North Kenwood resident Bonita Harrison’s goal has always been to own 200 units of property. As a residential developer, her mission was to create noticeable change to a South Side neighborhood when it comes to affordable housing for and by people of color.
She was well on her way with her firm Sunshine Management, which had 68 units before the pandemic. Now, she only has 15 left, a mix of two-flats and four-flats and single-family homes.
“When you’re a smaller business it’s hard for someone to have that capital to go through the tough times,” Harrison said. “I had to sell because I was constantly being crunched taking money from myself, my family, my daughter, trying to make decisions: ‘I’m not paying my own mortgage, but I’m paying the mortgage for all these other buildings.’”
In the real estate field since 2006, Harrison, 40, is just one of a number of property owners trying to hold on to what they worked for. After much conversation about tenant and landlord relations during the pandemic and hundreds of millions of dollars of rental assistance going to thousands of the former for the latter, Michael Glasser, president of the Neighborhood Building Owners Alliance, wants people to know losses like Harrison’s can influence the housing market in an area, and lead to disinvestment. A recent study by the Alliance, which represents Chicago’s small to medium-sized landlords, showed continued hardship for housing providers in the south and west sides and suburbs.
“It’s the small housing provider who’s really been up to an enormous challenge because they might only have four units in a building or two units or 10 units,” he said. “With a couple people not paying … it absolutely can destabilize housing.”
“Our gas prices will be the big issue this year. Our insurance prices are going up because of all the calamities around the world. And we all know what’s going on with property taxes. Those bills are going to cost a lot of money. And that’s going to be destabilizing for a lot of owners in low-income neighborhoods.”
Tanya Woods, executive director of the legal aid organization Westside Justice Center, worries that owners selling because of COVID-19 challenges could open the door to nonlocal investors, with local wealth leaving communities, leading the way to gentrification.
“When we talk about affordable rental, the vast majority is located in these lower-cost neighborhoods, and owned by folks like Bonita and other small owners who are for profit,” said Stacie Young, president/CEO of Community Investment Corporation, which lends money for the acquisition and rehab of affordable multifamily housing in low- and moderate-income communities throughout Chicagoland. “Our borrowers, half are led by people of color. The typical story of a borrower that we finance would be a janitor who saves his pennies to buy the six-flat down the block. They probably are employing local folks to maintain their building; going to local vendors to get their stuff. This is a disruption.”
Young said that’s why more attention and support is being paid to small housing providers nationwide. She, too, is concerned about big firms and/or outside investors coming in and buying property away from local developers who are familiar with the area. According to Young, CIC has worked with partners for years on creating and advocating for a proposal that would provide property tax relief to owners that invest in their buildings and hold a certain proportion of units as affordable. That proposal became state legislation this summer.
“This kind of property tax incentive is one of the rare types of government-related policies/resources that the small, for-profit rental owners can access without invoking an overabundance of costly government regulations,” Young said. “These guys (small rental owners) are anchoring our neighborhoods and our blocks. We have heard a lot about out-of-town money. They don’t know that there’s a difference between Auburn Gresham and a property on Lake Shore Drive. They’re like, ‘I can buy this building for such a low price. And they don’t know their neighborhood, the way small owners do.”
Harrison said the majority of the buyers of her properties were out of the community. She said six months after the sale of a former Greater Grand Crossing property, tenants were still contacting her trying to figure out where to send their rent checks because the new owners never contacted them.
Harrison, a former financial analyst, moved into real estate full-time after buying and selling her first home before the Great Recession. The sale was a “blessing,” according to Harrison, who made more money from her first home than her work salary, owning it for less than a year. Harrison flipped homes in Greater Grand Crossing, Chatham, Pullman, Roseland, Morgan Park, Bronzeville, Englewood, and Auburn Gresham. She acquired a lot of the properties through the Cook County Land Bank Authority.
The Land Bank is an independent agency of Cook County, founded by the Cook County Board of Commissioners. The agency acquires properties that sit vacant, abandoned and tax-delinquent for years and sells them at below-market rates to qualified community-based developers who then rehab the homes and sell them. Properties are awarded to developers through evaluation, in which a developer’s plan, prior work, and references are considered. You don’t have to be a licensed or certified professional to rehab a property. The agency is currently holding a holiday buying program through mid-January to help local developers acquire vacant properties in their neighborhoods; and giving away 10 parcels to the first 10 applicants approved. The majority of the properties available in Chicago are in Englewood, North Lawndale, Roseland and West Pullman, according to the organization.
Harrison taught the business to her daughter, Kenya, 25, a realtor, who is buying her first six-unit on the South Side.
“People when they look at our community, they’re like, there’s no value there. But there is,” Harrison said. “There’s a lot of people who want to be here. Like myself, I was born here. I was raised here. I raised my family here. I want to be in my community; I want to work here. It matters to me. I want to see the change here.”
Harrison said that one of the challenges she and other developers face are scarce and costly materials, which cause project budgets to rise. Many developers of color are using hard money loans to fund their entrepreneurship. This form of asset-based financing is a quick way to secure financing, but typically are higher interest and entails shorter repayment periods.
“How do you move through a project, if you have hard money to pay and also make a profit? It’s been very difficult. A lot of us that have these short term loans, we don’t have a choice but to move the project along. If we don’t, then it’s very detrimental.”
Harrison said she received a PPP loan and three of of her 68 renters have received federal rental assistance funds. She’s hoping more incentives are provided to current community residents to thwart gentrification. She knows the city has a number of programs for developers like herself, but admits that paperwork can be a barrier. According to Land Bank chairwoman and Cook County Commissioner Bridget Gainer, the organization is continuing to lower the barrier to entry for developers. Per CCLBA’s executive director Eleanor Gorski, the organization saw some of their highest numbers of applications this summer.
“We have over 600 small, vast majority Black and Latino developers from the neighborhood who know how and what to develop there,” Gainer said. “I don’t know if you saw the recent story about Zillow where they tried to buy all these houses and flip them at scale … They didn’t have any sense of the local market, like what kind of house did people want to buy, what were they willing to pay?”
Is there a case where an outside investor makes sense? Per Young, the national nonprofit Preservation of Affordable Housing is a great example.
“About 12 years ago, they were the out-of-town investors,” she said. “They hadn’t done work in Chicago before, but what they brought with them was this expertise to do large-scale developments in a neighborhood. POAH came here from Boston with this capacity, and because they work so hard on the ground … it really added value to that neighborhood and also the rest of the city.”
Bill Eager, senior vice president of Midwest real estate development for Preservation of Affordable Housing, said what made the difference for POAH was spending a fair amount of time making connections within the community, with individuals and local organizations. He said a lot of the early work was in Woodlawn — working with block clubs and tenant associations. Eager said POAH hired a director of community engagement full-time to help the organization build the network they needed to become part of the community that they wanted to be in.
“When we buy a property, we are not at all looking for short-term ownership. We’ll want to do a deal and be in it for 20 to 30 or more years,” Eager said. “I don’t think it’s outside versus inside with investors. I think the bigger question is are the people who are looking at the properties interested in being long-term stewards, putting the resources in financial and otherwise, to keep the properties healthy, or are they just looking to flip them in a few years. The question is: what are their plans once they’re here?”
When the pandemic is over, Bonita Harrison is going to try to attain the goals that she originally set, which is 200 units. And she’s all about cooperating with other developers to concentrate efforts to redo homes a block at a time.
“We can do better together; I can find other developers,” she said. “Let’s focus and that way we can bring equity to the community and it could be us within the community doing it. It helps versus me doing one here, someone else doing one in Pullman, someone else in Roseland, the effect is not as great.”