THE PILSEN BUILDING INVENTORY PROJECT by Winifred Curran and Euan Hague DePaul University, Department of Geography Executive Summary The historically working-class character of Pilsen is currently threatened by the gentrification of this largely Mexican-American neighborhood. The Pilsen Alliance, a grassroots organization formed in 1998, joined with urban geography classes at DePaul University to conduct a building inventory of Pilsen in order to identify and organize around issues related to gentrification. The Building Inventory Project An extensive and systematic community mapping project was undertaken to produce a database of current building conditions and publicly available information on building permits, property taxes, assessed values, property sales, and ownership. This report provides the results of that project, with data collected by DePaul students over two years, from Fall 2004 to Spring 2006. 5002 lots are in the database. The building inventory consisted of both a visual and web-based component. Each student was assigned one square block of Pilsen. Students were asked to assess the condition of the buildings and the purpose for which the buildings were being used. The web-based component consisted of a search of city and county websites for assessed values of land and buildings, taxes, zoning, recent sales, and recent building permits. Property Values and Taxes Increasing property values and taxes lead directly to the displacement of area residents. High real estate values make it expensive to both buy and stay in Pilsen, even for homeowners. The rise of property values goes hand in hand with rising property taxes. Often, Pilsen’s working-class homeowners cannot afford to pay these increasing property taxes. Landlords may pass the increased costs onto their tenants, who may be forced to move because of increased rents. Those homeowners without tenants may be forced to sell their homes just to pay of their tax bills. The Building Inventory Project shows that 43% of properties saw a 2549% increase in their assessed values, with an additional 23% experiencing a 5074% increase in assessed values. 24 properties experienced an increase of over 125% in assessed value. The neighborhood saw assessed value increases from $30,000 to over $200,000. It is estimated that a $1000 increase in assessed value leads to a $165 increase in property taxes. Zoning Zoning regulates both land use and building density. Pilsen’s zoning has made it a target for developers because much of the neighborhood is zoned RT-4.

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As such, it is overzoned, because many of the buildings zoned RT-4 are at a much lower density than that zoning designation allows. The Building Inventory Project shows 300 single family homes zoned RT-4. This mismatch between zoning and actual use means that developers can buy a single family home, demolish it, and rebuild three to four story condominiums or rental units in its place, all without any community or city zoning board approval. This mismatch between zoning and actual land usage has resulted in a large number of teardowns in Pilsen, so much so that the entire neighborhood of Pilsen was declared one of the seven most endangered sites in Chicago by Preservation Chicago in 2005. The mismatch between existing zoning designation and actual land use is also an issue for industrial users. Through an anomaly in the city’s zoning code, there are multiple sites which are being used for industrial purposes but are zoned for residential use. This zoning mismatch makes business owners vulnerable, especially if they rent their space. Because residential usage has a far higher rate of return than manufacturing, industrial space that can legally be converted to residential use is highly profitable to developers. One such site is the Lerner Box Company at 16th St and Carpenter, which has been converted into condos with prices ranging from $150,000 to $375,000. Tax Increment Financing (TIF) Pilsen’s TIF is an industrial TIF, meant to protect and encourage industrial enterprises and the employment they bring. TIF districts are in areas determined to be blighted, and the TIF is meant to encourage economic development that would be unlikely to happen without the TIF designation. Despite these stated intentions, the City Council, with support from Pilsen alderman Danny Solis, voted to allow for a special district zoning designation at 18th St. and Peoria to allow for a mixed use development that would allow for 387 condominiums, one parking space for each unit, and commercial uses in 13 buildings, ranging from townhouses to ten-story towers. While 21% of the units are supposed to be “affordable” (starting at $150,000), market rate units will cost up to $699,000. The high cost of the units at the site will exercise speculative pressure on both industrial and residential rents in the surrounding area. Fighting Gentrification Data from the building inventory was used in a series of community meetings to foster discussion on what strategies should be employed to fight gentrification and preserve the working-class identity of Pilsen. The results of the community congress led the Pilsen Alliance to collect signatures in order to put a referendum on the March 2006 ballot. 550 signatures were collected. The referendum read, “Shall the Alderman of the 25th Ward and the City Council downzone Pilsen from RT-4 to RS-3, to slow down gentrification?” The referendum passed with 75% of the vote, a clear indication that teardowns, luxury rental and condo construction, and the gentrification that result are a major concern for Pilsen residents. The Building Inventory Project also showed that some Pilsen homeowners were not taking advantage of the tax exemption for homeowners who live in their

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homes as their primary residence. Over 33% of eligible homeowners in the Building Inventory Project were not claiming this exemption, showing the need for a community education campaign. Conclusion The findings of the Building Inventory Project show a dramatic increase in assessed property values and property taxes, a mismatch between current zoning and actual land use, and a large population of homeowners who are not taking the tax exemptions that would ease their tax burdens and allow them to hold onto their homes. The data inventory findings have led to organizing around a downzoning referendum for the neighborhood and a community education campaign on homeowner and senior tax exemptions. Pilsen The neighborhood of Pilsen, about three miles south west of Chicago’s downtown Loop, has been part of Chicago since the city’s incorporation in 1837. Covering approximately 3.5 square miles and bounded by 16th Street in the north, the South Branch of the Chicago River to the south and east, and Western Avenue on the west, the area encompasses approximately two hundred blocks of residential, commercial, and manufacturing property. Pilsen was the only neighborhood to survive the Chicago fire of 1871, and some of the area’s housing predates the fire. The area has a housing stock that largely dates from the neighborhood’s inception in the 1880s and 1890s as a “port of entry” for Central and Eastern European immigrants – the neighborhood being named after the Czech city of Plzen. Since the 1950s, this area has become a major center of Latino population, primarily Mexican-American, and remains to this day a port of entry neighborhood for immigrants looking for work. The historically working-class character of the neighborhood is currently threatened by the gentrification of the neighborhood, with single-family homes being replaced with luxury rentals and condominiums, and massive residential developments replacing manufacturing sites that have long been a source of employment for the area’s residents. Throughout Chicago, port of entry communities are witnessing significant displacement if they are targeted for reinvestment (Nyden, Edlynn, and Davis, 2006). According to the 2000 Census, Pilsen has a population of over 44,000. 88.9% of the population identifies as Hispanic. 49.1% identify as foreign born. The socio-economic characteristics of the area indicate a solidly working-class population. The median household income in 1999 dollars is $27,763, over $10,000 below the City of Chicago median of $38,625. The majority of Pilsen residents rent, with 74% of housing units renter occupied. Almost 60% of Pilsen residents spend more than 30% (the threshold for affordability) of their income on rent (Voorhees Center, 2003). Gentrification

