Thanks for writing about this, I did look into this to try and understand the dynamics of how it affects what the school districts receive. From what I can find, I do believe that when this building comes online, the District can start claiming all the property tax revenue in the form of the “balloon levy” (additional amount over the allowed increase to account for new/improved buildings on the tax rolls). In theory, the balloon levy should be tied to the actual property tax increase as the abatement falls off in tiers. In practice, I can’t find any documentation of that mechanism. It seems that the county bases their balloon levy calculation on building permits. This would mean that the school districts are able to claim the full amount in year 1, but the rest of the taxpayers are carrying that increase. I’m not 100% here, but this certainly appears to be the case. If this is true, this is a major issue with this program.
I am skeptical of many of the YIMBY talking points, but I do feel that on balance, more development is beneficial. For this reason, I still support the development. That said, I think of this building not as a building, not as housing, but as a financial product. That is certainly how the developer looks at it. Our financial system is broken. That the government would give HUGE tax breaks to a corporation to create a financial product which is unattainable to most Americans feels fundamentally unfair. Until we can figure out how to actually make housing affordable, fair, and allow regular people to build wealth through their own housing, we will continue to have these types of fights. This is way bigger than an Evanston issue.
Ok then let’s stop pretending it’s about affordable housing. If it were, the city would utilize lease certificates to raise $45M to build a multi-unit structure that would be ALL under market rate rent for lower income people.
More and more, Evanston is becoming less and less the city I “envisioned” when I moved here in 1977. I am not against progress and change. I am against a creeping gentrification of a once-diverse and inclusive place where everyone could live, love, and grow old in peace with our neighbors.
One thing I think about when I write on City politics is this: local politics involves a constant tension balancing existing residents vs new residents. It's a pendulum that goes back and forth - you want/need growth but existing residents are the actual voters so you don't want them to get paved over.
Since 2016 this has been out of whack, because the voters are more swayed by national political issues than local ones. You definitely saw this in D65 and it's in the City now too. Mayor Biss and Kat are down in Broadview getting tear gassed to show how hardcore they are because they know that voters care more about the symbolism than actually fighting ICE in Evanston and prioritizing residents.
I'd argue the same force at work here - the City wants to prioritize things that have national salience like "affordable housing" but when it comes to actual local policy, this isn't very good policy for really anyone except the developer.
To share some background on this site: in 2018, Vermillion attempted to build a similar-height building here (33 stories), but was shockingly rejected by a very pro-development City Council for being too tall. In 2020, they came back with an 18-story office building that the Evanston City Council indeed approved. Due to COVID, Vermillion opted not to build it.
The lot remains empty as Vermillion has worked through their plans here—not for a lack of approvals. As Land Use Commissioner and real estate developer Darush Mabadi said to City Council recently: this site in the middle of Downtown Evanston is very desirable "is screaming to be built - by this or another developer" and argued that we should not lose tens of millions in taxes for tiny studios and one bedroom affordable housing (not helpful for families) when we can easily secure another project here that pays the tens of millions in taxes our schools and city needs AND will still provide the required amount of affordable housing.
It is unacceptable that, at a moment when the city is proposing to raise taxes by 13.7%, and we are closing schools to save a mere $2 million each, our City Council is so willing to forgo $40 million in taxes. Vermillion is opting to build a Tier 3 project here. City Council should demand a Tier 1 structure (more typical) or find another developer who will.
I suggested to Vermillion that they offer a payment in leu of taxes to the schools and city. Everybody wins and we move forward. But I don’t have a seat at that table- anyone at the table ask for that?
Yes, please! How about a little goodwill for and from the community you'll profit from? Missed opportunity on the new Northwestern stadium - Wish they'd negotiated for a tiny fraction of ticket/concession sales go to D65. We'll all take our kids there and spend money. Mutual benefit!
Thanks for the column, Tom. You’ve really done your homework here.
For the record, I am downtown resident who does not oppose adding housing to our neighborhood, including this lot. But since we have very little space available, we have to been highly selective in how we use it. I personally think we should get a better deal for 605 Davis.
