Why No Micro-Apartments in Chicago?

 

Several cities have jumped on the bandwagon of building Micro-apartments, a hot trend in apartment development.  San Francisco and Seattle already have them. New York outlawed them, but is testing them on one project, and may legalize them again. Even developers in smaller cities like Denver and Grand Rapids are taking a shot at micro-apartments.

At the same time, Chicago is building lots of apartments, and is known for having low barriers to entry for downtown development.  Yet we aren’t hearing of much new construction of micro-apartments here.  Premier studios are fetching as much as $2,000 a month.  Certainly there must be demand for something more approachable to young professionals.  In theory, we should expect to see Chicago leading the way in innovative small spaces.

Chicago doesn’t have an outright ban on small apartments like New York, but there are four regulatory obstacles in the Chicago zoning code.  These are outdated remnants from eras where excluding undesirable people were main objectives of zoning, and combined to effectively prohibit small apartments:

1. Minimum Average Size:  Interestingly, there is no explicit prohibition of small units.  This is unlike New York City’s zoning, which prohibits units smaller than 400sf. There is, however, a stipulation that the average gross size of apartments constructed within a development be greater that 500sf.  Assuming 15% of your floor-plate is taken by hallways, lobbies, stairs, etc; this means for every 300sf unit, you need one 550sf unit to balance it out.

Source:  17-2-0312 for residential; 17-4-0408 for downtown

2. Limits on “Efficiency Units”: Zoning stipulates a minimum percentage of “efficiency units” within a development. The highest density areas downtown allow as much as 50%, but these are the most expensive areas where land is most expensive. In areas traditionally more affordable, the ratio is as low as 20% to discourage studios, and encourage homes for families.

Source:  17-2-0313-A for residential (20% for RT-4 to 40% for RM6.5); 17-4-0409-A for downtown (20% for D-3 to 50% for D-10+)

3. Minimum lot area: (MLA) Like most features of zoning codes, MLA serves to encourage large units for wealthy families, and discourage more affordable small-sized units. During the condo boom, when 2-bedroom condos were the most in-demand kind, MLA was less important, and floor area ratio (FAR) dictated the scale of projects in Chicago. However, when desiring to build smaller units, MLA dictates the scale instead of FAR. Basically, there is a maximum number of units permitted on a site, based on the size of the site. ULTIMATELY this prevents micro-apartments more than the other 3 factors. Limiting the number of units on a site prevents a developer from building micro-apartments at a reasonable density economically; and a developer building larger, more luxurious units will be able to pay more for the land.

4. Parking minimums: The typical person who rents a micro-apartment in a big city does not own a car, and would not need a parking space. Nonetheless, zoning dictates that a developer provide between .5 and 1 parking space for every unit. Structured parking spaces are not cheap to build, complicate design and management, hamper aesthetics, and crowd out open space. Thus, being forced to build significantly more spaces than will be used by the tenants puts a lot of economic pressure on the micro-apartment developer (not to mention the environmental consequences of building unused and underused spaces).

Furthermore, a micro-apartment developer with a high number of units would be required to provide on-site parking for all the units.  On a constrained site, this means a developer would need to provide several levels of structured parking, which is expensive to build, especially considering the tenants are unlikely to use the spaces.

Source:  downtown: 17-10-0208

What about SRO?:
There are provisions that allow Single Room Occupancy (SRO) buildings in Chicago, unlike New York ,which banned them outright.  It seems reasonable to conclude that a micro-apartment could be considered an SRO under the zoning code. SRO enjoys a unique categorization, which is exempt from limits on the percent of efficiency units, and is subject to very liberal parking minimums (one space per 10 units). SROs still are subject to the 500sf average and Minimum Lot Area per unit, but SRO units are held to a lower Minimum Lot Area requirement than conventional units or efficiencies.

As a developer, I personally have attempted to build micro-apartments using SRO zoning.  Unfortunately, Chicago’s Department of Planning and Development has arbitrarily decided to redefine SRO as housing “serving a specific lower income population and include a social service component”, and is not allowing market-rate development of SROs.  This is terribly unfortunate, since when the zoning codes were first drafted, SROs were a form of market-rate affordable housing.  The definitions in the zoning code are clear, but it is unclear to me, my architects, or my zoning attorneys how the Department of Planning and Development can defend this stance.

Existing SROs:

A small number of Chicago developers, such as Flats Chicago, had been rehabbing older SROs in uptown.  Redeveloping existing SROs was the only surefire approach to providing micro-apartments in Chicago.  On the downside, redeveloping existing SRO eliminates rare stock of very cheap housing much needed by the city’s poorest residents.  For this reason, the rehabilitation of dilapidated SROs as market-rate micro-apartments has come under fire from housing advocates and politicians, who successfully lobbied for the passage of the SRO Preservation Ordinance in late 2014.  This ordinance slows down the process of rehabilitating or selling any SRO building in Chicago.

Some relief: Transit-Oriented Development Ordinances

Over the past few years, Chicago has taken very positive steps in one regard: transit-oriented development.  These amendments to the zoning code have loosened–and in many cases eliminated–parking requirements for residential developments within close proximity to transit.

In the end, some major changes still need to be made to Chicago’s zoning code to make apartment living more affordable.  To start, my suggestion is to significantly lower or eliminate MLA requirements from the code, and continue the process of liberalizing the parking requirements in all parts of the city.  Fortunately, despite the Department of Planning and Development’s bizarre interpretation of the definition of SRO, they have been known to be cooperative in granting adjustments to the limits on the percent of efficiency units in certain cases.  However, a significant lowering of the Minimum Lot Area requirements throughout the city is still needed to allow development of more affordable market-rate apartments in Chicago.  Let’s hope Chicago continues changing it’s ways, and takes steps towards making city life more affordable.