Chicago's ADU...Insanely powerful
Howdy Chicagoans!
I have been quite excited about the possibility of this ordinance being passed and in effect 8.1.20 and have been thinking about the best way to implement a strategy. For those who are just hearing about this, on May 20th the long anticipated ADU ordinance was introduced to Chicago's City Council. I really like the way it was written as I think it will be able to remedy some pent up demand for affordable housing, legalize in-law units and coach houses that have been there for a long long time, and add conversions units and new coach houses!! I certainly recommend reading the details, but here is a few snapshots of what we can expect-
"3. How many ADUs could be built on a property?
Property owners in “R” zones can choose to add either one or more conversion units or a coach house. Coach houses would not be able to be built on any lot that has a conversion unit.
If adding conversion units
Owners of single-family houses that are 20 years or older would be able to build one “conversion unit”. All other residential buildings that are 20 years or older would be able to add 33 percent of the number of existing units, and rounding up or down.
- 2-flats: 2x0.33 = 0.66 rounding up to 1 unit
- 3-flats: 3x0.33 = 0.99 rounding up to 1 unit
- 4-flats: 4x0.33 = 1.32 rounding down to 1 unit
- 5-flats: 5x0.33 = 1.65 rounding up to 2 units
- 6-flats: 6x0.33 = 1.98 rounding up to 2 units
- And so on.
If adding a coach house
All properties that are either vacant or have a single-family house, 2-flat, 3-flat, or 4-flat would be able to add one coach house as long as there is no conversion unit on the lot."
If you have an Rzoned lot(majority of lots in the city) you would be able to, by right, add 1 unit. My thought is that if you have an open basement, it would be the most cost effective way to utilize the new ordinance. A coach house could be 700-1400sq feet as the footprint of the CH has to be 700sq ft, but maybe some builder creates an affordable CH design for the inevitable demand coming.
This should increase property values of current owners even if they haven't utilize the conversion or CH because a future owner could monetize that.
Where I'm really excited is the idea of adding 33% more units in a big building with an open basement. Lets say you already own a 45 unit courtyard building with an open basement that used to house the boiler, W/D, and electric panels but you have already HVAC'd each apartment, added in-unit W/D , and moved electric panels to the units. By right you would be able to convert that empty ground floor space to 15 apartments!! Half of these apartment will need to be affordable ($1,069.50/mo) for the next 30 years and half could be market rent apartments. Assuming 100k/door to create these 2bd/1ba units, you could hit the 1% rule on the affordable units and close to 2% on the market rate apartments. You could refi the building after all of the new conversion apartments are rented and recapture 100% of the capital needed to create these new apartments. You just took your 45 unit building and converted it to a 60 unit building with no money out of pocket, created 1.5m of equity(assuming $200k/door ARV), and cash fow . That is the very definition of "highest and best use" and will make a lot of folks $$ while also contributing 8 affordable units to the city of Chicago.
I would love to hear others thoughts, and how they would take action if passed!
