Lathrop developers dishonest in quest for public dollars

The historic Lathrop Homes, pictured here along Clybourn Avenue, is one of Chicago’s first public housing projects and is currently undergoing redevelopment.

Photo by Max Herman

The historic Lathrop Homes, pictured here along Clybourn Avenue, is one of Chicago’s first public housing projects and is currently undergoing redevelopment.

The degree of bad faith by the private developers in control of Lathrop Homes, abetted by the city and the Chicago Housing Authority, is remarkable even for this town. Recently it was revealed that the developers concealed a National Park Service letter that challenged key elements of their plan as they pushed that plan through the approval process.

The bad faith extends to their promise to sunset a new Lathrop Homes TIF when the infrastructure and housing costs it’s dedicated to are paid, hailed by some as a “slushless TIF.” They knew that a key element of their financing plan –federal historic preservation tax credits, which can cover 20 percent of development costs but require Park Service approval – are far from certain.

And it includes keeping quiet about a second TIF district being planning for the southern part of Lathrop, which they can use to finance the retail and luxury housing that residents oppose – and to fill in the gaps from any federal funding that falls through.

For years, Lathrop residents have joined with housing advocates and preservationists to argue that Lathrop’s neighborhood is saturated with luxury housing and retail, and that a plan that restores the historic low-rise public housing development as public and affordable housing is the most efficient and appropriate use of public dollars.

Since 2012, a development team led by luxury highrise developers Related Midwest has insisted that more than half of Lathrop’s 900 public housing units must be eliminated to make way for luxury housing, including highrises on the riverfront, and more retail.

The Park Service letter (revealed by DNAinfo last week) was received by Related Midwest and Lathrop Community Partners last December. But it was never mentioned while LCP and the city rolled through a community hearing on a planned development agreement for Lathrop in February, consideration and approval of that plan by the Plan Commission in February and the City Council in March, and a public hearing on the first Lathrop TIF in April.

(Under questioning at that April hearing by Lathrop resident leader J.L. Gross, who noted that the proposed TIF only covered the northern portion of Lathrop, Jacques Sandberg of Related Midwest admitted that a second TIF was planned.)

Developers have said they expect to get the Park Service to back off its demands, but in its comments the agency was quite quite clear and left little wiggle room.

Noting that “new construction must be compatible with the historic character” of the property, the Park Service asks for more information about plans for the south campus – and adds that two new six-story buildings proposed for the Diversey Avenue gateway to the development are out of scale and “would need to be deleted from your plan.”

That language strongly suggests that the 13-story building the developers want for the south end of Lathrop (detailed plans for which have never been made public) would never get approval. And for Related Midwest, that highrise is the whole reason they are involved.

Asked if they were committed to making changes necessary to qualify for historic tax credits, Related Midwest did not respond.

Regarding the extent of demolition in the Lathrop plan, the Park Service’s letter could be read as understated sarcasm: “Historic tax credits are designed to encourage the rehabilitation of historic buildings and not their demolition.” The Park Service says it would approve demolition of 10 historic buildings on the south campus if developers could show that some of them are beyond repair – a contention I’m told the developers have consistently denied in public meetings.

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Demolition of historic low-income housing is needed to create parking for 50,000 square feet of retail and the highrise on the south campus.

Unless they have some impressive clout with the U.S. Department of the Interior, the Lathrop developers are either going to have a dramatically scale back their plans – to something more in line with what residents want – or load up the second TIF and perhaps tap into CHA’s $400 million reserves to cover the loss of the federal tax credit.

Of course they could come up with private financing, but developers always think that’s a terrible idea when there’s public money available.

It may be a little unfair to go after developers for trying to game the system: that’s simply what they do.

But the nonprofit affordable housing developers that are Related Midwest’s junior partners, Heartland Housing and Bickerdike Redevelopment Corp., shouldn’t be too proud of themselves, cashing in on a project that is reducing the supply of affordable housing on the North Side.

Then there’s Ald. Joe Moreno, who touted the sunset provision of Lathrop TIF No. 1 (which only takes effect if a future City Council votes at a future date for it) without ever mentioning Lathrop TIF No. 2.

The most fundamental betrayal here, however, is by the Chicago Housing Authority under Mayor Rahm Emanuel. They’re abandoning their mission of providing housing for those who need it most, and betraying their own rhetoric about spreading housing opportunities around the city.

Instead they’re offering tens of millions of public dollars to enrich private developers and demolish public housing.

The Community Development Commission will hold a hearing on Lathrop TIF No. 1 on July 12. My guess is there will be a lot of questions that weren’t asked at previous hearings.