Huge Apartment Rent Increases Forecast For Chicago Have Not Yet Hit
Like death and taxes there’s one other inevitability in life—apartment rent increases.
With the battering-ram of real estate tax increases hammering away at Chicago apartment owners this year, experts are wondering how much longer “Ma-and-Pa” landlords can compete with downtown luxury rental developments and stay in business. Skyrocketing tax assessments on homes, condominiums and small apartment buildings in 2018 led to dramatic increases in real estate tax bills payable in 2019 for hundreds of thousands of property owners on Chicago’s North Side and Northwest Side.
Out-going Cook County Assessor Joseph Berrios raised the estimated fair market value of some properties from 30% to more than 140% in North Side and Northwest Side neighborhoods. This comes as a parting shot from Berrios after he lost his re-election campaign to challenger Fritz Kaegi, the newly elected assessor.
In 2018, the entire City of Chicago was reassessed. The sharply higher assessed valuations sparked mind-bending real estate tax hikes when bills arrived this month.
Facing huge tax increases, many apartment building owners are planning to strike back with large rent increases to pay the expected sharply higher 2018 tax bills, but the tax hikes may take years to recoup.
Apparently, the expected Herculean rent hikes have not yet hit the Windy City. Chicago apartment rents rose only 1.4% between August of 2019 and August of 2018, slightly below the national average of 1.6% reported Apartment List, a national rental survey.
Currently, median rents in Chicago stand at $1,095 a month for a 1-bedroom unit and $1,288 for a 2-bedroom layout. Experts say renters should brace themselves for hefty rent hikes on new leases offered by landlords in spring of 2020.
However, one Old Town landlord who was slapped with a 33% real estate tax hike said he is planning a 6%-plus increase on a 1,000-square-foot rental unit in a Victorian walk-up, hiking the rent from $2,495 to $2,650.
Meanwhile, rents are skyrocketing more than 4.5% in Henderson, NV and Mesa, AZ, and more than 3% in Phoenix, AZ, Raleigh, NC and Austin, TX.
Another national rental study by Yardi Matrix reported that multifamily rents in 127 markets for the year through July of 2019 rose a hefty 3.4% to $1,469.
Rents are going up faster in so-called “Lifestyle” buildings—fancy high-rises with a concierge, a swimming pool and roof-top grilling club and other expensive amenities.
Lifestyle rents increased 3.1%in July, showcasing the strongest growth for the segment since September of 2016, according to the report.
However, for the past six years, in “Renter-by-Necessity” buildings—those lowly walk-ups without the bell-and-whistle amenities—rents have grown faster. Despite the rent increases, the national apartment occupancy rate declined only 0.1% to 94.8%.
Yardi Matrix reported that rent increases stem from several economic changes such as the nation adding 172,000 jobs per month in 2019.
The U.S. Census Bureau reported that the number of renter households increased to its highest level during the first quarter of 2019. Data shows that the number increased by more than 600,000 to 43.8 million.
For more housing news, visit www.dondebat.biz. Don DeBat is co-author of “Escaping Condo Jail,” the ultimate survival guide for condominium living. Visit www.escapingcondojail.com.