The city of Chicago has been hit with lawsuit over its Affordable Requirements Ordinance (ARO).
The plaintiffs in the case, Hoyne Development and the Home Builders Association of Greater Chicago, claim the ARO measure violates the Constitution, specifically the Fifth Amendment.
"Chicago needs more affordable housing, and residential developers are ready to help build it. The issue at hand here is that the city is in direct violation of the Constitution," Steven P. Blonder, lead counsel for the plaintiffs and a principal at Much Shelist, said in a statement. "The Fifth Amendment prohibits the taking of private property for public use without just compensation. The ARO Ordinance's requirements are doing just that."
Under the current ARO, developers of residential projects utilizing zoning increases or building on city land have to designate 10 percent of their units as affordable, or pay $100,000 per required unit to a city fund for affordable housing.
According to the plaintiffs, a Hoyne Development residential project was improperly subjected to the ARO requirements. As a result, Hoyne Development was required to either set aside two affordable units or pay a $200,000 fee, the suit says.
A mayoral spokeswoman told the Chicago Tribune that the city is prepared to "defend the ordinance vigorously" from the suit, which the administration says lacks merit.
Meanwhile, the city's affordable requirements measure will soon get tougher under an updated ARO measure slated to take effect this October.
Of the ARO changes approved in March, one clause mandates that developers designate at least 25 percent of the required affordable housing units on-site, at the property in question. In order to opt out of the on-site building requirement for affordable units, developers would have to pay a fee between $50,000 to $175,000 per required unit, depending on whether the building is located in high- or low-income census tract areas. After a one-year phase-in period, the in-lieu fee for affordable units in downtown projects would increase from $175,000 to $225,000.
For certain projects downtown and in high-income areas, developers have the option of building or rehabbing required affordable units within a two-mile radius of the original project. Developers can obtain city approval to build off-site units anywhere in the city only if the project is located downtown and involves owner-occupied, rather than rental, units.