The Additional Dwelling Units (ADU) ordinance5 established in 2020, which was itself a repeal of an ordinance enacted in 1957 prohibiting such units, was a breath of fresh air and lauded for embracing the simple concept that more supply reduces housing costs. Because of its success, the city is planning to expand the pilot boundaries citywide.6
Unfortunately, the regulation keeping the city from many more units is that half of the housing units must be “affordable,” thereby blunting housing providers incentive to create more. If one can ignore the language, and instead understand incentives and economics, it becomes clear what’s happening: less supply, higher rents.
How ironic that housing providers should be championing these misguided regulations, like rent control and ARO, as both regulations choke supply and create an imbalance that makes rents boom. Instead of that, I think both sides should find one of the few issues in the country that both sides agree on: find ways to create more housing to ease the housing shortage throughout the country. Chicago ought to de-regulate: relieve the ADU ordinance of its intervention (50% “affordable”) and remove the ARO requirements for new housing, both of which inhibit building.
We have the rare opportunity for a win-win-win if we can de-regulate:
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The city gets much more housing thus lower rents.
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Builders build, providing stimulus to the local economy.
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City nets more tax dollars as land is monetized and economy grows.
We have seen how affordable regulations have created unaffordable housing, now let’s try to incentivize building!
1 - Unintended Consequences Of Regulation - Austrian Economics Center (austriancenter.com)
2 - DMQ.pdf (stanford.edu)
3 - Replacing The Heartland Cafe: Here's The 6-Story, $15 Million Apartment Building Proposed For Site (blockclubchicago.org)
4 - Heartland Cafe Site Being Turned Into Apartments As Developer Breaks Ground After COVID-19 Delays (blockclubchicago.org)
5 - City of Chicago: Additional Dwelling Units (ADU) Ordinance
6 - Chicago aldermen express support for citywide granny at ADU permits | Crain's Chicago Business
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