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Its proximity to the Loop, old buildings and historic designation, and relatively low rents have resulted in Pilsen becoming ripe for gentrification at the start of the 21st century. Urban planner Peter Marcuse (1999: 790-1) defines gentrification as, “the movement into a previously working-class area by upperincome households, generally professionals, managers, technicians, the new gentry, resulting in the displacement of the former lower-income residents.” This definition recognizes the class-based nature of the process, as well as the centrality of displacement to the experience of gentrification. A more popularized definition is provided by the Merriam-Webster dictionary, which defines gentrification as, “the process of renewal and rebuilding accompanying the influx of middle-class or affluent people into deteriorating areas that often displaces earlier usually poorer residents.” It is the displacement of population and assumed deterioration of neighborhoods that make gentrification a contested process. Gentrification may take the form of the rehabilitation of existing buildings or the tearing down of existing buildings and replacement with new construction. The process affects not only the area’s housing stock, but industrial space as well. Many of the neighborhoods targeted for gentrification are industrial neighborhoods. Although these manufacturing centers are not as central to the urban economy as they once were, they still house a vibrant and varied manufacturing sector that serves important urban niche markets and provides employment for a less-educated and largely immigrant and minority workforce. As urban neighborhoods gentrify, these manufacturers are faced with displacement because their space has become attractive to developers who convert lofts into residences. Pilsen has in part become a target for gentrification because of its supply of loft-style buildings as well as its supply of large industrial lots that prove attractive for developers of new housing. Like much of the United States, Chicago has seen a boom in the real estate market, with condominium developments at the forefront. Yet, both market experts and community activists question the type of city being created by this real estate boom. Some argue that Chicago is creating a “see-through city,” in which market experts estimate that as many as 20% of new housing units may be vacant, held by speculators to be flipped at a later date (Roeder, 2005). Reports on the local news instruct viewers on how to flip properties and recommend neighborhoods ripe for exploitation. Single-family homes are being torn down and replaced with luxury rentals or condominiums. Rental units are vacated of their tenants and converted to co-ops or condos. Affordable housing is in short supply. Developers are looking to maximize returns on their investments and this means a focus on areas near to Chicago’s Loop where properties are over-zoned, for example a small, single family home sitting on a plot on which current zoning regulations would allow a four apartment dwelling, a situation common in Pilsen. In such instances, demolition and rebuilding will maximize profits with minimal bureaucratic interference as the new structure will not need approval from the City’s Committee on Zoning as no change or variation in the extant ordinance is necessary. Such developments are already common, with local journalist Laura Putre (2005) noting that in Pilsen, “property taxes have tripled in 10 years”. In

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addition, the proximity of the University of Illinois-Chicago (UIC) and its massive University Village project two blocks north of Pilsen has also impacted on property values in the neighborhood.1 The Pilsen Alliance notes that between 1990 and 2000 house prices have risen on average 68% and, in the census tract nearest to University Village, as much as 548% (Pilsen Alliance, 2005). This is in keeping with findings presented by Geroulis (2003) showing housing price increases on the Lower West Side from $175,000 in 2001 to $250,000 in 2002 for small multi-unit buildings and from $114,000 to $165,000 for the average home in a neighborhood where the housing stock is typically over 75 years old and dominated by 1200 square foot homes and small multi-unit buildings. The cost of rent has also increased, with average rents increasing 44% between 1995 and 2002 (Voorhees Center, 2003). On the eastern side of Pilsen, around one hundred buildings are owned by the Podmajersky family who have been attempting to transform the area into an artists district since the 1950s (Isaacs, 2003). These plans have met with repeated opposition from local residents whose articulation of an anti-gentrification position Wilson et al. (2004: 1173) identify as a “protect-community discourse.” Despite this local opposition to developers, set sections of the media continue to present gentrification as an inevitable process that will occur in Pilsen. For example, on a recent broadcast by Chicago’s local NBC affiliate evening news program, buying property in Pilsen was described by builder Jim Segrue as a, “great investment… [It’s the] best bang for your buck. You can still buy low over here. A young couple coming in can put a nice deposit down [and] in a couple of years, they can flip the property for a nice profit” (Lemon, 2005). It is this kind of attitude, one that values profit over community, that led to the formation of the Pilsen Alliance and the partnership with DePaul University on a building inventory of the neighborhood to detail the effect that gentrification is having on Pilsen. The Pilsen Alliance Pilsen has a long history of struggle. The intersection of Halsted and 16th Streets saw the “Battle of the Viaduct” as part of the general railroad strike of 1877 which resulted in 30 workers killed and 100 more wounded. Events related to the strike at the area’s McCormick Reaper Works in 1886 lead to the infamous Haymarket Affair. More recently, Pilsen has been battling the forces of gentrification to maintain its history and character as an ethnic, working-class neighborhood. The Pilsen Alliance had been at the forefront of this battle. 1

University Village is a 68-acre, 930-unit mixed use development immediately north of Pilsen between I-90/94 (the Dan Ryan Expressway) to the east, rail tracks north of 16th Street forming the southern boundary, Roosevelt Avenue the northern edge and, on the west, S. Morgan Street. A second project, approximately half a mile west of University Village between S. Morgan Street (east) and S. Racine Avenue (west), the 16th Street railroad tracks (south) and W. South water Market (north) is the 11-acre University Commons. Located on the site of the South Water Market, a former distribution and sales center for fresh produce, when completed University Commons will have 850 loft and condominium residential units (initial sales prices being $209,900 to $389,900). The developers maintain that 7% of the units will be “affordable” and priced at $210,000 for a two-bedroom apartment (Handley, 2004).

