CHICAGO | General Developments

[Via Chicago]

Originally Posted by the urban politician

^ But what makes you think I will stop when the cycle goes bust? The process only accelerates. Once you hit a bust, property values drop, and investors snatch up cheap property left and right, upgrade them, and rent them out at higher prices for a gain.

The peaks and valleys only speed up the process, they don't slow it down. We are due for a price drop, as it's getting next to impossible to find good deals in better parts of town these days.

no, the difference is you seem to think theres some inexhaustible supply of money thats available to the average american family. if we do have another bust (and im not talking about a slight rent correction, im talking about some thing as cataclysmic as 9/11 or the financial crisis, which we are about due for), then we as a country are in for far bigger issues than whether your tacky rehab has granite countertops and vessel sinks or not. do you find the Shock Doctrine to be a bible rather than a scathing critique? why not profit off of war and natural disasters while youre at it?

[the urban politician]

^ The "correction" will happen, but not what you are dreaming about. The reality is, rents in Chicago have been too low for decades, not too high. They have corrected upward, but are probably hitting a peak now.

Even if rents plateau or drop a bit, the notion that we will see widespread crashing of rents city wide are a wet dream that'll simply never happen.

[Via Chicago]

Originally Posted by the urban politician

The reality is, rents in Chicago have been too low for decades, not too high.

Originally Posted by bcp

Landlords take risks...when demand drops and the economy dips...some will take it on the chin. If we protect renters from upside risk, shall we also protect owners from downside risk? Hell no on both.

Im protected from upside risk? Wow, I must have missed that cushy rent control I've got going to protect me from sociopaths like TUP.

[maru2501]

^and shut the fuck up, Donnie

[Steely Dan]

I am the walrus.



anyway, downtown rents may be coming down in the coming years according to one report:

Rents downtown could ease in coming years, report says
Gregory Karp
Chicago Tribune

Renters in downtown Chicago feeling the pinch of escalating monthly prices could see relief as new apartments are being built faster than landlords are likely to fill them, which could translate into more stable or even declining rents over the next few years, according to a report released this week.

"We expect rents to moderate in 2016," says a third-quarter real estate market overview report by Chicago-based Appraisal Research Counselors.

With a record 3,100 rental units coming online this year, followed by 3,500 and 4,500 units in subsequent years, supply will soon outpace demand, said the report on the state of the downtown rental and condominium markets. And occupancy has slipped to 93.7 percent, down half a percent from last year.

source: http://www.chicagotribune.com/busine...110-story.html

[Ryanrule]

Originally Posted by bcp

UP is spot on...these cycles, and market rates, are what increase the quality of the entire city (and the quality of life for all). When the core is expensive it pushes people out a bit (wicker park 15 years ago...) and those areas start to improve through demand-driven investment.

Its not an evil plan as Via and Ryan would have you believe...it's being an adult and treating other adults as such.

Landlords take risks...when demand drops and the economy dips...some will take it on the chin. If we protect renters from upside risk, shall we also protect owners from downside risk? Hell no on both.

the rent keeps going up, the quality of apartments declines.

landlords/developers are not charities, they will fuck you in the ass, mouth, ear, and anywhere else they can shove it, barring regulations.

[Skyguy_7]

Originally Posted by rlw777

APPLE STORE AT PIONEER COURT
A courtesy presentation by Zeller Realty Group on a proposed Riverfront Retail project at 401 North Michigan Avenue. The project includes construction of a glass enclosed entrance located on the 401 Plaza with descending stairs to the lower concourse level retail space. The concept includes exterior stairs cascading down from the 401 Plaza and Michigan Avenue to the Riverwalk level. (42nd Ward)

Sounds like



to me

Drove by this at 11:30 last night and the site was in full gear. Did anyone expect this to be ready for the Christmas season? I don't recall what the Newspapers said, but I have every reason to believe it will be open for business by December. Regardless, it should be a welcomed addition to the heart of our City.

[King of Chicago]

Sorry TUP, but I don't see any kind of economic indicator that supports any concept of a 75% - 100% increase in rent prices, ANYWHERE in the City of Chicago. WHY do you think they "need to be higher"? Do you have an economic data point to support that? Or, do you just wish them to be higher so that you benefit?

I just don't see any reason why Chicago rents have been "too cheap for decades".

I can see how higher rent prices do drive developers to start looking to build more units, to meet market demand and thereby make a profit, causing neighborhood revitalization to accelerate...but here is the thing...there would have to be actual demand to cause that to happen...in order to first get rents to double, you would have to have a MASSIVE, MASSIVE, MASSIVE population increase in that one area of town, and all the new comers would have to have average incomes that match what the current average income already was. But there would have to be a sudden overnight doubling of demand...not happening.

