ILLINOIS — A new report reveals that Illinois is short about 142,000 housing units, and the state will need to build 227,000 new homes over the next five years to meet growing demand. Without swift action, affordability will continue to worsen across cities like Chicago, where rents are already rising faster than the national average.
Severe Shortage Threatens Affordability in Chicago
The report, released by the Illinois Economic Policy Institute and the Project for Middle Class Renewal at the University of Illinois Urbana-Champaign, highlights serious challenges in both the rental and for-sale housing markets. Despite being more affordable than coastal cities like New York or Los Angeles, Chicago rents grew 2% in May — five times the national average — and home prices have jumped 37% since 2019.
These trends, according to Chicago Tribune, are being fueled by:
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Rising incomes and job growth
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Declining housing listings (down 64% over five years)
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A sharp drop in new construction permits (down 13%)
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Limited supply due to zoning restrictions and high material costs
Chicago Homebuyers Face Growing Investor Competition
Would-be homebuyers are also facing increasing competition from real estate investors. The investor-owned share of the Chicago housing market has risen from 8% in 2010 to 14% in 2023, according to the study. Many buyers are being priced out by all-cash offers, limiting access to first-time and middle-income families.
New City Programs Aim to Reverse the Crisis
Chicago Mayor Brandon Johnson has launched several programs to tackle the shortage:
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Cut the Tape Initiative: Reduces red tape and accelerates affordable housing development
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Green Social Housing Program: Builds energy-efficient mixed-income rental buildings with at least 30% affordable units
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Missing Middle Housing Program: Allows developers to buy city-owned lots for $1 and receive up to $150,000 per unit to build for-sale homes on the South and West Sides
Despite these initiatives, affordable housing developers say they are still waiting to see real progress on permitting and construction delays.
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State Funding Cuts Complicate Housing Goals
While Chicago has invested over $200 million in its new housing programs, the state has cut housing-related funding by over $26 million for the upcoming fiscal year. This has impacted several housing assistance groups and programs that support low-income residents across Illinois.
What Needs to Happen Next
Experts say Illinois lawmakers must act fast. The report suggests several changes to improve housing supply:
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Loosen zoning restrictions and speed up permits
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Offer tax breaks for converting commercial spaces into housing
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Increase taxes on short-term rentals like Airbnb
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Boost public investment despite federal cuts and inflation fears
“The data certainly argues in favor of policy changes that boost supply in order to improve affordability,” said co-author Frank Manzo of the Illinois Economic Policy Institute.
Do you believe Chicago and Illinois leaders are doing enough to solve the housing crisis? What solutions would help your neighborhood the most? Let us know in the comments on ChicagoSuburbanFamily.com.
