No one seemed to care when Chicago began losing many of its single-room occupancy hotels to redevelopment in the late 1950s, given the reputation SROs had of being understaffed, unattractive and home to an undesirable clientele. But a few imaginative developers have begun looking beyond the grime, the deterioration, the code violations and the intimidating clientele, and they`re seeing buildings that could be restored to serve previously neglected segments of the housing market.
One of those segments is senior citizens and others living on a fixed income, many of whom see SROs as housing of last resort.
In the mid-1980s, when properties capable of being rehabbed were becoming rarer and public attention began to center on the growing ranks of the homeless, housing activists and other community leaders began to take a second look at the remaining SROs.
Lakefront SROs, which operates in the Uptown-Edgewater area, was one of the first nonprofit groups to venture into rehabbing SROs. It recently received a Sara Lee Spirit award and a $50,000 grant for helping lower-income groups.
Lakefront was incorporated six years ago by a previously all-volunteer team of residents who were active in the shelter movement. The group was concerned about the lack of permanent housing for the area`s lower-income singles, many of whom were homeless after having formerly lived in SROs.
”With the funds available, we`re salvaging what we can,” said Lakefront executive director Jean Butzen, ”but we can`t even stem the flow. SROs are the only practical housing solution for many lower-income singles, and if they continue to disappear at the present rate, the numbers of homeless are going to continue to increase.”
In 1985, after being impressed by a study by the Jewish Council on Urban Affairs that showed that 70 percent of the city`s SROs had disappeared over the past 20 years and that they were continuing to disappear at the rate of about 1,000 per year, Lakefront launched its first project, taking over the Moreland Hotel at 4946 N. Sheridan Rd. after the building had been ordered vacated by the Housing Court.
The building was purchased and renovated through a combination of tax credits and funding from the City of Chicago and the federal Department of Housing and Urban Development.
It reopened in May, 1989, as the Harold Washington Apartments, containing 70 residential units and nine commercial spaces, two of which house the Lakefront Social Service and Property management offices. The others contain a variety of businesses, including a dentist, two restaurants and a clothing boutique. Most rooms are about 180 square feet, including kitchenettes, but there are also 10 studios and four one-bedroom units. All spaces are furnished.
With additional funding, Lakefront was able to open a renovated Malden Arms at 4727 N. Malden St. in October, 1991. Malden Arms has 86 single rooms, which also include kitchenettes and are furnished.
All Lakefront tenants pay monthly rents based on their ability to pay, and, according to Butzen, the rent usually represents about a third of the tenant`s income.
”We seldom have more than a one percent vacancy rate,” said Butzen, who added that the tenant turnover rate is low at both Lakefront hotels and that both are 100 percent occupied.
Butzen noted that both facilities have tight security. The front desks are manned 24 hours a day, visitors and tenants must pass the desk to get to the rooms, and there are three buzzers that must be activated to admit visitors. There are also regulations governing when guests may be in the building and the circumstances under which they may remain for the night. Two social workers are available to assist tenants who are coping with emotional or physical limitations.
”Our goal is to provide permanent homes for single adults, including seniors and those with special problems,” Butzen said. ”To do that, we must assume a blended management technique, which combines conventional services with support services through which we can help stabilize the lives of tenants.”
Lakefront also is restoring a 66-unit SRO at 4707 N. Malden. When completed, the building will be used as permanent housing exclusively for women who have been the victims of abuse or domestic violence.
Lakefront has proved that nonprofit groups, using government funding, can renovate SROs as affordable housing. But the real question is whether a private developer, without subsidies, can profitably renovate such hotels.
At least one is trying. Although Peter Hosten admits it is ”economically marginal” to renovate and manage an SRO, his development company, Oakwood Construction, has renovated three SROs and is working on a fourth.
The first SRO he renovated was the 154-unit Norman at 1325 W. Wilson Ave., which was rehabbed in 1988.
Hosten, whose Oakwood Management has been managing residential properties in Chicago since 1975, explained that he works backward from the purchase price to determine how much he can afford to put into renovation and still hold to affordable rents. He said he paid $5,000 per space for the Norman and put $1 million into restoring it.
The renovated spaces feature new kitchens and baths, intercoms, closet organizers, ceiling fans and carpeting. Common areas were renovated and redecorated. The mechanical systems were upgraded and new mailboxes, doors and security locks were installed. A laundry room was provided. Rooms are $275 per month, including utilities. According to Hosten, the hotel is operating at 87 to 95 percent occupancy and the turnover is minimal.
”We received a good deal in terms and interest from First Chicago`s Neighborhood Lending program,” he said. ”I also have my own construction crew. I shop carefully and buy quantity at wholesale prices and I act as my own general contractor to save money.”
