The Northwest Housing Preservation Ordinance (NSPO) is reshaping the real estate landscape in several Chicago neighborhoods.
Passed by the City Council with the goal of protecting affordable housing, the ordinance introduces new regulations that grant tenants the right to match offers on rental properties before a sale can proceed.
While advocates see this as a way to preserve affordability and prevent displacement, property owners and investors are raising concerns about the unintended consequences this could have on real estate transactions.
What Is the Northwest Side Housing Preservation Ordinance?
Enacted in September 2024, the NSPO applies to rental properties in Logan Square, Humboldt Park, Avondale, Hermosa, and portions of West Town and Pilsen.
The ordinance consists of two major provisions:
- Higher Demolition Fees – To discourage the teardown of multi-unit buildings for single-family home conversions, the ordinance increases demolition permit surcharges, making redevelopment more costly in these neighborhoods.
- Tenant Right of First Refusal – When a property owner decides to sell a rental property, tenants have the right to match the purchase offer and buy the building themselves. This provision allows tenants 120 days to organize, secure financing, and make a competitive bid.
To exercise this right, tenants can form an association to collectively gather the necessary financial resources. If tenants fail to act within the allotted time, the owner can proceed with the sale to the third-party buyer.
How Could This Impact Property Sales?
While the ordinance intends to stabilize housing and protect tenants, it introduces several challenges that could complicate real estate transactions.
Extended Sale Timelines
One major concern for property owners is the delay in the sale process.
Under normal conditions, a real estate transaction moves forward once a seller accepts an offer. Under the NSPO, however, property owners must wait up to 120 days before finalizing the deal. This can deter investors and buyers who prefer smoother, quicker transactions.
Uncertainty for Buyers
Third-party buyers now face uncertainty when making an offer on a property.
If tenants decide to match the offer, the original buyer loses the opportunity to purchase the building. This added risk may make investors hesitant to pursue properties in affected areas, potentially reducing overall demand.
Tenants may assign their rights to take their right of first refusal. That may make the intention to preserve tenant rights illusory, since it might allow for payment to the tenants to have them walk away from their rights.
Impact on Property Values
With fewer willing buyers, property owners may struggle to sell at market rates.
Some sellers may be forced to lower prices to attract interest, knowing that a lengthy approval process could deter competitive offers. The combination of fewer buyers and prolonged sales timelines could result in declining property values in these neighborhoods.
Financial Hurdles for Tenants
While the ordinance gives tenants an opportunity to become property owners, the reality of securing financing, organizing a tenant association, and navigating the purchasing process within 120 days is a significant challenge.
Many tenants may lack the resources to follow through, leaving the market in limbo while sellers and buyers wait for the process to unfold.
What’s Next for the Northwest Side Market?
The NSPO introduces a new layer of complexity to property transactions in some of Chicago’s most competitive neighborhoods.
While the ordinance aligns with efforts to combat gentrification and preserve affordable housing, the practical challenges it presents could slow down sales, deter investors, and reduce market activity in the short term.
Whether this ordinance will achieve its goal or create additional market barriers remains to be seen.
The Minchella & Associates Difference
With over 40 years of experience in Illinois real estate law, Erica Minchella has represented thousands of home sellers and buyers, landlords, and commercial and investment property owners. For more information, schedule a consultation today.
