Tag Archives: affordable housing

What private equity expects from suburban residential developments and “a revenue gap”

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A new proposed residential development in suburban St. Charles sparked discussion about the possibility of including affordable housing:

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A 29-acre site in St. Charles — one of the last remaining open properties in town for residential development — is becoming a flashpoint for housing affordability in the city.

With a new proposal on the table, some city officials are requesting affordable units while the project’s developers argue it would hurt their private equity-backed bottom line…

The developers said they are trying to support retail along the Randall Road corridor by “attracting residents with disposable income.” City officials responded by saying there are people who work for the city who can’t afford to live there.

During the March 16 meeting, the developers said offering affordable units, such as a $1,070-per-month studio, would “provide a revenue gap.”

The basics of the story are not unusual for suburban residential development projects. A developer sees an opportunity. Upscale residential units can bring a good profit and upscale suburban communities tend to like residential properties that enhance their status and character. The city responds to the proposal with a few requests, including requesting some affordable housing units for several groups in the community the suburb would like to retain or attract. A period of negotiation or dialogue commences.

What is different here is that the developer has clearly stated that substituting affordable housing units will lead to a revenue problem. Why? Because there are expectations from the private equity supporting the development. The article does not discuss the details (and they may not be publicly available) but it sounds like it can be put another way: not enough money will be made on this development if affordable housing is included.

Profit-making is not unexpected. The clash between private equity money and affordable housing is less often in the public view. What amount or percentage does private equity expect to make on residential development? Can it make room for any affordable housing or is it completely about profit maximization?

Who is driving newfound Midwestern population growth?

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I wrote in January about the modestly increasing population in the Midwest and this piece from yesterday suggests housing affordability is behind the change. Let’s say this is true and it is more than a one or two year pattern: more people are moving to the Midwest and they are doing so because they can still get good housing for less than $350,000. Who exactly are these movers? Some speculation from yesterday’s piece:

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Take Rockford, the most popular housing market from the Zillow report. Although it’s within easy driving distance of Chicago, the average home value is about $170,000, to Chicago’s $300,000. A hybrid worker could conceivably work from Chicago a day or two a week while paying much less for a house than if they lived in the city. The same goes for Milwaukee, which is also an hour and a half from Chicago…

In addition to proximity to a large city, what distinguishes bright spots such as Columbus and Indianapolis from less desirable midwestern cities is the availability of good-paying jobs. After all, few people can buy a house, even for $300,000, if they can’t find work nearby. According to OSU’s Partridge, the midwestern cities that were less reliant on manufacturing in the 1950s are the ones doing well now. These places were never dependent on factory jobs, so they were better able to weather the steep decline in U.S. manufacturing that began decades ago. “Because they had a more service-oriented composition of businesses, they did much better,” Partridge said. Today, these cities offer plentiful finance, tech, and health-care jobs. JPMorganChase employs 18,000 people in Columbus, for example; the pharmaceutical company Lilly is headquartered in Indianapolis.

Two kinds of people are referenced: people who work remotely at least part-time and those who can access good-paying white collar jobs. This may require certain levels of education and/or job experience.

For years, I have read discussions about how Americans who need cheaper housing could move to places with cheaper housing. Particularly in comparison to the most expensive housing markets, often on the coasts, there is decent housing to be had in other places. This is easier than it looks. People have ties to particular social and family networks as well as places. Additionally, if a lot of people moved to these cheaper places, this drives the prices up.

What might a more accurate version of this story be (and someone must have some data to support or counter this)? Something like: those with some resources and education can move to the Midwest for particular jobs and take advantage of comparatively cheaper housing compared to high-priced housing markets. This means this potential opportunity is not necessarily available to everyone.

