Chicago Rents Surge as Construction Struggles to Keep Pace

Rents in Chicago are rising at an alarming rate, outpacing other major metropolitan areas. According to a recent report from Zillow, rental prices in the Chicago metro area increased by 6% over the past year, with some suburbs witnessing even steeper climbs of over 10%. The surge comes despite a relatively stable population, indicating strong demand for housing that is not being met by construction efforts.

The average monthly rent for an apartment in Chicago now stands at an eye-watering $2,213, reflecting an increase of about $138 from the previous year and over $680 compared to a decade ago. To afford this typical rent, a household would need to earn approximately $88,500 annually.

Construction Lagging Behind Demand

While many cities have successfully aligned construction with demand, Chicago is falling behind. Builders in the region are struggling to keep pace, resulting in a tighter rental market where prices continue to climb. The 2024 data indicates that Chicago-area municipalities issued just 4.6 housing permits per 1,000 existing homes, which is significantly lower than the national average of 10.1 and the lowest among major U.S. metros, as reported by Construction Coverage.

The challenges in building new residential units stem from stringent regulations and zoning laws. Orphe Divounguy, a senior economist at Zillow, points out that cities with fewer building restrictions have managed to maintain affordability better. For instance, even as rents have increased in Chicago, they have decreased in Denver, where developers constructed around 20,000 new apartments last year.

Impact on Future Residents

Despite Chicago’s historical appeal to recent graduates and young professionals, the rising costs may deter potential newcomers. As remote work expands opportunities for flexible living arrangements, the city’s rental landscape could become less attractive. Divounguy notes that sustained trends in rising rents could lead to diminished interest from graduates of nearby universities, particularly those in the Big Ten.

While rent in Chicago remains more affordable than in cities like New York, where housing costs consume 41% of household budgets compared to 27% in Chicago, the growing rental prices warrant attention. Although the city is not likely to lose its reputation as a livable metro overnight, the current trajectory raises significant concerns.

Addressing the underlying issues of supply and demand is crucial for Chicago’s housing market. Without significant increases in residential construction, the city risks becoming increasingly unaffordable for both current and future residents. The call to action is clear: Chicago needs to build more housing to ensure that it can continue to attract and retain a vibrant population.