Chicago Guides

The Affordable Requirements Ordinance

Chicago’s ARO is not a tax on building. It is the price of asking the City for something — a rezoning, its land, or its money — and it lands on projects of 10 units or more.

What sets it off

an entitlementCity landCity money

plus 10+ dwelling units · §2-44-085(C)

The ARO lives in §2-44 of the Municipal Code, not in the zoning ordinance, so it is not in our hosted Title 17. Every figure below is from the published chapter text and the Department of Housing; both are linked at the foot of the page, and the fees are adjusted annually.

Trigger

Three doors, and only three

The ARO applies whenever the City gives the project something:

  1. Approves an entitlement for the property, and the property is then developed residentially.
  2. Sells the land to the developer — including land folded into the site to satisfy parking, lot area or setback standards.
  3. Provides financial assistance: TIF, bonds, grants, loans, LIHTC, HOME, CDBG and the rest.

“Entitlement” is defined broadly, and one entry matters to anyone reading our transit-served development guide: a transit-served floor area premium or minimum lot area reduction is itself an entitlement, even with no change of base district. That is the hinge between the two ordinances — the TOD bonus is what buys the affordable units.

A project of 10 or more units is a “residential development” whether it is new construction, an addition, a rental-to-condo conversion, or a substantial rehabilitation — the last defined as work costing at least $75,000 per unit rehabilitated, adjusted annually. The count runs across contiguous parcels under common ownership or control.

Two exemptions. Developments carrying government subsidies with stricter affordability rules than the ARO, and developments rezoned solely to restore a building to a conforming use — see nonconforming uses.

The set-aside

How many units, and at what income

A 40-unit building drawn as 40 stacked blocks, 8 of them highlighted: the affordable units required at a 20% set-aside, spread through the building.

A 40-unit rental project in an inclusionary area, taking Option 1.

Units
40
Set-aside
20%
Affordable units
8
Must be on-site
2
On- or off-site
2
May be fee
4
In-lieu fee
$536,968
The highlighted blocks are the 8 affordable units. Half of them — 4 — must be built; the other 4 may be bought out at $134,242 each.

The percentage depends on tenure and on which kind of area the site sits in. Rental projects in a low-moderate income area owe 10% at a weighted average of 60% AMI. Everywhere else — downtown, an inclusionary area, a community preservation area — the base is 20%, and a developer owing six or more units picks one of four options:

OptionSet-asideAffordability
Option 120%weighted average 60% AMI; at least a third of the affordable units at or below 50% AMI, and a sixth of those at or below 40%
Option 216%weighted average 50% AMI; at least a third at or below 40% AMI
Option 313%weighted average 40% AMI
Option 410%weighted average 30% AMI

Rental set-aside options downtown and in inclusionary and community preservation areas. No rental affordable unit may exceed 80% AMI under any option.

Option 1 has a variant: affordable units may be leased or sold to an authorized agency and still count as 60% AMI units, but sell or lease more than half of them to the Chicago Low-Income Housing Trust Fund or a similar agency and the set-aside rises to 25%.

The trade is explicit: go deeper on affordability and you owe fewer units. For-sale projects work the same way at shallower depths — 20% at 100% AMI or 16% at 80% AMI in the higher-cost areas, 10% or 8% in low-moderate income areas, with no unit above 120% AMI.

Which area a site is in is not something you can read off the zoning map: the Department of Housing publishes and periodically updates the lists of inclusionary areas, community preservation areas and low-moderate income areas. Check the current list before underwriting the set-aside.

Compliance

Build them, place them, or pay

  • Rental: at least 25% of the required units on-site, another 25% on-site or off-site, and the balance on-site, off-site or as fee. The most that can ever be bought out is half.
  • Owner-occupied: at least 50% on- or off-site, balance as fee — except a for-sale project downtown, which may fee out entirely. Put fewer than 25% on-site and the fee per unit rises by 25%.
  • Off-site units must sit in a downtown district, an inclusionary area or a community preservation area; within a mile of the project if it is in a community preservation area; in a comparably transit-served location if the project is; and each must have at least two bedrooms.
  • Family-sized units earn credit: the Commissioner may reduce the required number of affordable units in exchange for units with more bedrooms, on a published equivalency table.
LocationOption 1Option 2Option 3Option 4
Downtown$187,939$234,924$289,137$375,878
Inclusionary & community preservation areas$134,242$157,803$206,526$268,484
Low-moderate income areas$53,697$67,121——

In-lieu fee per unit, current published schedule. The fees are adjusted annually by the Chicago CPI, so confirm the figure with the Department of Housing before it goes in a pro forma.

