Chicago faces a deficit of 120,000 affordable homes. The typical response—build more subsidized housing—ignores a fundamental question: which housing investments actually deliver returns? Let’s look at the numbers from an investment standpoint.
According to Crain’s Chicago Business reporting, city-supported affordable housing projects now cost between $644,000 and $766,000 per unit. That’s more than upscale downtown luxury development. The city is directing $135 million in taxpayer-backed bond financing toward Green Social Housing, a program that will invest roughly $375,000 per unit (half the total development cost of $750,000) in new construction.
In addition, the City Council recently expanded a program for ADUs—the “granny flats” and coach houses. On paper, these should be the perfect market-driven solution. Private investors build them, the city doesn’t pay construction costs, and they add housing supply incrementally.
Unfortunately, the city wrapped this market solution in regulations that housing advocates called “cost-prohibitive.” Contractors must participate in federal apprenticeship programs—a requirement that exists for no other housing construction in Chicago. Construction is capped at 1–3 units per block per year. Aldermen must “opt-in” for single-family neighborhoods. And affordability requirements limit the long-term return.
As a result, a program ostensibly designed to address a 120,000-unit shortage may produce only a few hundred units over several years, concentrated in wealthy neighborhoods where investors can absorb the regulatory costs.
The Investment That Works
Now consider a third option: preserving naturally occurring affordable housing.
Most people don’t know it, but more than two-thirds of Chicago’s affordable housing is naturally occurring. It’s found in older buildings with lower rents because of their age, location, or condition. These aren’t subsidized—but they’re disappearing, converted to luxury rentals or lost to deferred maintenance.
My organization, Chicago Metropolitan Housing Development Corporation (CMHDC), has been acquiring and rehabilitating these buildings since 1982. Our cost: $120,000 to $150,000 per door for acquisition and rehab combined. A fraction of the cost for new construction or even for ADU conversion.
CMHDC has grown from $4 million in assets in 1996 to over $80 million today, with a 740-unit portfolio delivering consistent returns—all while keeping rents affordable for working families. This isn’t subsidy-dependent housing that requires ongoing public support. These are sound real estate investments that happen to serve a social mission.
Of course, no investment is guaranteed. But over more than 40 years, CMHDC has demonstrated that it’s possible to produce strong, consistent returns without any loss of principal. That track record speaks to the fundamental soundness of the preservation model—when you’re acquiring real assets at below-replacement cost in stable markets, the downside risk is substantially lower than new construction.
This is what investors call a double bottom line: financial returns and social impact. The buildings are already built, already occupied, already serving low- and moderate-income families. Smart capital simply prevents their loss—and gets paid back with interest.
Private investors are already recognizing this opportunity. CMHDC is launching our own acquisition fund because we see what the market sees: preservation delivers both financial returns and housing impact at a scale that new construction simply cannot match.
Follow the Smart Money
Chicago needs new construction in neighborhoods where preservation opportunities don’t exist. It needs ADUs to add incremental supply where regulations don’t kill the economics. But neither of these approaches can reach the scale that 120,000 missing homes demands.
The city faces a choice about where to deploy its scarce resources. It can invest hundreds of thousands of dollars per unit in expensive new construction. It can hope that overregulated ADUs somehow pencil out for private investors despite cost-prohibitive requirements. Or it can redirect capital to proven preservation strategies that deliver both financial returns and housing preservation.
This isn’t about choosing between affordable housing and sound investments. The preservation model proves you can have both. The question is whether public policy will follow the same logic that private capital already understands.
The smart money—both public and private—is already flowing toward investments that deliver returns. The 120,000 families waiting for affordable housing deserve better. The new year offers Chicago a chance to follow the smart money, and to align its investments with proven returns.