Increasing Numbers of Rental Units:
Circa 2009, we saw a massive surge in new construction of Chicago rental properties. The appeal to new construction–mostly for a growing population of young, white collar professionals–was an increase in amenities: new appliances, in-until laundry, and luxury building features such as pools and gyms, for instance. The surge of new construction has contributed to an overall record high number of Chicago rental properties in the city, and temporarily, this led to a excess of reasonably priced older units on the market, especially in more residential, fringe neighborhoods.
Logically, one may conclude that an influx of new (often luxury) construction would help maintain a relatively large market of affordable rentals in older buildings, but interestingly, this has not been the case over the last seven years. The continual development of new construction, the renovation trend of older properties, and most importantly, the growing urban Millennial population, has contributed to a spike in rent across virtually all Chicago rental types citywide. In fact, According to Mae Rice, in her April 2016 Chicagoist piece “Chicago Ranks #9 in the U.S. For Rising Rents,” Chicago saw a whopping 8% raise in rent (for one-bedroom apartments) from April to May, the ninth highest rise in country, as the title suggests. Furthermore, according to Adobo, ” the average rent for a Chicago one-bedroom is $1,754 a month. based on just over 10,000 property listings—so this doesn’t seem like a case of a tiny sample size. [And while] Abodo’s Chicago rental listings are especially densely clustered along the lakefront, they have rentals listed as far north as Evanston (and Wilmette!) and further south than the city limits—including Hammond, Illinois.” So in short, the surge of rental properties in the mid-2000s has now also resulted in the surge of Chicago rental prices.
The Implications and Solutions:
Ideally, rents would go down and/or stay relatively constant in older buildings and rise in newer luxury buildings, but that doesn’t seem entirely possible at present, given the national and citywide trend in urban rental spikes. As such, tenants are very likely best off staying where they are in lieu of seeking out rentals at somewhat lower price points or at comparable price points but with better amenities; the fact is that rises are happening frequently enough that a move may not be worth losing what tenants already have. In Gail Marks Jarvis’ May 2016 piece in The Chicago Tribune, “As apartment rents rise, a majority of Chicago renters are staying put,” she sites various findings from MPF Research pertaining to rental trends: “Nationally, the same trend exists, but in Chicago–with most new construction luxury at luxury prices–an even greater percentage of renters are clinging to the apartments they’ve had for a while. For the nation, MPF found 52.2 percent of renters in April choosing to re-up their lease rather than move.” Furthermore, MPF president Jay Parsons says, “typically if you renew your lease, you pay less than the new person coming in [and] now, with vacancies low, people who shop around for lower rent than they are paying end up concluding that they are already getting a pretty good deal.” And conversely, landlords who wish to keep good tenants long-term should consider raising rent by small increments over time instead of so dramatically.