The Case for a Transit-Oriented Chicago

A report by the Metropolitan Planning Council and Institute for Transportation and Development Policy

Development near transit is Chicago’s ticket to equitable growth

Metropolitan Chicago grew by just 0.22 percent a year between 2010 and 2013, far outpaced by peer cities. While the Loop and select neighborhoods are growing, most places in the city—as distinct as Lincoln Park and Englewood—have lost population. Reversing this trend is critically important: More people will mean more home sales, construction jobs, local purchases, and tax revenue to support retail, city services and infrastructure.

The question is not whether we want to grow; it’s how we want to grow. Both to strengthen our economy and promote equity, we need to provide people of all incomes with more options to live in stable and growing communities; more commercial development and jobs in communities where population has been stagnant or shrinking; and development that builds on assets that connect our entire city, such as our riverways and public transportation network.

With hundreds of miles of rail lines, new bus rapid transit routes and a huge passenger base—two million riders a day—the Chicago metropolitan area’s public transportation network is one of our greatest assets. Transit access is not only attractive to businesses and developers, but also connects residents to jobs, amenities and recreation.

Yet for decades, the region’s growth trended away from the transit system and toward roads. Just eight percent of the region’s population now lives within a quarter-mile of a rapid transit station. This change drew people and jobs away from many city neighborhoods, reduced the economic viability of the entire transportation network, narrowed opportunities for working families and increased environmental damage. Far too many people live with long commutes that require automobiles, excessive transportation costs and few amenities located within walking distance of home.

Increasingly, places with excellent transit access price out low and even middle-income residents. This trend bodes poorly for the city, as the latest research from Harvard University has shown that commuting time—in essence, how easily, or not, a person can get to work—is the strongest factor in determining whether a person escapes the cycle of poverty.

Where development near transit is occurring, it generally serves an upper-income market. New construction near transit is rare in lower-income communities. But today, transit use is on the rise, and more and more people want to live in city neighborhoods with excellent transit access and amenities. In Chicago, underused land within a quarter-mile of rail stations could accommodate at least 280,000 new residents and more than 80 million sq. ft. of retail, commercial and manufacturing space—enough to house 70 percent of the city’s expected population growth by 2040.

In Chicago, there is significant support for encouraging more investment and growth near transit. During his first term, Mayor Rahm Emanuel—a regular transit rider—instituted transit-oriented zoning reform and incentives to encourage affordable housing in strong markets through the Affordable Requirements Ordinance.

To take this vision even further, the Metropolitan Planning Council (MPC) and Institute for Transportation and Development Policy (ITDP) offer recommendations to broaden reforms to city zoning regulations and create a dedicated stream of funds to advance development near transit—known as transit-oriented development, or TOD—in neighborhoods across the city of Chicago.

Key findings and recommendations

  1. Development near transit has numerous economic, social and environmental benefits.

  2. Current zoning regulations and financing tools significantly limit new construction in areas close to transit, particularly for mixed-use, mixed-income developments.

  3. A sustained civic collaboration—comprised of community, financial, development, nonprofit and governmental organizations—is needed to advance transit-oriented development in Chicago.

  4. We recommend that the City of Chicago reform the zoning code to encourage mixed-income, mixed-use construction with less parking near our transit corridors.

  5. We recommend that the City establish a dedicated pool of low-interest loans that would encourage the development of affordable housing near transit in high-income neighborhoods and help attract new retail and community amenities to other parts of the city.


See how these recommendations will expand development potential

Today: Only parcels zoned B-3, C-3 and D-3 near transit / Recommendation: TOD zone expanded to 1,200 ft from transit and to all B, C and D zones

Drag the slider left and right to see the difference.
Areas qualifying for density boosts


Current conditions

The city of Chicago has one of the nation’s most extensive public transportation systems, and jobs and population have followed. Today, 42 percent of the city’s land is located within a half-mile of a Chicago Transit Authority or Metra rail station, and 51 percent of the city’s population and 76 percent of its jobs are within that same distance. Since 2005, 65 percent of new building permits and city-subsidized affordable housing units have been recorded within that same half-mile radius from transit.

