A federal housing official tells City Hall that a civil rights complaint makes “persuasive” arguments the metal shredder’s move to the Southeast Side would cause “serious and irreparable injury.”

Mayor Lori Lightfoot’s administration should hold off on issuing a final operating permit for General Iron’s owner as the government investigates whether the move to the Southeast Side violates the civil rights of residents there, according to a federal official.

In a letter to the city’s Law Department, a U.S. Housing and Urban Development official in Chicago said a federal civil rights inquiry likely would be hampered if the city issues the permit.

Last month, HUD officials confirmed they were investigating after Southeast Side community groups filed a complaint with the agency saying the business’ move from white, affluent Lincoln Park to a Latino-majority neighborhood, surrounded by predominantly Black neighborhoods, was a violation of federal fair housing laws.

The complaint alleges the city is aiding the transfer of the metal-shredding operations — a nuisance that causes air pollution — to the South Side through a Lightfoot administration agreement signed with the business’ owner last year.

As a recipient of HUD funding, the city is required to adhere to the Fair Housing Act, which promotes integrated housing and aims to prevent segregation. Chicago’s zoning and land-use practices are discriminatory, Southeast Side groups allege.

“The city’s actions to facilitate this transfer are central to this complaint,” Lon Meltesen, director of HUD’s Office of Fair Housing and Equal Opportunity in Chicago, said in a letter dated last week. “Any further actions to this effect could frustrate efforts to settle this matter.”

Meltesen added that a preliminary review of the complaint brought against the city “finds persuasive complainants’ evidence that this transfer would subject complainant organizations and the neighborhoods they represent to serious and irreparable injury.”

Under an agreement with the city signed in fall 2019, General Iron will stop accepting scrap metal at its North Side location at the end of the year and will begin dismantling its operation there.

Owner Reserve Management Group is building a new shredding operation along the Calumet River at East 116th Street but needs a final city permit for so-called metal recycling. The company hopes to be up and running on the South Side within the first three months of 2021.

The fair housing complaint was brought by three groups, the Southeast Environmental Task Force, the Southeast Side Coalition to Ban Petcoke and People for Community Recovery. The groups have pointed to city citations for pollution and nuisance. Recently, RMG paid $18,000 to settle its outstanding complaints with the city.

“I’m only hoping it’s indicative they are taking our complaint seriously,” said Peggy Salazar, executive director of the Southeast Environmental Task Force. “I hope HUD holds [the city] accountable.”

A separate lawsuit in federal court in Chicago also alleges residents’ civil rights are being violated.

In his letter, Meltesen asked the city to respond to his request Tuesday, adding “your commitment to pause any action to facilitate this transfer of metal recycling operations is crucial to the successful resolution of this complaint.”

Meltesen didn’t return calls seeking comment. A HUD spokeswoman in Washington said the agency cannot publicly comment on cases under investigation.

A spokeswoman for Lightfoot declined to comment on whether or how the city would answer. In a statement, the city said RMG’s application for the permit has been filed, and information on a “community engagement process” will be announced this week.

In its own statement RMG said it expects the city “will conduct its own rigorous review of the operating permit application, ensuring that the state and local government bodies with the closest interests and best information have and will engage in a fair process.”

Brett Chase’s reporting on the environment and public health is made possible by a grant from The Chicago Community Trust.