There have been many statements by the supporters of this project about housing supply and demand. They come waiving studies about how adding housing, even at the high end, lowers prices for all. (Actual statement.) A more accurate takeaway is that most studies show adding housing supply reduces the rate of rental increase somewhere in the range of 1% to 5% except for the lowest class, least desirable properties, where rents decline. To put this in real terms, some studies predict that by adding at least 10% more rental housing, rents for most apartments will increase $95 to $99 a month instead of $100. Rents for places where no one wants to
live are predicted to fall.
This benefit is hardly a windfall.
We hear a lot about “supply and demand” in this debate. Another economic principle is also at play, “premiumization”. It’s what can happen when supply is added at a higher price and resets price expectations. The most common example is Starbucks coffee. Coffee sold at .50 to 1.00 a cup (on average) pre Starbucks. Starbucks entered the market with a supply of a “luxury” product. Competitors didn’t try to compete by lowering their prices, they raised them when Starbucks proved they could sell at a higher price. Key point is that more supply does not always lower prices, and in fact can raise them. Thank you for adding this point to the discussion.
I'd never heard the term "premiumization" before, but this is exactly what is happening in the third ward, as the older apartments which are genuinely affordable are targeted by the city for re-development.
Tom hits the issue on its head. This is a gift to developers that does very little for those that truly need more affordable housing, instead it puts more pressure on current residents making their housing costs even more unaffordable.
The letter from Biss is wild. Last year we reached out to him on behalf of a friend and long time Evanston resident and he wouldn’t even respond to us. I ran in to him on the street and asked him about the multiple emails and phone calls I had made to him and he said sadly he has no power over landlords in Evanston. In my friends situation she had to move because her previous landlord jacked up the rent by 50% and she was having an impossible time finding a new landlord that would allow them to lease an apartment due to her new husband and child being going though the legal immigration process but lacking a credit history (because of the fact that he had only been in the US for a short time). Biss refused to even write a letter of recommendation or meet with the constituents in our case. For all of his talk of being concerned for evanston’s low income family’s he shows his true self when he could actually be helpful.
I guess not that different from his lack of leadership or even being willing to comment on district 65’s mess.
One more point. The City Council can stop this loophole by basically telling the developer that there will be no variances to zoning if they proceed with the 20%. It’s important that we all contact our Council Member and let them know that this is a bad deal.
Evanston is fortunate to have you on the case! This analysis makes me wonder, tangentially, what our city is (and isn't) doing to bring business/enterprise/industry to our town other than giveaways to NU and real estate developers.
Thanks Tom for writing about this issue. Once again a developer wins,affordable housing doesn’t increase and taxpayers shoulder the burden. We need your skills, Tom, more than ever. And thank you to knowledgeable citizens adding to the dialogue.
I think we would need some firmer data than a window observation snapshot. Tom, two things I'm not clear on yet:
1) With the gross tax volume is there a middle case where the building contributes more than the empty lot was doing and in some proportion to its value, I would hope that it at least meets its incremental demand on the community services funded through the property taxes while the local economy then benefits from increased sales tax from the residents?
2) Is the developer entitled to use the state bill if they offer the affordable units in a prescriptive manner or does the city have any discretion to offer use of the bill or not offer it, or offer something more moderate?
3) Bonus comment/question: I'm also sensitive to the fact that the lot has been empty for quite a long time, and maybe there has been some issue with the property split into the four parcels? (or three parcels for the lot and one for the existing building) I'm sure the location is desirable so why vacant for so long, even way before covid? I'm supportive of the mayor's efforts to keep the parcels together and hope he would be doing the same for any other developer or independently of any developers. But there seems to be some other issue among the owners of the parcels that has been keeping this lot vacant even when things were more active before the pandemic.
OK stay tuned, this will take me a while to work up. I do absolutely think there is a middle ground where this works out but it's really threading a needle and depends on Cook County properly handling the EAV/levies and so on properly.
One small note: you said “$1700 rent on $50k income is 40% of your monthly income!”, which is true. And: $1700 rent on $60k income (also qualifying for the lower prices) is 34%. So still not ideal, but not as absurd as 40%, and likely not all that off of what Evanston families may currently spend? Does the city have any sway on what the rent levels can be for the affordable units? I wonder if we could get the rents even a bit lower.
I am less excited about this development now that your article helped me better understand how long it would be for them to start paying taxes (ugh), but I still think the upsides outweigh the downsides.
You bury a great point in the footnotes: who will likely live in the designated affordable units. It’s not those who truly need it.
