Four years ago, Gabriela Perez was a tenant living in a four-flat in foreclosure, worried her family would be tossed out on the street.
Today, Perez and her children remain in the same – but now remodeled – two-bedroom apartment because a local community group, a mission-based developer and a financial backer stepped in to help keep rents affordable in her rapidly gentrifying Albany Park neighborhood.
The program, ROOTS, an acronym for Renters Organizing Ourselves To Stay, launched in 2014 after area residents and community leaders noticed heavily discounted two- to four-flat buildings were being purchased by cash investors who flipped them, converting them into single-family homes for sale or apartments with much higher rents.
With the help of Communities United, a neighborhood group, and Enterprise Community Partners, a national community development organization, the Chicago Metropolitan Housing Development Corp. began buying foreclosed two-, three- and four-flat buildings, rehabbing them and then renting the units at less-than-market rates. But with the pipeline of cheaper, foreclosed properties dwindling, the program’s challenge will be finding a way to secure pricier, market-rate apartment buildings before they join the wave of gentrification rippling through blocks.
So far, Chicago Metropolitan Housing has purchased 41 apartment units in 19 buildings in the Albany Park, West Ridge, North Park, Irving Park and Belmont-Cragin neighborhoods.
“Albany Park … is traditionally affordable for immigrant families,” said Nick Jefferson, housing organizer at Communities United. “We’d see foreclosed properties in Albany Park and a lot of times we’d see them being turned into luxury rentals or single-family homes that people couldn’t afford,” he said.
Compared with fall 2011, the median price of single-family homes in Albany Park is up more than 30 percent, according to data from the Chicago Association of Realtors. In Belmont Cragin, the price is up more than 100 percent.
In some cases, foreclosed two- to four-flat buildings were selling for about 50 percent higher this fall than three years ago, according to Communities United’s research.
Cash investors began scouring neighborhoods like Albany Park and Irving Park in 2012, pouncing on distressed small buildings. Communities United found that in 2014, nearly half of all sales of two- to- four-unit buildings in Chicago were purchased with cash – an indicator that they were bought as investment opportunities, not by people who planned to make them their homes.
Between 2014 and 2015, the sale price of the residential buildings tracked by Communities United on the Northwest Side increased at least 150 percent and in some cases, nearly 300 percent. Most of those, the group found, were converted to single-family homes.
“In my block alone, there was a three-flat converted into two-flat with a wine cellar put in the basement. Right across from me there was a two flat-that was converted into a beautiful single-family,” said Diane Limas, board president of Communities United.
Rents have increased as well, according to Limas. Before the foreclosure crisis, Albany Park residents were paying $600 to $800 a month for a two-bedroom unit and the same apartments now rent for $950 to $1,300, she said. “This, along with the property tax and the gentrification, is really, really pushing a lot of longtime residents out.”
The initiative aims to buy an additional 45 units in the next year or so. “If you do some rehab, you don’t need to gut a unit,” said Rafael Leon, executive director at Chicago Metropolitan Housing. “The goal is to ensure the units are affordable and in good condition and the people will be happy to live in them.”
Perez’s building was the first one bought under the program and her rent dropped to $775 a month, about 9 percent less than before her building went into foreclosure.
The ROOTS organizations would like to expand its effort into other communities and not rely so heavily on foreclosed properties owned by Fannie Mae.
But expanding ROOTS could prove challenging. Chicago Metropolitan Housing has, on average, spent $160,000 to buy and rehab the units, relying on financial assistance from Enterprise Community Partners and a deal with Fannie Mae that provides a 20 to 30 percent discount on the properties. Chicago Metropolitan Housing already has put $1 million of its own money into the project.
With the pipeline of foreclosed properties slowing down, the metropolitan housing group will compete more with cash investors for properties, pushing up the cost.
To make the numbers work, Leon said the housing group will seek to acquire larger multiunit apartment buildings, and will need additional sources of funding.
“A private owner will sell her building for market value and we may not be able to afford that,” he said. “In order to take this to a larger scale, we need help from others – banks, the city of Chicago and foundations.”
What’s happening to rents and housing prices in Albany Park and the surrounding neighborhoods is part of a national trend, said Lauren Nolan, an economic development planner at the University of Illinois at Chicago’s Nathalie P. Voorhees Center for Neighborhood and Community Improvement.
“When people thought about the foreclosure crisis, they think about homeowners losing their homes, but there’s another … story,” she said. “Small properties have also been foreclosed on, which has affected renters as investment buyers have come in.”
“Housing prices have grown at a higher rate for about 10 years now,” she said. “Rents have grown … in the wake of the housing crisis as more people have moved into or stayed in the rental markets.”
In Chicago, where the median single-family home price was $215,000 in September, there are fewer neighborhoods available to middle- and working-class families, Nolan said.
“In 1970 there were many neighborhoods that were solidly middle-class, she said. “Now what we’re seeing is polarizing – a concentration of high-income, high-cost neighborhoods and high poverty and dis-invested neighborhoods.”
Leon acknowledged that preserving 41 units in an area where hundreds of units are available is a drop in the bucket. “Let’s not fool ourselves, the impact is very small,” he said. “But we’re making an impact for the families that will be displaced.”
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