Chicago Developers Look Elsewhere as Housing Pipeline Stalls

Chicago’s reputation as a big-city bargain is getting harder to defend, as new apartment development stalls and landlords push rents higher on limited supply.

New apartments completed over the past 12 months amounted to just 0.8 percent of existing inventory, and the city’s average rent hit $1,956 a month at the end of 2025, according to CoStar data.

Bloomberg reported that longtime Chicago developer Alan Lev is among those shifting capital out of the market. After nearly four decades building apartments exclusively in the city, the Belgravia Group chairman has spent the past five years investing mostly in Arizona, where the firm has completed a Phoenix condo building and has another project underway.

Lev told the outlet that the city needs to develop apartments at a scale that isn’t currently happening.

Rents have risen even as the local economy shows limited momentum. Nonfarm payrolls in the Chicago metro area were up 0.3 percent in January from a year earlier, while Chicago rents increased 3.4 percent last year — second only to San Francisco among major U.S. cities, per CoStar.

The city’s development pipeline has thinned, with apartment permits down by almost half since 2022. CoStar data shows one 300-plus-unit project completed in January, with only one more of that size expected before year-end.

“There’s almost nothing starting,” said Mike Potter, an executive vice president at Riverside Investment & Development, which is building a 199-unit project near Union Station. Potter told the outlet that this year and next will likely continue to be supply constrained.

Developers point to a mix of friction points, including permitting timelines, the city’s affordable housing requirements and property taxes. In Cook County, property tax bills have risen 182 percent over the past 30 years, a jump that a recent study said is about double the rate of inflation, according to the publication.

Capital has also become scarce for large multifamily deals. Between 2023 and 2025, only three multifamily loans above $100 million were issued across the metro area, and Newmark data shows insurance companies and private capital sources largely sat out Chicago apartment lending recently.

State and city leaders are trying to reverse the trend. Governor JB Pritzker proposed zoning changes to allow more multi-unit buildings and a $250 million investment plan, while Mayor Brandon Johnson’s “Cut The Red Tape” initiative reduced the first step of approvals to 79 days from 135, according to the outlet.

Some large projects are still making financial sense with public support, including Related Midwest’s project at 400 Lake Shore Drive, financed with $500 million in tax-exempt bonds. Riverside is also among developers pursuing LaSalle Street office-to-residential conversions, including a plan to bring 430 units to a project at 135 South LaSalle Street.

— Eric Weilbacher