Options 3 and 4 are rental only. Every dollar goes to the Affordable Housing Opportunity Fund, split between affordable housing production and the Chicago Low-Income Housing Trust Fund.

The obligation is settled before the permit. Ahead of any building permit — foundation and phased permits included — the developer has either paid the fee or recorded an inclusionary housing agreement against the property. Affordability runs 30 years and binds successors, so it shows up in due diligence on the next sale.

ADUs

The rule that catches small projects

The ARO needs 10 units. A separate section of the same chapter needs two.

If two or more additional dwelling units — coach houses or conversion units — are added to a residential building at any time after May 1, 2021, the owner must keep half of them, rounded down, affordable to households at or below 60% AMI for 30 years. The obligation runs with the land, the units are registered with the Department of Housing, and no building permit issues for any ADU until the Department certifies which ones are affordable.

That is a rule about conversions of exactly the size most owners attempt: add two conversion units, one of them is affordable. See coach houses and conversion units for where they are allowed in the first place, and §17-9-0131 for the zoning side.

Sources

Where these numbers come from

This page summarizes §2-44-085 (2021 Affordable Requirements Ordinance) and §2-44-106 (Additional Dwelling Unit Ordinance) of the Municipal Code of Chicago, plus the Department of Housing’s published program materials. Projects entitled before the 2021 ordinance took effect may still run under the 2015 ARO in §2-44-080, and three pilot areas — Near North/Near West, the Milwaukee Corridor, and Pilsen–Little Village — modify the requirements inside their boundaries.

Sources: City of Chicago, Department of Housing — Affordable Requirements Ordinance · Municipal Code of Chicago, Chapter 2-44. Figures current as of September 2026; fees and area designations change, so confirm both before relying on them. This is not legal advice.

Questions

Common questions

What triggers the Affordable Requirements Ordinance?

Three things, and only three: the City approves an entitlement for property that is then developed residentially; the City sells the land to the developer; or the City provides financial assistance. On its own, building by right triggers nothing (§2-44-085(C)).

What counts as an entitlement?

A rezoning to a higher FAR or unit count, an administrative adjustment or variation that does the same, a floor area premium, a transit-served floor area premium or minimum lot area reduction, an amendment to a planned development, a map amendment into a district that allows residential use, or any rezoning to a planned development. The ordinance also says developers may not file piecemeal applications to avoid it (§2-44-085(B)).

How many units before the ARO applies?

Ten. A "residential development" is the construction, addition, substantial rehabilitation or rental-to-condominium conversion of 10 or more dwelling units, on one lot or on contiguous parcels under common ownership or control — so splitting a project across adjacent lots you control does not avoid it (§2-44-085(B)).

How many units have to be affordable?

In a low-moderate income area, 10% of a rental project at a weighted average of 60% AMI. Downtown, in an inclusionary area or in a community preservation area, 20% at 60% AMI — or one of three deeper-affordability options that lower the count. No rental affordable unit may exceed 80% AMI (§2-44-085(F)).

Can I just pay the fee?

Not entirely, for rental. At least 25% of the required units must be on-site and another 25% on-site or off-site, so the most that can be bought out is half. Owner-occupied projects must provide 50% on- or off-site — except downtown, where a for-sale project may fee out entirely, and a project that puts fewer than 25% on-site pays 25% more per unit (§2-44-085(G)).

How long do the units stay affordable?

30 years from the initial rental or the initial sale, secured by a recorded inclusionary housing agreement that runs with the land. A rental unit converted to a condominium inside that window starts a fresh 30-year term (§2-44-085(J)).

Does the ARO apply to coach houses and conversion units?

Not the ARO itself — a separate rule does. If two or more ADUs are added to a residential building after May 1, 2021, half of them, rounded down, must be kept affordable at 60% AMI for 30 years, registered with the Department of Housing before the building permit issues (§2-44-106).

When do I have to comply?

Before the building permit issues — including foundation and phased permits. By then the developer has either paid the in-lieu fee or recorded the inclusionary housing agreement (§2-44-085(M)).

Keep reading

For a real address

Check the real numbers for a real parcel

LotGrade shows what a rezoning would add on a Chicago parcel — and a rezoning is exactly what pulls the ARO in, so you can see the extra units and their cost in the same place.

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