In 2000, the Chicago Housing Authority and HUD signed an agreement to do something unheard of in America's inner cities—replace and transform blighted public housing with 25,000 new or rehabilitated units mixed with market-rate housing.

Though the program faced challenges and legal complaints, the Chicago agency recently passed the halfway point of its ambitious program. Since the program began, private developers have built or renovated 13,000 units, including 90 percent of the senior sites, and rehabbed 95 percent of the scattered-site units. “Something of this magnitude has never been done before in public housing,” says Terry Peterson, CEO of CHA. “But we always said this was a work in progress. We will take this on a year-by-year basis.”

The private sector is playing a huge role in the Chicago transformation by building and managing new units, as well as providing financial incentives for their employees to move into the mixed-income developments. “The private sector and civic community have really stepped up to support this effort,” Peterson says.

Still, challenges lie ahead. Joseph Williams, president on Granite Development, a Chicago-based developer working with CHA in the project, remains concerned about financial support for the program. The future of Hope VI grants, a critical source of funds, is his biggest concern. “I don't know where the funding would come from if that [Hope VI] funding was not there,” Williams says.