SRO Preservation Ordinance Introduced

SRO Preservation Ordinance Introduced

This past summer LCBH joined the Chicago For All Coalition, which was formed by ONE Northside, the Chicago Coalition for the Homeless, and the Sargent Shriver National Center on Poverty Law, to address the loss of Single Room Occupancy (SROs) hotels in Chicago. The coalition has been working with the City of Chicago to create a long-term solution that would help stabilize tenancies and preserve this affordable housing resource.

In the meantime, LCBH’s Affordable Housing Preservation Program (AHPP) has recently focused much of its efforts on representing SRO renters facing forced relocation, and has crafted innovative litigation strategies to assist in the preservation of SRO buildings at risk of conversion. As recently reported in “Future of Affordable Housing Unclear after SRO Tenant Deals,” written by Chicago Sun Times columnist Mark Brown, “The Rosemoor and Milshire hotels are examples of a new strategy by the Lawyers’ Committee for Better Housing to pro-actively organize SRO tenants to strengthen their legal position when new owners take over with plans to kick them out.” The Chicago For All Coalition, working with the city, also worked to halt conversions through a short-term moratorium on SRO development that was passed by the Chicago City Council on July 30, 2014. This six month moratorium will serves as a stop-gap measure until an SRO preservation ordinance can be passed.

On September 10, 2014, the Single-Room Occupancy and Residential Hotel Preservation Ordinance was introduced into the City Council. Under the ordinance, owners of SROs seeking to convert to market rate rentals will be mandated to keep at least 20% of the building’s units affordable for very low or extremely low-income individuals for at least 20 years. In the event that the owner intends to preserve less than 20% of the units as affordable it must pay a fee of $200,000 times the difference between 20% of the units and the owner’s actual commitment of affordable units. For example if a building has 100 units and the owner commits to preserving 15% affordable, then the owner must pay $200,000 times 5% of the units, which is 5 x $200,000 or $1,000,000. This further means that if the owner decides not to preserve any of the building units as affordable then he must pay a fine of $200,000 times 20% of the units. In a 100 unit building, that is a fine of $4,000,000. Fees collected through this ordinance will be diverted to a “preservation fund” which will be available to SRO owners for development, improvement and preservation of SRO units. Long-term residents of SROs that are being rehabbed will be entitled to return to one of the affordable units or will be provided relocation assistance in the amount of either $2,000 or three months’ rent, whichever is greater.

The ordinance also requires those seeking to sell SROs to first engage in negotiations with residents—in order to draw in non-profit housing developers—before opening bidding to private developers. Sellers may opt out of this “right to purchase” requirement by paying a $200,000 per unit fee for 30% of the units. Owners who opt out of the right to purchase requirement, will also be required to pay long-term residents relocation assistance in the amount of $10,600.00. At the press conference held at City Hall the same day the ordinance was introduced, ordinance sponsor Alderman Walter Burnett (27th Ward) said, “We don’t just want money, we want housing for people in the city of Chicago.”