Chicago doubles down on unaffordable housing

In 2025, new affordable units in Chicago will cost *at least* $679K a pop to build

A year ago, I wrote about a quiet disaster unfolding in Chicago’s Department of Housing. In 2023 new City-supported affordable housing units cost, on average, $747,000 to build. Since the federal dollars we receive to build these projects are relatively fixed, these sky-high costs mean we’re building far fewer “affordable” units than we otherwise could.

Some of that can be ascribed to the complexities of the federal Low Income Housing Tax Credit (LIHTC). But Houston has figured out how to build new units at half our cost.¹ Even the State of Illinois funds projects *in Chicago* for hundreds of thousands of dollars less per unit than the City.

Those stories picked up a fair bit of national coverage that included heavy criticism of Mayor Brandon Johnson. Some of that coverage struck me as a little unfair. Johnson just came into office in 2023. The eye-popping cost for projects announced that year was really a product of policies and processes put in place by the Housing Department under Mayor Lori Lightfoot.²

But now we’re three years in. The Mayor has had a chance to put his stamp on the Housing Department, which has approved new tranches of LIHTC awards, and rolled out new policies for reviewing them. Have things gotten better?

Only slightly. While proposed per-unit construction costs dipped to $568K per unit in 2024, they bounced back up in the round of projects announced earlier this month. Based on the preliminary data released by the Mayor’s Office on April 1^st, construction costs for 2025 LIHTC projects will come in at $678,870 per unit.³ That’s better than 2023 – but it’s nowhere near the level we need to crank out more units.

It also doesn’t account for the fact that the final price tag for these projects tends to be a fair bit higher than the announced values. Take Hub 32, a 51-unit affordable project in Garfield Park that was initially submitted to the DOH in 2023, at a cost of $732,401/unit. It was selected for LIHTC funding in March 2024. As of February 2026 the project still hadn’t closed, and total costs have risen to $795,789. It’s entirely unclear what the final development cost will be – but I’d be shocked if it doesn’t break $800K. All for a project being built on a vacant lot, with a land acquisition cost of $1.

Rendering of Hub 32 Source: Studio Dwell Architects.

As a result, Chicago is building far less housing than we otherwise could. In 2023, the Illinois Housing Development Authority announced funding for Ogden Commons Residential Phase I in North Lawndale, at a cost of $382,060 per unit. If Chicago’s Department of Housing had just managed to keep its average project cost at that level, we could have built an additional 1,107 homes for low-income families over the last three years.⁴

Think about that for a minute. If we bulldozed 1,100 brand-new, affordable apartments there’d be marches on City Hall. If a city employee or contractor had embezzled the funds necessary to build those 1,100 homes, it’d make national headlines. But without illegal conduct or scandal? Crickets.

I get that this is a less exciting topic to cover. But I doubt that distinction matters much to the 1,107 families who missed out on a decent place to live.

What’s going on here?

To quickly summarize the articles from last year, there are three things that make Chicago’s affordable housing costs uniquely expensive:

1. Thanks to our building code, labor standards, land use rules and other regulatory hurdles, Chicago’s construction costs are among the highest in the country. This impacts both market rate and affordable projects.

2. The Department of Housing layers on a second set of building code requirements that only apply to projects that receive city funding.

3. The Housing Department awards those tax credits in a uniquely opaque manner that appears to reward higher-cost projects.

We’re going to write a lot more about the building code issues in the coming weeks. Today, we’ll focus on the two elements that are squarely within the control of the Department of Housing: the second building code and the actual allocation process. Conveniently, they were also both updated in 2025, which gives us a chance to assess the Johnson administration’s efforts to get these costs under control.

The new ATSM has gotten much better

This second building code is laid out in a document called the Architectural Technical Standards Manual (ATSM). The ATSM also outlines the process that developers need to go through to contract and manage change orders. The prior version, written in 2023, included extremely specific requirements, including specifying particular amenities and green building code thresholds.

The updated version is clearly better. It gives developers the option to work with General Contractors prior to submitting a bid, and allows them to retain contingency funds if they keep the project under budget.⁵ Required unit sizes have been lowered and aligned with the Illinois Housing Development Authority’s thresholds. And rather than requiring specific amenities or sustainability thresholds, DOH now lets developers select from a menu of options – enabling greater flexibility, and aligning standards with other Departments.

