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Tax Increment Financing (TIF) Funding and Affordable Housing: An analysis of current TIF resources and City of Chicago TIF-funded housing 1995-2008

by Julie Dworkin

Jul 31, 2009
A serious affordable housing crisis, which has plagued the City of Chicago for more than a decade, has deepened drastically during the last two years due to the rise in foreclosures and unemployment. Meanwhile, through its 158 active Tax Increment Financing (TIF) districts, the city has accumulated, and likely will continue to generate, a large surplus of funds that could be used to alleviate the affordable housing problem.

TIF districts were created to promote revitalization of blighted or struggling neighborhoods, and the availability of affordable housing is instrumental to a neighborhood's stability. Unfortunately, the city's policy on the use of TIF funds for housing has not gone far enough to adequately address the fundamental need for affordable housing in developing neighborhoods. Expenditures on affordable housing have accounted for too small of a percentage of TIF funds. An even smaller percentage of TIF funds have supported housing affordable to people in the neighborhoods in which it is built and for those with the greatest housing needs.

Key findings are:

  • As of 2008, there was nearly $1 billion built up in Chicago's TIF accounts at least $350 million of which has not been dedicated to a particular project.[1]
  • Between 1995-2007, only 4 percent of TIF funds were targeted for development of affordable housing.[2] (Note: 1995 was the first year the Chicago Department of Housing began issuing detailed reports on its production and spending)
  • TIF funds have been used to create housing that is more expensive and targeted for higher incomes than existing housing in the neighborhoods in which it has been created. In 50 percent of the wards in which TIF-funded housing was built, at least half of the units were too expensive for current residents.[3]
  • TIF-funded units go disproportionately to higher income households. Between 1995-2008, only 27 percent of the units created with TIF funds went to the households with the most critical needs -- those earning less than $20,000 a year.[4]


Recommendations:

  • Target 20 percent of TIF funds each year for affordable housing.
  • For those targeted dollars, affordable should be defined as housing that meets the needs of neighborhood residents and those with the greatest need.


This report was prepared by Chicago Coalition for the Homeless on behalf of the Sweet Home. Chicago Coalition.