Affordable Housing in Riverwoods: Balancing Values

By: Laurie Breitkopf, Chair of Riverwoods Plan Commission

This article is intended to define and examine the effect of the adoption of an Affordable Housing Plan by the Village of Riverwoods to comply with the Illinois Affordable Housing Planning and Appeal Act.  Implementation of the Plan is guided by Area Median Income and Income Limits, and the availability of new housing units.  Affordable housing has recently stirred more interest in the Village as the Plan Commission has received a proposal for a new multi-family development. 

Most people agree that humans need housing.  Many people also would agree that there should be housing available for people who work locally at a range of income levels, and local housing stock should include affordable housing. Generally, “affordable housing” is defined as housing for which a household pays no more than 30% of its gross annual income on all housing costs. The often-controversial question is where affordable housing should be constructed. We want affordable housing for local workers, but not in our backyards.  Given the high cost of available land and single-family homes in Riverwoods, how do we balance the equally compelling values of providing affordable housing for local workers with our desire to maintain the beauty of our environment and single-family residential living? 

This article will briefly discuss the status of affordable housing in Riverwoods.  It will address common misunderstandings about “affordable housing” and describe the inclusion of such housing in a proposed Lexington Homes townhome development at the Federal Life property on Deerfield Road, which is now before the Riverwoods Plan Commission.  

Affordable Housing in Illinois 

For many years, there has been a significant deficit of moderately priced housing in many Illinois communities, including municipalities in Lake County.  Growth in home values continues to outpace growth in household incomes throughout the Chicago region and many householders who are vital to local economies and who provide critical community services are unable to afford to live in or near the places they work. It is estimated that 25% of owner-occupied households in Lake County, and 47.8% of renter-occupied households, spend more than 30% of their income on housing expenses. (See Institute for Housing Studies at DePaul University, Housing Market Indicators Data Portal 2021, at www.housingstudies.org)

Because of this affordable housing deficit, in 2003 Illinois passed the Affordable Housing Planning and Appeal Act (Act).  The Act required towns with at least 1,000 residents and with less than 10% affordable housing stock to submit affordable housing plans to the state by April 1, 2005.  The Act primarily affects affluent communities that have less than the targeted threshold of affordable units within their boundaries.  

The Act states: 

"Affordable housing" means housing that has a value or cost or rental amount that is within the means of a household that may occupy moderate-income or low-income housing. In the case of owner-occupied dwelling units, housing that is affordable means housing in which mortgage, amortization, taxes, insurance, and condominium or association fees, if any, constitute no more than 30% of the gross annual household income for a household of the size that may occupy the unit. In the case of dwelling units for rent, housing that is affordable means housing for which the rent, any required parking, maintenance, landlord-imposed fees, and utilities constitute no more than 30% of the gross annual household income for a household of the size that may occupy the unit. 

The Illinois Housing Development Authority, a State agency which is charged with the implementation of the Act, publishes guidelines to inform communities on what qualifies as affordable housing. 
There are two factors that generate the guidelines: (1) Area Median Income and (2) Income Limits. These factors vary among different agencies, because (a) median income is regularly updated by the U.S. Dept. of Housing and Urban Development (HUD); (b) median income can be generated for different areas (a regional average or just Lake County), and (c) the target income limit varies with different affordable housing programs.

Area Median Income 
The 2022 HUD figures for our area include the median income for households of 1, 2, 3 and more persons. According to HUD, the median income for a 3-person household in our area in 2022 was $93,800.  In other words, 50% of 3-person households in the area have income above and 50% have income below this Area Median Income (AMI). (See 2022 Chicago-Naperville-Joliet, IL HUD Metro FMR Area.) 

Income Limits

The Act’s definition of affordability is spending 30% or less of gross household income on housing and various related housing costs – but with a further qualification.  This 30% spending threshold should be met by families that earn no more than 80% of the AMI. Families that earn between 50% and 80% of the AMI are defined as moderate income families under the Act. Using 80% of AMI, the Illinois Housing Development Authority has determined that the affordable purchase price of a home in Lake County in 2022 for a 4-person household is $207,083, and the affordable rent for a 3-bedroom unit is $2,167 per month. At 60% AMI, the affordable rent for a 3-bedroom unit is $1626 per month.

For purposes of comparison, the median value of a home in Riverwoods in 2020 was $705,700. (U.S. Census Bureau (2021). American Community Survey 5-year estimates. Retrieved from Census Reporter Profile page for Riverwoods, IL (http://censusreporter.org)

The Illinois Housing Development Authority encourages communities to create affordable housing not only for those earning below 80% AMI but for those earning below 50% or 60% AMI. Many housing programs seek to meet this challenge with multiple target incomes rather than applying a single yardstick. A number of affluent communities with costly housing have accepted a mix of affordable units to advance toward their goals, with some affordable units at 120% AMI and others at 80% AMI. 

Riverwoods Affordable Housing Plan 
Section 25(b)(iv) of the Act required that Riverwoods adopt one goal out of three affordable housing options.

•    Option #1:  An affordable housing goal of a minimum of 15% of all new development or redevelopment within Riverwoods; or
•    Option #2:  A minimum of 3 percentage points increase in the overall percentage of affordable housing within Riverwoods; or
•    Option #3:  A minimum of a total of 10% affordable housing within Riverwoods.