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In 1998, as the University of Illinois-Chicago expanded southward and the City of Chicago created the Pilsen Industrial Tax Increment Financing District, local leaders began to recognize the need to organize. Of particular concern was the potential of the TIF to encourage gentrification. Community leaders hosted a Community Congress for Pilsen residents, community-based organizations, and businesses to develop a strategic plan for community preservation. The creation of the Pilsen Alliance was part of that plan. The Pilsen Alliance formed with the mission, “To improve the quality of life and to preserve the rich Mexican culture of the greater Pilsen community through the process of seeking and developing local leadership at the grassroots level to work on advocacy/organizing campaigns that emphasize and promote self-determination, accountability and inclusiveness” (Pilsen Alliance, 2002). The Pilsen Alliance advocates for active community participation in the planning and implementation process of new development projects. Pilsen Building Inventory The building inventory that forms the basis of this report is the result of a collaboration between the Department of Geography at DePaul University and the Pilsen Alliance, brought together by DePaul’s Stean’s Center for CommunityBased Service Learning. The Pilsen Alliance wanted to compile data on the area’s building stock to examine what was there and what had changed since the onset of gentrification. The professors of Urban Geography courses at DePaul, which operate as experiential learning classes, were looking for a meaningful project to both teach fundamentals of urban geography while also fostering a sense of civic engagement. The Pilsen Alliance had chosen to pursue the formation of a community zoning board, demanding to be alerted about and have the right to review applications for zoning changes that had been made to the City of Chicago’s Committee on Zoning. In March 2004, the Pilsen Alliance successfully passed a ballot initiative with 95% voter approval for its question, “Shall the alderman hold open public meetings on zoning changes in Pilsen?” As a result, a nineteen member Pilsen Community Zoning Board was established on 15 November 2004. Discussions between the academic and community participants led to the realization that what was necessary for maintaining a vigilant outlook for real estate development was a comprehensive database of existing property and zoning status in the neighborhood. The decision was made to undertake an extensive and systematic community mapping project to produce a database of current building conditions and publicly available information on building permits, property taxes, assessed values, property sales and ownership. This report provides the results of that project, with data collected by DePaul students over two years, from Fall 2004 to Spring 2006. 5002 lots are in the database, comprised of 4763 buildings and 239 vacant lots. The building inventory consisted of both a visual and web-based component. Each student was assigned one square block of Pilsen. Students were asked to assess the condition of the buildings and the purpose for which the buildings were being used. The web-based component consisted of a search of

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city and county websites for assessed values of land and buildings, taxes, zoning, recent sales, and recent building permits (see Appendix A for a sample data inventory sheet). As such, the Building Inventory Project is subject to any inaccuracies that may be posted on these public sites. This is a continuing project, with the Building Inventory database constantly being updated. Property Values and Taxes In discussions with a variety of community residents, the rapid rise of property values and property taxes resulting from the gentrification of Pilsen emerged as perhaps the single most important issue for both homeowners and renters. Of the close to 100 people who attended a community congress on October 4, 2005, the majority wanted the Pilsen Alliance to concentrate its efforts on reducing property taxes. Increasing property values and taxes lead directly to the displacement of area residents. High real estate values make it expensive to both buy and stay in Pilsen, even for homeowners. The rise of property values goes hand in hand with rising property taxes. Often, Pilsen’s working-class homeowners cannot afford to pay these increasing property taxes. Those homeowners with renters may pass the increased costs onto their tenants, who may be forced to move because of increased rents. Those homeowners without tenants may be forced to sell their homes just to pay their tax bills. Landlords may also be forced to look for tenants who can pay the increased rents necessary to maintain their homes. This results in a changing demographic of renter, from Latino families to more middle class tenants and students at the city’s universities. While gentrification has increased the prices those who sell will receive from their homes, the rise of home prices throughout the Chicagoland area makes it difficult to find appropriate, affordable replacement housing within the area. Anecdotal reports indicate that those displaced from Pilsen have been pushed farther away from downtown and to areas far removed from Pilsen such as the suburbs of Berwyn and Cicero. Gentrification is the cause of these increasing home values. Neil Smith’s (1996) theory of the rent gap explains that certain areas of the city become attractive for development because the actual ground rent is lower than the potential ground rent. This gap enables large profits to be realized when land is developed. The new and rehabilitated homes being sold in Pilsen today range from $150,000 for a studio or one bedroom to the $699,000 cost of townhouses in the proposed development at 18th and Peoria. A similar increase is visible in rental rates as well. A two-bedroom apartment in the Bishop Street Lofts at 1822 S. Bishop St rents for $1200. A long-term Pilsen homeowner a few doors down at 1816 S Bishop St rents her two-bedroom for $500. The higher prices of new and rehabilitated condominiums and rental units are well out of the range of affordability, defined as 30% of income for renters or 2.5 times earnings for buyers, for the majority of current Pilsen residents, as the area’s median income is $27,000. Data from the building inventory shows a jump in property values from 2001 to 2005 as shown in figure 1. The highest individual assessed property value increase was $493,235. This represented a 1415% increase in the assessed values

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of the building. Property values are assessed every three years. Current assessments are due in the fall of 2006, and the Assessor is predicting 60-90% increases for Pilsen, as indicated in figure 2. These assessments will hit homeowners particularly hard because the 7% assessment cap that had been in place was defeated by legislators in the Illinois State House. Table 1 shows the increase in assessed values for properties zoned for residential use from 2001 to 2005, while Table 2 shows the percentage increase in assessed values. 43% of properties saw a 25-49% increase in their assessed values, with an additional 23% experiencing a 50-74% increase in assessed values. 24 properties experienced an increase of over 125% in assessed value. The neighborhood saw assessed value increases form $30,000 to over $200,000. The increase in assessed values is important because it leads directly to an increase in property taxes. Property taxes are calculated using a formula based on the assessed value of the home. An example, for a home valued at $100,000 is as follows (Cook County Assessor): $100,000 X $16,000 X $32,000 - $5,000 $27,000 X .10 $2,7000

Property value .16 Residential Assessment Level (16%) Assessed Value 2 Equalization Factor (multiplier) Equalized Assessed Value Homeowner Exemption Adjusted Equalized Assessed Value Sample Tax Rate (10%- determined by local gov’t) Yearly Tax Bill

