[x] Patrick Sisson, Can Megadevelopments Serve the Whole City?, Curbed: Property Lines (Feb. 5, 2019, 12:46 PM), https://www.curbed.com/2019/2/5/18211070/chicago-lincoln-yards-development-real-estate.
[xii] For a brief overview of this debate and possible solutions, see generally Jeffrey Steele, Is Rent Control Right For Chicago?, Forbes (Apr. 18, 2019, 9:00 AM), https://www.forbes.com/sites/jeffsteele/2019/04/18/is-rent-control-right-for-chicago/#cf7881fbbce0.