Chicago And The Disappearing Two-Flat

Converted to single-family homes in high-income areas, vacant and demolished in low-income ones. No one's building new ones. How does Chicago hold on to an indispensable piece of affordable housing?

A block of two-flat buildings in Chicago. Source: architecture.org

(Note: New content has been hard to come by this week. New stuff will arrive very soon. Until then please take in this piece from January 2020. It’s from the very end of the Before Times but still very relevant today. -Pete)

America is a nation of contradictions.

Take climate change. Our nation’s general recognition of the impact of climate change is probably at an all-time high. But does our recognition lead to any policy changes, or even personal ones? Hardly. Global carbon emissions continue to rise despite what we know. Sales of gas-guzzling SUVs and pickup trucks today exceed those of cars, and while electric vehicles are making their mark, they haven’t fully broken through the mainstream consciousness in wider acceptability. As a person of color, I often hear of our nation’s commitment to the values of diversity and multiculturalism, but everyday practice in American society doesn’t always reflect that.

American urbanist discourse is no different. NIMBYs decry the loss of affordable housing and neighborhood character when arguing against new residential development, but often their concern is about home value loss, traffic and parking. YIMBYs push for more housing wherever it can be built, and sometimes find themselves supporting the type of high-rise luxury development they often ridicule for being targeted to the affluent, in the hope that housing affordability filters down to the middle class.

Through all the contradictions, the nation continues to move forward – for better or worse.

Another example is what’s happening in Chicago. Over the last year there’s been a growing movement to legalize accessory dwelling units (ADUs) in the city once again. They were once quite prevalent in Chicago – granny flats and coach houses above garages were a frequent sight in many city neighborhoods. But they’ve effectively been banned since 1957 when the city did a substantial zoning ordinance update, and ADUs were either demolished or converted.

It’s a worthy policy goal. But it also stands in contradiction to the facts on the ground and the demand seen in the housing market.

What do I mean? Exhibit A: the disappearing Chicago two-flat. The two-flat, the utilitarian workhorse of Chicago architecture that enabled millions to affordably own property, collect rent to assist in paying off a mortgage and move up to the middle class, is the only housing type in Chicago declining in absolute numbers. Despite the fact that housing affordability is approaching crisis levels in parts of the city, a staple of the Chicago housing stock, every bit as iconic as New York’s brownstones or Philadelphia’s rowhouses, is fading away.

Chicago’s two-flats were mostly built between 1900 and 1920. Two-flats, and their three-flat and four-flat cousins, were modest structures that allowed families to share housing costs. They were typically narrow enough to fit onto Chicago’s standard 25’ x 125’ residential lots with about 3 feet of space between the building and lot line. Most versions of the Chicago two-flat included a front room with a bay window, a formal dining room, a kitchen, three bedrooms and one bath – all within about 1,200 square feet. Typical floor plans looked like this:

Source: chicagopattern.com

DePaul University’s Institute of Housing Studies has written about the two-flat's demise for some time, going back to at least 2017. In their 2017 State of Rental Housing in Cook County report, they noted that Chicago’s stock of 2-4 unit structures fell by nearly 22,000 units between 2011 and 2015. I did my own investigation using U.S. Census data, and found that two-flats alone fell by 13.5% between 2000 and 2017, representing an absolute loss of more than 27,000 housing units (the decline in two-flats slowed significantly between 2010-2017, losing only 2% during that period. But the loss of 3-unit and 4-unit buildings accelerated during that time, falling by 8% from 2010-2017. This happened despite a big increase in 3-unit and 4-unit building housing between 2000-2010, going up by 19% over that period).

Why is this happening, when urbanists throughout Chicago talk about rising unaffordability? The report nails the reason right here:

“In many Chicago neighborhoods with strong real estate markets, we have seen a growing demand for single-family homes,” says Geoff Smith, IHS’s executive director. “Unfortunately, these areas also have a small supply of single-family homes and very little vacant land for new development.”

As a result, he says, 2-to-4 unit buildings in these areas often are often converted to single-family homes or torn down to make way for new, high-cost single-family homes. This reduces the supply of rental housing in these high-demand neighborhoods and puts more pressure on the existing rental stock.

Two-flats in weaker markets face a different challenge: they were hit hard by the foreclosure crisis. Many of these mom and pop landlords simply couldn’t hold out. Nationwide, writes Allan Mallach in a Federal Reserve Bank of Boston publication, “fewer than half of the owners of two-to-four-unit family properties made an operating profit from their rentals.” That makes it hard to withstand any upheaval. As our data show, between 2005 and 2011, nearly one-third of the apartments in 2-to-4-unit buildings in Cook County’s low-income communities were affected by a foreclosure filing.

