The impacts of low inventory on housing prices are undeniable. What’s gone unnoticed, especially in the north and northwest suburbs of Chicago, is there are far fewer renters than home buyers because of the state of the rental housing market. Let’s face it, the selection of rental homes in the suburbs is not abundant. We have clients today that would sell their home if they could get into a rental just for a year to figure out their next move. Similar to the impact on homes for sale, these factors, either individually or in combination, contribute to a tight rental market. This makes it quite challenging for renters to find suitable properties at affordable prices.
Here are 10 factors influencing the current rental housing market:
1. Supply and Demand Imbalance: The demand for rental properties exceeds the available supply in many suburbs due to factors such as population growth, migration from urban to suburban areas, limited new construction of rental housing, and homeowners staying in their homes longer.
2. Low Housing Inventory: Tightness in the rental market is exacerbated by overall low housing inventory which increases competition for rental properties as potential buyers may opt to rent instead.
3. Economic Conditions: Economic factors such as job growth, wage levels, and affordability contribute to increased demand for rental housing, particularly in areas experiencing strong economic growth.
4. Trends in Homeownership: Changes in homeownership trends, including delayed homeownership among younger generations and preference for renting for flexibility or affordability, further drive demand for rental properties.
5. Regulatory and Policy Factors: Local regulations, zoning laws, and government policies impact the availability and affordability of rental housing, influencing rental market dynamics.
6. Investor Activity: Significant investor activity in rental properties can reduce the number of homes available for individual tenants, tightening the rental market further.
7. Pandemic Effects: The COVID-19 pandemic disrupted housing markets, with some homeowners opting to rent out their properties instead of selling, contributing to the tight rental market.
8. Rising Rents: Rents have increased significantly in the U.S. and the Chicago area, consuming a larger portion of renters' incomes, and leaving less for other expenses. Factors such as the pandemic, inflation, and housing shortages contribute to rent increases.
9. Housing Shortage: The housing shortage, stemming from factors like the 2008 housing crash and inadequate construction, has led to an incredibly tight market, exacerbated by remote work trends during the pandemic.
10. Impact on Renters: Renters across income levels are affected by rising rents, with middle-income renters experiencing significant rent increases. Affordability challenges may force renters to make sacrifices in terms of neighborhood quality, commute distance, or school quality.
The combination of these factors underscores the complexity of the current home rental market and highlights the challenges renters face in finding affordable and suitable housing options in the suburbs of Chicago. If you want to stay up to date on new blog posts, make sure to follow our social accounts: @therealbobwise and @lynwisegroup on Instagram and Facebook and Lyn Wise Group on LinkedIn.