It is estimated that a $1000 increase in assessed value leads to a $165 increase in property taxes (Raila, 2006). Table 3 shows the trend in property tax increases from 2004 to 2005 for the properties in Pilsen for which data is available for both years. According to Joravsky, “For better or worse, the city is hooked on property taxes, which pay for schools and parks and pensions and almost all the city’s capital budget. Just as important, property tax revenues fund the city’s 140-plus tax increment financing districts, the piggy banks Daley needs to keep his aldermen content” (Joravsky, 2006:9). While the primary concern for neighborhood residents was for the increases in residential assessments, data from the building inventory shows that assessed values increased in all zoning designations, though to varying degrees. Properties zoned for business use (Tables 4 and 5) saw a spike in assessed values, with 62% of properties seeing assessed value increases of 25 to 74%. Commercial properties (Tables 6 and 7) have also seen consistent increases. Manufacturing properties are also experiencing significant assessed value increases, with the largest spike for any individual building at 2141 S. Union, a building zoned M2-3. Increasing assessments for manufacturing properties may reflect the potential for manufacturing buildings to be converted to residential use (Curran, 2004). At the time of the writing of this report, a zoning variance is being sought from M1-2 to RT-4 at 905-923 Cullerton Ave. to allow for condo

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conversion. Tables 8 and 9 show the increases in assessed values for manufacturing properties. While the increases are less dramatic than those for residential and business properties, there are dramatic increases for certain properties. Tables 10 and 11 show the assessed value increases for manufacturing properties in the Planned Manufacturing District (PMD) in Pilsen. The PMD is designed to protect manufacturing properties, and the businesses they house, from residential conversion. While PMD properties have seen a consistent increase in assessed values, the values for these properties are significantly lower than for those properties not protected by the PMD, indicating that the PMD is successful in limiting property speculation on these manufacturing properties. However, not all manufacturing properties in Pilsen are protected by the PMD. Zoning Zoning regulates both land use and building density. There are zoning categories for residential, commercial, business, and manufacturing, as well as special zoning designations for planned manufacturing districts (PMD), planned developments (PD), or special districts (SD). Each zoning category has a floorto-area ratio (FAR) that determines how large a building on a given site can be. Much of Pilsen is zoned RT-4, which allows for a multiple dwelling building. The FAR for RT-4 is 1.2. For example, a lot that measures 25ft x 125ft has 3125 sq. ft. 3125ft multiplied by the 1.2 FAR allows for a building with 3750 sq. ft. of floor space. The minimum size of a swelling unit in RT-4 is 1000 sq. ft. This then would allow for a building with 3.75 dwelling units. Pilsen’s zoning has made it a target for developers because much of the neighborhood is zoned RT-4. As such, it is overzoned, because many of the buildings zoned RT-4 are at a much lower density than that zoning designation allows. The building inventory shows 300 single family homes zoned RT-4. Figure 3 shows the extent of the problem of homes with mismatched zoning in Pilsen. The map also shows that the vast majority of these homes were built before the current zoning code was enacted in 1957. This mismatch between zoning and actual use means that developers can buy a single family home, demolish it, and rebuild three to four story rentals or condominiums in its place, all without any community of city zoning board approval (see figure 4). Tables 12 and 13 show the increases in assessed home values for properties zoned RT-4. The data shows tremendous spikes in home values for a number of properties. 40% of properties saw an increase of over 50%, with 5% of properties more than doubling their value. In contrast, tables 14 and 15 show the assessed values of properties zoned RS3. While assessed values increased, the level and values were significantly lower than for RT4 buildings, with no properties seeing a doubling in value and no properties assessed at over $100,000. This mismatch between zoning and actual land usage has resulted in a large number of teardowns in Pilsen, so much so that the entire neighborhood of Pilsen was declared one of the seven most endangered sites in Chicago by Preservation Chicago in 2005. Preservation Chicago (www.chicagopreservation.org) describes Pilsen this way:

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Taking a stroll down any street attests to the viability of a neighborhood that must be preserved, in its entirety, at all costs. The simple act of turning a corner can reveal a mural exploding from the side of a building. A garage door becomes an artist's canvas, telling the story of a community and its people to anyone who passes by. In a neighborhood starved for green space, the street becomes a ball field and chairs hastily borrowed from the kitchen table instantly transform the sidewalk into a welcoming front porch. The instinct to place flowerpots on a windowsill, on the front steps, or on any other horizontal surface seldom goes unfulfilled. Fences are not fences, but art galleries and, what would be an ordinary sidewalk sale in any other Chicago neighborhood, in Pilsen becomes an outdoor Bazaar. Pushcarts selling ices and other delectable Mexican treats ply the streets or are found strategically parked on busy corners, and a constant chorus of children's voices underscores it all. Even the faded and peeling paint lends an aura of charming realness in a city whose current administration favors newness and suburban sterility. To get an idea of what Pilsen may look like in five years, a short drive north may provide some answers. The East Village neighborhood began an intense debate over its future about 10 years ago when rampant speculative redevelopment began to transform its historic but run down streets. Today, on some blocks, almost every building has been demolished and replaced with luxury housing.

This experience of teardowns in Pilsen is in keeping with a Chicago-wide study which found that smaller, older, frame buildings with less lot coverage had a higher probability of being demolished in gentrifying neighborhoods (Weber, et al, 2006). The mismatch between existing zoning designation and actual land use is also an issue for industrial users. Through an anomaly in the city’s zoning code, there are multiple sites which are being used for industrial purposes but are zoned for residential use. This zoning mismatch makes business owners vulnerable, especially if they rent their space. Because residential usage has a far higher rate of return than manufacturing, industrial space that can legally be converted to residential use is highly profitable to developers. One such site is the Lerner Box Company at 16th St and Carpenter (see figure 5). For most of the 20th century, this site was used for industrial purposes. The building was sold to developer Steve Lipe, who announced his intention to convert the building to condominiums. The RT-4 zoning designation of the site would allow him to do this with neither community input nor city oversight. Despite this favorable zoning designation, Mr. Lipe sought a zoning variance from RT-4 to RM-5 so that he might build at an even higher density. This zoning change request opened up the process of the residential conversion of this previously industrial site to community debate. The Lerner Box case was the first to come before the Pilsen Zoning Board, created in November of 2004. This zoning board, consisting of community groups, neighborhood residents and business owners, was formed as the result of a referendum placed on the March 2004 ballot by the Pilsen Alliance. As with any community experiencing gentrification, a primary concern of the Pilsen Alliance was displacement. The luxury condos to be built at the Lerner

