More than a decade ago, former Mayor Richard Daley’s Plan for Transformation began taking shape with the goal of replacing Chicago’s notorious public housing projects with a mix of subsidized and market-rate rentals and for-purchase homes in attractive neighborhoods.
Now, the developers attached to the project are becoming like any other home seller who wants to move on, and they are slashing prices. Market-rate homes are again adjusting to the new definition of “the market,” and some are being offered at more than a third off their original prices two to three years ago.
Since the first Find Your Place in Chicago marketing campaign began in September 2008, 103 people have taken advantage of various purchase incentives funded by the Partnership for New Communities, a nonprofit consortium of business and civic leaders that backs the city’s plan to reshape the Chicago Housing Authority development.
But 138 units remain unsold: 58 at Parkside of Old Town; 32 at Park Boulevard; six at Oakwood Shores; 23 at Lake Park Crescent; and 19 at West End. And so, once again, the partnership is offering incentives of $10,000 to help homebuyers with the down payments, closing costs and other expenses that come with purchasing condominiums and town homes now priced at $150,000 to $450,000.
Is the limited success of the homes a function of the horrible housing market or the mixed-income neighborhood and the potentially safer financial investments elsewhere?
Gordon Ziegenhagen, of Draper and Kramer, the company behind Lake Park Crescent in North Kenwood-Oakland, said it’s more the former. Most buyers who express interest in buying in these mixed-income neighborhoods know what they would be moving into — a neighborhood with future promise. And, he noted, many neighborhoods in Chicago are naturally mixed income.
Lake Park’s overall 68 market-price homesonce were listed for as much as $800,000. At one point almost all were reserved, and 60 percent were under contract. Then the fallout began, as people walked away from their earnest money for one reason or another.
This year the company has written seven contracts and closed five sales, Ziegenhagen said. Now, prices on the 23 remaining homes have been cut by as much as 50 percent, well below cost.
“Every single Plan for Transformation (community) is in exactly the same predicament,” said Ziegenhagen, vice president of operations. “They’re looking at their pro forma and they’re looking at a huge loss. The lenders have been more willing to work things out with these developments because they invested in them knowing they were really community development, and we were all assaulted by the same economic development.”
Oakwood Shores may be down to six units left to sell, but developer Joseph Williams, of Granite Partners, is blunt in his assessment of why.
“Quite candidly, we would not have any sales if we did not have the (partnership) program in place,” he said.
Even in the good times, Williams said, buyers in a development like Oakwood Shores, on the site of the former Ida B. Wells housing complex, had to be what he calls “trailblazers.”
Now, those trailblazers aren’t happy because the price cuts of 25 to 35 percent have negated their equity, while their property tax bills have increased. Newer buyers need to be trailblazers who are much better educated about just what it is they are buying into at a Plan for Transformation community, Williams said.
“We have to really help them understand what it is to make this investment in real estate,” he said. “These communities are going to have great appreciation in price when the market comes back.
“If you believe in real estate, you just have to believe that you keep building a neighborhood. Otherwise, you’ll continue to have a decline in the values of the existing neighborhood. These transformation sites are hard work,” Williams said. “This is missionary work. I didn’t start out thinking this is missionary work, but that’s what I think I’m doing now.
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