There are three hurdles that have historically made affordable housing difficult to develop in Chicago: rising costs of construction, the building code and the competing priorities of the parties involved in these types of deals.
“Those aren’t necessarily issues exclusive to affordable housing, but they are issues that challenge the development community in general and their ability to finance a deal because of uncertainty,” said Dave Bartolai, vice president, McHugh Construction. “As such, each deal seems to need to be evaluated neighborhood by neighborhood, location by location, and requires the entire team to work collaboratively to address these issues from the earliest stages.”
One of those three hurdles was recently lowered with the adoption of a new Chicago building code that hews closer to the International Building Code. Basing the code on the IBC has improved the cost metrics for some affordable projects in Chicago as it expanded the spectrum of building products and parameters that can be used.
For example, restrictions have been loosened on the use of wood framing, allowing for stick-built affordable structures higher than what had previously been allowed. Alternative construction methods such as panelized load bearing walls and floor systems also allow these projects to go up faster and cheaper.
“The subcontractors have gotten really innovative and figured out ways to panelize these structures,” Bartolai said. “They’re bringing out pre-fabricated components that have been coordinated in advance and really they’re just stacking elements into place which allows for construction to advance pretty quickly.”
There has been a growing trend to locate affordable housing within transit-oriented parts of the city. Meshing affordable housing with TOD not only puts residents in close proximity to public transportation, but it also allows the developer to forego the expense of putting in surface or structured parking, meaning more development dollars can go toward actual housing.
Another way to underwrite affordable housing is to co-locate it with market rate units. Affordable-only housing projects tend to scale smaller, which inherently makes them more expensive to develop. Sharing those costs within a market rate development can offset the capital outlay.
“The quality expectations of affordable housing have been increasing over the last several years,” said Steve Wiley, senior vice president – preconstruction and estimating at McHugh Construction. “Affordable housing, on a quality level, is really now almost indistinguishable from market rate products.”
One project that McHugh is working on is the $200 millionOgden Commons which, upon completion, will deliver 120,000 square feet of commercial and retail space, as well as more than 350 mixed-income housing units to Chicago’s North Lawndale neighborhood. McHugh is building the development on behalf of a public-private partnership between The Habitat Company, Sinai Health System, Cinespace Chicago Film Studios, the Chicago Housing Authority and the city of Chicago.
Construction just wrapped on the first phase of the project, a commercial medical office building, and McHugh is working with the development team to plan the first phase of residential construction which will hopefully begin later this year.
The contractor is also working on 43 Green, a $100 million TOD project in the Bronzeville neighborhood. The first phase will add 99 rental units and 6,000 square feet of retail space to formerly vacant land at the corner of 43rd Street and Calumet Avenue. The Habitat Company and P3 Markets are joint venturing this development.
McHugh is partnering with Bowa Construction for the contracting work on both the Ogden Commons and 43 Green developments.
“That’s absolutely critical to the success of these projects,” Wiley said. “All of these projects that we’re working on are joint venture partnerships, which is so important to addressing the concerns of community inclusion.”