If anything, I see Chicago's rents being too high. There are two factors that cause Chicago's rents to be higher than places like Columbus etc...first is that the lake creates scarcity (the city cannot expand to the East) and people do want to be by the lake, so that area should be priced higher. The Second reason, was that for decades, entire sections of the city were deemed unsafe...there were only certain areas that were safe for the middle/upper classes to live...this put an artificial constraint on supply, making prices higher...but as those areas have been cleared of blight and made safe again, those areas open up for condo/SFH/apartment development, brining supply to the market, and eventually lowering prices. The ultimate goal of the market is price efficiency, and increasing supply does exactly that.

However, I do see your point about high prices creating what is called "Geometric demand"...if people create an interesting neighborhood (with services, bars, restaurants walkability etc), then prices go up because people want to be there, which then causes developers to build more apartments nearby, which then causes more people to notice the area and want to live there....so the additional supply actually creates more demand!

So, if you want to create more development in the city, that is understandable, but you will have to find another way to do that, as raising prices won't be sustainable at this time...at least without tremendous geometric growth or population increase.

[ChiGuy312]

They were just breaking down the temporary retail building that was there. I walk through this plaza every day. Nothing has been done yet, at least that I've noticed.

[george]

Location x 3... ^'walkable, transit, safe' with nearby culture. Proximity to CTA Blue Line is key. I listed a 6 unit last year at this time in the East Village which was under rented. 2bd/2bth units rented for $1000-1400mo. The building sold quickly for $1.1mil. After rehabs including in-unit laundry, new kitchens w quartz counters & stainless steel, those same units now rent for $2500-2900mo. Not even listed on the MLS. Craigslist & Postlets got the units rented in days. Those rents are not about to fall anytime soon.
If you want to buy or sell PM me.

[DePaul Bunyan]

Originally Posted by intrepidDesign

Almost everyone I know, who is single, and has a decent job, is looking to spend no more than $900 a month on rent. Is this low? Apparently it is. But they either have to get a roommate or move further out of the city to find something. I like that this developer isn't aiming for "luxury' rentals, but I think there is room for variety in our housing options, which in turn leads to a non-homogeneous variety of city dwellers, which I happen to think is important.

I make ~$70k+ (gross) a year. I did not want to spend over $1k a month when I was recently looking for an apartment. Theoretically, using the 30% of your income rule, I could spend ~$21k a year for rent, or $1800 a month. You also have to factor in utilities, parking, etc. $1800 a month RENT would be insane on my earnings. After taxes, 10% for retirement, and health insurance, that ~$6k a month gets whittled down to well under ~$4k. $1800 is easily half of my take home. I would have to make six-figures to even remotely consider spending that much on rent, and there aren't that many "young professionals" making that kind of dosh, especially in the Chicago metro.

I get this forum is full of enthusiastic urbanistas, but there is a wide gulf between what the typical forumer here finds affordable and what the average person finds affordable/reasonable. The developer that was quoted upthread encapsulates this thinking, that there are young people who can "only" afford "under $2k" a month rent, and that sub-$2k is somehow affordable for younger working people is insane.

[VKChaz]

Originally Posted by DePaul Bunyan

I make ~$70k+ (gross) a year. I did not want to spend over $1k a month when I was recently looking for an apartment. Theoretically, using the 30% of your income rule, I could spend ~$21k a year for rent, or $1800 a month. You also have to factor in utilities, parking, etc. $1800 a month RENT would be insane on my earnings.

Interesting read linked below on the trend in % of income going toward rent among younger renters. (Of course, with a higher income it is easier to exceed 30% and effectively "come out even" - vice versa with a lower income - so applying an income index would be helpful as well.)
The NYU Furman report linked in the article is interesting as well.

http://www.bloomberg.com/news/articl...or-millennials

[Skyguy_7]

Ah, my mistake. There is, however, a fresh construction trailer and new fencing directly under the plaza along lower Michigan. At any rate, This is obviously not a high rise discussion. Sorry mods!

[pilsenarch]

Hey all... since we are talking about rent... what do you guys think is an appropriate price for:

1Bd, 1Bath, Terrace, 900SF in the Heritage on Garland Court facing west...

[the urban politician]

If you can't afford the rent, then either room up with somebody or move further out from the more prime parts of the city.

I don't know where all the whining and sense of self-entitlement comes from from some people. You can't get mad because the rent is too high. It just makes you look silly--what makes you think people are in the business of owning rental property for charity? Do you really think people want to fix your leaky faucets, clean and repaint units, deal with taxes and debt payments and the city's corrupt and abusive Dept of Buildings all just for the altruistic joy of providing you a home?

