Originally published in Crain's Chicago Business.
By Alby Gallun
Amid worries that housing around the future Obama Presidential Center will become increasingly unaffordable, a non-profit plans to buy a big apartment building down the street and hold down rents for low-income residents.
Preservation of Affordable Housing is paying about $65 million to acquire and renovate Island Terrace Apartments, a 240-unit property at 6430 S. Stony Island Ave. in Woodlawn, about four blocks south of the Obama project. POAH plans to keep rents at some Island Terrace apartments affordable to households earning as little as 30 percent of the area median income, or $27,950 for a family of four.
POAH aims to complete the acquisition on June 23, just a few months before the planned groundbreaking of the $500 million presidential center in Jackson Park. Planning for the Obama project has been underway for several years, attracting scrutiny from community groups and housing advocates worried that the economic boost from the center will produce an unwelcome side effect: gentrification.
Island Terrace is “an important acquisition for us because it’s a way to extend housing options in a neighborhood where people are concerned about displacement and the potential effects of gentrification,” said Bill Eager, senior vice president of real estate development for the Midwest at Boston-based POAH.
Half the residents within a two-mile radius of the Obama site earn less than $35,000 per year, and 69 percent are renters, according to a 2019 report by the Nathalie P. Voorhees Center for Neighborhood and Community Improvement at the University of Illinois at Chicago. Nearly 9 out of 10 renters cannot afford their rent, spending more than 30 percent of their income on housing, according to the report.
Home prices have jumped in Woodlawn, and investors have been speculating on vacant land, Eager said.
“We’ve seen some upward pressure on rents. We haven’t seen runaway rent increases,” Eager said. “The concern is that people need to act before those forces take full effect, to protect and create as many opportunities as you can before the economics make it more difficult.”
To combat displacement due to the Obama center, the City Council last September passed the Woodlawn Housing Preservation Ordinance, a multi-pronged measure that provides funding for neighborhood housing and a requirement that vacant city-owned lots in the area be set-aside for low-income housing.
To finance the Island Terrace project, POAH is relying on multiple public funding sources, including Low Income Housing Tax Credits. Last month, the Illinois Housing Development Authority approved about $1.2 million in tax credits for the 22-story building. POAH expects to seek more credits for the project in the future.
Eighty-eight apartments at Island Terrace already are set aside for low-income residents with housing vouchers from the Chicago Housing Authority. The building doesn’t have any income restrictions on the rest of the units, but POAH aims to make all of them available to tenants with limited incomes, Eager said.
Monthly rents at Island Terrace range from $957 for a one-bedroom apartment to $1,665 for the largest three-bedroom unit, according to real estate data provider CoStar Group.
POAH is buying the building from a unit of Pittsburgh-based PNC Financial Services Group, which paid $19 million for the property in 2015, according to Cook County property records. POAH is paying about $30 million for the building and spending the rest of the money fixing it up, Eager said.
POAH has been expanding rapidly in Chicago in recent years and now owns 26 properties totaling nearly 2,200 units in the city and suburbs, according to its website. Its Woodlawn holdings include several buildings along South Cottage Grove Avenue between 60th and 63rd streets.