Hosten`s firm has also renovated the 110-room Lakeland at 4541 N. Sheridan Rd. and the 155-unit Southerland at 4559 S. Drexel Blvd., and it is working on the 77-unit South Shore Apartments at 7456 South Shore Drive.
The last two are being completed in a limited partnership with the Chicago Equity Fund and Travelers and Immigrants Aid, which also provides tenant referrals and backup social services, as well as assuming
responsibility for accounting, legal and tax matters.
Attempting to explain the difficulties owners, managers and developers confront when striving to provide low-income housing, Hosten said, ”Buildings tend to wear out and financing incentives have to be provided so that existing or new owners can afford to bring them up to code and still hold to affordable rent structures.
”The biggest problem today is the constant increase in property taxes, which fails to take into account that owners cannot pass along the tax to low- income tenants because these people simply can`t bear the increases,” he concluded.
Tony Klok and his partners, Eugene Kornota and Maurice Corcoran, are developers who found that renovated SROs can serve another overlooked segment of the housing market: city visitors who, for a variety of reasons, may prefer small neighborhood hotels to those downtown.
The Surf Hotel at 555 W. Surf St. was a marginal SRO in the Lake View community when it attracted the attention of the rehabbers. Klok is a civil engineer and real estate broker. Kornota and Corcoran are mechanical engineers. The three met at the University of Illinois and have been renovating apartment buildings in the area for 10 years.
They were convinced that there was a market for quality neighborhood hotels, which have, for many years, been nonexistent in areas such as Lake View. They were searching for a facility they could renovate to test their theory.
They acquired the Surf in 1988, and because its restoration was going so well, the partners felt sufficiently confident to pick up a second SRO property. In 1989, they bought the Wilmot at 933 W. Belmont Ave.
A controversial hotel that had been blamed for problems on the street for years, the Wilmot was, like the Surf, an essentially sound structure that was simply suffering from decades of neglect. They renamed the property City Suites.
”The Wilmot was a major, major problem on Belmont and we`re all grateful to those men for solving it as well as they did,” said Ald. Bernard Hansen, in whose 44th Ward the group`s two properties are located.
Klok also noted that a vital factor to the success of an SRO restoration lies in a positive reaction from neighboring businesses and residents. The group has had that. ”The business community and our neighbors have all been very supportive,” Klok said. ”It`s been gratifying.”
The partners estimate that they will spend about $500,000 on each of the two properties before completing renovation.
”We`re very frugal,” Corcoran said, ”and we shop carefully for contractors and subcontractors. We also move slowly and by stages. We`re renovating just one wing at a time. We started on the first wing of the Surf in September and we will have it completed by April. We`ve also completed all the public areas and a majority of the rooms at City Suites.”
Even though temporary visitors to the neighborhood are the target market for both properties, there are still many permanent guests in each of the facilities. Some of them have been living in the buildings since World War II. The partners continue to hold rent schedules to affordable levels for these permanent residents.
”We don`t displace any of our tenants,” said Klok. ”The rooms usually become vacant through attrition. If it becomes necessary to relocate a permanent guest while we renovate a room, we will relocate that person elsewhere in the building or to another of our buildings. We didn`t get into this business to create any more homeless people.”
Marketing director Bonnie Roberts noted that the blend of permanent and temporary guests has helped to create a homey atmosphere at the two hotels.
What about the problem tenants-the pushers, the addicts, the prostitutes? ”Those people seldom stay in one place very long anyway,” Roberts said, ”and when they see that the rules have changed and are being strictly enforced, they leave of their own accord.”
The partners also retained most of the existing staffs of both buildings. ”They are all loyal employees,” Roberts said. ”They learned quickly and now they`re all enthusiastic about the new policies.
The partners are not surprised. ”Neighborhood hotels are a very realistic concept,” said Klok, ”and they used to be quite common. Many people prefer small, European-style neighborhood hotels.
”These are also ideal locations. They`re within walking distance of the Lake View theater and entertainment strips and just a short cab or bus ride from all the downtown attractions. We`ll be offering theater packages this summer,” said Klok, who added that he and his partners are shopping for additional neighborhood SROs suitable for restoration.
”I`ll have to admit, though, that the desk clerks were very nervous for a time after we removed the bulletproof glass from the front-desk area.”
Overnight rates at the Surf are $50 to $60 for a single room (the higher rate is for rooms with French windows overlooking the street) and $65 for double rooms and suites. At City Suites, rooms are $60 and suites are $75.
Accommodations are spacious and well-appointed with all the conventional amenities, including 21-inch color cable TV. Occupancy rates for both hotels are running 61 to 63 percent on weekdays and 80 to 90 percent on weekends. The occupancy rate for hotels in the Chicago metropolitan area in 1991 was 64.7 percent, according to the Hotel-Motel Association of Illinois.
