By Rafael Leon
The most cost-effective units of affordable housing in Chicago were not built last year. They have been there for years, and we are saving it.
Over the past decade, the city’s affordable housing conversation has been almost entirely about new construction: LIHTC developments, inclusionary zoning, density bonuses, and the billion-dollar programs designed to make them possible. That conversation is not wrong. It’s just incomplete. And the gap in that conversation has a price tag.
A typical Low Income Housing Tax Credit (LIHTC) transaction in Chicago now exceeds $600,000 per unit. That number reflects real costs - construction labor, land, financing complexity, and the overhead of navigating layered public programs. It also reflects an assumption baked into how the field thinks about affordable housing: that the problem is shortage and the solution is production.
But our shortage of affordable housing is not just the result of not having enough, it is also about losing what we already have. And the solution must extend beyond production and include preservation.
For thirty years, the Chicago Metropolitan Housing Development Corporation (CMHDC) has been acquiring multifamily buildings in neighborhoods where working families live and where market pressures are beginning to erode affordability. We rehabilitate them, stabilize rents below market, and manage them as long-term affordable housing — without relying on public subsidies. We have preserved more than 1,000 units across many Chicago and suburban communities at roughly half the per-unit cost of a comparable LIHTC development.
The people we house are what some call the “missing middle” — families who earn too much to qualify for publicly subsidized housing, but not enough to afford market rents in neighborhoods with good schools, reliable transit, and access to jobs. The average annual household income in our portfolio is around $54,500. These families are not in crisis, but they are one rent increase away from displacement, and the affordable housing sector has very few programs designed specifically for them.
How the Model Works
The mechanics of our strategy are straightforward. We identify multifamily properties — two-flats, six-flats, courtyard apartment buildings in neighborhoods that are on the cusp of market change. We analyze each transaction the way any disciplined real estate investor would: cash flow before debt, cap rate, property condition assessment, and operating expense assumptions. The difference is that our pro forma uses below-market but non-subsidized rents, because that is our mission. We determine how much debt the property can support and then we identify equity capital to close the gap.
When we have equity, we can close in 90 days. That speed - made possible precisely because we are not navigating public program requirements - is a distinct competitive advantage. Sellers know we can execute, and we can move on opportunities before they disappear.
After acquisition, we stabilize the property which typically includes some light rehabilitation and manage it for the long term. When the property appreciates and refinancing becomes available, we pull equity out and redeploy it into the next acquisition. The cycle repeats. Real estate investors call this the BRRRR method: Buy, Rehabilitate, Rent, Refinance, and Repeat. We take the same approach. The difference is that we never send our equity out the door. It just goes back into the next preservation deal.
We have been doing it like this since the mid-1990s, one building at a time. Today, our portfolio has more than $100 million in assets and serves more than 2,500 people.
What Makes Our Approach Different
The mechanics of what we do are similar to what any small-building investor does. The goal is different. A private investor acquiring a property without rent restrictions in an appreciating neighborhood will likely choose to maximize rents as the market rises - a perfectly rational approach. We do not. We preserve affordability. The building stays affordable because that is what our organization exists to do, not because a regulatory agreement requires it.
This matters for the broader housing ecosystem. When private capital acquires these buildings without an intentional approach to preserve their affordability, the affordable units disappear - sometimes at once and sometimes through gradual rent increases over several years. Either way, new construction cannot replace those affordable units at anything close to the same cost, and the community loses them.
Albany Park is a useful example. It is one of Chicago’s most diverse neighborhoods, home to a large concentration of low- and moderate-income renters, and a place where the two-to-four unit buildings that have historically anchored its affordability have been disappearing, converted or replaced by single-family homes at prices far beyond what working families can absorb.
CMHDC has been acquiring buildings in this neighborhood since 2002. Today we serve 196 families in Albany Park - in buildings that we have held and maintained as affordable housing for more than two decades - with an average household income of around $54,500. This is what preservation looks like at the neighborhood level.
What the sector is missing
LIHTC will always have a role. New construction addresses shortage in markets where preservation cannot. But preservation is cheaper, faster, and reaches a population that public programs often do not touch. Chicago loses affordable housing faster than it builds it - by some estimates, up to 1,000 units a year. Building a few hundred new units annually isn’t closing that gap. In fact, the gap just keeps getting wider. A policy agenda that focuses almost entirely on new construction, while the existing stock quietly disappears, is not a housing strategy. It is a treadmill.
Chicago already has hundreds of the small multifamily buildings we are talking about. Many of them are in neighborhoods where affordability is under pressure right now. The question is not whether our model works - the growth in our portfolio over the past 30 years shows that it does.
The question is whether policymakers are interested in solutions that make it easier for equity capital to fund more of these efforts at scale.
Rafael Leon is the Chief Executive Officer of the Chicago Metropolitan Housing Development Corporation, a non-profit real estate corporation serving the Chicago metropolitan area and dedicated to preserving affordable housing with a particular focus on emerging and changing communities.
You can learn more about the great work that Rafael and his team are doing in Chicago, here.