That’s good news, because transit-oriented development encourages people to spend more money at local business, use transit more, relieve congestion and contribute to a more sustainable environment. It increases opportunities for job-seekers and reduces overall municipal expenditures. It also allows more people of all types—young, old, rich and poor—to have access to opportunities that otherwise are available only to those who can drive their own cars.

However, privately developed new construction near transit remains constrained. While it would seem that the demand to live near transit would encourage developers to provide the supply, this same demand also drives up land values near transit, encouraging investors to build primarily for homebuyers with significant means. This limits both the number and types of homes being developed near transit, ultimately constraining not only the number of people who can live near transit, but also the economic and racial diversity of those communities. For example, five Chicago neighborhoods that recorded major increases in housing costs over the past 10 years—Lakeview, Lincoln Square, Logan Square, North Center and West Town—also actually lost population over that period.

High land values in transit-oriented communities on the north and northwest sides also make investing in new affordable housing in those neighborhoods more difficult, as land is more expensive than in less-wealthy neighborhoods. As the following chart shows, this means that low-opportunity neighborhoods in Chicago, or those with high rates of poverty and poor access to jobs, schools and other amenities, concentrate a disproportionate share of the city’s subsidized affordable housing.

Meanwhile, decades of discrimination, combined with the lower buying power of residents, has reduced access to community amenities such as retail and restaurants in many neighborhoods on the south and west sides of Chicago. As the following chart demonstrates, low-opportunity neighborhoods in our city have a disproportionately low share of the city’s business licenses. While more than 70 percent of the city’s residents live in low-opportunity districts, just 49 percent of the city’s business licenses are located in those areas.

Regulatory barriers to development near transit

Our research demonstrates that the city’s zoning ordinance, which regulates new building construction in terms of use and size, imposes significant limits on how large buildings can be, even near transit.

Size

Zoning rules allow very large buildings in Chicago’s downtown, where more than 75 percent of land near transit is zoned for construction of buildings that are the equivalent of 10 stories or more (with “floor area ratios,” or FARs, of 10 or more). On the other hand, in the rest of Chicago’s neighborhoods, more than 60 percent of land allows buildings of the equivalent of only two stories or less—even within a five-minute walk of a rail transit station. In many cases, today’s zoning makes illegal the rebuilding of the three- to five-story walk-up and courtyard buildings that characterize so many of Chicago’s neighborhoods because they would be considered too dense to comply with current law.

Use

Developers are also very restricted in terms of what types of buildings they can construct. Within a five-minute walk of rail stations, including downtown, only about 20 percent of land is zoned to allow buildings with more than one use inside, such as retail and residential. In addition, in every part of the city, the city imposes large parking requirements—usually one space per unit—even when developers can demonstrate that their prospective tenants will choose not to drive. These parking requirements increase development costs by at least $20,000 per space, based on the industry average. Read more details about existing zoning near transit in Chicago »

  1. Photo by John W. Iwanski

    Zoning near transit in many of Chicago’s neighborhoods is holding back our growth potential and pricing low and middle-income families out of places with excellent transit access.

  2. Photo by David Wilson

    The majority of land near transit limits new construction to roughly two stories.

  3. Photo by CTA

    Most land requires developers to build only one type of use, such as residential or commercial, and not mix them.

The 2013 TOD ordinance…

More about the 2013 ordinance »
Chicago's zoning classifications »

In 2013, the Chicago City Council took a major step forward in encouraging additional transit-oriented development in our city. The TOD ordinance allows projects on certain parcels near rail stations to benefit from reduced parking requirements and increased built densities, both of which support the goal of bringing additional population and jobs to areas close to our transit system.