These are material improvements that DOH (and the Johnson administration) deserve credit for. That said, there still are a few things that could be cleaned up:

• Elevators: All projects are required to include two elevators (one of which must be sized for a freight elevator), regardless of building height or layout. That quickly adds an extra half-million dollars to a project’s cost, and makes it much harder to justify midsize projects.⁶

• Doors: DOH requires all doors to be solid wood core. That makes plenty of sense for a front door, but it’s wildly at odds with private market standards for interior doors on bedrooms and closets – and likely adds hundreds of dollars of cost a pop.

• Countertops: The ATSM requires that countertops are stone (think granite or quartz). Lower cost high-pressure laminate (standard in Massachusetts) is explicitly prohibited, and developers also can’t explore newer low-cost options like recycled paper.

Ultimately, while it’s important for DOH to clearly lay out expectations for the contracting and construction process, it’s not clear to that it should be in the business of specifying materials. We already have a building code! It is important that new affordable buildings can hold up to wear and tear, and not require costly recapitalizations. Developers of deed-restricted affordable projects generally hold the projects for 15 years or more, and have to convince private capital to invest in these deals—so they have ample incentive to ensure their product remains durable.

Notably, the impact of these rules extends beyond LIHTC allocations. If a project gets any federal assistance, through LIHTC, TIF, or a wide range of other city funds, the full set of ATSM rules apply.⁷ That means that even on affordable deals where the city puts in a small amount of money, and other actors (like the Illinois Housing Development Authority, or Chicago Housing Authority) do most of the funding, Chicago’s Housing Department still exerts an enormous amount of control over the process.

The Qualified Allocation Plan remains a problem

DOH’s approach to awarding tax credits, called the Qualified Allocation Plan, has also been updated. There are some positive changes here as well. The new QAP:

• Introduces a Preliminary Project Application step, which allows DOH to provide early feedback to developers prior to formal approval

• Adds tougher standards on “project modifications” for cost increases that occur after tax credits are awarded

• Attempts to accelerate the timeline from project award to close to 18 months. This is longer than the timeline in other agencies (California targets 180 days, Illinois is 12 months), but it would represent a marked improvement from some of the prior projects.

Unfortunately, DOH has also added new costs in the updated document. Those include expanded preferences for projects that include “emerging” developers or vendors.⁸ These operators, who have limited experience on past projects, are relatively small, and have struggled due to some mix of limited capital access, industry networks, or “institutional or geographic barriers.” Ironically, one of those institutional constraints is “regulatory or market constraints that deter new entrants,” which does a nice job of describing the Chicago Department of Housing’s approach to the Low Income Tax Credit.

Rather than eliminate those regulatory constraints,⁹ this new emerging developer/vendor track appears to be an effort by DOH to get around the Trump administration’s crackdown on contract set-asides for minority and women owned businesses. That’s a noble goal, and minorities and women have long been denied opportunities in construction and the trades. But it’s worth noting that the city’s existing minority and women owned business requirements (22% and 6% of project value, respectively) still apply.

When projects are required to use a small set of undersized and less experienced subcontractors, costs are likely to spike. And the more unique the carve out is, the harder it is to see how the process sets up emerging business for success. If you’re a subcontractor who’s invested years building a business that can jump through DOH’s paperwork and requirements to qualify as a small-scale, disadvantaged business, are you then set up to compete on price and quality for private market contracts?

But the greatest problems with Chicago’s LIHTC costs stem from the way the city decides which projects are funded. Unlike almost every other housing agency, Chicago does not have a standardized scoring system that awards points for cost, quality, and other priorities. Instead, the Qualified Allocation Plan just lists a whole bunch of factors that increase the odds of winning. That makes it easy to direct projects to specific wards, and for the city to avoid confronting the tradeoffs associated with new requirements.¹⁰ But developers have no idea what tradeoffs to make – they’re playing Calvinball with the Housing Department.