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Box site are far out of the reach of the average Pilsen resident and will certainly encourage increasing real estate prices throughout the neighborhood. But an equally pressing concern was the displacement of industrial uses from the neighborhood. As a working class neighborhood from its beginnings, Pilsen has always relied on the factories in the neighborhood to provide employment for its residents. While that employment has fallen off as a result of the widespread deindustrialization of Chicago, it remains an important economic sector in Pilsen. Zip code business patterns for 60608 in 2002 provided by the Census Bureau show 119 establishments in manufacturing, 162 wholesale trade businesses, and another 72 establishments in transportation and warehousing. The Pilsen Alliance and neighborhood residents were worried about the long-term impacts of the conversion of an industrial site like Lerner Box to high-end residential use. There are other industrial buildings in Pilsen that are vulnerable to residential conversion because of their current zoning. The success of Steve Lipe, the developer of the Lerner Box property, in getting the necessary zoning change, despite objections from the Pilsen Zoning Board, to build at a higher density sets a troubling pattern for the future of industrial businesses in urban locations attractive to developers. The conversion of industrial space for residential use also has a ripple effect on other industrial businesses who are themselves not directly threatened with conversion. The Lerner Box site was not the only industrial business in the area. There are other industrial businesses within two blocks of that site. Certain noises, smells, and truck traffic are associated with any industrial business. Once new residents at the Lerner Box site (to be known as the Chantico Lofts, in deference to the neighborhood’s Mexican heritage) have paid $300,000 for their apartments (prices range from $150,000 to 375,000), they are unlikely to look kindly on these negative externalities associated with industry in the neighborhood. As has been detailed elsewhere (Curran, 2004; Curran and Hanson, 2005), residential conversion of industrial space negatively affects the ability of existing industrial businesses to stay in business. Another issue related to zoning and gentrification is the ease with which developers are granted zoning variance, as the Lipe case illustrated. Applications for zoning changes are dealt with by the Zoning Administrator and Committee on Zoning. Those seeking a variance must send a written notice of a request for zoning changes via first class mail to property owners within 250ft of the lot in question (not including roads) at least 10 days before the public hearing. Notice must be published in newspapers 15-30 days in advance and a sign must be placed on the property within 5 days of filing an application. There are certain requirements a site is supposed to fill in order to be eligible for a zoning change (City of Chicago, 2006). The Zoning Board of Appeals assesses: • if the lot shape is a “hardship” for owner (and that this hardship has not been created by the owner) • if the application is applicable (does it match other properties in the area?) • if it is “based exclusively upon a desire to make more money out of the property”

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• whether, if passed, the variation “will not be detrimental to the public welfare or injurious to other property… ” • if the variation “will not impair an adequate supply of light and air to adjacent property, or substantially increase the congestion in the public streets… endanger the public safety… impair property values… ” Despite these rather straightforward requirements, experience at the Zoning Board of Appeals has shown that if an alderman supports the variance, it is overwhelmingly likely that it will be approved, regardless of whether the site fits the variance criteria. Tax Increment Financing Zoning has also been an issue in relationship to the Tax Increment Financing district (TIF) declared in much of Pilsen in 1998. Pilsen’s TIF is an industrial TIF, meant to protect and encourage industrial enterprises and the employment they bring. TIF districts are in areas determined to be blighted, and the TIF is meant to encourage economic development that would be unlikely to happen without the TIF designation. TIFs are geographically bounded territories in which property taxes are held to reinvest within the TIF’s boundaries. They have become an increasingly attractive urban economic development tool, so much so that Joravsky (2004) estimates that up to one third of Chicago’s land area is now within TIF districts. As much as half a billion dollars of this TIF money had gone unspent, awaiting allocation (Hinz, 2004). The impacts of this rapid allocation of land into TIF districts, and the associated diversion of property tax revenues from Chicago’s general fund to locationally specific projects, has generated much local media commentary, to the extent that Ben Joravsky (2004: 10) exclaimed “the government is lying to you” in his explanation of the inaccuracies in official property tax billing statements which downplay or elide just how much of Chicago’s property tax revenue is diverted from general funds into area-specific TIFs. Urban geographers have also assessed the impact of TIFs in Chicago (e.g. Weber, 2002, 2003; Weber et al. 2003) as have those in other disciplines (e.g. Gibson, 2003). Weber et al. (2003: 2017), for example, provide an assessment that demonstrates urban industrial land within Chicago does not seem to increase in value when located within a TIF district. If anything, Weber et al. (2003) maintain, “a vacant industrial parcel located in an industrial TIF district may even sell for significantly less than an otherwise-identical industrial parcel that is not located in a TIF district.” Parcels in mixed use TIF districts in Chicago, by contrast, do not see decreases in value. This may be because, Weber et al. (2003) continue, mixed use TIFs allow development of residential and commercial properties in a manner that industrial TIF designations do not, and in Chicago development of residential condominiums is booming. On 30 November 2005, a rally protesting against the proposed development of a residential unit containing almost 400 condominiums was held at the intersection of 18th and Peoria in the Chicago neighborhood of Pilsen. This is exactly the type of development the community feared in 1998 when the TIF was declared, and it was one of the major reasons for the formation of the Pilsen Alliance. The proposed development site is located almost entirely within the

