Chicago Construction News staff writer
Illinois needs to build 227,000 new housing units over the next five years to meet demand and ease a growing affordability crisis, according to a new report from the Illinois Economic Policy Institute and the Project for Middle Class Renewal at the University of Illinois at Urbana-Champaign.
The state currently has a housing shortage of about 142,000 units, the report found, citing a combination of strong economic growth, rising demand, and constraints on supply. While housing remains more affordable in Illinois than in many other states, researchers say the gap between demand and availability is widening.
The report, titled You Can’t Buy What You Can’t Afford: Illinois’ Housing Shortage and Ways to Fix It, identifies several drivers of the shortage. These include employment growth, household formation, and rising homeownership rates, as well as regulatory barriers, rising construction costs, and an increase in investor ownership of housing.
Between 2010 and 2024, the state’s workforce grew by 9%, and household formation increased by 4% over the past five years. But housing supply has lagged. Active listings of new homes fell by 64%, vacancy rates hit historic lows, and the five-year average for new construction permits dropped by 13%.
Since 2019, home values have climbed 37% statewide. The report links that rise to increasing insurance costs and property taxes, while mortgage rates and competition from institutional investors have pushed more buyers out of the market.
“Regardless of where in Illinois you live, it costs dramatically more to own or rent a home today than it did five or ten years ago,” said Dr. Robert Bruno, PMCR director and coauthor of the study.
Researchers estimated the state needs 227,000 housing units to stabilize the market: 95,000 units to restore healthy vacancy rates, 47,000 to accommodate “missing households” of working-age adults not currently in the housing market, and 85,000 for expected household growth.
The report recommends policy changes to ease restrictions on development, including modifying zoning laws to allow more multifamily housing, reducing parking requirements, streamlining permitting, and offering tax incentives for redevelopment and affordable housing. It also suggests new rules to help individual buyers compete with investors, and a possible surcharge on short-term rentals.
While macroeconomic conditions such as interest rates are beyond state control, the report argues that Illinois leaders can take steps to improve affordability and housing access.
“With home values skyrocketing, supply already at a deficit, and demand for housing remaining strong, the data argues in favor of considering policy interventions,” said Frank Manzo IV, ILEPI economist and study coauthor.
