Chicago Construction News staff writer
Gov. JB Pritzker has launched a statewide initiative to build middle-income housing in Illinois, acknowledging development has not kept pace with the state’s growth.
“Illinois must urgently accelerate efforts to approve and build new housing, providing affordable options for working families. We need innovative solutions to fuel this mission,” Pritzker said in a statement.
The newly appointed Illinois Director of Housing Solutions will spearhead efforts to boost the state’s housing supply and support working families.
“We will work to eliminate unnecessary barriers to housing construction, explore investments to stimulate housing development, and form partnerships with businesses, community organizations, and local governments,” Pritzker said.
Recommendations from the Governor’s Ad-Hoc Missing Middle Solutions Advisory Committee the need to increase housing options for middle-income families
“When it comes to affordable housing, working together is crucial,” said committee member and former Mayor Ali. “The partnership between local governments and the state of Illinois is vital to ensuring that safe, quality housing is available for residents of all income levels.”
Insufficient housing supply and a corresponding lack of production has put significant pressure on housing prices, exacerbating affordability challenges for households across income tiers.
As committee members explored the challenge, they found there is a broken housing production supply chain that makes it difficult for the market to self-correct to increase housing affordability and choice for missing middle households.
The cost of residential real estate development and management continues to rise, due to the overall inflationary environment as well as the cost of regulatory requirements, particularly at the local level.
Since U.S. inflation reached its 40-year high in June 2022, interest rates have remained high, impacting not only the cost of mortgages but prices for labor and construction supplies. As a result, commercial real estate construction costs rose from 25 to 30% between 2019 and 2023.
Also, financial institutions are increasingly risk-averse, making access to capital challenging or prohibitively expensive for residential developers.
The cost of government regulations further increases costs; according to the National Association of Home Builders, in 2021, government regulations were 24% of the price of a new single-family home nationally and Illinois is home to the greatest number of local taxing bodies in the nation, many of which have additional layers of regulations, fees, and/or distinct entitlement and permitting processes that further drive up costs.
High costs have resulted in even fewer home builders in Illinois, and smaller housing inventory.
Nationally, there are about one million fewer workers in the construction trades than there were during the last housing boom in 2007. In Illinois, the construction industry employs about 4% of the state’s workers, the 3rd lowest share in the U.S.
A significant number of builders left the industry following the Great Recession in 2008. Among those who have stayed in the industry in Illinois, many are aging out, and others have moved to the luxury market, where they can sell homes at prices higher than a middle-income household can afford.
