Downtown Chicago is in the midst of a prolonged building spree, adding between 3,000 and 4,000 new rental units every year since 2016. But with uncertainty around rising property taxes, soaring construction costs, and possible changes to the city’s affordable housing rules, can the apartment boom sustain its current levels?
“It can last,” Gail Lissner of Integra Realty Resources, tells Curbed Chicago. According to Integra’s predictions, the city is on pace to build an additional 10,000 units over the next three years.
Despite the fresh supply of luxury units in new or soon-to-be-completed buildings like Wolf Point East (698 units), The Venn (586 units), and Alta Grand Central (346 units), downtown rents aren’t expected to drop any time soon. Instead, Integra predicts a modest 2 percent increase in rental prices for the current year—meaning there’s no shortage of residents lining up to live in these new luxury apartment towers.
Those renters who can afford to spend more than $3,100 on a 1,000-square-foot apartment should generally expect to see smaller sized units. Roughly 70 percent of these apartments are either studios, convertibles, or one-bedrooms, says Lissner. Tinier apartments with more efficient floorplans can help keep monthly rents in check and lower the per-unit cost for developers.
That said, rising costs continue to be a concern among Chicago-based developers, especially if the new Cook County assessor comes up with an unfavorable tax assessment for the downtown area. Such a change could translate into higher rents for future tenants.
Lissner says developers are also keeping a close eye on what City Hall does with regards to changing its Affordable Requirements Ordinance (ARO). The legislation controls how many units must be set aside as affordable, as well as the sort of fees developers can pay to opt-out of providing lower-rent housing on-site.
Housing advocates see Mayor Lightfoot’s proposed overhaul of the ARO as an opportunity to address the shortage of affordable housing and create a mechanism for spreading investment to underserved neighborhoods. Developers warn that raising the requirements could prevent future projects from getting off the ground.
For the moment, the pace of new downtown apartment construction seems to be balanced. As the Chicago angles itself as a tech-centric city, it continues to attract the kind of high-paying jobs that further the demand for luxury rentals.
“There’s been a shift away from homeownership and into rentals,” Lissner adds. “Combine that with the employment opportunities in and around the Loop, and I think it speaks well to the downtown market.”