The Northwest Side Preservation Ordinance Explained

Background

In response to the growing concerns about displacement, rising property taxes, and the loss of affordable housing on the Northwest Side, Alderpeople Jessie Fuentes (Ward 26), Carlos Ramirez-Rosa (Ward 35), Daniel La Spata (Ward 1), Byron Sigcho-Lopez (Ward 25), Ruth Cruz (Ward 30), Felix Cardona (Ward 31), and Rossana Rodriguez-Sanchez (Ward 33) introduced the Northwest Side Housing Preservation Ordinance to the Chicago City Council on July 17, 2024. The ordinance was passed on September 18, 2024, and is a critical tool to help preserve the affordability and diversity of our neighborhoods.

Why was the Northwest Side Housing Preservation Ordinance Created?

Our neighborhoods, including Avondale, Hermosa, Humboldt Park, Logan Square, and West Town, are home to a large number of two- to four-flat apartment buildings — this type of housing is known as “naturally occurring affordable housing” (NOAH). These buildings have historically been a vital source of affordable homes for working-class families, particularly among low- and moderate-income communities. However, on the Northwest Side, these buildings are increasingly being demolished or converted into luxury single-family homes, pushing out long-time residents and contributing to the rising rents and property taxes that are causing displacement.

This ordinance is designed to address these issues by protecting our neighborhoods from the loss of this crucial housing stock, stabilizing property taxes, and helping prevent the displacement of residents. It aims to preserve the historic character and affordability of our communities, ensuring that they remain vibrant and accessible to all.

What Does the Northwest Side Housing Preservation Ordinance Do?

The Northwest Side Housing Preservation Ordinance provides several important protections:

  • Protects Two-Flats, Three-Flats, and Four-Flats from Demolition: Developers who want to demolish multi-family buildings must pay a demolition surcharge of $20,000 per unit or $60,000 per building (whichever is higher). The funds collected through this surcharge are directed to the Chicago Housing Trust and the Here To Stay Land Trust, which work to build and preserve affordable housing in our communities.

  • Prevents Conversion to Luxury Single-Family Homes: The ordinance prohibits the conversion of two-flats, three-flats, and four-flats into luxury single-family homes on blocks where the majority of buildings are multi-family apartments. This ensures that the existing affordable housing stock remains intact.

  • Gives Tenants the Right of First Refusal: Tenants now have the right to match any offer made by a third-party buyer when their building is up for sale. This provision is designed to give tenants the opportunity to purchase their homes, ensuring they aren’t displaced by market-driven forces.

  • Legalizes New Two-Flats: The ordinance allows for the construction of new two-flat buildings by-right in residential areas that are currently zoned only for single-family homes. This change promotes the development of more middle-income housing, which is essential to meeting the housing needs of our communities.

What You Need to Know about the Northwest Side Housing Preservation Ordinance as a Landlord or Tenant 

On September 18, 2024, the Chicago City Council passed the Northwest Side Housing Preservation Ordinance (NWS HPO). The NWS HPO promotes housing affordability by protecting two-flats, three-flats, and four-flats from demolition via a demolition surcharge and by disallowing the conversion of two-flats, three-flats, and four-flats to luxury single-family homes on blocks where most buildings are multi-family apartment buildings; providing tenants with the right of first refusal and first opportunity to purchase their building when it goes on sale; and legalizing the construction of new two-flats by-right in zones currently only zoned for single-family homes. 

The Tenant Opportunity to Purchase (T.O.P.) component of the ordinance will go into effect on March 1, 2025. The rules governing the right of first refusal and Tenant Opportunity to Purchase depend on the number of units in the building. The Tenant Opportunity to Purchase is modeled off of timeframes typical of the local real estate market. 

  • ●  The owner must give tenants 30 days' notice of their intent to sell before listing the property for sale. 

    ● Following the 30-day notice period, the owner must notify tenants of any third-party offers they receive that they intend to accept. 

    ● Tenants have 15 days from receipt of notice of a third-party offer to exercise their right of first refusal by notifying the owner in writing of their intention to match the third-party offer. Written notice of intent to exercise right of first refusal must be accompanied by a pre-approval and earnest money. The ordinance caps the amount of earnest money a seller can require at 5% of the purchase price. 

    ● An offer to purchase can be made by one tenant; the formation of a tenant association is not necessary. 

    ● If the offer is accepted, the tenant(s) have 60 days to secure financing and complete the closing process.

  • ● The owner must give tenants 30 days' notice of their intent to sell before listing the property for sale.

    ● Following the 30-day notice period, the owner must notify tenants of any third-party offers they receive that they intend to accept.

    ● Tenants have 30 days from receipt of notice of a third-party offer to exercise their right of first refusal by notifying the owner in writing of their intention to match the third-party offer. Written notice of intent to exercise right of first refusal must be accompanied by a pre-approval and earnest money. The ordinance caps the amount of earnest money a seller can require at 5% of the purchase price.

    ● The tenants’ offer to purchase must be made collectively by 51% or more of the current tenants in non-owner-occupied units.

    ● If the offer is accepted, tenants have 60 days to secure financing and complete the closing process.

  • ● The owner must provide 60 days' notice to tenants of intent to sell before listing the property.

    ● Once the property is listed for sale, the owner must provide notice of any offer they receive and intend to accept to the tenant association or, if none exists, to each tenant.

    ● After receiving this notice, tenants have 90 days to form a tenant association and exercise their right of first refusal by giving the owner written notice of their intent to match the third-party offer received. Written notice of intent to sell must be accompanied by a letter of intent from a lender or community organization and earnest money. The ordinance caps the amount of earnest money a seller can require at 5% of the purchase price.

    ● The tenants' offer to purchase must come from a tenant association representing residents of at least 75% of occupied units.

    ● The tenant association has 120 days after providing the owner with notice of intent to exercise their right of first refusal to secure financing and complete the closing process.