Source: GoComics

And because DOH keeps selecting projects with sky high costs, developers naturally assume that that’s what the Department (or the Mayor’s Office) wants. I’ve talked to more than one architect in Chicago who works on affordable developments elsewhere but avoids DOH LIHTC projects. That’s because they expect the awards to go to high-cost “starchitect” designs that prioritize glitzy renderings over desperately needed housing.

The 2025 Qualified Allocation Plan makes no effort to change this. Until it does, developers, architects, and everyone else in the process will face limited pressures to reduce costs.¹¹

What are we doing here?

It’s great that DOH has eliminated many of the worst elements of the ATSM. And it’s encouraging that recent project costs have come in below their 2023 highs. But the changes made over the last year will not be sufficient to get project costs down to levels commensurate with market rate projects.

Fortunately, City Council is now starting to push for better performance. Last year, Alderman Matt Martin introduced an ordinance to eliminate the design requirements of the ATSM, and force DOH to be more responsive to communication from developers. That ordinance was banished to the rules committee, but it’s now moving again.¹²

Hopefully, Martin’s ordinance helps jumpstart a more productive conversation on this issue. While I think it’d be a welcome change, it’d be great to hammer out a much wider set of changes between DOH, the Mayor’s Office, and the City Council. That could include:

• Allowing developers to use the State of Illinois design standards to qualify as sufficient for City projects, and designating a single ‘lead agency’ when IHDA and CHA are also involved in deals

• Making additional changes to the contingency and review process to dramatically shorten the closing time - with a goal of 12 months instead of 18

• Reducing the number of times projects have to be approved by City Council (an important source of “red tape” that Alders may be less interested in cutting)

• Most importantly, requiring the city to adopt a standardized scoring template for LIHTC deals, with at least 30% of the weight afforded to cost

These are solvable problems. But it takes time for new standards to play out, and for contractors to believe they’ll stick. If we don’t want to waste another thousand units of affordable housing in the next few years, we need to act now.

1. Yes, Chicago has higher construction costs, which aren’t within the control of the Housing Department. But that’s a reason for us to be *more* flexible in other areas, to make it easier to value engineer around those costs. It’s also a reason that the Mayor’s Office, the Department of Buildings, and City Council need to be part of the solution, rather than just DOH.

2. Who, full disclosure, I worked with when I was in the Mayor’s Office during the Lightfoot Administration (although not on LIHTC).

3. A note of thanks to a very helpful DOH press office, which was quick to share the per-project breakout of the announced development costs.

4. The math there: between 2023 and 2025 the total (announced) development cost for DOH’s new LIHTC construction projects came out to $1.2B. If you divide that by the Ogden Commons Phase I average cost per unit of $382,060 and assume a generous 5% annual inflation increase, you get a total unit count of 2,846 units of housing. But thanks to the much higher DOH costs, we actually only produced 1,739 units over that time period.

5. The old version was a perfect example of the perverse consequences of rule by bureaucrat: by requiring the developer to hand back any contingency or project savings at the end, DOH eliminated the incentive for developers to try to realize savings mid-project, and forced them to submit higher bids (because there was no potential upside to be captured if the project went smoothly).

6. I think the rationale here is that there are plenty of seniors and older adults in DOH buildings, and a second elevator adds redundancy in the risk of a mechanical failure. But it sure seems like you could specify this just for senior buildings and taller buildings. Requiring everywhere makes it much more expensive to do smaller scale 3-5 story projects.

7. With one interesting exception: the city’s new Green Social Housing Program

8. How much of a preference? Who knows!?

9. Or pay those small contractors in a timely manner

10. Some of the coverage last summer bashed DOH for having a scorecard that only awarded 5 out of 100 points for cost control. That’s bad, but it’s actually the State of Illinois standard – which is still far better than the City’s approach of not using any points at all.

11. I asked DOH for comment on why the City doesn’t use a points-based allocation mechanism, and received the following response: “We acknowledge and agree that transparency is important, and we are always working to improve the Qualified Allocation Plan process. To that end, we introduced the Preliminary Project Application and Full Project Application stages to ensure projects were clear on departmental priorities as the process progressed.”

12. It’s being co-sponsored by Alds. Bennet Lawson and Leni-Manaa Hoppenworth, who deserve credit as well.