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Pilsen industrial TIF, established in 1998 by the City of Chicago to redevelop the area “as a planned and cohesive industrial and employment district providing sites for a wide range of land uses, including manufacturing, distribution, assembly, warehousing and research and development uses.” (City of Chicago, 1998, 19). Covering 907 acres and containing land both on the north and south banks of the South Branch of the Chicago River that has long been used industrially, the TIF’s “Redevelopment Project and Plan” for Pilsen stated a clear aim to enhance “the industrial corridor and commercial areas within the community” (City of Chicago, 1998, 1). It was designed to ensure that Pilsen retained industrial jobs: “49.7% of the private sector employment in zip code 60608 is in manufacturing and wholesale trade… . [and] maintenance of this industrial job base is critical to the economic well-being of the area and to the City” (City of Chicago, 1998, 3). In addition, Pilsen’s TIF would protect the 150 commercial and industrial employers and 7,800 employees within its borders and add to these by providing support for local entrepreneurs and business owners to generate jobs for local residents (City of Chicago, 1998). The 23-year long duration of the TIF aimed to create a “stable environment” for future industrial and commercial development and generate “[a]n increased sales tax base resulting from new and existing commercial, retail and industrial development” in Pilsen (City of Chicago, 1998, 10). Despite these stated intentions, the City Council, with support from Pilsen alderman Danny Solis, voted to allow for a special district zoning designation at the 18th and Peoria site to allow for a mixed use development that would allow for 387 condominiums, one parking space for each unit, and commercial uses in 13 buildings, ranging from townhouses to ten-story towers. 82 of the housing units are designated as affordable, with process ranging from $150,000 to $215,000. Affordability is based on the median income not of Pilsen, but of the Chicago metropolitan area. Thus, an apartment selling for $150,000 (34 units) is considered affordable for an income of $35,000. Those selling for $189,000 (34 units) are affordable with an income of $45,000. Another 14 units will sell for $215,000, considered affordable on an income of $50,000. These affordable units will all be one or two bedroom apartments, largely inappropriate for Pilsen’s large families. Market rate units will sell for up to $699,000. Henry Cisneros, one of the developers of the site and former secretary of Housing and Urban Development (HUD) in the Clinton administration, declared at a community meeting, “This is progress.” While TIF money will not be used in the construction of this development because it is not industrial, the taxes generated from the site, an estimated $15 million, will add to the Pilsen TIF revenues. According to Alderman Solis at a community meeting in which the developers presented their plans for the 18th and Peoria site, “I can use TIF money for anything I want.” Residents are concerned that the alderman’s discretion over the use of TIF funds will shut out the community from the decision-making process and result in TIF dollars being spent on projects not seen as benefiting the entire community. A major community concern is the retention of industrial employment in the area. Part of the 18th and Peoria site is currently being used by a produce wholesaler. Community residents advocated for the retention of the site for

13

industrial use, but the alderman stated that appropriate tenants could not be found. The 18th and Peoria site is a cause for concern for other industrial users in the area. If designation of an industrial TIF is not enough to protect industrial space, all industrial users are vulnerable to residential conversion. The high cost of the units at the site will also exercise speculative pressure on both industrial and residential rents in the surrounding area. Fighting Gentrification Data from the building inventory was used in a series of community meetings to foster discussion on what strategies should be employed to fight gentrification and preserve the working-class identity of Pilsen. Pilsen was divided into three sections, east, central, and west, and community meetings were held in each of these sections. Maps using data from the building inventory were provided to highlight the status of property value increases, zoning mismatches, and absentee landlordism in each of the sections. Attendees of the meeting were then broken into groups to discuss which issues were of most concern to them and to strategize on how best to address these issues. The feedback from these meetings resulted in a series of potential strategies that were then researched by the authors of this report and members of the Pilsen Alliance. These included downzoning, rent control or stabilization, historic preservation, property tax limits, and community land trusts. A community congress was held to present information on these strategies and to solicit feedback on what should be the next step in the Pilsen Alliance’s fight against gentrification. Close to 100 people, from each section of Pilsen, attended the congress. After presentations, those at the meeting voted on which strategies they favored. People were allowed to vote for multiple options. The clear winner was a downzoning referendum, with 50 votes. Next was advocating for a property tax freeze with 47 votes. Exploring rent control or rent stabilization garnered only 14 votes. Community land trusts (CLTs) received only five votes. Historic designation received no votes, an interesting result considering the fact that the alderman was active in proposing a historic district for Pilsen which has since been recognized as a federal historic district. Downzoning The results of the community congress led the Pilsen Alliance to collect signatures in order to put a referendum on the March 2006 ballot. 550 signatures were collected. The referendum read, “Shall the Alderman of the 25th Ward and the City Council downzone Pilsen from RT-4 to RS-3, to slow down gentrification?” The referendum passed with 75% of the vote, a clear indication that teardowns, luxury condo construction, and the gentrification that result are a major concern for Pilsen residents. Nationally, downzoning is an increasingly used tool to preserve at least the physical appearance of neighborhoods (Scott, 2006). The intent is that whatever new development occurs will replace like with like, so that the scale of the neighborhood is maintained. Zoning is only a very blunt tool in the fight against gentrification. It does not insure the affordability of housing, but it does try to

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dampen the speculative pressure on real estate prices in neighborhoods which are zoned for a higher density than current usage. Because comprehensive community planning is largely absent, downzoning has become a popular tool for maintaining the character of communities in the face of large scale condominium construction. The argument against downzoning is that it restricts the number of housing units that can be built and will therefore lead to increased housing prices. Over time, it is possible that downzoning would actually increase housing prices because there are few neighborhoods with a supply of single-family housing. The condominiums and rental units that have been built in Pilsen, however, have been far from affordable and the increased housing stock has not at all lessened housing prices in the neighborhood. New developments like those in Pilsen tend to result in a decreasing of the density of the neighborhood because fewer people are living in these new units, many of them studios and one-bedroom apartments. The potential for teardowns has actually led to speculative pressure on housing prices, as both buyers and sellers assume that condo conversion will add to the value of the site. Downzoning does not prohibit the construction of larger-scale buildings; it simply would require developers to seek a zoning variance, and thus allow for at least some public input, before any larger-scale buildings were built. The experience of both the Lerner Box site and the 18th and Peoria site show that zoning variances are not difficult to get. While there has been active opposition from the community to both of the developments planned for these sites and the variances they received, without this public process, it is highly unlikely that any “affordable” units would have been included in these two developments. An examination of the difference between potential development with RT4 zoning versus that with RS-3 zoning shows that the scale of Pilsen would change dramatically if all of its zoning-allowed development were realized (see tables 16 and 17 and figure 4). Based on the1350 buildings for which both zoning and square footage data were available, we found that 40% of building square footage is zoned RT-4, while 55% of lot square footage is zoned RT-4. The current RT-4 building area is 1,688,589 sq. ft. This leaves 934,895 sq. ft of unused capacity. If these 834 RT-4 lots were downzoned to RS-3, there would be only 279,024 sq. ft. of unused capacity. If the 834 sample lots were built up to RT-4 capacity, then 703 (84%) buildings would have to be demolished and rebuilt. If these 834 buildings were changed from RT-4 to RS-3 (with a lower FAR of 0.9) then 540 (65%) could be demolished and rebuilt. The minimum lot size for RS-3 is 2500 sq. ft. and the average RT-4 lot size is currently 2621 sq. ft. The result is that RS-3 will likely replace like-with-like (it would only apply to new construction). RS-3 zoning allows detached houses and 2-flats. The full realization of the development potential of RT-4 zoning would completely change the look and character of Pilsen. It could mean a 42.7% increase in the amount of built up square footage in the neighborhood. RS-3 zoning still allows for some development potential, but maintains the scale of the current neighborhood. The overwhelming voter support of the downzoning

