The last family moved out of the last high-rise at the notorious Cabrini-Green public housing projects in Chicago in early December. Investors soon will line up to bid on redevelopment of an urban battleground, home to gang violence and unrelenting poverty since World War II. It is envisioned as a new model for mixed-income residential living with some 5,000 apartments and condominiums and houses slated to be built eventually on Cabrini's 70 scarred acres.

Chicago may have harbored some of the most dangerous public housing in the nation in the 20th century, but in the new century the city is proving adept at tearing down old, rotted buildings and inviting private-sector developers to erect entirely fresh neighborhoods. Parts of legendary cesspools such as Henry Horner Homes and Stateway Gardens have already been refashioned into gentrified low-rise housing bearing names like Park Boulevard and Westhaven Park.

The city's target formula to reduce crime is simple: Redeveloped Chicago Housing Authority (CHA) sites should contain a mix of one-third market-rate housing and one-third subsidized, below-market-rate housing with the remainder reserved for CHA tenants.

“We're creating better, more defensible communities,” says Lewis Jordan, the CHA's chief executive officer. Another public housing project, Lathrop Homes, attracted more than 10 bidders, he says. “It's very competitive. Every company bidding expects to turn a profit.” Holsten Real Estate Development Corp. is expected to be the lead bidder.

The bidders are an eclectic mix of for-profit and non-profit groups with a clear understanding of the tax credits and rental assistance that make low-income housing viable. Renaissance Cos., which has built some Cabrini-Green replacement housing, put up a four-story apartment building of 59 units with monthly rents ranging from $400 to $2,200. The company got a $1.8 million loan from the U.S. Department of Housing and Urban Development to finance part of the $15 million construction, and raised equity by selling low-income tax credits.

“Redevelopment projects like these require a public-private partnership,” says Nancy Kapp, president and chief executive of Renaissance. “Even then, it's very low-margin development work. With HUD involved the rule is that the housing must remain affordable for 50 years. That limits your potential return.”

Maybe so, but for-profits like Brinshore Development LLC haven't lost their enthusiasm. Brinshore, master developer of the former housing project Robert Taylor Homes, has built more than 1,000 units so far on the Robert Taylor and other sites. The city promises to build infrastructure. The CHA keeps its deed to the land, typically leasing it out for 99 years at $1 a year to developers.

“The first buildings to go up are rental,” says Peter Levavi, senior vice president with Brinshore. “For-sale comes later.”

Non-profit Mercy Housing Lakefront built the 96-unit Schiff Apartments near Cabrini-Green. Aimed at the homeless and special needs residents, Mercy closely screens prospective tenants for criminal backgrounds and sometimes drugs.

“We'll typically get over 1,000 applicants for less than 100 slots,” says Lisa Kuklinski, vice president at Mercy. “The demand is great for housing like this.”

In Progress: Logan Circle Mixed-Use Project

DEVELOPER: JBG Cos. and Grosvenor

LOCATION: 14th & S Streets, Washington, D.C.

BUZZ: The glass, metal and terracotta structure will incorporate the building that once housed the Whitman-Walker Clinic. It will span the block of 14th Street NW between S and Swann streets NW. When completed, the building will have seven stories with 125 condo residences. The first floor will have 18,000 sq. ft. of retail space. The rooftop terrace will have a kitchen, bar and fire pit.

SIZE:120,000 sq. ft.

PROJECTED COMPLETION: Spring 2012