This is actually my main problem with envision evanston, I think the zoning changes will allow Northwestern students (namely undergrads) to move into neighborhoods instead of permanent residents.
I was once a Northwestern student, so I completely understand the desire for affordable off campus housing, especially for graduate students. But we honestly have tons of that, I lived at 680 Hinman in a tiny studio. Chicago Avenue is lined with studios and small 1 bedrooms occupied by grad students. For the undergrads, student housing should be subsidized by mom and dad or Northwestern, not the existing Evanston residents. It's honestly insane that we're even debating this - does any other college town on earth subsidize housing for the rich students?
Nailed it. 100 percent agree with the “who are we building this for” comment. And yes this will absolutely drive up housing costs for the rest of us. Essentially this project will only strengthen the divide between the haves and have nots.
Another thing I really worry about with this project is the sub par retail component, only 35 feet deep. If you study the ground floor, it’s all taken up by the program for a large building, BOH spaces, loading, leasing, even a dog run… if this was a smaller project we could maybe expand retail so it could be a restaurant or something cool(gasp!) in downtown. Right now we have an empty storefront problem, and this small leftover space would certainly join that list. Would hate to see a key downtown parcel without a viable plan for retail.
Same question about the eco-home project on our block: twelve 600sqft, 2 bed 1 bath homes, starting at $350k. I'm all for housing density for all the reasons: environment, affordable housing, increasing the tax base...But, it's hard to imagine anyone other than wealthy(ish) singles, college students or retirees occupying these homes. With a mayor who says almost nothing about the D65 budget crisis, what kind of Evanston are we envisioning? We're just not imagining a place for middle income families at all?
Thanks for writing about this, I did look into this to try and understand the dynamics of how it affects what the school districts receive. From what I can find, I do believe that when this building comes online, the District can start claiming all the property tax revenue in the form of the “balloon levy” (additional amount over the allowed increase to account for new/improved buildings on the tax rolls). In theory, the balloon levy should be tied to the actual property tax increase as the abatement falls off in tiers. In practice, I can’t find any documentation of that mechanism. It seems that the county bases their balloon levy calculation on building permits. This would mean that the school districts are able to claim the full amount in year 1, but the rest of the taxpayers are carrying that increase. I’m not 100% here, but this certainly appears to be the case. If this is true, this is a major issue with this program.
I am skeptical of many of the YIMBY talking points, but I do feel that on balance, more development is beneficial. For this reason, I still support the development. That said, I think of this building not as a building, not as housing, but as a financial product. That is certainly how the developer looks at it. Our financial system is broken. That the government would give HUGE tax breaks to a corporation to create a financial product which is unattainable to most Americans feels fundamentally unfair. Until we can figure out how to actually make housing affordable, fair, and allow regular people to build wealth through their own housing, we will continue to have these types of fights. This is way bigger than an Evanston issue.
Pinning this comment - thank you for this assessment and I couldn't agree more that this is a financial product first.
Ok then let’s stop pretending it’s about affordable housing. If it were, the city would utilize lease certificates to raise $45M to build a multi-unit structure that would be ALL under market rate rent for lower income people.
More and more, Evanston is becoming less and less the city I “envisioned” when I moved here in 1977. I am not against progress and change. I am against a creeping gentrification of a once-diverse and inclusive place where everyone could live, love, and grow old in peace with our neighbors.
One thing I think about when I write on City politics is this: local politics involves a constant tension balancing existing residents vs new residents. It's a pendulum that goes back and forth - you want/need growth but existing residents are the actual voters so you don't want them to get paved over.
Since 2016 this has been out of whack, because the voters are more swayed by national political issues than local ones. You definitely saw this in D65 and it's in the City now too. Mayor Biss and Kat are down in Broadview getting tear gassed to show how hardcore they are because they know that voters care more about the symbolism than actually fighting ICE in Evanston and prioritizing residents.
I'd argue the same force at work here - the City wants to prioritize things that have national salience like "affordable housing" but when it comes to actual local policy, this isn't very good policy for really anyone except the developer.
This is a real problem!
To share some background on this site: in 2018, Vermillion attempted to build a similar-height building here (33 stories), but was shockingly rejected by a very pro-development City Council for being too tall. In 2020, they came back with an 18-story office building that the Evanston City Council indeed approved. Due to COVID, Vermillion opted not to build it.