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referendum shows the community-wide concern over the type and scale of change that has been occurring in the area. Homeowner, senior exemptions In the course of collecting data for the building inventory, it became clear that many homeowners in Pilsen were not taking advantage of some of the benefits available to allow them some relief from rising property values and taxes. The Cook County Assessor allows for an exemption for homeowners who live in their homes as their primary residence. The value of the homeowner exemption varies based on the value of the home, but is typically around $5000. This can significantly reduce assessed taxes and perhaps allow homeowners to stay in their homes despite increasing taxes. Yet, we found that a large percentage of homeowners were not claiming this exemption. Of the 1289 residential buildings that had the homeowners living at the building address, only 862 claimed the homeowner exemption. 427 homeowners, over 33% of those eligible, were not claiming this important exemption (see table 18). Thus, the education of homeowners around tax issues such as the homeowner exemption and also the exemption for senior citizens would provide a practical and tangible way to allow people to stay in their homes despite rising property taxes. This may have the effect both of allowing homeowners to stay in their homes and also of limiting rent increases for renters in homeowner- and senior- owned buildings. Another avenue for education and organization is the appeal of real estate assessment values. The Cook County Assessor assess property values based on similar building sale process and characteristics of the building like square footage and recent improvements. Mistakes can be made in measuring things like square footage that may lead to an overvaluing of the property, and hence higher property values. Documentation of any mistakes is required. Community activism educating homeowners of the process could achieve real results. At a recent meeting in Edgewater (Edgewater Community Council, May 2, 2006), Assessor Houlihan estimated that about 20% of the appeals that made it to his office were successful. Community education and organization around assessment and tax issues will be central to maintaining the current population. Conclusion Gentrification has led to spiking real estate values and displacement of both residents and businesses from Pilsen. The data from the building inventory shows a consistent and often startling increase in assessed property values that lead to a rapid increase in property taxes that can threaten the ability of homeowners to remain in their homes and lead to rental increases that may displace renters, the majority of Pilsen’s population. Pilsen has been particularly susceptible to speculative development because of the mismatch between zoning and current usage. The RT-4 zoning designation of a large number of single family homes leaves these homes vulnerable to condominium conversion which further fuel increases in real estate prices. Massive condo conversion are also being allowed through zoning variances, even in the industrial tax increment

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financing district that was supposed to promote blue collar employment. Analysis of the building inventory data combined with response from community residents has led the Pilsen Alliance to advocate for a downzoning of sections of the neighborhood from RT4 to RS3. The data has also shown that a large number of homeowners are not claiming the homeowner exemption on their property taxes. An education campaign will be necessary to allow people to realize this tax break and thus ease the financial burden of increasing property taxes.

Acknowledgements: Thank you first and foremost to the residents of Pilsen, who participated in community meetings, drove this research, and patiently spoke with students. Our particular thanks to some of the exceptional students who assisted the project, Harpreet Gill, DJ Forbes, Andrea Craft, and Joe Menard. Thanks also to Howard Rosing at the Steans Center for his support and Larry Shure for the cover illustration.

Works Cited Cook County Assessor. Understanding your assessment. Pamphlet. Curran, Winifred. 2004. Gentrification and the nature of work: Exploring the links in Williamsburg, Brooklyn. Environment and Planning A, 36 (7) 1243-1258. Curran, Winifred and Susan Hanson. 2005. Getting globalized: City policy and industrial displacement in Williamsburg, Brooklyn. Urban Geography 26(6):461482. City of Chicago. 1998. The Pilsen Tax Increment Financing and Redevelopment Project Plan, 10 March. City of Chicago. 2006. Zoning ordinance. Sec 17-13-1107. http://w14.cityofchicago.org:8080/zoning/default.jsp. Accessed May 1, 2006. Gibson, Diane. 2003. Neighborhood characteristics and the targeting of tax increment financing in Chicago. Journal of Urban Economics, 54, 309-327. Geroulis, Dean. 2003. Lower West Side reinvents itself. Chicago Tribune. May 11: 5.M. Handley, John. 2004. To Market we go: Historic produce center joins the fertile fields of Near West Side housing. Chicago Tribune, 22 February.

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Hinz, Greg. 2004. TIF funds bulge with cash. Crain’s Chicago Business, 12 July. Isaacs, Deanna. 2003. East Pilsen’s makeover. Chicago Reader, 12 December. Joravsky, Ben. 2004. The government is lying to you! Chicago Reader. 10 December: 10-12. Joravsky, Ben. 2006. Mum’s the word. Chicago Reader. May 12: 8-10. Lemon, Don. 2005. Special Report: How to win in real estate game. Available online: http://www.nbc5.com/irresistible/4241960/detail.html [accessed 1 March 2005]. Marcuse, Peter. 1999. Comment of Elvin K. Wyly and Daniel J. Hammel’s “Islands of decay in seas of renewal: Housing policy and the resurgence of gentrification” Housing Policy Debate 10 (4): 789-797. Nyden, Philip, Emily Edlynn, and Julie Davis. 2006. The differential impact of gentrification on communities in Chicago. Loyola University Chicago Center for Urban Research and Learning for the City of Chicago Commission on Human Relations. January. Pilsen Alliance. 2002. Basic TIF Information – Pilsen TIF Community Pamphlet, Pilsen Alliance, Chicago. Pilsen Alliance. 2005. Gentrification Phenomenon in Pilsen: East vs. West, Pilsen Alliance, Chicago. Preservation Chicago. 2005. Chicago 7: Pilsen. (http://www.preservationchicago.org/chicago7/2006/pilsen.html). Accessed May 6, 2006. Putre, Laura. 2005. Zone sweet home. Chicago Journal, 9 May. Raila, Andrea A. and Associates. 2006. Edgewater Community Council Community Meeting on Property Tax Assessments, Packet 1. May 2. Roeder, Davis. 2005. Chicago’s new downtown. Chicago Sun Times. August 25. Scott, Janny. 2005. In a still-growing city, some neighborhoods say slow down. The New York Times. October 10: B1.

