Chicago’s Housing Crisis: Can Gen Z Afford to Live Here?

Chicago aims to become the most affordable big city in the U.S., but a critical policy known as the Affordable Requirements Ordinance (ARO) is actively hindering this goal. For many Gen Z residents, the dream of homeownership is out of reach, and even renting is becoming an uphill battle, pushing young talent away from the city.

The Growing Struggle for Gen Z in Chicago

Young Chicagoans, often referred to as Gen Z, face a daunting housing market characterized by high rates, low inventory, stagnant wages, and dwindling job prospects. This challenging environment means that for many, buying a home is a distant dream, and simply moving out of their parents’ homes remains a significant struggle. The city’s ambition to retain and attract young workers is directly tied to addressing this affordability gap.

Chicago’s Affordable Requirements Ordinance: A Two-Decade Problem

Introduced in 2003, the ARO mandates that developers of projects with 10 or more units designate 20% of them as “affordable.” However, after two decades, this policy has produced fewer than 2,800 units – a meager contribution for a city of 2.7 million people. Critics argue that instead of promoting affordability, the ARO has deterred large-scale development and inflated housing prices by reducing supply. Developers, like Sam Goldman of Arbor Investment Management, emphasize that Chicago has focused too much on “affordable housing” mandates and not enough on overall “housing affordability.”

Rising Rents and Lagging Development

The consequences of the ARO are stark. Multifamily rental unit prices in Chicago have surged by 6% in the last year and a staggering 35% since before the pandemic, with the average rent now at $2,113. This is notably higher than in cities like Philadelphia ($1,881) and Houston ($1,675). Development rates paint a clear picture: in 2023, Chicago granted permits for only 1.36 units per 1,000 residents, a rate significantly lower than Los Angeles (more than triple) and Houston (over five times). Most Gen Z renters in Chicago are already spending over 30% of their income on housing, a figure set to worsen with the growing supply gap.

Mayor Johnson’s Vision and the Need for Change

Mayor Brandon Johnson’s 2026 budget proposes laudable steps towards affordability, including updating building codes and supporting the conversion of high-rise office buildings into housing. These conversions are particularly promising, as vacant office buildings are often ideally located near transit and amenities, and adaptive reuse projects can be completed faster than new ground-up developments.

However, Chicago’s current approach to these conversions is costly and often punitive. The city relies on one-off subsidies, like the $166 million allocated in tax increment funding for just 120 affordable units in two commercial conversions. This reliance on mandates and complex financing scares away private investors, keeping valuable spaces empty.

Learning from New York City’s Success

New York City offers a compelling roadmap for Chicago. Facing similar office vacancy challenges, New York implemented a smart mix of incentives rather than mandates. Their tax abatement program provides developers with 35 years of property tax certainty if they include affordable units, a strategy that has already revitalized Manhattan with numerous conversion projects. By offering predictable incentives, New York has successfully encouraged development without burdening taxpayers with exorbitant subsidies.

Recommendations for a More Affordable Chicago

To truly expand housing options and make Chicago affordable for all, especially Gen Z, city leaders should:

• Replace the ARO with incentive-based policies, such as a property tax abatement model similar to New York City’s.
• Streamline approval processes for housing developments.
• Upzone transit-dense areas to permit more multiunit development.
• Fast-track permits for adaptive reuse projects.

FAQs About Chicago’s Housing Affordability

• What is the Affordable Requirements Ordinance (ARO)?
  The ARO is a Chicago policy established in 2003 that mandates developers of projects with 10 or more units set aside 20% of them as “affordable.”
• How effective has the ARO been?
  In two decades, the ARO has produced fewer than 2,800 affordable units, a very small number for a city of Chicago’s size, and is often cited as a reason developers avoid the city.
• Why are Gen Z residents struggling with housing in Chicago?
  Gen Z faces high housing and mortgage rates, low inventory, stagnant wages, and dwindling job prospects, making it difficult to afford rent or homeownership.
• How do Chicago’s rents compare to other major cities?
  The average multifamily rent in Chicago is $2,113, higher than in cities like Philadelphia ($1,881) and Houston ($1,675), and has increased significantly since the pandemic.
• What alternative solutions are proposed to improve housing affordability?
  Suggested solutions include replacing the ARO with developer incentives (like property tax abatements), streamlining approvals, upzoning transit-dense areas, and fast-tracking adaptive reuse projects.

For Chicago to truly become an affordable magnet for young talent and ensure housing for its residents, policymakers must move beyond outdated mandates and embrace proven incentive-based strategies that encourage widespread development and genuinely increase housing affordability.