The Chicago City Council passed Mayor Brandon Johnson's green affordable housing plan on Wednesday. The city will seed an independent nonprofit residential real estate development corporation with $135 million from a $1.25 billion bond authorization the City Council approved in 2024.
The corporation will finance, buy, own and operate mixed-income, sustainable and tenant-governed buildings that include affordable units,
The corporation will not have bond issuance authority, said Steven Mahr, assistant commissioner - debt manager for the city's finance department.
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None of the bonds from the $1.25 billion authorization have been issued yet. The details of how much and what type of bond the city will issue are under review, but have not yet been determined, and are subject to market conditions, Mahr said.
S&P Global Ratings Director Scott Nees said the bond authorization has already been woven into S&P's assessment of Chicago's general obligation credit quality: BBB, after
"In general, we think the bonding will be largely credit neutral in that it will not materially increase the city's leverage ratios from the current baseline, and we'd also note that it isn't uncommon for the city to issue upwards of a billion dollars in tax-backed debt in any given year," he said.
The new Residential Investment Corporation will operate independently of the city Department of Housing, Johnson
"At a time when federal funds for housing are uncertain, we continue to develop tools to make Chicago the safest and most affordable big city in America," Johnson said in the release. "I'm confident that Green Social Housing in Chicago will become a model for the nation."
Ward 32 Alderman Scott Waguespack told The Bond Buyer he is concerned about the lack of oversight for the new corporation, whose board will be appointed by the mayor.
"Once the members are appointed, they are essentially a completely separate entity than any city agency," he said. "They would be outside the purview of the inspector general, outside the purview of the City Council."
With bond proceeds, the council usually retains oversight that it will not have over the RIC.
"This is just another costly layer of bureaucracy that's doing double or triple work," Waguespack added, saying it will duplicate the Chicago Housing Authority.
"They would be loaning out money, but at a lower interest rate than what we're borrowing for, and without any of the oversight," he said.
"We're borrowing at five-plus percent, and they are promising to give it away at around 2%," Waguespack said.
"We have a $1.3 billion deficit coming down the pike this fall," Ward 9 Alderman Anthony Beale warned at Wednesday's City Council meeting..
"We're adding to the deficit right now with this vote," he said.
The Johnson administration was in a bit of a hurry, according to Beale and Waguespack. Beale noted the City Council had three committee meetings on the affordable housing item in the last month.
"There was never any documentation provided until a few weeks ago," Waguespack said. "When you're looking at it, what was the rush? It was in one of the documents that I got that said they had already committed jobs to people on June 1. So they had to get it done by May to onboard all these people."
Waguespack said aldermen never got an answer as to why the new hires' start date was set for June 1.
"They were arguing that they already had six projects that were in play," he said. "They wouldn't tell us what those projects were."
Beale said at the City Council meeting that the threat of federal government meddling "is an excuse," and he pointed to existing tools and vacant housing stock across Chicago's communities.
"We have a Department of Housing that should be doing this," Beale said. "We also have the CHA… Why not partner with them to rehab their stock that they already have in their inventory?"
The ordinance passed 30 to 18, with two alderpeople absent.