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Smith, Neil. 1996. The New Urban Frontier: Gentrification and the Revanchist City. London: Routledge. Voorhees Center for Neighborhood and Community Improvement in partnership with the Resurrection Project. 2003. Pilsen Rent Study Update. University of Illinois Chicago, March. Weber, Rachel. 2002. Extracting value from the city: Neoliberalism and urban redevelopment. Antipode, 34, (3) 519-540. Weber, Rachel. 2003. Equity and entrepreneurialism: The impact of tax increment financing on school finance. Urban Affairs Review, 38 (5) 619-644. Weber, Rachel; Bhatta, Saurav Dev and Merriman, David. 2003. Does tax increment financing raise urban industrial property values? Urban Studies, 40 (10) 20012021. Weber, Rachel, Marc Doussard, Saurav Dev Bhatta, and Daniel McGrath. 2006. Tearing the city down: Understanding demolition activity in gentrifying neighborhoods. Journal of Urban Affairs 28 (1): 19-41. Wilson, David; Wouters, Jared and Grammenos, Dennis. 2004. Successful ‘protect-community’discourse: spatiality and politics in Chicago’s Pilsen neighborhood. Environment and Planning A, 36, 1173-1190. Table 1

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Assessed Value Increases of Residential Properties: 2001 v 2005

Assessed Values in $

300000 250000 200000

2005 Assessed Values

150000

2001 Assessed Values

100000 50000 0 Residential Properties

Table 2 Residential Property Value Increase in % from 2001 - 2005 400 300 # of Residential Properties

200 100 0

# of Residential Properties

024%

2549%

5074%

179

371

196

75- 100- 125% 99% 125% + 87

12

24

Table 3

20

2003 Property Taxes v 2004 Property Taxes

Property Tax Value in $

12000 10000 8000 2004 Property Tax

6000

2003 Property Tax

4000 2000 0 PIN's of Properties

Table 4 Assessed Value Increases of Business Properties: 2001 v 2005

Assessed Values in $

350000 300000 250000

2005 Assessed Values

200000

2001 Assessed Values

150000 100000 50000 0 Business Properties

Table 5

21

Business Property Value Increase in % from 2001 2005 80 60 40

# of Business Properties

20 0

# of Business Properties

0- 25- 50- 75- 100- 125 24% 49% 74% 99% 125 %+ 40

62

26

7

3

5

Table 6 Assessed Value Increases of Commercial Properties: 2001 v 2005

Assessed Values in $

1000000 800000 600000

2005 Assessed Values

400000

2001 Assessed Values

200000 0 Commercial Properties

Table 7

22

Commercial Property Value Increase in % from 2001 - 2005 100 80 60

# of Commercial Properties

40 20 0

# of Commercial Properties

025- 50- 75- 100- 125% 24% 49% 74% 99% 125% + 95

40

23

19

17

14

Table 8 Assessed Value Increases of Manufacturing Properties: 2001 v 2005

Assessed Values in $

2500000 2000000 1500000

2005 Assessed Values

1000000

2001 Assessed Values

500000 0 Manufacturing Properties

Table 9

23

Manufacturing Property Value Increase in % from 2001 - 2005 60 40

# of Manufacturing Properties

20 0

# of Manufacturing Properties

025- 50- 75- 100- 125% 24% 49% 74% 99% 125% + 45

17

14

11

2

1

Table 10 Assessed Value Increases of PMD Properties: 2001 v 2005

Assessed Value in $

500000 400000 300000

2005 Assessed Values

200000

2001 Assessed Values

100000 0 PMD Properties

Table 11

24

PMD Property Value Increase in % from 2001 2005 30 20 #PMD Properties 10 0

#PMD Properties

0-24%

2549%

5074%

7599%

27

8

7

3

100- 125% 125% + 3

3

Table 12 Assessed Value Increases of RT-4 Properties: 2001 v 2005

Assessed Values in $

300000 250000 200000

2005 Assessed Values

150000

2001 Assessed Values

100000 50000 0 RT-4 Properties

Table 13

25

RT-4 Property Value Increase in % from 2001 2005 400 300 200

# of RT-4 Properties

100 0

# of RT-4 Properties

024%

2549%

5074%

160

299

180

75- 100- 125% 99% 125% + 85

12

24

Table 14 Assessed Value Increases of RS-3 Properties: 2001 v 2005

Assessed Values in $

120000 100000 80000

2005 Assessed Values

60000

2001 Assessed Values

40000 20000 0 RS-3 Properties

Table 15

26

RS-3 Property Value Increase in % from 2001 2005 80 60 40

# of RS-3 Properties

20 0

# of RS-3 Properties

024%

2549%

5074%

19

72

16

75- 100- 125% 99% 125% + 2

0

0

Table 16

Current Building Square Footage by Zoning Status RS-3 5% RT-4 40%

Business 19% Other 3%

Commercial 21% Manufacturing 12%

Table 17

27

Current Lot Square Footage by Zoning Status RS-3 8% Business 13% Other 3%

RT-4 55%

Commercial 13% Manufacturing 8%

Table 18

Property Tax Payer Address Matching Building Address in 60608

427 (33%)

862 (67%)

Properties where homeowner's exemption is claimed Properties where homeowner's exemption is not claimed

Figure 1

28

29