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Heartland Café Redevelopment


The redevelopment of the Heartland Café would qualify as a big story in Rogers Park under any circumstances. But the fact that this will be the first, large scale construction project in the neighborhood under the leadership of newly elected Alderwoman Maria Hadden makes the story even bigger.

The Heartland site was acquired by AGE Glenwood LLC, an affiliate of the Goldman family in January of this year for $1.3 million. The Goldmans obtained a demolition permit in April. The old building has since been torn down and the site now awaits final plans and permits for a scaled-down redevelopment.

Sam Goldman, founder and principal of Arbor Investment Management LLC, is leading the effort to redevelop the site on behalf of the Goldman family which has deep roots in Rogers Park, dating back to the 1950s. Tom Rosenfeld, the most recent owner of the Heartland Café, decided to sell for a variety of reasons. These certainly include the greatly increased value of the land, but also the financial difficulties of the enterprise, increasing operating expenses, and constant maintenance needs of the now demolished property.

Sam could have elected to make a payment-in-lieu and include just two affordable units in his proposed development. Instead, he pledged to include all six affordable units on-site.

Under current zoning regulations, the site can be developed with 30 to 40 rental units; however, Sam applied for a zoning change to allow for more units in a slightly larger building. Sam also sought off-street parking reductions, which are allowed under the city’s Transit Oriented Development (TOD) Ordinance. As proposed, the new development would have produced a 54,000 square foot building on six floors and cost somewhere in the neighborhood of $15 million to build. The first floor would have contained 2,400 square feet of commercial space with a 25-foot loading berth and parking for 15 cars and 60 bikes. The five upper floors would have contained 60 rental apartment units.

As with any new, multifamily development in Chicago with more than ten units that requires a zoning change, the proposed Heartland redevelopment project was subject to the city’s Affordable Requirements Ordinance (ARO). In Rogers Park, the ARO requires a 10% set-aside of units affordable to households earning no more than 60% of area median income (AMI). At least 25% of these affordable units must be provided on-site. The rest may also be provided on site, or may be waived in exchange for a “payment in-lieu” to the City’s Affordable Housing Opportunity Fund. Sam could have elected to make a payment-in-lieu and include just two affordable units in his proposed development under current ARO requirements. Instead, he pledged to include all six affordable units on-site.

At a June 5th community meeting held by Alderwoman Hadden to discuss this development, Sam pointed out that his proposed project would be just five feet higher than what is allowed under current zoning regulations and would create six new units of affordable housing, as compared to none if the zoning variance was not approved and an as-of-right building is constructed under current zoning regulations.

Limited advance notice of the meeting virtually ensured that the process would be driven by a group of like-minded activists, rather than a true cross-section the broader community.

None of these arguments appeared to win over many of the meeting attendees, many of whom were the Alderwoman’s political supporters and affordable housing advocates from outside the neighborhood. When Sam outlined his proposed rents – $800-921+ for studios; $1,000-1,504+ for 1-bedrooms; $1,851-2,119+ for 2-bedrooms; and $2,300-2,858+ for 3-bedrooms – many attendees complained they were too high. Sam pointed out that these rents are far lower than in other popular neighborhoods seeing significant new construction such as Logan Square or the West Loop. This comment seemed to provoke anger with some audience members responding, “We are not Logan Square.”

In response to calls for a higher percentage of affordable units, Sam argued that this would require higher rents for the non-subsidized units to make the development economically feasible. As is so often the case, economic reality and public sentiment did not match up, with many attendees insisting that 10% was not an adequate allotment of affordable units, despite the fact that the 10% on-site set-aside actually exceeds ARO requirements.

Instead of a mixed-income community at the Heartland site, there will now be an exclusively market rate development.

In her weekly community newsletter, dated June 28, Alderwoman Hadden announced her decision not to approve the requested zoning variance, stating, “the proposed project didn’t need the zoning amendment in order to proceed and didn’t offer a proposition to the community that met our specific needs or wants in exchange for changing the character and history of the surrounding area.”

This brief statement raises a number of questions, including the following:

  • Is it better for the community to have a 30 to 40 unit building with no affordable units, or a 60-unit, TOD-compliant building with six affordable units?
  • Did the Alderwoman consider the benefits of bringing new residents with more disposable income to the neighborhood, and their economic impact on local businesses?
  • What specifically about the Goldman “proposition” did not meet the “needs and wants” of the community?
  • What specifically are those “needs and wants?”
  • Who comprises “the community?” Have the “needs and wants” of the entire Rogers Park community been recognized and taken into account, or are these concerns just a reflection of the desires of the smaller group in attendance at the community meeting?
  • How specifically does the new development compromise the “character and history” of the area that an as-of-right development would not?

Limited advance notice of the meeting virtually ensured that the process would be driven by a group of like-minded activists, rather than a true cross-section the broader community. Her seemingly pre-determined decision allows a small group of people to define the agenda for the entire community. Ironically, in so doing, Rogers Park will have six fewer new affordable units than it might otherwise have had. Instead of a mixed-income community at the Heartland site, there will now be an exclusively market rate development.

The decision ignores economic reality and seems to accept as fact the premise that developers have unlimited resources that should be used to create public benefits.

Perhaps most disturbing – the decision ignores economic reality and seems to accept as fact the premise that developers have unlimited resources that should be used to create public benefits. The Goldman proposal exceeded the requirements of the ARO. It is both arbitrary and capricious to require an even larger affordable housing set-aside on a project-by-project basis. This is a clear example of the kind of Aldermanic overreach that is all too common in Chicago – and that the Alderwoman said she opposed when she ran for office.

If there is a silver-lining in this unfortunate decision, it is that Sam still intends to build a 30 to 40-unit property under the current zoning regulations. While the new building will be marginally smaller than initially proposed – and while the new structure will NOT include units that are affordable to households earning less than 60% of AMI – it still represents a substantial investment in the neighborhood. Sam promises “to build a quality housing project” for the community.

As Alderwoman Hadden’s first land-use decision, property owners and developers are now on notice: going forward, anti-development activists will set the agenda, an agenda that appears to be motivated more by an interest in asserting dominance over property owners that in finding the best development path for the entire Rogers Park community or even, ironically, a genuine commitment to expanding the supply of affordable housing in the neighborhood.

Property owners and developers are now on notice: going forward, anti-development activists will set the agenda.

The fall-out from this decision has already begun. At least one developer has decided to halt preliminary development plans of a prominent neighborhood site. This individual is well aware of what just transpired at the Heartland site and has decided not to spend time on a complex and expensive development, given the current political climate.

Like it or not, economic principals cannot be dispensed with simply because they are unpopular.

Community activists can celebrate the Alderwoman’s decision, but this celebration may be short-lived. Like it or not, economic principals cannot be dispensed with simply because they are unpopular. Suppressing the number of new housing units in Rogers Park will not keep people with greater economic means from moving into the community. It will simply reduce the supply of housing in the neighborhood and drive up the price of the units that are already here.

The Alderwoman and her social activist supporters have made it clear that they are in the driver’s seat. They would do well to beware of unintended consequences. The market is a powerful force. More that one politician has tried, and failed, to tame it.


 

 

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