Over 16,000 Chicago apartment buildings containing 52,000 rental units went into foreclosure between 2009 and 2011. Local building owners couldn’t keep up with their mortgages and speculative investors walked away from the risk. Three years later, a group of lenders has created a new $26 million loan pool to entice those investors to come back and buy small rental buildings in hopes of supplying affordable housing in Chicago’s poorest neighborhoods. Along with the backing of other lenders, the MacArthur Foundation kicked in $5 million to support the cause (Read MacArthur Foundation: Chicago Grants).
Buildings with two to four units make up over a quarter of the overall housing stock in the city, but constitute nearly half of residential units in the Chicago’s hardest-hit neighborhoods. The Lawyers Committee for Better Housing determined that approximately 75% of the foreclosed upon units in Chicago were buildings of this size. "In the neighborhoods where there's the most foreclosures, not only have credit standards tightened up, there's little or no homebuyer demand," explained John Markowski, President and CEO of Community Investment Corporation. "Look at the scores of vacant two-flats. They are not buying in these neighborhoods. In today's world, if you can qualify for the more stringent (loan standards), you are unlikely to cast your lot in a changing area.”
One of the MacArthur Foundation’s housing program focus areas is preserving affordable rental housing. Since nearly one-third of U.S. households rent their homes, the foundation launched a $150 million ten-year initiative to preserve affordable rental properties. Although “Window of Opportunity” is a nationwide initiative, the focus has been predominantly on Chicago and New York City. Other recent housing programs that impact in Chicago include $150,000 to the Chicago Rehab Network, $180 to the Metropolitan Planning Council, and $300,000 to the Sargent Shriver Center on Policy Law.
With this new $26 million loan program, investors are required to buy at least nine units in an area to make a significant impact on that neighborhood. After the initial building rehab is complete, the investors will have about ten years to pay off initial loans. This program is expected to fund approximately 200 buildings in the Chicago area, and savvy investors are paying attention to which neighborhoods are exhibiting promising trends. As the Chicago Tribune points out, the program lines up with the city’s five-year housing plan that links nonprofit groups, foundations, and financial institutions to tackle housing needs together.
To learn more about MacArthur’s housing program, take a look at the Housing Grant Guidelines page on the foundation website. Questions about grants to preserve affordable housing can be addressed to Director of Program-Related Investments Debra Schwartz at email@example.com.