The ordinance has been effective in bringing new development to some parts of the city, such as along the Blue Line in Wicker Park and Logan Square and along the Red Line in Lakeview. Those projects, several of which are profiled on the Case Studies page, are adding hundreds of housing units and new commercial spaces to neighborhoods that have lost population in recent years—without adding congestion or pollution. They will add vitality to local businesses. Some buildings could not have been built without the ordinance as they took advantage of reduced parking requirements to free up space for other uses and reduce construction costs.

But the ordinance as currently approved affects little of the city’s land area. Just 3.1 sq. mi. of land, or 1.8 percent of the city, qualifies for reduced parking requirements. And an even smaller share—just 0.3 sq. mi., or 0.2 percent of the city—qualifies for increased density.

FAR corresponds roughly to the number of stories in a development.

Finally, development projects seeking provisions offered by the TOD ordinance undergo extensive review periods, which delay development and increase cost and risk for investors.

Financing barriers to development near transit

Financing barriers

The City of Chicago’s Affordable Requirements Ordinance (ARO), which was reformed by the City Council in 2015, plays an important role in encouraging additional mixed-income developments. Beginning in 2016, the ordinance will mandate some on-site affordable housing for most projects that receive either City subsidies or a zoning change. Projects that include less than 10 percent affordable housing on site must pay the City an in-lieu fee, which then goes to fund affordable housing elsewhere. The ARO also includes a special provision for additional density near transit.

But there remains a major gap in financing for other types of affordable housing and community amenities near transit. In the Chicago region, MPC has played a role in creating funds for affordable housing near transit in the south and west suburbs. Other metropolitan regions, including Denver, San Francisco and Seattle, have invested in new “TOD funds” designed specifically to provide grants or low-cost loans for acquisition of land, development of plans and construction of affordable housing and other needs near transit stations. These funds, which have been supported by government and philanthropic grants as well as community development financial institutions, have been successful in attracting new development, including in areas with high land costs. In the Bay Area, for example, a local fund with access to $50 million in capital has helped create some 900 affordable units in the past four years alone. A similar approach could support thousands of units over time in Chicago.


Recommendations

To reorient development in Chicago near transit and create more opportunities for households across the income spectrum, we recommend the following:

Amend the TOD ordinance

With our recommended zoning changes, the amount of land citywide that would qualify for additional housing and commercial density would increase by three times.

MPC and ITDP conducted interviews with developers, community groups and city officials to evaluate what kinds of changes would be most effective in bringing additional population and jobs to areas near transit. To dramatically expand the areas that qualify for TOD benefits and allow our transit system to serve as the backbone for significant new urban growth, we recommend the following:

Increase capacity to encourage development near transit

Cities from Denver to Minneapolis to San Francisco have strong civic partnerships dedicated to encouraging development near transit—and they are delivering results.

We recommend the creation of a civic collaborative with representation from community, financial, development, nonprofit and governmental organizations dedicated to advancing TOD in Chicago. This group will meet regularly to identify new regulatory and financial incentives and to advocate for major TOD projects.

We also recommend that the City of Chicago Mayor’s Office dedicate a point person—to be housed in the Mayor’s Office or a key City department—to coordinate capital infrastructure spending across all City agencies and departments to specifically encourage TOD. This person should also serve as a point of contact for developers, organizations and others looking to speed projects through the approval process.

Tap existing and new financing for development near transit

Near-term, we recommend that the City of Chicago prioritize the expenditure of Community Development Block Grants, Low Income Housing Tax Credits, HOME and other City funds to areas within a quarter-mile of rapid transit stations. We recommend that existing community development financial institutions and the Cook County Land Bank work to focus existing financing and land-acquisition tools on areas near transit as a matter of policy. This will ensure that community resources are accessible to as much of the population as possible.

Long-term, we recommend the creation of a series of new loan products, encompassing acquisition, predevelopment, construction and mini-permanent needs, for developments near transit. These products should be managed by an existing community development financial institution and dedicated to the creation of affordable housing in high-opportunity neighborhoods and community amenities, such as retail, in low-opportunity neighborhoods. We propose that these products be made possible through $10 million in seed funding, potentially from a public or philanthropic source.


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