Before the nationwide recession struck Evanston in 2007, it was no secret that the city was in the midst of massive gentrification. Property values and the average household income were skyrocketing in concert with towering condominium high rises, and affordable housing opportunities were shrinking despite initiatives by the city government.
Evanston is “a community on the rise,” although its reputation for diversity is starting to seem more like a temporary condition than a permanent characteristic.
At first glance, it seems intuitive to predict that a city battered by a real estate-driven recession would see a reversal or flatlining of gentrification. But a closer look at ongoing trends in Evanston’s housing market and political landscape reveals that a perfect storm of surging affluence may be brewing off the coast of the North Shore, set to make landfall as soon as the economy begins to rebound.
Real Estate Rush
To this point, gentrification in Evanston has followed a common model: Development in one part of town creates a ripple effect that causes taxes and rents to rise across the city, forcing less wealthy residents out of the community.
“A lot of what’s happening in Evanston has been building these totally new condominium buildings,” said Lincoln Quillian, a Northwestern sociology professor who specializes in urban studies and social stratification. “It brings in a lot of higher income residents who can afford to purchase them. That can be part of a process that causes rents to go up. If property values go up, people’s property taxes go up, too.”
After years of debate, the Evanston City Council last month approved the construction of the controversial Fountain Square “Tower,” a 35-story condominium building at 708 Church St. that will replace Sherman Plaza, another condo high-rise, as Evanston’s tallest building.
According to Quillian, this type of development both helps and hurts a city.
“It creates winners and losers because people that own property already are now faced with a higher tax burden. Even older residents who don’t want to move may have to,” he said. “At the same time, (lawmakers) have political pressures from developers who have a lot of power, and they may also want to gain those tax revenue increases.”
The losers, in the words of Quillian, seem to be concentrated in the south and west ends of the city, which were once considered dangerous areas. Some former residents who were forced to move are still able to keep ties in Evanston because they found affordable housing nearby. Many of these individuals live a double life between their homes in a neighboring municipality, where the property taxes are lower, and Evanston, where many of their friends and family live.
Jean Nicholson lived in south Evanston her entire life before moving to Skokie two years ago after her rent became too expensive. With four children and a job in Evanston, she said the move was difficult, although the family has since adjusted.
“Of course, I didn’t want to leave Evanston,” said Nicholson, who works in a retirement home in Evanston. “It was rough for my children because they had to switch schools.”
Others, however, were less fortunate and had to leave the community entirely.
“A lot of people I used to know are gone,” said Chiquita Yusuff, a 34-year-old who grew up in Evanston but moved to Roger’s Park because she could no longer afford to live in her hometown. “Evanston’s definitely getting out of control.”
Once the economy rebounds, this process will be compounded by a backlog of residents – who could not sell their properties during the recession – moving out of the city in a large wave, probably between 2010 and 2012.
This is true because the drop in property sales in Evanston, from 1,249 in 2006 to 758 last year, represents a shrinking number of buyers rather than sellers, according to local real estate agent Lin Ewing, who compiled the data from the Multiple Listing Service of Northern Illinois.
“Prices have been going down, but buyers are still reluctant to move forward,” said Ewing, who works for Baird & Warner Residential.
Looking forward, however, she said she does not expect the trend to continue much longer.
“I think the general feeling is that we’re pretty much bottomed out. I think by the end of the year certainly we’ll have hit the bottom,” she said. “It seems that in the last month or so there have been more people looking.”
This observation appears to be consistent with when economists predict markets to rebound.
Lawrence Christiano, a Northwestern economics professor, said the process might be in full swing by 2010. When this happens, according to Christiano, more people will move in and out of Evanston.
“If the economy takes off, you would see more movement,” he said. “People would see an advantage to move to find work in the rebounding economy.”
This shuffling around will cause prerecessionary trends in the real estate market to be magnified, meaning comparatively affluent people will be moving into the city at an even higher rate during the rebound than they were before the crisis.
