Chicago metro, September 2, 2025
News Summary
New apartment starts across the Chicago metro plunged sharply as rising construction and insurance costs, higher labor expenses and tighter lending undercut the post-pandemic building boom. The region saw a steep year-over-year decline that pushed it down national rankings and shifted growth toward other metros. Roughly a third of the limited new units remain inside the city, while large projects pivoted from condos to rentals and small infill permits continue in neighborhoods. Local policy changes removing parking minimums near transit aim to reduce costs and encourage denser development, even as builders prioritize amenities tied to mobility and wellness.
Chicago-area apartment starts plunge by 60.4% in 2025 as builders slow
New apartment construction in the Chicago metro area fell sharply in 2025, with starts down 60.4% from the prior year and just 3,756 new units estimated to begin this year. Less than half of those units are in the city itself, with about 36% — roughly 1,371 units — expected inside Chicago and the remainder in the suburbs.
Why starts fell so fast
The steep pullback reflects a mix of higher building costs, tougher lending conditions and rising insurance bills that together have made ground-up apartment work harder to finance and deliver. Many projects that appear in 2025 were permitted in 2021–2022, while far fewer sites actually broke ground in 2023–2024, leaving a gap between permitted plans and new activity.
How Chicago compares nationally and regionally
The metro slipped out of the top 30 markets for new rental starts and landed near 33rd nationally for 2025. Regionally in the Midwest, Chicago ranks about fifth, trailing metros that are expected to start several thousand more units. The Midwest as a whole is projected to deliver about 12% of roughly half a million new rental units nationwide this year, while the U.S. South is driving the market with an estimated 52% of 2025’s apartment production.
Local policy and small-site activity
City policy changes aim to reduce barriers to housing. In July the city council approved an ordinance removing city parking minimums for developments near public transit, eliminating required parking for projects within a half mile of rail stations or a quarter mile of bus routes. The change is part of broader efforts to remove zoning rules that can stand in the way of new homes near transit.
At the same time, small infill projects continue to move through permitting. A four-story, five-unit building was recently approved on a vacant lot at 1361 West Chicago Avenue in Noble Square. The permitted plan calls for three residential floors above a ground-floor retail space, two covered parking spaces accessed from the alley, five bike spaces inside, and a reduced rear setback that makes the building fit the narrow parcel. The site sits across from a neighborhood park and is a short bus ride from a nearby rapid transit station.
High-profile tower turned rental
A recently opened high-rise on Michigan Avenue illustrates how market pressures can reshape major projects. The tower was reworked during development from a condo model into a large rental building after the pandemic caused buyers to pull back and lenders to reassess risk. The finished tower rises to about 805 feet with roughly 738 rental units, reported as fully leased after opening. The project faced pandemic-era pauses, financing shifts and design changes, and later emphasized energy efficiency, bike storage, electric vehicle charging, fitness and wellness amenities to attract renters.
Renters’ priorities and market signals
Amenities remain an important market signal for new projects. The most-sought features include reserved or covered parking, fitness centers, coworking and shared lounge space, with luxury extras such as rooftop pools and spa-style areas appealing in higher-end buildings. Those preferences affect what developers include when they pivot developments or design new product.
Outlook
The near-term outlook points to a continued slowdown in new apartment construction unless materials, labor and insurance costs ease and financing becomes more available. The policy change removing parking minimums near transit could make smaller, transit-oriented projects easier to build and help shift new housing closer to public transport. For now, the sharp year-over-year drop leaves the region with far fewer new rental starts than in the recent boom years.
FAQ
How big was the drop in Chicago-area apartment starts?
The Chicago metro area saw apartment starts fall by about 60.4% in 2025 compared with 2024, leaving an estimated 3,756 new units beginning construction this year.
Where will most of the new units be?
About 36% of the expected 2025 starts are in the City of Chicago. The rest are distributed across suburban communities in the metro area.
What factors are slowing new construction?
Key headwinds include high labor and material costs, rising insurance premiums, and tighter lending standards. These factors make financing and building new apartment projects more difficult.
Will zoning changes help build more housing?
Recent local zoning moves that remove parking minimums near transit are intended to lower development costs and encourage homes close to public transport. Those changes can make smaller projects and transit-oriented housing easier to build over time.
Are big towers still being built?
Some large towers have been completed or restarted after redesigns and financing shifts. A high-rise that pivoted from condos to rentals opened with hundreds of units and full occupancy, showing demand for certain luxury rental product remains strong.
Key features at a glance
| Topic | Key fact |
|---|---|
| Year-over-year starts | 60.4% drop to 3,756 units in 2025 |
| City share | 36% of 2025 starts located in Chicago (~1,371 units) |
| Regional rank | Chicago slipped to 33rd nationally and fifth in the Midwest |
| Major causes | High labor/material costs, higher insurance, tighter lending |
| Policy change | Parking minimums removed near rail and bus lines to encourage transit-oriented development |
| Small-site example | Permitted four-story, five-unit project at 1361 W. Chicago Ave with ground-floor retail and alley parking |
| High-rise example | 805-foot tower reworked from condos to 738 rental units, reported fully occupied |
Deeper Dive: News & Info About This Topic
Additional Resources
- Chicago YIMBY: Five residential units, one commercial unit permitted at 1361 West Chicago Avenue
- Wikipedia: 1361 West Chicago Avenue
- Bloomberg: Chicago zoning reform targets parking rules to boost housing
- Google Search: Chicago zoning reform parking minimums 2025
- CoStar: Apartment tower clears obstacles to 73-story tower over Grant Park
- Google Scholar: Grant Park apartment tower 73 stories 2025
- Bisnow: The convoluted start-stop process that birthed $1000M Chicago apartment tower
- Encyclopedia Britannica: 1000M Chicago apartment tower
- WTTW: Developer moves forward on Lincoln Park apartment complex
- Google News: Lincoln Park apartment complex developer 2025
Author: Construction TX News
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