IL governor’s push to have statewide residential zoning

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In his State of the State address, Governor JB Pritzker said he supports statewide zoning changes to promote more housing:

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Gov. JB Pritzker will propose a statewide zoning law in his State of the State address on Wednesday, drastically limiting the authority local governments have to control what types of housing structures can be built on land that’s zoned residential…

A study published last year by the University of Illinois found that the state is about 142,000 units of housing short and would need to build 227,000 over the next five years to keep up with demand. That equals about 45,000 new homes a year — nearly double the five-year average of about 19,000 built annually between 2019 and 2024…

Pritzker’s office says the plan includes a tiered framework to permit multi-unit housing by right in all but the smallest lots zoned for residential use. Local zoning boards would no longer be allowed to prohibit property owners from building multi-unit housing on residential lots exceeding 2,500 square feet…06

More straightforward, accessory dwelling units — attached or detached secondary residences such as granny flats, backyard cottages and above-garage apartments — would be legalized on all properties zoned for residential use. The city of Chicago moved last year to relax its 60-year ban on granny flats. And legislation was filed in Springfield last year to ban local governments from prohibiting the units. But it has not moved.

Three thoughts in response to this proposal:

  1. One feature Americans tend to like about suburbs and local governments is that they have control over land use decisions, not people located elsewhere. This means residents have more direct say about who might be there neighbor or what might be located next door. In roughly the last one hundred years, zoning in suburbs is then used to protect single-family homes and their values. Messing with this established use is not easy; as the article briefly notes: “the effort is likely to be met with stiff pushback.”
  2. Illinois is not the first state to pursue this so there are other models to look at and see whether similar legislation has had positive effects. This has primarily occurred in blue states with more expensive housing markets than Illinois.
  3. It will be interesting to see how different parts or communities in Illinois respond to this. The Chicago area housing market is different than downstate. How will wealthier suburban communities react? Which communities are most eager to construct affordable or missing-middle housing? Where would developers and builders want to construct housing if these statewide guidelines are passed?

Where Americans might migrate to if they could afford their “ideal” city or state

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Imagine cost was not a concern and Americans could move to their ideal locations:

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The cost crisis isn’t just making people broke. It’s making them homeless in a different sense, forcing them to abandon places that used to feel like theirs.

More than a third of respondents have already moved because where they were living became too expensive. About a third of those relocated to a different city, while another third left their state entirely, searching for someplace they could actually afford. Half of Gen Z respondents reported moving due to costs, compared to just 19% of baby boomers.

What’s worse is how many Americans have stopped dreaming. About half of all respondents don’t believe they’ll ever be able to afford living in their “ideal” city or state. Among Gen Z, nearly two-thirds have abandoned hope of affording their ideal city. That’s not just about housing markets or inflation. That’s about an entire generation learning to aim lower because aiming higher feels pointless.

The geography of affordability matches expectations. Coastal states and mountain resort areas rank as largely out of reach, with Hawaii, Alaska, and Colorado at the bottom. California, New York, and Illinois aren’t far behind. Meanwhile, Southern and Midwestern states dominate the affordable rankings, with Mississippi, Alabama, and Oklahoma at the top.

Would everyone chase warm weather? Meaningful work opportunities? Centers of entertainment and leisure?

We could chalk up the mismatch between where people live and where they want to live to their choices. Can’t anyone move anywhere in the United States? Can’t people pursue certain careers and/or education that leads to opportunities? Perhaps it is a matter of preferences: some people want to live in rural areas and others want to live in big cities?

Of course, we do not have a system where costs do not matter. Housing is the largest budget item for many households. Finding a quality place to live is often expensive. If lots of people want to live in the same places, this drives housing costs higher unless adding more units to the local supply helps offset the demand. If millions of more people want to live in the largest metropolitan regions, what would it take to make it possible? Would it be desirable if more people gathered in the already populous places?

These are questions to consider as people and places struggle with housing prices. Not being able to live where people want to live could have all sorts of downstream effects.

Ongoing housing affordability issues in the Chicago region in 2026

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Finding affordable housing is not predicted to get easier this year in the Chicago region:

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While experts said Chicago might see small, incremental improvements in the housing market this year, many said affordability and a lack of homes will define 2026.