Christiano illustrated this process by relating it to the way a conveyer belt works in a factory. Suppose that, before the recession, there was a steady flow of wealthier people moving into the city like a line of products moving along the belt. At the other end, an equal amount of less wealthy residents were moving out of the city, like finished products off the assembly line.
When the recession hit, the belt stopped and the gentrifying process halted despite the fact that the same flow of disadvantaged Evanston residents were looking for a way out.
“People that would normally come in delayed coming in and people that would normally leave delayed leaving,” he said.
Because real estate movement accelerates in a time of rebound, the demand is once again likely to catch up with the supply, and the belt will start moving again.
This time, however, it will be carrying a lot more products, meaning Evanston is about to lose more of its less affluent residents in one wave than it has since the gentrifying process began.
Avoiding the Inevitable
Since 2006, the Evanston political landscape has been dominated by one question: How will the city make up its $145 million pension funds shortfall?
A 1993 law passed by the Illinois General Assembly requires all municipalities to fulfill their “unfunded liability,” the amount of money its police and fire department pensioners are likely to need in retirement, by 2033.
For Evanston, this means the City Council must put aside an average of more than $10 million per year for the next decade and a half or its police and fire pension boards will have the right to sue the city for the missing cash.
Although almost every council vote is framed in the context of this mammoth deficit, the debate becomes more heated in the January and February budget workshops when the aldermen toe the precarious line between raising the property tax and coming up with other sources of revenue.
“The question we have to ask ourselves is what are the council’s priorities?” former City Manager Julia Carroll said during her last budget season in office, the 2008-09 cycle. “Is it more important to lower the tax levy or retain all current services or some combination thereof?”
Because Evanston officials and residents take enormous pride in the city’s history of socioeconomic diversity, the council has gone to great lengths to avoid making the city a more expensive place to live.
A look into the history of the deficit, however, reveals that significant tax hikes in the near future are almost inevitable.
The city became aware of the pension funds’ dire conditions in 2006 when it reevaluated its actuarial assumptions, an in 2006 when it reevaluated its actuarial assumptions, estimates of how much money the city owes based on the number of policemen and firefighters who will retire in the
near future and how much money they will receive in retirement.
In the aftermath of this discovery, most of the finger-pointing was directed at the city’s former actuary, Ted Windsor. Windsor, who was replaced by the firm Gabriel, Roeder, Smith & Co. in 2006, is blamed for underestimating how much the retirees would cost the city.
“(Windsor) had all the police and firemen retiring as old men and dying shortly thereafter,” Mayor-elect and Seventh Ward Alderman Elizabeth Tisdahl said. “Of course we came up short.”
The 2008-09 budget, the first to be voted on after the officials learned just how far in the hole Evanston is, included a more than 7 percent spike in the property tax, the city’s largest in more than a decade. In the same year, the council also transferred $1.2 million from the General Fund, a financially dangerous move in the eyes of many.
“The people who will be hurt the most (by a tax increase) are those who are having a hard time staying in Evanston,” said Ald. Edmund Moran (6th). “It could be the straw that breaks the camel’s back.”
This February, the council decided not to raise the property tax, making the immediate needs of residents dealing with the recession its first priority.
While this move can hardly be seen as inappropriate, it will make the process of fulfilling the unfunded liability even more difficult in the coming years because the council reduced the amount of direct pension funding by about 15 percent compared to 2008-09. The council also used an enormous amount of one-time transfers to avoid a tax hike.
Two years ago, when Evanston began forming a financial plan to deal with the deficit, city officials were in consensus that the council had to employ all possible revenue-generating methods to meet its liability: cutting the least vital services, finding as many one-time sources as possible, selectively increasing fees for services as well as fines for violations and raising property taxes. The question at the time was finding a balance between those methods, not choosing one or the other.
With $2 million gutted from General Fund allocations this year alone and one-time funding opportunities quickly evaporating, the city is running out of options. The council can only avoid raising the property tax for so long.
