Bronzeville Developers Struggle with FHA Restrictions

Nestled between the bustle of Chicago's Loop and the stately enclave of Hyde Park - home to the University of Chicago and President Obama - lies the historic neighborhood of Bronzeville. The entry point for many African-Americans into Chicago during the Great Migration, Bronzeville has been a neighborhood "on the make"  since the early 2000s, slowly reviving itself after a decline in the late 1960s. With its proud mansions lining King Drive, cultural centers along 43rd and 47th Streets, and proximity to Chicago's lakefront and central business district, Bronzeville has been attracting interest in redevelopment since before, and even throughout, the financial crisis.

Joe Williams, co-founder of commercial real estate company Granite Asset Management Inc, is a developer heavily invested in the community. Williams is one of the more successful African-American developers in Chicago and has been involved with the Community Builders, Inc. (of Boston) in transforming the former Ida B. Wells housing project in the heart of Bronzeville into the mixed-income Oakwood Shores development. In the middle of the development bound by 35th St to the north, 39th St to the south, King Drive to the west and the lakefront to the east was the footprint of Grove Place, a to-be-constructed mid-rise seven-story building of 83 one- to three-bedroom condos and townhouse units situated above approximately 12,500 sq. ft of ground floor commercial space.

Initially, 20 percent of the Grove Place units were to be sold at a reduced rate for affordable housing, with the remaining being sold market-rate, which, as of early 2008, ranged from a $179,900 one-bedroom to $329,900 three-bedroom. Speaking to Chicago Magazine at the time, Williams said, "This is a very important piece for us. It's a big part of the plan to have a multi-generational community," noting that the low entry prices, affordable housing units, and still-planned early childhood center on the ground floor of Grove Place would provide enough options for a diverse mix of lifestyles and a full community.

However, as Granite was moving ahead with financing for the building on 37th and Cottage Grove, it became apparent that current FHA/HUD lending standards would prevent Grove Place from being completed under HUD's 221d4 and 220 programs, both of which dictate caps on the commercial space Granite was poised to deliver. Williams and company continue to pursue FHA/HUD programs which contain the flexibility to permit commercial space, but in the interim, potential buyers for Grove Place were effectively pushed out of the market with the financing constraints, unable to complete purchase of a product they were eager to acquire and that the developer was more than willing to deliver. 
 

"The rules prevent developers like me from delivering market goods and amenities," Williams says now. "We went into a community that needs density and jobs with the intent to provide that. We followed the characteristics from HUD to design a full life community that fits into the HUD/USDOT/EPA Sustainability standards. The market wants this type of mixed residential-commercial development. Certain federal programs want this type of development. But the financing regulations which discriminate against form do not allow it."

Granite remains eager to provide product that is affordable to a broad range of individuals, but, without FHA/HUD approval, it is nearly impossible to find those moderate buyers who are able to obtain financing. Williams is now looking to re-structure Grove Place as a co-op under HUD Section 213, which underwrites mortgages to facilitate cooperatives. As renting becomes even more expensive than owning, Williams states, "people want to be in control of their housing costs," and the co-op may simply be the solution to find the equilibrium point until FHA regulations are retooled to allow the market to meet demand.