“In Illinois, the issue is very acute in the sense that our housing economy hasn’t recovered in the same manner that other states have,” Illinois Realtors CEO Jeff Baker said. “Housing stability, housing affordability, the trickle down affects every other element of our state from economic development to school funding, public safety. It touches everything.”…

Baird & Warner predicts homeowners will see their home values rise this year. It also predicts home listings will continue to be snapped up quickly, with the average number of days on market virtually unchanged. Homes in the Chicago metro area are on the market for an average of 29 days until they’re sold, according to Illinois Realtors…

Pekarsky said Chicago’s housing inventory crunch is even more dire for first-time homebuyers, who often can’t compete with all-cash offers and buyers who have built up equity.

Another possible way to frame this story: a long-standing affordable housing shortage continues in 2026. Sure, COVID may have interrupted plans but it is not like the region had a surplus of affordable housing before that.

The topic of affordable housing does come up in local discussions but then affordable housing is difficult to approve and construct and then can be limited in scale or intended for particular people.

Imagine a different headline: plans and building underway in 2027 to add affordable housing or more housing? What would have to happen in 2026 for that to happen?

The recent rise in housing costs in Boston through the lens of generations – and other options

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Owning a home in the Boston area now requires more resources than it did just a few years ago:

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The typical house in Greater Boston sold for $833,900 in the second quarter of 2025, more than 7.5 times the region’s median household income. Five years ago, a household needed to earn $126,519 a year to afford the median-priced single-family home in this region, according to an analysis by Harvard University’s Joint Center for Housing Studies. Today, that figure has more than doubled, to $259,648.

The result is people who 20, 10, or even 5 years ago would have been able to purchase a home — teachers, nurses, and academics — can hardly even conceive of it…

The consequences are being felt by an entire generation, forced to make a choice their parents did not: Stay in Massachusetts, and rent forever, or leave, and put down roots somewhere less expensive…

In 2010, for example, the median home price was $360,800, but the average on a 30-year fixed-rate mortgage was 4.75 percent, meaning the mortgage payment on that median-priced house was only $1,816 a month, almost the same as it was in 2000. Now, with a median house price of $833,900, and a 30-year fixed-rate mortgage around 6.79 percent in the second quarter of the year, the monthly mortgage payment on that median-priced house is $5,240 a month — before homeowners insurance, property tax, and mortgage insurance, which can tack on $1,500 more each month.

This is quite a rise in median home prices in a short amount of time. A typical lens through which to consider these changes, including in this story, is to focus on generations. One group born before a certain point could reasonably expect to own a home; those born later have a tougher time doing so. There is at least some truth to this, particularly since Americans have told a story for decades that people who reach middle-class status are able to buy houses and enjoy all the benefits that come with this.

Is this the best lens to use or the only worthwhile one? Here is another option: as prices have risen, who is now buying and selling houses compared to a decade or two ago? Who benefits from the higher prices or is able to live with the higher prices and who cannot? Where is this housing wealth concentrated? Is this just about generations or are there other patterns present?

Or another option: these median house prices are for a whole region. Even if the whole region has high housing costs compared to other places, how big is the variation within neighborhoods and communities? Why have values in some places gone up so much more than other places? How have communities been impacted by these higher prices, either in raising their status or limiting opportunities?

If younger Americans see that they have a much harder time in buying a house, they may change their behaviors and attitudes for the long-term. But they are not the only actors affected; people of all ages, organizations and industries, and communities are also affected. Housing affordability affects many other areas of life and leaders who do not address the need for cheaper housing with concrete action will impact many people and places.

Suburban moratoriums on data centers and warehouses; what might be built instead?

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The suburb of Aurora has put a temporary hold on approving data centers and warehouses in the community:

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Such concerns led Aurora’s city council to enact a temporary zoning moratorium on data centers as well as warehouses. Mayor John Laesch made clear officials are not against data centers as a whole.

“It’s just trying to give us time to make sure that we have the proper guardrails in place,” he said.

In neighboring Naperville, at least one city council member said he’s exploring the idea of a similar pause.

