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Northwest Side development reignites interest in program aimed at preventing white flight

Jan and Joe Hernandez stand outside their Northwest Side home on May 5, 2017. They belong to a taxpayer-funded program designed to make sure homeowners in their area can get the appraised value of their homes, but that has not been the case for them, and they say they are frustrated because of it. (Phil Velasquez/Chicago Tribune)

When it was created nearly 30 years ago, the Northwest Home Equity Assurance Program was meant to stop white flight from a handful of Chicago bungalow belt neighborhoods by guaranteeing the value of residents’ houses.

Since then, the program has done little more than collect a few bucks a year from thousands of homeowners. Nearly $10 million has been stockpiled because the agency has paid out only a handful of times, thanks first to steadily rising home values and later to a loophole that meant the housing collapse didn’t qualify homeowners for payments, much to their chagrin.

Now the organization says it’s seeing a spike in interest, one its director says is tied in part to anxiety about a proposed apartment complex in Jefferson Park. The fight over the building project, set to include dozens of subsidized units, has resurfaced some of the same arguments over neighborhood character, integration and racial discrimination that greeted the launch of the home equity program in the late 1980s.

"We went from very little registration to oh my gosh," said director Robin Larson, thumbing through a stack of applications in the agency’s Harlem Avenue office.

Larson pointed to several addresses within a few blocks of 5150 N. Northwest Highway, the site of the planned apartment building that has drawn big crowds of irate neighbors to meetings at Ald. John Arena’s 45th Ward office as well as to hearings at City Hall.

The seven-story complex would include 80 units rented at below market rate, with 20 set aside for people with Chicago Housing Authority vouchers.

While Larson doesn’t ask callers why they’re signing up for the home equity plan, she said many offer their motivations unprompted.

"They say, ‘You won’t believe this bleep bleeping development they want to put in over here,’" she said.

Thirty people have either signed up or asked to update the value of their homes since early November, Larson said, a significant jump over similar time periods in recent years. While she doesn’t know why in every case, she said the Jefferson Park project and O’Hare International Airport jet noise have been frequently mentioned reasons.

Opponents of the Jefferson Park development have focused their public complaints on its size and on an agreement Arena made with the developer to settle a lawsuit. They say that the building would be too tall for the neighborhood and that the alderman isn’t looking out for their best interests. A group of homeowners sued, saying Arena’s settlement with the developer violates city law.

The group Northwest Side Unite pushed back against the characterization that opponents are racists.

"We are not discriminatory people. We care deeply," the group’s Trisha Kannon said at a City Hall news conference Thursday. "We are not racists simply because we oppose a development."

"We welcome diversity in any fashion that’s appropriate for the area," added Kannon, who said the problem is the size of the proposed building.

But at a competing City Hall news conference held by supporters of the housing plan, Nick Kryczka said opponents have chanted slogans and displayed signs at community meetings that "brim with the lowest kind of unvarnished bigotry," belying claims that it’s about zoning.

And at a recent Plan Commission meeting, supporters of the project claimed opponents in Jefferson Park are really motivated by fear of African-Americans with housing vouchers moving into the neighborhood.

After the panel approved a storage facility meant to accompany the apartment building at the site, Arena responded to questions about racism playing a part in the fierce opposition.

"Some people have obviously made some assumptions about what housing — whether it’s here or in other areas — will bring to the community," the alderman said.

"And all I can say to my residents, to the folks who are concerned about that, is I am as much concerned about the folks who live in my neighborhood, who have come to me and said we need positive development, we need opportunities for buildings that are accessible," he added.

The storage facility later stalled when powerful Southwest Side Ald. Edward Burke, 14th, took the unusual step of stopping a vote on the ordinance in the City Council Zoning Committee on the grounds there was not a quorum.

The storage facility portion of the plan is set to come back to the Zoning Committee for another hearing Monday, and Arena says it has the votes to pass. The apartment building part of the plan has not yet come before aldermen.

Six other aldermen stood with Arena at a City Hall news conference May 10 and pledged to add affordable housing to their North and Northwest Side wards. Each signed a letter noting that "Chicago’s segregation is the product of decades of intentionally exclusive law, policy and action," and that "for far too long, aldermen on the North and Northwest sides have done far too little to open our communities to low-income and minority families."

And days earlier, a handful of people who back the housing plan disrupted an unrelated Zoning Committee hearing, standing in council chambers to chant, "Don’t cave to racists, no more delays in Jefferson Park!"

History of controversy

Created via referendum in 1988 in a controversial bid to stabilize the housing market in a big swath of the Northwest Side, the home equity program covers about 48,000 homes in parts of the Jefferson Park, Old Irving Park, Dunning, Montclare, Galewood, Portage Park, Belmont Central, Belmont Heights and Belmont Cragin neighborhoods. Two similar programs were started around the same time on the Southwest Side.