Get a damn clue...

[Via Chicago]

I can afford my rent. You however are the one on some weird power trip fantasizing about displacing the current population of the entire city. NO ONE can magically absorb a 75% increase in housing costs, and you've utterly failed to provide any sort of rational defense of your ramblimgs or any sort of study that supports your numbers

If you dont want to deal with the things you listed than find a new line of work.

[george]

Originally Posted by pilsenarch

Hey all... since we are talking about rent... what do you guys think is an appropriate price for:

1Bd, 1Bath, Terrace, 900SF in the Heritage on Garland Court facing west...

130 Garland Ct, 1/1, 800-900SF in 2008 rented for $1800-1900.
Now would rent for approx $2300-2400.

[aaron38]

Originally Posted by george

2bd/2bth units rented for $1000-1400mo. The building sold quickly for $1.1mil. After rehabs including in-unit laundry, new kitchens w quartz counters & stainless steel, those same units now rent for $2500-2900mo.

I find that to be insane. My mortgage on a 3db house is $1500. If I was to take on a $2500 mortgage, I'd be expecting a hell of a lot more than just a remodeled kitchen.

It's also crazy that the prevailing attitude is "suck it up and pay it, or move further away from transit and drive".
Then people wonder why so many people live in the burbs and don't use public transit.

[orulz]

I can see why folks don't like high rents, nobody wants to pay more - but in principle I agree with what TUP says - because there is no reasonable alternative that allows the city to grow and improve. And, basically, economics 101: supply and demand. Though I do think he was rather tactless in the way he said it...

Supply and demand of course states that: If demand is so high that it pushes up rents, then it induces construction, to bring about an increase in supply. Increase in supply means infill: more density, more activity, etc. Good for the city.

If the boom results in too much construction and a glut of apartments, then landlords will drop rents to fill units. It is important to emphasize that the current point in a boom cycle where rents are very high is temporary. Chicago may even still be on the upswing but if you look to places like Washington DC, rents have already begun to drop from their peak due to supply catching up with demand, and Chicago is sure to follow eventually.

I would say the market will never reach equilibrium, due to construction lagging behind demand, perhaps by as much as 2-3 years, so there will always be a boom-bust cycle, and rents will always vary depending on the current point in that cycle.

Artificial limits on supply such as zoning and NIMBYs can create some frictionu, but really NIMBYism in Chicago is not as bad as in most other US cities. The TOD ordinance also reduces the power of NIMBYs in the most important locations. So, the city is headed in the right direction.

Artificial limits on price, aka rent control, are an alternative to the free-market scenario, but under such a regime, as TUP points out, nobody will build anything new, everybody will stay in their units forever, and the demand will never be met. The doors to the city will be shut and it will stagnate.

Another alternative is a massive public housing program, like Singapore for example, which targets even middle class residents. But you have to find money for that, which Chicago, Illinois, and the US of A all lack, so we seem to be moving in the opposite direction with respect to public housing.

[OrdoSeclorum]

Originally Posted by the urban politician

If you can't afford the rent, then either room up with somebody or move further out from the more prime parts of the city.

I don't know where all the whining and sense of self-entitlement comes from from some people. You can't get mad because the rent is too high. It just makes you look silly--what makes you think people are in the business of owning rental property for charity? Do you really think people want to fix your leaky faucets, clean and repaint units, deal with taxes and debt payments and the city's corrupt and abusive Dept of Buildings all just for the altruistic joy of providing you a home?

Get a damn clue...

This does seem a bit strange. I mean, I think that rents should be whatever they are, absent some sort of large-scale intervention to distort them. If you have lands and you want to use your labor and capital to improve and extract increased rents from them, more power to the landowner!

But basically, rent is a matter of supply and demand. For the average inflation-adjusted rent to go up 50%, there would have to be a huge increase in demand. Much more in Chicago than even in other cities, due to our very elastic supply, considering; how much room there is for infill in Chicago; how easy it is to build tall in Chicago; how many neighborhoods close to transit are economically depressed compared to other Tier One cities. If rents went up that much after inflation and costs, it would be amazing for the city!

It's meaningless and jejune to say that rents "should" be higher. Apple farmers think apples "should" be 50% more expensive. Prostitutes think they "should" be getting $100 more per night. If only pesky market forces didn't get in the way!

Beyond that, it's not real likely for--on average--a landlord to beat the risk-adjusted rate of return on a property. A lot of investors only see the upside. Good ones understands the pitfalls of human reason and the mechanisms of deception so as to avoid being deceived by others, sure, but more importantly, themselves.