Rent in Chicago is climbing at record rates. As of March, median one-bedroom rental prices saw a 21% year-over-year increase, even as real estate markets have slowed down and home prices have stalled. Meanwhile, overall demand for rentals is in decline: Even before the coronavirus pandemic, Chicago’s population was shrinking, but since then, the city has been losing residents left and right.
More shocking than the stubborn rental prices, however, is that Chicago Mayor Brandon Johnson has a proposal that may actually do something about it.
Johnson’s plans to deal with housing have generally taken the restrictive route that got Chicago into this mess in the first place. His Bring Chicago Home proposal, which failed as a referendum in March, would have nearly tripled the real estate transfer tax on properties selling for more than $1 million and up to $1.5 million while quadrupling it for properties selling for more than that. Soaking the rich, whom Illinois has a hard enough time keeping around, was never going to improve housing for everyone else. Rather, it would have disincentivized further development and held large commercial and multifamily properties hostage to the status quo.
Since the dismissal of Bring Chicago Home, Johnson has adopted a new approach. Proposals in his new “Cut the Tape” report take the opposite philosophical stance to his failed tax hike. The mayor calls for “a more effective and streamlined development process,” seeking to reduce time spent on onerous bureaucratic procedures and suggesting that they will bring more units of “affordable, supportive, and market-rate housing” along with citywide commercial development.
This is a welcome change. Johnson suddenly sounds less like the Chicago machine and more like the Chicago school of economics, suggesting that perhaps he’s realized that supply available to renters who pay out of pocket is declining for reasons that can be squarely blamed on state and local government. Chicago’s bloated regulatory regime means only big developers can afford to build, and even they have limited options with strict zoning laws and building stipulations. This biases new builds toward luxury rentals — a fact counterproductively decried by housing activists — because that’s the easiest way for developers to recoup their high overhead costs. Now, even those builds are slowing down, and Illinois ranks last in the nation in the construction of new homes.
As promising as Cut the Tape is, we should not expect it to solve Chicago’s housing problems without broader changes to the city’s bad habits. Many of its prescriptions are straightforward: Expedite approvals, eliminate redundant environmental reviews, loosen zoning restrictions and remove parking minimums. However, if the mayor appoints only partisans and allies to related positions and working groups, he runs the risk of creating more tape.
Similarly, the positive effects of the plan could be cannibalized if Johnson follows through with more typical proposals. Recently, the City Council approved the mayor’s plan to borrow $1.25 billion to build affordable housing — something best left to the market. It also gave the mayor $70 million in migrant aid, creating artificial demand by attracting immigrants to Chicago while taking away from the market-rate housing supply, even as the mayor rejects nongovernmental help with housing migrants.
Finally, the mayor’s old friends at the Chicago Teachers Union are asking for their own housing subsidy, which would only further distort the housing market.
Despite everything that could go wrong, it’s worth celebrating the mayor’s unusual foray into free market economics. He’s done us the favor of creating a specific policy checklist, and it’s the voters’ responsibility to make sure he follows through.
Mike Viola is a State Beat Fellow at Young Voices and a Chicago landlord who would charge less in rent if he could afford to.
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