Chicago Luxury Rents Surge as Affordability Slips

Chicago’s top-tier apartment rents are rising faster than anywhere else in the country, fueled by a construction pipeline that has slowed to a trickle and a wave of renters willing to pay for the newest buildings in the buzziest neighborhoods.

Chicago led all major U.S. metros in rent growth in October, with typical asking rents up 6 percent year over year, Crain’s reported based on a Zillow finding. The Chicago area also slipped in the firm’s affordability index, ranking 39th out of the 50 largest metros. And the market’s imbalance isn’t easing anytime soon. Only 9,800 apartments are under construction — just 1.7 percent of total inventory — and fewer than 1,500 are expected to be delivered this year, according to CoStar.

Price tags at the One Chicago apartment complex for instance, located at 14 West Superior Street in River North, start around $2,700 a month, with three-bedrooms topping $13,000, according to the property’s website.

Those eye-watering prices aren’t outliers anymore, as the city’s supply of attainable housing is shrinking, testing the limits of Chicago’s long-touted affordability edge.

Demand is being stoked on multiple fronts. Americans are renting longer as the average first-time homebuyer hits 40, a record high, according to the National Association of Realtors. Elevated interest rates and economic churn make renting feel safer, and remote workers with six-figure salaries continue to arrive from New York, California, Florida and Texas. Many can comfortably afford Class A rent — and compared to the coasts, Chicago still looks like a deal.

That’s especially true downtown. Luxury Living, a boutique residential brokerage, told the outlet that gross rents for the Class A market — about 28,500 units across 85 properties built since 2016 — climbed 6.3 percent in the third quarter to $3,228 a month. River North led the surge with a 13 percent jump, pushing average rents to $3,738. The typical luxury renter is making six figures, has been leasing for several years, and isn’t in a hurry to buy, founder Aaron Galvin said.

The high-end boom isn’t limited to the city. Suburban developers are rolling out luxury products aimed at downsizers and remote workers with deep pockets. One Winnetka on the North Shore has a waiting list for units renting from $7,000 to over $12,500, developer John Murphy told the outlet. Tight supply, pricey construction and a reshuffled office market are pushing demand outward.

But as the luxury tier balloons, the middle is evaporating. Chicago’s naturally occurring affordable housing — older, unsubsidized units that rent below market — is disappearing. Two- and four-flats in neighborhoods like Lincoln Park and Lakeview are being scrapped for single-family homes; others in areas like Logan Square are trading hands, renovated and repriced.

“What we’ve seen is an erosion of the low-cost rental supply, and that just means to the extent that renters need affordable housing, they’re having a harder and harder time,” Geoff Smith, executive director of DePaul University’s Institute for Housing Studies, told the outlet.

Owners of modest buildings say demand is so intense they raise rents without losing tenants. Silver Property Group’s Ron Abrams likened it to “shooting fish in a barrel” at a recent real estate panel.

Chicago remains cheaper than New York or L.A., but rents are rising faster than wages. Bureau of Labor Statistics data shows wage growth slowing and employment gains flattening. Zillow economist Orphe Divounguy warned that if that gap widens, Chicago’s talent pipeline could feel the strain.

— Eric Weilbacher