Green Social Housing: A sustainable approach for permanent affordability

April 29, 2025 / Blogs

An innovative solution that directly addresses the needs of Chicago families struggling with housing instability.

The Housing and Economic Development Bond, passed in April 2024, diversified the City’s approach to funding housing and community development, reducing its reliance on Tax Increment Financing and generating new resources to build equitable development. The bond, which Metropolitan Planning Council (MPC) supported, is already delivering results through targeted initiatives that strengthen communities on the South and West sides.

In North Lawndale, proceeds from the bond are being used to support the Missing Middle Housing Initiative, which will revitalize vacant City-owned lots and support home-ownership opportunities for neighborhood residents. Meanwhile in West Englewood, bond funds are expanding the Wood Street Farm – an urban farm and job training center in the neighborhood’s 59^th Street Corridor.

The bond also set aside $135 million to establish an innovative public-private partnership model: Green Social Housing. This new tool pairs public sector investment with private sector development experience to create environmentally sustainable, permanently affordable homes. Funds have already been allocated for the program. The next step is for City Council to create an entity – such as the Residential Investment Corporation (RIC) proposed in an ordinance before a Joint Committee of the Finance and Housing and Real Estate Committees – to make the loans and, ultimately, own the developments.

MPC was pleased to testify in support of the ordinance when it was introduced in City Council. And, since then, we have been encouraged to watch the Mayor’s Office and City Council work collaboratively to strengthen it, such as by adding language to support increased Council oversight of the nonprofit board and taking steps to ensure that projects create good union jobs. Once their efforts conclude, we encourage Council to pass the ordinance.

What is Green Social Housing?

Under the proposed ordinance, projects receiving loans from the Residential Investment Corporation (RIC) would need to set aside at least 30 percent of units as affordable. In this context, “affordable” means rents less than 30 percent of the monthly income for a household earning 80 percent of the area median income – a threshold of $62,800 for a single person, or about the median income for a school social worker. Because the RIC would have an ownership stake in the properties it invests in, it would be able to ensure this affordability is permanent.

For many municipalities, including Chicago, the heart of the social housing model is a revolving loan fund. Through this mechanism, the RIC would provide loans for housing development projects at below-market interest rates in exchange for both an ownership stake in the project and long-term affordability. What makes the Green Social Housing fund sustainable is that as developers repay these loans, the capital returns to the original pool, becoming available to finance new housing. Put differently, because the short-term loans are repaid within 3-5 years, the fund would not require new revenue beyond the initial investment.

The most prominent example of this approach is Montgomery County’s Housing Production Fund. Backed by a $100 million revolving loan fund established using county bond proceeds, the Housing Production Fund has been used to produce a total of 731 units as of June 2024, with another 2,399 units in pipeline. Thirty percent of those units are or are expected to be affordable. Similar efforts are also underway in Atlanta, with the city’s new Urban Development Corporation using a revolving loan fund and public land to build mixed-income housing; and in Tennessee, where the Invest Chattanooga initiative is pairing a revolving loan fund with philanthropic investment.

In addition to the revolving loan fund, the other key component of Green Social Housing’s financial sustainability is cross-subsidization, or using the higher rents in each development’s market-rate units to offset lower rents in the affordable units. At least initially, the cross-subsidization model would work best in neighborhoods where the market can support high-cost market rate units. While this means RIC may not immediately make investments in Chicago’s most disinvested communities, the program offers significant benefits to the city’s overall housing ecosystem.

By deploying GSH in areas with higher cost areas, the City can strategically redirect limited resources like Low-Income Housing Tax Credits (LIHTC) to neighborhoods where new construction affordable housing projects require deeper capital subsidy. This will help ensure every community has access to new developments, rather than having LIHTC projects compete for limited allocations across all neighborhoods.

As the RIC’s portfolio grows over time, the program will evolve beyond building-by-building cross-subsidization, allowing revenue from successful projects in higher-cost markets to help subsidize developments in communities with lower market rents, expanding the geographic reach of the program. This portfolio approach means that initial investments in higher-cost areas will benefit a wide range of neighborhoods.

Conclusion

In 2021, Chicago was short 111,000 homes affordable to low-income renters. By 2021, that number had climbed to 119,000. The top-line statistics are staggering to the point of obscuring the personal toll of the problem. In 2021, nearly half of low- and middle-income Chicagoans were spending more than 30 percent of their income on rent. In practice, that often means facing the choice between paying rent or other essentials, like medical expenses or childcare – to say nothing of pursuing education or training programs that drive the city’s dynamism.

The old approaches are inadequate. On its own, so is this program – the problem is simply too big for silver bullets. But the Green Social Housing model has the potential to sidestep some of the vexing challenges facing affordable housing development. In a world of declining federal investment and limited city funding, Green Social Housing would be financially self-sustaining, with the potential to even be revenue-positive. In a status quo where affordable housing typically becomes market-rate in 15 or 30 years, affordable homes built through the program would stay that way in perpetuity.

And, in a fiscal environment where every new dollar is rightfully under scrutiny, City Council has already done the hard part, recognizing the program’s potential and funding it to the tune of $135 million. All that’s left is for Council to pass the enabling ordinance, establish the Residential Investment Corporation, and let the dollars go to work.