2- to 4-unit buildings make up 38% of
the rental stock in Chicago, and account for a much greater portion in many of
the city’s low-income neighborhoods.
Responsible, experienced investors will be needed to help bring 2- to 4-unit properties back onto the rental market and maintain them into
As our working group has learned, and as the audience heard at our Preservation Forum, weak demand by potential owner occupants in areas most affected by foreclosures, and a lack of financing for investors hoping to rehab and rent 2- to 4-unit properties, puts the stock at risk.
The forum opened with a presentation from Geoff Smith, Executive Director of DePaul’s Institute for Housing Studies. Smith shared that 2- to 4-unit buildings make up 38% of the rental stock in Chicago, and account for a much greater portion in many of the city’s low-income areas. In neighborhoods like Humboldt Park and Belmont Cragin, more than 70% of rental units are in 2- to 4-unit properties. Unfortunately, foreclosure filings have also affected a huge portion of the stock—as high as 35% in some neighborhoods.
Jane Bilger, of Community Strategies Consulting, shared the results of her survey of lenders, revealing that many banks offer loan products for 2- to 4-unit properties, but most of the loan programs are inactive.
Next, a panel of investors and lenders shared their perspectives. Jim Athanasopoulos described how his company, SLM Realty, invests in 2- to 4-unit buildings in concentrated geographical areas, fully rehabbing them and managing the properties in-house. Very low appraisals have made take-out financing a challenge, sidelining continued acquisition and rehab activities.
Investor Anthony Oliver, of Community Venture Investment Corp., discussed his experience about being priced out of 2- to 4-unit investments at the height of the housing market several years ago. The sharp decline in the value of these properties has made them viable as affordable rental housing again, but Oliver agrees that financing is now the challenge for investors.
Tony Smith, of PNC Bank, explained that the combination of very low appraisals and regulatory restrictions placed on lenders limits options for financing, but Jay Fahn, from First Eagle Bank, was optimistic that together we could find viable models for Cook County to bring these properties back.
Responsible, experienced investors will be needed to help bring 2- to 4-unit properties back onto the rental market and maintain them into the future. The Preservation Compact and its partner organizations will work in the coming months to develop tools needed to help responsible investors turn around distressed properties..
We look forward to continued discussions about the challenges and opportunities for 2- to 4-unit properties, and we will be reaching out for feedback and to share our findings.