Chicago’s political leaders are finally starting to address one of the biggest issues facing the city: housing unaffordability.
In April, the median home price in the city hit a record $370,000. All the while, 43% of Chicago households are burdened by spending at least 30% of their incomes on housing.
Accordingly, Chicago Mayor Brandon Johnson released his “Cut the Tape” report, a shockingly free market approach to “building faster, building everywhere and building together.” Now, Chicago City Council is considering an ordinance that will clear the way for more housing. The affordable conversion ordinance, SO2024-0008918, would permit more accessory dwelling units across the city such as granny flats inside or added to an already existing unit.
These steps in the right direction acknowledge a basic tenet of housing affordability: The key to achieving it is by increasing housing supply.
And a key driver of increasing housing supply is reducing the burdensome regulations that make it difficult to build. Government regulations nationally account for 23.8% of the current average sales price of a new single-family home. In Chicago, that translates to $88,060
To meaningfully change Chicago’s housing situation, here are more proven examples of housing reform that achieve housing affordability and growth.
After passing the city ordinance expanding ADUs, the city should first reduce zoning restrictions, including by broadly legalizing multi-family housing.
Economists estimate the city’s zoning laws alone add $60,000 to $80,000 per home – higher than in Boston and Miami. The median household income in Chicago was $71,673 at the end of 2022. That's one year of work to cover just those costs.
Second, the city can expand the size of areas zoned for residential use, legalize mixed-use housing and reduce barriers to converting commercial zones to residential use.
Illinois is the second most restrictive state in the Midwest when it comes to land use, according to research from the Cato Institute. In Chicago, 41% of land is zoned exclusively for single-family housing, and over 25% is off-limits to any residential property. Only 21% is zoned for multi-family housing. That leaves ample room for expansion.
Third, leaders must cut restrictions on new construction. This includes streamlining permit approval processes, relaxing lot minimum and maximum requirements, reducing parking minimums and loosening aesthetic restrictions on new construction.
Take Chicago's "City Lots for Working Families'' program. It’s designed to provide affordable housing developers with city-owned vacant lots for $1 each but is hampered by extensive bureaucratic processes. Developers must navigate multiple rounds of reviews, approvals from various city departments and commissions and even a final vote by the City Council, all before construction can begin – the process takes six months or longer.
The long permitting process is dragging the city down. According to the Chicago Cityscape research service, it takes on average 112.8 days to get a permit. In Minneapolis it takes 20-35 business days. Indianapolis regularly approves new home construction in 12 days and new commercial construction in 20.
Review times in Columbus, Ohio can take as little as a week. If Chicagoans want to speed up the process, the city directs them to third-party expediters – a recipe for both higher costs and potential corruption.
Chicago also administers fewer housing permits than other major cities. The Chicago metro area authorized just over 15,000 new private housing units in 2023, whereas Houston approved 4.5 times as many. New York City approved nearly twice as many permits per 100,000 people than Chicago.
The North Port, Florida metro approved more permits than Chicago while having about one-tenth the population. With so few permits issued, it's not surprising that in April, Chicago only had about one-third the 90-day supply it had five years ago.
With some changes, the city can upgrade its systems.
In 2017, Minneapolis enacted numerous housing reforms, including eliminating its minimum parking requirement, permitting duplex and triplex construction in all residential lots and increasing the amount of housing that can be built near transit and commercial districts.
The results? Housing supply has increased 11.9% in Minneapolis, compared to 4.1% in Chicago. Average apartment rents in Minneapolis have only increased 1.8%, while they’re up 16.5% in Chicago.
In recent years, many other cities, including Denver, Portland, Oregon and Austin, Texas have adopted exactly these proven reforms to reduce barriers to building homes.
Chicago can follow in their footsteps. City leaders need to enact these reforms to pave the way for housing affordability in the city.
