Chicago, cities grapple with 'transit-oriented development' critics

Nestled in the South Side Chicago neighborhood of Washington Park, KLEO Art Residences opened in July with a host of attractive amenities - 4,824 square feet of ground-level commercial space, fitness and community centers, and even artist studios serving its 58 apartments.

The building and its modern architecture also sit within walking distance of rail transit routes, plus several bus stops.

KLEO, which stands for Keep Loving Each Other, is what's known as a transit-oriented development (TOD), so named for providing high-density housing near bus or rail lines, often accompanied by limited parking and taller height than otherwise would be allowed. The developments are touted as a way to provide affordable housing to residents who don't need a car. In the case of KLEO, 50 of the 58 units are either subsidized or discounted by the Chicago Housing Authority.

"Our transit infrastructure, although it seems old, is literally the future," said Ghian Foreman, CEO of the Emerald South Economic Development Collaborative and a longtime Chicago real estate investor. "The L train is the great equalizer. It's something that everyone can use."

But even as the movement gains momentum, concerns are being raised - such as in Los Angeles - over whether the transit developments are driving up costs and exacerbating the problem they're designed to fix - the lack of affordable housing.

Some assert that the rezoning required for the developments threatens single-family housing, that TOD residents will still drive cars and park them on city streets, and that most of the developments consist of luxury apartments that actually accelerate gentrification and displacement.

"We're building more housing around transit, and demolishing affordable housing to build luxury housing," said Los Angeles City Council member Paul Koretz. Earlier this year, the council voted unanimously to oppose a state Senate measure calling for transit development as part of an effort to create millions of new housing units in California.

In the District of Columbia, local developer CityPartners has proposed redeveloping the Congress Heights Metro station in Southeast Washington, D.C. Living near a Metro station comes at a significant premium for D.C. residents - nearly $9,000 to live within a mile of a Metro stop and $40,000 to live within a quarter-mile, according to research from Sam Khater, chief economist at Freddie Mac.

The Metropolitan Washington Council of Governments has passed a nonbinding resolution calling for at least 75% of new housing to be in activity centers or near transit.

Still, Chicago has been considered by some transit experts a leader in the TOD space, implementing a policy in 2013 with the goal of creating pedestrian-friendly neighborhoods near rail lines.

The policy was expanded in 2015 and again in 2019, the second time to promote TODs near bus stops. Under certain conditions, it includes a potential 100% parking reduction, with a secondary benefit of reducing carbon emissions.

From 2016 through the end of 2018, more than 144 TODs were built in Chicago containing 24,419 residential units. Under the latest version of the policy, developers must incorporate affordable housing into any new projects, and there's a bigger focus on building up the city's South and West sides.

KLEO property manager Stephen Gazaway said the project has proved tremendously popular, nearly fully leased just a few months after opening.

"There are 58 units and 56 are already leased up," he said. "We literally have eight applications submitted for the last two units."

A market-rate, two-bedroom unit at KLEO goes for $1,075 monthly, while a subsidized unit of the same size goes for $740, according to Gazaway. To get the subsidies, a two-person household can make no more than $42,780, but must bring in at least $26,480 to land a two-bedroom unit.

Residents don't have to be artists, though several are. One, David Anthony Geary, designed a mural in the building's lobby and moved into a subsidized one-bedroom unit earlier this year. Geary doesn't own a car, relying on transit nearly exclusively.

"The energy here from the folks I've bumped into so far has felt great," said Geary, who takes the Green Line to his art studio in Chicago's Pilsen neighborhood.

California Gov. Gavin Newsom, a Democrat, has set a goal of building 3.5 million new homes by 2025, relying in part on TODs to help reach that goal.

The debate rages on about statewide housing policy, but several transit developments are already in the works in California's major cities. Along the Bay Area Rapid Transit (BART) system, planned projects surround the MacArthur station in Oakland and the North Berkeley station in Berkeley.

Farther south, a handful of developments dot the Expo Line in Los Angeles. One example is Cumulus, a TOD built by Carmel Partners that's expected to open in late 2020 with 100,000 square feet of retail and 1,210 apartments.

"At the corner of two major commuter corridors and directly adjacent to the recently developed Expo Line light rail between downtown and Santa Monica, Carmel anticipates Cumulus will be a vital part of the local area and beyond," Carmel partner Neils Cotter said in a news release announcing a Whole Foods Market at the site. Cotter declined an interview request for this article.

Paul Habibi, a professor at the University of California at Los Angeles's Ziman Center for Real Estate, said there is a shortage of 500,000 affordable units in Los Angeles, which TODs can help address.

"There's a widespread belief that the affordability problem needs to be solved from the supply side," Habibi said. "Density is one mechanism by which to have that happen, because developers can increase the number of units in any given community."

He added that reducing parking requirements is key because parking can add $100,000 to the cost of building a typical condo, which is then passed on to the resident.

Dan Dunmoyer, president and CEO of the California Building Industry Association, said he supports Senate Bill 50, which would require cities to allow four- or five-story apartments within a half-mile of a rail station, a quarter-mile of a bus stop or within a "job rich" neighborhood. Building more housing for people at all income levels, he added, would largely take care of the shortage.

But the measure has been tabled to January because of widespread opposition.

"If someone is living in a nice two-story home next to an undeveloped piece of land, and somebody wants to build a 10-story complex on that land, they'll say, 'over my dead body,' " Dunmoyer said. "They eventually convince the city to make a two-story complex instead. The developer can't make money on that, and then walks away."

Koretz, who along with other Los Angeles council members voted to oppose the Senate bill, said he doesn't buy the argument that affluent TOD residents will eschew car ownership. He has called SB 50 a giveaway to developers and points to data suggesting that transit ridership in Los Angeles is actually falling. Perhaps most importantly, in Koretz's view adding more housing would only induce more people to move to the city.

"I don't believe that trickle down Reaganomics applied to housing will work," he said. "If we built 3 million more units in California, we'd wind up with 3 million new residents. I think a lot of folks would like to move to California, but there isn't any housing, and I don't feel like we have an obligation to house the rest of the United States … We have an affordable housing shortage, not a luxury market-rate housing shortage."

Even Chicago's transit development plans are being questioned.

A chief complaint is that most end up on the more affluent North side, with KLEO joining only a handful of projects in the south. The latest iteration of Chicago's TOD policy aims to address the issue by requiring more affordable units and focusing more on bus lines.

"One of the fears is that TODs will be seen as a way to expand or increase the velocity of gentrification in the community," Foreman said. "We're trying to say, 'Let's take what we've learned and figure out how to keep what's here in place in order to create affordability and equity using TODs.'  "