The Illinois Housing Development Authority determined in 2018 that that were 1,248 housing units in Riverwoods, of which only 71 (owned and rental combined) were classified as affordable using 80% AMI as the income limit, for an affordable housing percentage of 5.7%.
(See https://www.ihda.org)

Option #2 would have required 8.7% of all housing units in Riverwoods (109 units instead of 71) to be affordable.  Option #3 would have required 125 units instead of 71 units in Riverwoods to be affordable.   

Riverwoods could not realistically satisfy the second or third options (for example, by converting existing homes into affordable homes), so the Village adopted Option #1 as its housing goal when it adopted an affordable housing plan in 2005.  The Village further revised its affordable housing plan in 2020. 

The existing plan has not defined “affordable” in terms of AMI; however, 50% to 80% AMI (or $46,900 to $75,040) is considered moderate income for a 3-person household.  As a point of reference, the salary for a teacher in Lake County, Illinois with 0 to 5 years of experience ranges from $43,000 to $57,439 depending on a variety of factors. (See Lake County School District Certified Staff Salary Schedule 2022-2023.) 

It should be noted that adoption of the affordable housing goal was mandatory, but the means for achieving this goal was left to the targeted communities. The Act creates a State Appeals Board whereby a developer proposing a project with affordable units can appeal a negative zoning decision. It is possible that Riverwoods might eventually lose zoning control via the State Appeals Board if the Village does not satisfy its affordable housing plan.  However, the State Appeals Board has not yet been materially implemented and has not reviewed any cases of noncompliance to date. 

Does affordable housing have a negative impact on property values?

According to the Illinois Housing Development Authority: In recent years, researchers have produced numerous studies with rigorous analytic methodologies to better understand the impact that affordable housing developments have on surrounding property values, local community safety and services. A review of the literature on the subject conducted in 2016 indicated that most studies do not find a negative impact related to affordable housing developments. The literature review also showed that affordable housing sited in economically strong communities and dispersed across metropolitan regions are the most successful and have the least negative impacts. Another study focused on affordable housing developments in suburban New Jersey, which has a State policy similar to the Affordable Housing Planning and Appeal Act, found that affordable housing development was not associated with increased crime, decreased property values or increased taxes.  
(From Illinois Housing Development Authority 2018 Non-Exempt Local Government Handbook, December 28, 2018,  p. 19.) (Emphasis added by author.) 

The Lexington Homes Proposal 

A proposal from Lexington Homes before the Plan Commission seeks to construct townhomes on the approximately 10-acre parcel now occupied by the Federal Life Insurance Company. A public hearing was opened on the application at our November meeting and is still in progress. It is not unusual for complex redevelopment proposals to require multiple appearances before the Plan Commission as questions are raised and responses and resubmissions offered. An important feature of public hearings is that we hear comments and questions from the public.  

Lexington’s original application requested 69 units for sale, three of which were designated as affordable housing.  The affordable townhomes would be interspersed in three of the twelve townhome buildings on the site.  Lexington also proposed paying an “in-lieu” fee of $125,000 per unit for four additional units rather than selling those units as affordable housing.  The Village’s goal of 15% affordable housing in new developments would have recommended ten affordable housing units in a 69-unit Lexington project.  

The Plan Commission has not yet explored the affordable housing component of the Lexington Homes proposal in any detail. Lexington Homes has indicated it is revising its application to avoid construction of townhomes in the woodland buffer between the Federal Life property and the Meadowlake subdivision. 
The Plan Commission is waiting for Lexington’s revised application, since we wish to address the underlying zoning questions before considering the affordable housing component. 

How Might Riverwoods Handle Affordable Housing Sales and Rentals? 

Before the Lexington Homes application, Riverwoods had not received any zoning applications to include affordable housing within a proposed new development.  Cities that accept fee-in-lieu donations often have Housing Commissions that invest the fees in community trusts or affordable housing projects. 

Since Riverwoods does not have a Housing Commission, it is likely the Village would work with a local non-profit agency that specializes in administering activities related to the development, sale and rental of affordable housing.  These activities might include helping with marketing, determining homebuyer eligibility, managing waitlists, conducting homebuyer education, facilitating sales and resales, and providing post-purchase support and consultation services.  Affordable units in Riverwoods would be expected to remain affordable with long-lasting covenants; subsequent sales or rentals would continue to be made to people qualifying for affordable housing.  These ongoing activities should be handled by specialists in affordable housing.

Lake County offers grants and forgivable loans to non-profit organizations, municipalities and developers for affordable housing projects and programs serving households with under 80% of AMI. Eligible projects and programs include acquisition, rehabilitation, new construction and homebuyer assistance. 

The Lake County Board funds the Lake County Affordable Housing Program with County dollars. This program promotes affordable housing activities for households that are ineligible under federal guidelines and meet the 80% - 100% AMI requirements. In addition to federal funding, prospective homeowners or renters may seek State of Illinois housing assistance funding. 

In summary: 

• Riverwoods is required to develop an Affordable Housing Plan.  The Village has done so establishing an affordable housing goal of a minimum of 15% of all new development or redevelopment within Riverwoods.
• The existing plan has not defined “affordable” in terms of Area Median Income (AMI); however, 50% to 80% AMI (or $46,900 to $75,040) is considered moderate income for a 3-person household.     
• There are alternatives available for implementing an Affordable Housing Plan, including the engagement of non-profit organizations or contributions to projects with the ability to deliver more housing units.
• The current proposal before the Plan Commission has not yet addressed affordable housing.
• The Plan Commission regularly meets at 7:30 p.m. on the first Thursday of each month at the Riverwoods Village Hall.  We encourage the public to attend.