The lot remains empty as Vermillion has worked through their plans here—not for a lack of approvals. As Land Use Commissioner and real estate developer Darush Mabadi said to City Council recently: this site in the middle of Downtown Evanston is very desirable "is screaming to be built - by this or another developer" and argued that we should not lose tens of millions in taxes for tiny studios and one bedroom affordable housing (not helpful for families) when we can easily secure another project here that pays the tens of millions in taxes our schools and city needs AND will still provide the required amount of affordable housing.
It is unacceptable that, at a moment when the city is proposing to raise taxes by 13.7%, and we are closing schools to save a mere $2 million each, our City Council is so willing to forgo $40 million in taxes. Vermillion is opting to build a Tier 3 project here. City Council should demand a Tier 1 structure (more typical) or find another developer who will.
I suggested to Vermillion that they offer a payment in leu of taxes to the schools and city. Everybody wins and we move forward. But I don’t have a seat at that table- anyone at the table ask for that?
Yes, please! How about a little goodwill for and from the community you'll profit from? Missed opportunity on the new Northwestern stadium - Wish they'd negotiated for a tiny fraction of ticket/concession sales go to D65. We'll all take our kids there and spend money. Mutual benefit!
Thanks for the column, Tom. You’ve really done your homework here.
For the record, I am downtown resident who does not oppose adding housing to our neighborhood, including this lot. But since we have very little space available, we have to been highly selective in how we use it. I personally think we should get a better deal for 605 Davis.
There have been many statements by the supporters of this project about housing supply and demand. They come waiving studies about how adding housing, even at the high end, lowers prices for all. (Actual statement.) A more accurate takeaway is that most studies show adding housing supply reduces the rate of rental increase somewhere in the range of 1% to 5% except for the lowest class, least desirable properties, where rents decline. To put this in real terms, some studies predict that by adding at least 10% more rental housing, rents for most apartments will increase $95 to $99 a month instead of $100. Rents for places where no one wants to
live are predicted to fall.
This benefit is hardly a windfall.
We hear a lot about “supply and demand” in this debate. Another economic principle is also at play, “premiumization”. It’s what can happen when supply is added at a higher price and resets price expectations. The most common example is Starbucks coffee. Coffee sold at .50 to 1.00 a cup (on average) pre Starbucks. Starbucks entered the market with a supply of a “luxury” product. Competitors didn’t try to compete by lowering their prices, they raised them when Starbucks proved they could sell at a higher price. Key point is that more supply does not always lower prices, and in fact can raise them. Thank you for adding this point to the discussion.
Thanks for your diligence.
I'd never heard the term "premiumization" before, but this is exactly what is happening in the third ward, as the older apartments which are genuinely affordable are targeted by the city for re-development.
The City response that the Mayor did not endorse a specific proposal is, quite frankly, bs.
“We are discouraged to hear that Chase is considering selling its parcel separate from the planned larger assemblage. Without the assembled parcels….”
Yeah the letter was authored by the developer, revised by the Mayor, and signed. If that's not an endorsement, I don't know what is.
I'm less offended by the ethics issue here, and way more offended at the sheer laziness. He couldn't have written this letter himself?
Tom hits the issue on its head. This is a gift to developers that does very little for those that truly need more affordable housing, instead it puts more pressure on current residents making their housing costs even more unaffordable.
The letter from Biss is wild. Last year we reached out to him on behalf of a friend and long time Evanston resident and he wouldn’t even respond to us. I ran in to him on the street and asked him about the multiple emails and phone calls I had made to him and he said sadly he has no power over landlords in Evanston. In my friends situation she had to move because her previous landlord jacked up the rent by 50% and she was having an impossible time finding a new landlord that would allow them to lease an apartment due to her new husband and child being going though the legal immigration process but lacking a credit history (because of the fact that he had only been in the US for a short time). Biss refused to even write a letter of recommendation or meet with the constituents in our case. For all of his talk of being concerned for evanston’s low income family’s he shows his true self when he could actually be helpful.
I guess not that different from his lack of leadership or even being willing to comment on district 65’s mess.
