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How the rent vs. buy calculation has changed in Chicagoland

by Meg White

How the rent vs. buy calculation has changed in Chicagoland

The decade is coming to a close, and it’s clear that attitudes toward renting and the choices consumers have in housing stock have changed. But exactly how this has played out — and changed the work you do as a real estate professional — is easier to see when we look at the numbers.

Researchers at RENTCafé, a real estate blog run by the data platform Yardi Matrix, looked at data from the U.S. Census Bureau, PropertyShark and the U.S. News & World Report and came up with a long list of high-level trends in the rent vs. own calculation, both nationally and in Chicagoland. Here are three that caught our eye.

The cost of renting is rising

While the official founding of New York’s The Rent Is Too Damn High party was way back in 2005, the twenty-tens saw a fair amount of concern over the rising costs of tenancy. In fact, average rents across the country have gone up by $390, or 36 percent, since 2010. While median home prices and income also went up during this same time period, they only grew by 31 percent and 27 percent, respectively.

In Chicago, median home prices were up 55 percent over the decade while household income was up 31 percent, both stronger than the national averages. Meanwhile, average rent went up a whopping 45 percent over the same time period.

While this increase in the cost of renting hasn’t driven more people to homeownership, it is directly related to both the changing demographics of renters and the calculus behind the construction of rental buildings, as seen in the next two trends.

Renters got older and richer

The only way rent could go up so quickly is a rise in demand, and the 2010s saw that in spades. In the last 10 years, the number of renters increased two times faster than the number of homeowners at the national level.

Perhaps to go with trend No. 1, there was also a significant increase in the share of high-earning renters. RENTCafé found that, while the overall increase in households earning more than $150,000 per year increased by 86 percent nationally, the number of high-earner homeowner households increased by only 78 percent. That gap was made up by high-earning renter households, which increased two times faster than the number of high-earning homeowners in the last decade, at 157 percent.

Chicago saw the number of homeowners earning more than $150,000 per year increase at a rate of 1.8 times, while the same share of renters went up by 3.3 times.

There are also more older renters on the scene than in past decades. The number of renters age 60 or older increased by 32 percent in the past decade, while that of aging homeowner households went up by only 23 percent. This gap wasn’t made up by new, younger homeowners. While the number of renters under the age of 34 increased by 3 percent, the number of homeowners in this age group decreased over the decade.

Construction changes over the past decade

While RENTCafé noted that the last 10 years have witnessed “a construction boom unseen since the 80s,” part of the reason for this is the simple fact that a very large generation (millennials) was in the process of moving out on their own, increasing demand.

Still, there are some important factors to be aware of in terms of how structures for rent have changed over the past decade. First, there’s more luxury space on the market: Of the 2.4 million rental units built this decade, 40 percent were located in Class A+ and Class A buildings, a phenomenon characterized by RENTCafé as “the first time we see such a substantial demand for and supply of high-end apartments.” Also, the suburbs have seen substantial increases in renters.

Chicago was No. 11 on the list of cities that saw the most apartments built over the decade, and of the 55,700 total units, 56 percent were luxury spaces. 

Another interesting finding is that Chicagoland is bucking a national design trend. While apartment sizes have decreased slightly across the country over the last ten years, in Chicago they’ve increased in size, going from 699 square feet in 2010 to 723 square feet in 2019.

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