My longer-term question for Aurora, Naperville, and suburbs with similar concerns: what will they approve for the land that might be used by data centers and warehouses? Several options they could pursue:

  1. Green or open space on this land. This might be hard to do with land zoned for commercial and industrial use as suburbs hope such land will generate tax revenue and jobs. But residents might like this option if the alternative is something that generates noise and traffic.
  2. Pursuing office space or industrial uses with limited noise and pollution. The problem with this could be whether there is demand for such structures. How much vacant office space is there already in office parks and buildings along I-88? How long could a community pursue these options if the market is not favorable?
  3. Approving housing. There is a need for housing in the Chicago area and both Aurora and Naperville have experienced population growth in recent decades. But what kind of housing – expensive units without too many kids (so as to not burden local school systems)? Housing for seniors or young professionals? Affordable housing? Would neighbors like more housing – noise, traffic, potential water issues, etc. – near them?

Perhaps some suburbs can wait this all out. Will the boom in warehouses and data centers end at some point? If some suburbs say no to data centers and warehouses, they will end up somewhere. Will the warehouses end up not being in wealthier suburbs?

When suburbs resist affordable housing proposals, what positive outcomes are possible?

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The Chicago Tribune describes concerns leaders and residents of two North Shore suburbs have regarding affordable housing proposals:

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Case in point: Evanston’s Land Use Commission narrowly voted last Wednesday to recommend denial of a zoning application to build a 31-story, 430-unit apartment building in downtown Evanston. The tower would be among the tallest in all of Chicago’s suburbs. All the apartments would be studios, 1-bedrooms and 2-bedrooms, with 86 of the units deemed “affordable.”

The commission isn’t the last word on the project; the City Council will have that final say. But the 4-3 vote against the project reflected divisions within the community about growth. Speaking at the commission meeting, Chris Dillion, president of Chicago development firm Campbell Coyle (which isn’t developing the 605 Davis project that was the subject of the proceeding), clearly was frustrated: “Downtown Evanston cannot be preserved for only those who already are here. We need to make room for everyone,” he said, according to the Evanston RoundTable.

A majority of commissioners nonetheless thought the project was too big…

In Highland Park, another lakefront community about 14 miles north of Evanston, a fierce debate is underway about the redevelopment of a 28-acre vacant tract once the site of a Solo Cup factory. Prominent Chicago developer The Habitat Co. has proposed building 232 townhomes.

A recent meeting of the village’s Plan Commission on the project featured pointed criticisms, jeering and disruptions from residents complaining about the usual things when substantial residential developments are proposed — traffic and the impact on schools. But one resident complained that because some of the units were envisioned as rentals, the new residents would be “transient” and not invested in the future of Highland Park, according to a Tribune report.

The commission didn’t vote on whether to recommend approval, but a majority of commissioners expressed misgivings. Habitat partner Kathie Jahnke Dale said that any major reduction in the density, which already had been scaled back from a prior proposal, would lead the developer to walk away, likely leaving the site “vacant for another 15 years.”

This resistance is not unusual. For decades, suburbanites in the Chicago and across the United States have often resisted proposed developments that would bring denser and/or affordable units to their communities. Leaders and residents bring up concerns about noise, traffic, density out of line with the surrounding area, threats to property values and local quality of life, and concerns about the residents who would live in new residences.

Given this consistent opposition, what positive outcomes are possible regarding suburban proposals for affordable housing? Some thoughts on the possible options:

  1. Approval of the proposal in its initial form. This is rare. But there must be examples that could serve as models that others could learn from. What factors in suburbs lead to approving needed affordable housing from the start?
  2. A significantly smaller proposal. This happens quite a bit with proposals for suburban development: the initial pitch from the developer is considered and in the discussion with the community, the number of units is reduced. Take the Evanston example above slated for 31 stories and 430 units. Given the concerns expressed, perhaps the community would be okay with 15 stories and 200 or so units. Or with townhouses as in the second example, the density is reduced a bit with more open space provided. These changes can lessen the affordable housing contribution made but at least some affordable housing units are added.
  3. I do not know if proposals that are rejected all together can be positive. Perhaps it encourages an ongoing conversation in the community? Perhaps turning down a reasonable proposal galvanizes local efforts to support affordable housing?