One more point. The City Council can stop this loophole by basically telling the developer that there will be no variances to zoning if they proceed with the 20%. It’s important that we all contact our Council Member and let them know that this is a bad deal.
Perfect modern American capitalism: socialize costs, privatize gains.
Evanston is fortunate to have you on the case! This analysis makes me wonder, tangentially, what our city is (and isn't) doing to bring business/enterprise/industry to our town other than giveaways to NU and real estate developers.
Thanks Tom for writing about this issue. Once again a developer wins,affordable housing doesn’t increase and taxpayers shoulder the burden. We need your skills, Tom, more than ever. And thank you to knowledgeable citizens adding to the dialogue.
Thank you, Tom, for covering what our local media won’t! This is the information every Evanston resident should be afforded. Glad to have you back!
I think we would need some firmer data than a window observation snapshot. Tom, two things I'm not clear on yet:
1) With the gross tax volume is there a middle case where the building contributes more than the empty lot was doing and in some proportion to its value, I would hope that it at least meets its incremental demand on the community services funded through the property taxes while the local economy then benefits from increased sales tax from the residents?
2) Is the developer entitled to use the state bill if they offer the affordable units in a prescriptive manner or does the city have any discretion to offer use of the bill or not offer it, or offer something more moderate?
3) Bonus comment/question: I'm also sensitive to the fact that the lot has been empty for quite a long time, and maybe there has been some issue with the property split into the four parcels? (or three parcels for the lot and one for the existing building) I'm sure the location is desirable so why vacant for so long, even way before covid? I'm supportive of the mayor's efforts to keep the parcels together and hope he would be doing the same for any other developer or independently of any developers. But there seems to be some other issue among the owners of the parcels that has been keeping this lot vacant even when things were more active before the pandemic.
OK stay tuned, this will take me a while to work up. I do absolutely think there is a middle ground where this works out but it's really threading a needle and depends on Cook County properly handling the EAV/levies and so on properly.
One small note: you said “$1700 rent on $50k income is 40% of your monthly income!”, which is true. And: $1700 rent on $60k income (also qualifying for the lower prices) is 34%. So still not ideal, but not as absurd as 40%, and likely not all that off of what Evanston families may currently spend? Does the city have any sway on what the rent levels can be for the affordable units? I wonder if we could get the rents even a bit lower.
I am less excited about this development now that your article helped me better understand how long it would be for them to start paying taxes (ugh), but I still think the upsides outweigh the downsides.
Oh I didn't realize that error, thank you!!
You bury a great point in the footnotes: who will likely live in the designated affordable units. It’s not those who truly need it.
This is actually my main problem with envision evanston, I think the zoning changes will allow Northwestern students (namely undergrads) to move into neighborhoods instead of permanent residents.
I was once a Northwestern student, so I completely understand the desire for affordable off campus housing, especially for graduate students. But we honestly have tons of that, I lived at 680 Hinman in a tiny studio. Chicago Avenue is lined with studios and small 1 bedrooms occupied by grad students. For the undergrads, student housing should be subsidized by mom and dad or Northwestern, not the existing Evanston residents. It's honestly insane that we're even debating this - does any other college town on earth subsidize housing for the rich students?
Evanston has nearly twice as much as the state mandated affordable housing.
Nailed it. 100 percent agree with the “who are we building this for” comment. And yes this will absolutely drive up housing costs for the rest of us. Essentially this project will only strengthen the divide between the haves and have nots.
Another thing I really worry about with this project is the sub par retail component, only 35 feet deep. If you study the ground floor, it’s all taken up by the program for a large building, BOH spaces, loading, leasing, even a dog run… if this was a smaller project we could maybe expand retail so it could be a restaurant or something cool(gasp!) in downtown. Right now we have an empty storefront problem, and this small leftover space would certainly join that list. Would hate to see a key downtown parcel without a viable plan for retail.
Same question about the eco-home project on our block: twelve 600sqft, 2 bed 1 bath homes, starting at $350k. I'm all for housing density for all the reasons: environment, affordable housing, increasing the tax base...But, it's hard to imagine anyone other than wealthy(ish) singles, college students or retirees occupying these homes. With a mayor who says almost nothing about the D65 budget crisis, what kind of Evanston are we envisioning? We're just not imagining a place for middle income families at all?
One way to fix the affordable housing issue is to force out middle class folks who complain!