In other words, in hot markets, two units with six small bedrooms and two small bathrooms in 2,400 square feet of space make great four-bedroom, three-bathroom single-family home renovations. In much cooler markets units lay vacant, foreclosures rose, and many 2-4 unit buildings are ultimately lost to demolition.

And therein lies the contradiction. Affluent Chicagoans don’t want the utility of the two-flat in a dense neighborhood, they want the space – and easy access to the amenities found in dense areas. The number of units falls at the high end. Meanwhile working-class Chicago neighborhoods aren’t able to draw the eyes of a critical mass of renters, foreclosures rise, and buildings are demolished as a result. The number of units falls at the low end.

Density is being reimagined in Chicago – indeed, in America – and our contradictions have as much to do with our inability to address it as anything else.

Yes, restrictive land use regulations have played a significant role in today’s affordable housing crisis. They drive up the cost of development, and redevelopment is inherently more expensive to do than greenfield development. The amount of actual developable land also plays a huge role, particularly in land-constrained coastal cities. The waterways of the New York and San Francisco areas, for example, act as a rarely recognized natural barrier to development; the San Francisco Bay Area has the added burden of unbuildable hilly terrain. But the increasingly fragmented nature of housing demand has tempered the development community’s ability to respond.

Unlike most market urbanists, who view the housing crisis through the prism of restrictive zoning limiting housing development, I find the reason to be much more subtle. People are indeed expressing a desire to return to cities. However, they want to do so with more space and with smaller household sizes. They want the amenities that come with density but in a density-like context that is contradictory to what was previously built.

More than zoning limiting housing, I tend toward believing there’s a disconnect between the density people want and the developer’s ability to provide it.

How have developers responded? One response has been the luxury high-rise. In America’s superstar cities with global housing demand, luxury condo development has exploded. Urbanists have touted flooding the high end of the housing market as one way of filtering down housing affordability to the middle class. But New York City’s example shows it's not working:

“Even as 80,000 people sleep in New York City’s shelters or on its streets, Manhattan residents have watched skinny condominium skyscrapers rise across the island. These colossal stalagmites initially transformed not only the city’s skyline but also the real-estate market for new homes. From 2011 to 2019, the average price of a newly listed condo in New York soared from $1.15 million to $3.77 million.

But the bust is upon us. Today, nearly half of the Manhattan luxury-condo units that have come onto the market in the past five years are still unsold, according to The New York Times.

What happened? While real estate might seem like the world’s most local industry, these luxury condos weren’t exclusively built for locals. They were also made for foreigners with tens of millions of dollars to spare. Developers bet huge on foreign plutocrats—Russian oligarchs, Chinese moguls, Saudi royalty—looking to buy second (or seventh) homes.

But the Chinese economy slowed, while declining oil prices dampened the demand for pieds-à-terre among Russian and Middle Eastern zillionaires. It didn’t help that the Treasury Department cracked down on attempts to launder money through fancy real estate. Despite pressure from nervous lenders, developers have been reluctant to slash prices too suddenly or dramatically, lest the market suddenly clear and they leave millions on the table.”

Another development community response to today’s reimagined density is the one-plus-five multifamily building. Coming into vogue in the 2010’s in the aftermath of a revision in the 2009 International Building Code that allowed up to five stories of wood-framed construction, they combine high density with dramatically lower construction costs. But their sameness, in virtually every city around the country, has led to their identification as a hallmark of gentrification. Surely you know them:

A one-plus-five building (or in this case, a one-plus-four) in Austin, TX. Source: wikipedia.org

One blogger has called the one-plus-five the American "khrushchyovka", a pejorative Russian term for mass-produced apartment blocks constructed in the Soviet era as a stop-gap measure to meet housing demand. And as blogger Johnny Sanfilippo said, “…there is nothing more permanent than a temporary solution.”

Granny flats and coach houses are laudable additions to the Chicago housing stock, but I don’t think they’re what people are clamoring for in hot neighborhoods. Minneapolis famously ended exclusive single family home zoning districts last year, but I truly wonder what the alternative will be. Of course each local housing market is unique, but will Minneapolis builders build 2-4 unit buildings, if Minneapolis buyers and renters express a desire for… something else? I think that’s an open question. More "missing middle" housing options need to be on the table. Perhaps more cities opening up single-family zoning districts to a wider range of housing option encourages builders to come up with contemporary appealing designs.

Which brings us back to the humble Chicago two-flat. Iconic, yes. Functional and utilitarian, definitely. Contemporary, sadly, no. Claustrophobic spacing, little storage and small closets make them non-starters for the affluent. Lack of financing keeps them from being redeveloped in other neighborhoods. Maybe their time has passed as effective multifamily buildings.

At some point soon, cities will find – and build – the contemporary housing type that’s both acceptable and affordable.