Samuel Paler-Ponce, MPA
Associate Editor
Loyola University Chicago School of Law, JD 2026
As Chicago grapples with a severe affordable housing shortage—an estimated 119,000 units short—the city continues to experiment with policy solutions. More than half of Chicagoans are rent-burdened, meaning they spend over 30% of their income on rent and utilities. In response, city leaders have turned to tax abatements and zoning mandates to increase the supply of affordable housing. Two key programs—the Affordable Housing Special Assessment Program (AHSAP) and the Affordable Requirements Ordinance (ARO)—represent different approaches to tackling this crisis. Chicago’s affordable housing crisis requires a multifaceted approach, and while the AHSAP and ARO offer valuable incentives and mandates, neither alone is sufficient to address the city’s deep-rooted affordability and racial equity challenges.
AHSAP: Incentivizing development through tax breaks
Signed into law in 2021, AHSAP uses tax reductions to encourage the development and preservation of affordable housing. This program specifically applies to multi-family rental buildings that meet strict rent and tenant income requirements. To qualify, property owners must undertake new construction or substantial rehabilitation, maintain affordability standards, and rent to households earning 60% or less of the area median income (AMI).
The tax benefits under AHSAP remain tied to the property, ensuring long-term affordability even if the building is sold. The program also recognizes Housing Choice Vouchers (Section 8) as contributing toward affordability goals. AHSAP is particularly targeted at communities with historically low levels of affordable housing, as designated by local ordinances.
ARO: Mandating affordable housing in new developments
Unlike AHSAP, which offers financial incentives to developers, the ARO takes a more regulatory approach. The ARO requires developers to include affordable housing in new residential projects of 10 or more units if they receive city assistance (such as a zoning change or financial incentives). Developers must set aside 10% of units as affordable (or 20% if city financing is involved).
A major shift in the ARO’s 2015 revision was the introduction of a tiered in-lieu fee structure. Previously, developers could opt out of building affordable units by paying a flat fee. The revised ARO introduced fees that vary based on neighborhood income levels, making it more expensive to opt out in high-income areas while encouraging development in lower-income zones. The most recent 2021 update further strengthened affordability requirements, increasing set-asides and limiting opt-out options.
Comparing the two approaches
While AHSAP and ARO share a common goal of increasing affordable housing, they take fundamentally different paths to achieve that goal. AHSAP seeks to entice developers by reducing tax burdens, whereas ARO mandates affordability in certain projects. AHSAP’s strength lies in its ability to support long-term affordability without direct government intervention in private development decisions. However, its reliance on voluntary participation means it may not generate enough new units to meet demand.
ARO, by contrast, forces developers to create affordable housing, but has faced criticism for failing to produce enough units and for setting affordability thresholds that are still too high for many low-income residents. The 2021 ARO update attempts to address these shortcomings by requiring more on-site affordable units and lowering the income thresholds for eligibility.
What’s the solution?
Both initiatives play a role in Chicago’s affordable housing strategy, but neither is a silver bullet. AHSAP provides a valuable incentive for landlords to maintain affordability, especially in areas where tax burdens might otherwise push them toward luxury development. ARO, on the other hand, ensures that new construction includes affordable housing—but its effectiveness is limited by developers’ ability to opt out.
Addressing racial equity is essential in the conversation around affordable housing, as decades of discriminatory policies and systemic disinvestment have disproportionately impacted Black and Brown Chicagoans. While AHSAP and ARO aim to increase affordability, they must also be evaluated through an equity lens to ensure they are effectively serving those most affected by historical housing injustices.
Many Black and Brown Chicagoans continue to face barriers to stable housing due to gentrification, rising rents, and limited access to wealth-building opportunities. Future policy adjustments should prioritize not just affordability but also racial equity by increasing deeply affordable housing, preventing displacement, and ensuring that new development benefits long-standing residents.
Ultimately, solving Chicago’s affordable housing crisis will require a combination of both strategies. Inclusionary zoning policies like the ARO can ensure new developments contribute to affordability, while tax incentives like AHSAP can make it more financially viable for property owners to maintain affordable units in the long term. But without additional investment in deeply affordable housing, these policies alone are unlikely to close the gap.
Can these policies evolve to truly meet the needs of the city’s most vulnerable residents? Or will new solutions be necessary to make housing genuinely affordable for all?