The idea was that members who joined and got a property appraisal and then lived in the homes for five years or longer could be assured they would at least get the appraised value of their houses when they sold them because the program would cut checks for shortfalls. African-American city officials tried to stop the creation of the districts, saying they were an attempt to prevent integration in Chicago’s predominantly white outer edges.

Then-Northwest Side Ald. William J.P. Banks ushered an ordinance creating them through the City Council in 1988, but then-Mayor Eugene Sawyer vetoed it.

Illinois House Speaker Michael Madigan then helped get the programs approved in the legislature, bypassing City Hall. Richard M. Daley was elected mayor in 1989, and he supported the creation of the Southwest Side and Northwest Side home equity districts after voters in those neighborhoods overwhelmingly had backed them in ballot referendums.

In the decades since, the Northwest Side home equity fund has continued to collect money via the additional tax levied on all homeowners in the boundaries. The program’s reserves now total $9.57 million in two accounts, according to agency records.

Initially, the program levied $1 million per year. But as reserves rose, commissioners cut it to $125,000 annually. Most homeowners now pay between $1.50 and $3 a year, said Larson, who is paid $84,400 a year after the commissioners earlier this month approved an annual 3 percent cost-of-living raise.

To qualify for a possible payment, homeowners need to apply and pay $150 for a home appraisal for a single-family or two-unit building, or present a certified appraisal of their own.

It’s on members to keep up the appraisals as the assessed value of their homes rises. After an initial estimate is filed, a member has to keep living in the house for five years before collecting on any shortfall. Members can update appraisals every five years, and have to live in their homes for three years after to collect on shortfalls.

Larson said she isn’t sure how many active members the program has. There were about 4,000 at one time, but she said it’s tough to know which of those homeowners moved out or died without ever applying for reimbursement. People who own property within the boundaries and don’t join the program still pay the levy, but can’t apply for reimbursement.

During the real estate boom, the program largely was a victim of its own success, as property values mostly climbed and the neighborhoods "remained nice places to live," Larson said.

Just five homeowners received payments totaling $81,500, according to the agency’s records. The most recent payout, $25,000, was made in 1998.

Legal loophole

When the nationwide housing market crashed in 2008, homeowners began requesting to be made whole in the likely case they couldn’t sell for the appraised value of their houses.

But the program doesn’t cover for losses in home value because of those kinds of broader problems with the real estate market, Larson said. She pointed to language in the state law specifying "a program shall not provide relief from adverse municipal-wide, regional or national housing market conditions as they may affect local housing conditions."

When housing prices were slow to rebound, the program adopted a standard in 2015 to pay out partially, factoring in broader regional real estate losses.

Montclare residents Joe and Jan Hernandez found out they wouldn’t get their appraised amount when they were trying to sell their home in 2015. They’ve lived there since 1979 and joined the home equity program shortly after it was created.

"What was the point of the program, if it’s meant to protect us against a loss and now you aren’t going to do it?" Joe Hernandez asked.

And Mike Consiglio said he only learned he wouldn’t be made whole for his Jefferson Park home when he first inquired about it around 2009.

"They didn’t mention any of that when I signed up," he said. "They said you sign up, you get the appraisal done and if you can’t sell for that amount we’ll make up the difference. You tell me these are the rules. They’re sitting on all this money, and they aren’t doing what they told me they would do when I signed up. It’s just ridiculous. It’s dishonest."

The law allows the organization to change into either a low-interest home improvement loan program for members or an emergency loan fund for members in danger of falling into foreclosure. While the Southwest Home Equity Assurance Program in neighborhoods near Midway Airport has created a low-interest loan program for members to make repairs to their homes, Larson said the northwest commissioners have not considered making either of those changes.

The six unpaid commission members each have served since at least 2007, and three have been on the board since 1995. That means all of them precede Mayor Rahm Emanuel and the five aldermen whose wards include homes within the program boundaries. There are three empty seats, one a mayoral appointee and two which are to be filled by the mayor picking from nominees presented by community groups.

One commissioner, Robert Bugielski, is a former state representative. Another, Karen Rozanski, was the chief of staff for Banks, the longtime powerhouse Northwest Side alderman. Banks stepped down from the City Council in 2009 after two decades as Zoning Committee chairman and is now a partner at a law firm specializing in city zoning matters.

There has been frustration over when the Northwest Side organization will pay out. So when a mayoral appointment to the Southwest Side home equity commission came before the City Council this spring, several aldermen piped up with questions about why the districts exist. Burke subsequently held a hearing so aldermen could learn about the programs, which predate every council member but him and North Side Ald. Patrick O’Connor, 40th.

Northwest Side Ald. Nick Sposato, 38th, typified the reaction from several council members during discussion about the mayor’s appointment. "What do these groups do? Who do these people answer to?" he asked.

Twitter @_johnbyrne