We recently wrote a piece on the 2021 housing permits issued by America’s “superstar” metros. We found, once again, that high-cost, high demand metros permit little housing; that low-cost, high-demand ones permit far more; and that low-cost, low-demand metros are a mixed bag. Then there’s Chicago, which finishes dead-last in permits of the 20 metros we studied. A common narrative holds that this lower permitting is due to population stagnancy in the city and wider region. But another culprit is the nimbyism fostered by the city’s aldermanic ward system.
There is some truth to the “declining economy” argument—the city’s population dropped in the 2000s and has grown slowly since—but there is also demand for living in the city. Chicago’s Home Values Index (which compiles listing prices from Zillow), increased 48% since 2014. Rents average $2,200 monthly for small apartments, and it’s much higher in nice areas. Chicago has been called “1/3 San Francisco, 2/3 Detroit”, and this proverbial “San Francisco” portion along the northern coast has long been expensive. But the high demand spreads in pockets across all Chicagoland, as some people who tire of the city’s crime, schools and taxes move to suburbs. According to Norada Real Estate, median prices from December 2021 to December 2022 are expected to grow 7.6% in greater Chicago.
In fact, one study in recent years found that upzoning in particular sections of Chicago were actually correlated with price increases—a clear sign of the latent demand in certain neighborhoods. But this may speak more to what the greater culprit behind Chicago’s lack of permitting could be: a unique political arrangement, called “aldermanic privilege”, where councilors control land-use.
Under this system, aldermen—city council members—“initiate or block city council or city government actions in their own wards,” writes Chicago History. This decision-making power featured prominently in zoning decisions throughout the city’s history, and it continues today. Noel Sterett, a land use and zoning attorney with Dalton and Tomich, said by Zoom that the policy began as a way to reduce bureaucracy during council meetings. Supporters argue that aldermen provide democratic input into the development process.
Interestingly, Curbed Chicago writes that this authority isn’t actually formalized in city law, but has continued nonetheless, and results in corruption and discriminatory housing practices. Aldermen even have influence over issuing business permits, helping explain, according to the Illinois Policy Institute, why, “Chicago’s rate of entrepreneurship is the second-lowest among the country’s 15 largest metropolitan areas.”
Sterett said that virtually all land-use decisions include alderman input.
“A letter from the alderman in support of your project is almost more important than the…zoning code,” he said, opening the door to corruption. Indeed, there are numerous historic examples of aldermen engaging in misconduct, and the problem continues today—in 2019, one alderman was charged with running a bribery scheme in exchange for permits.
“Zoning has become highly discretionary as it is,” Sterett said, noting that an alderman’s “preferred developer” often gets a permit, and that aldermen can either make the process faster for favored businesses or slower for disfavored ones. “A letter of support from an alderman” can do more ultimately than adherence to zoning rules, he added.
The impacts on housing supply are stark. A report by the Chicago Area Fair Housing Alliance claims that thanks to aldermanic privilege, “just 20% of the city’s land (including the downtown central business district) is currently zoned for multi-family housing.” Downzoning has occurred in 14 neighborhoods, which the report points to as examples of discriminatory practice. Meanwhile, a majority of affordable developments backed by municipal loans were concentrated in particular districts; “the aldermen of more than half (27 or 54% of total) of Chicago’s wards did not accept even a single multifamily unit.”
In one case, aldermanic privilege was used to require a development to have entirely affordable housing. This might sound good to housing advocates, but can in fact be a NIMBY tactic—a way for aldermen to sabotage development. Very few developers, after all, are willing to build all units (or even with a percentage set aside) as affordable, so mandating 100% affordability is a project-stopper.
Sterett observes that aldermanic privilege is reinforced by anti-development constituents, who encourage aldermen to oppose construction. This adds another layer of NIMBY politics in Chicago—whereas anti-development advocates elsewhere oppose broader citywide zoning reform, aldermanic privilege creates an incentive to oppose it at neighborhood level in Chicago, and for aldermen seeking reelection to heed such voices.
Chicago’s long-time debate about aldermanic privilege speaks to a larger one about whether city council elections should be ward-based or at-large (meaning the whole city votes on councilors). The argument for ward-based is that it fosters hyperlocal politics, so that councilors are responsive to constituents and issues in their neighborhoods. The argument for at-large is that it removes parochialism and makes councilors support policies that are popular to the broader public.
When it comes to land use, at-large is likely the better system. Instead of homebuilders having to kiss the ring of a single alderman and a few noisy locals, they go through a planning bureaucracy and council that presumably has the whole city’s interests in mind. If Chicago combined systems, where at least some councilors are elected at-large, it might reduce the city’s notorious corruption levels.
But beyond the at-large vs. ward-based debate, the true answer is for U.S. cities to create a system of property rights that let people do what they want with their land. The more that land-use decisions can be divorced from politics—be it neighborhood, city, state or federal level—the more that land can be used in a way that meets various market needs. Until then, America’s Second City—and others nationwide—will suffer from less housing and entrepreneurship.
This article featured additional reporting from Market Urbanism Report content staffer Ethan Finlan.