Chicago Construction News staff writer
Chicago is experiencing the steepest decline in new apartment construction of any major U.S. metro this year, with openings set to fall 60.4% to 3,756 units compared with 2024, according to industry data compiled by RentCafe.com.
The slowdown comes as local developers contend with high labor and material costs, rising insurance premiums, and tighter lending standards. Many of the projects expected to open this year were permitted in 2021 and 2022, while fewer broke ground in 2023 and 2024, contributing to the sharp drop.
The decline in Chicago contrasts with trends elsewhere in the country, where new apartment construction remains strong. Nationwide, an estimated 506,353 units are expected to open in 2025. While this total is below last year’s record, it remains well above the annual averages recorded since 2015, reflecting ongoing demand for rental housing.
Chicago is not alone in seeing a steep pullback. Madison, Wisconsin, ranks second for the largest decline, with new apartments dropping 59.3% to 1,664 units. Higher interest rates and an influx of high-end apartments appear to be slowing development in the college town.
Despite cooling in some northern metros, the South continues to dominate apartment construction. More than half of all new units this year are expected in southern states, driven by population growth, job expansion, and comparatively business-friendly development regulations. Major Texas metros, including Dallas, Austin, and Houston, are leading the building boom.
New York remains the nation’s top apartment builder, edging out Dallas by more than 1,000 units, with a development surge in Manhattan and Brooklyn. At the city level, Austin, Texas, stands out for rapid growth, while Naples, Florida, nearly quadruples its completions in 2025.
“Southern metros typically offer streamlined approval processes and fewer regulatory hurdles, making it easier to bring multifamily projects to market,” said Doug Ressler, senior analyst and manager of business intelligence at Yardi Matrix. “At the same time, elevated home prices and a shortage of attainable for-sale housing are pushing more residents toward rentals. For many households, single-family ownership is simply out of reach — fueling demand for rental housing.”
As Chicago navigates higher costs and regulatory challenges, developers face the dual task of meeting strong rental demand while adapting to a less favorable construction environment.
