Chicago Landlords Reaping Benefits of Foreclosure Wave
by Gerri L. Elder
Chicago is becoming a landlord's market in the midst of the nation's foreclosure crisis. For several years, Chicago area landlords struggled to find tenants while everyone seemed to be busy buying homes in the booming market. The housing market boom made it very difficult for them to fill their units, but now the tide has turned.
In the Chicago area, the job market is good and people need places to live. The current real estate market is scary and many people are not ready to step in and buy homes during such uncertain times. So many people who are moving to the area to find work are deciding to rent, rather than buy.
Real estate experts in Chicago say that the rental market in the area is quickly tightening up, with many landlords reporting that their apartment buildings are 95% filled with occupants.
The landlords are also happy to report that the turnover rates on the rental units are the lowest that they have seen in years. Although the renters in the area saw their rent increase 2 to 7 percent during 2007, they are staying. According to a consulting firm in the area, Appraisal Research Counselors, the landlords of luxury apartments in downtown Chicago have raised the rent on those units an average of 17 percent over the last two years.
While the job market continues to grow in Chicago, new apartment buildings are not being built. Many apartment complexes have been converted into condos, but new apartments have not been built yet to replace those that were sold by the struggling landlords. With the foreclosure crisis in full bloom, new constructions just are not happening right now. So there are fewer apartments to go around, yet more people looking to rent. It seems that we can expect the cost of rent to continue to rise.
About 7 years ago, landlords were dealt a pretty devastating blow when several big employers in the area folded. The rental market was depressed even more with the economic slump that followed the September 11, 2001 terrorist attacks. When the housing market boom came along, I'm sure that many landlords thought that things could not possibly get any worse for them.
It turns out that it didn't get any worse. The mortgage crisis of millions of Americans is actually not a bad thing for landlords. It may have actually saved them from foreclosures of their own. Now landlords don't need to offer concessions of keep their rent prices low to woo new tenants or keep the ones they have. The rental units are back in demand.
So the landlords are happy, but they still say they have some catching up to do. For years the rent they collected didn't cover their operating costs and insurance premiums. One landlord says that the recent rent increases have only brought the cost of rent up to 2000 or 2001 levels. New renters are now paying more for units, while landlords are raising the rent at a slower rate for existing tenants to avoid losing them, assuming they would be able to find somewhere else to rent in the city.