For new affordable housing to be constructed in suburbs, my sense is that significant support needs to come from local leaders and residents who can articulate how this will benefit the community. Since many suburbanites will see such proposals as a threat, what about them adds to the community?

Who will lead the way to address the need for hundreds of thousands of housing units in Illinois?

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A new study suggests Illinois needs a lot of new housing:

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Illinois has a shortage of about 142,000 housing units and must build 227,000 in the next five years to keep pace with demand, a number that would require recent annual production rates to double, according to a new economic study.

The joint study published Tuesday by the Illinois Economic Policy Institute and the Project for Middle Class Renewal at the University of Illinois Urbana-Champaign found that although the rental and for-sale housing markets in Chicago and Illinois as a whole remain more affordable than many coastal cities, such as New York and Los Angeles, and some other states, Illinois still faces a severe housing shortage that is escalating affordability challenges.

National housing shortage estimates are wide-ranging, with Freddie Mac citing 3.7 million and the National Association of Realtors reporting 5.5 million.

And the recommendations for how to do this?

The authors suggest a variety of solutions, some of which Chicago officials and other state leaders are already working on, including easing zoning restrictions, quickening permitting processes, offering tax incentives to convert commercial buildings to residential units and increasing surtaxes on short-term rentals such as Airbnb. Aldermen recently took a step toward giving themselves the power to ban Airbnb and other short-term rentals from opening in their wards, a move that could potentially lead to an increase in housing supply.

This is not a new issue. And even drastic changes right now would not lead to 227,000 new units in five years. This is a long-term project that needs to be addressed.

One thought: this is an opportunity for Illinois to do something that could help lead the way in the United States. Here is why. It is a blue state and Chicago and its region dominates politics and perceptions. (This is not to ignore those living outside the Chicago area; there are just fewer of them.) It has more affordable costs compared to numerous other important cities. Chicago is still an important, world-class city. If Illinois could make a serious dent in providing affordable housing across the state, it could become a model for numerous other places. What works in Illinois might not work at all in New York City or Seattle or San Francisco or other super-heated housing markets. But it might work in Cleveland, Nashville, Denver, and other American metropolitan regions. Figure it out and Illinois and lots of areas could benefit.

For numerous reasons, it seems like politicians and business leaders in American cities and regions are hesitant to truly tackle affordable housing. But those who get out ahead of it can (1) help people living there and (2) provide models and tools for others to learn from and use.

And Area Median Income limits in California

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The Chicago region has particular Area Median Income limits. How might they compare to the AMI limits in California?

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In Orange, Santa Barbara and San Diego counties, the threshold for a low-income single-person household will soon surpass $100,000 if current trends continue, according to data published by the California Department of Housing and Community Development in April.

They would join three Bay Area counties that already hit that bureaucratic threshold.

California defines income levels by how they compare with the area’s median income. But in areas with unusually low or high housing costs, those definitions are often tweaked to reflect the reality on the ground for residents. Therefore, someone earning $100,000 could be above the area’s median income line but be considered low-income because of the high cost of housing. A number of government programs use these income designations to determine who qualifies for benefits such as housing assistance…

Between 2020 and 2025, the threshold to be considered low-income rose 40% across Southern California’s ten counties, reflecting the rising cost of living across the region.

At the same time, median incomes — representing the middle, not the average — across the region rose 35%.

Similar concept applied to a very different housing situation yields very different AMI limits. California housing prices are higher to the degree that the median income needed is much higher than in the Chicago region. Someone from the Chicago region might see this story about California regions and think that the housing situations are barely comparable.

At the same time, both regions struggle to provide affordable housing. The income levels may differ as might the physical landscape but both share limited appetites from municipal officials, developers, and residents for affordable housing.

Thinking beyond these two regions, are there regions that are doing better at constructing more units of affordable housing? Where incentives and local guidelines and people encourage affordable housing? Where there is good housing available at more or all of the points of the AMI limits?