Renters finding themselves evicted when their landlords go into foreclosure are having a hard time finding new housing in an already-saturated rental market, particularly if they are poor, experts said.
Chicago has an 80,000-unit shortage of rental housing that would be affordable to households who are renting and earning less than $20,000, according to a Chicago Reporter analysis. The Chicago median income of $43,223 as of 2006 represents a 7.5 decrease since 2000, said Kevin Jackson, executive director of the Chicago Rehab Network.
Already, nearly half of the renters in Chicago are cost-burdened, meaning that they pay more than 30 percent of their household income towards rent. And everything is going up now, from gas prices to the cost of groceries, so that takes away from the amount of money available to be spent on rent, said Phil Ashton, assistant professor in the urban planning and policy program at the University of Illinois at Chicago.
“You’re getting hit from two directions. One, rent is going up, and two, your dollar buys less,” Ashton said.
Rents in Chicago increased by 6 percent in the city and by 5 percent in the suburbs during 2007, according to that year’s U.S. Housing Market Conditions report. The rental vacancy rate in the city was 9.6 percent in 2006, according to the Chicago Rehab Network. Supply of rental units is down while demand for apartments continues to be strong, said Judy Roettig, executive vice president of the Chicagoland Apartment Association. “We’re just kind of in a wait and see mode,” she added.
Overall, there are more apartments available. Rental vacancy rates have nearly doubled since 2000, according to the Chicago Rehab Network. And in many cases landlords are not able to raise their rents to cover increased property costs because of the state of the economy, Roettig said.
There was an explosion in subprime lending in the 1990s, explained Phil Ashton of UIC’s Urban Planning and Policy Program, and by 2005 subprime mortgages made up about 15 percent of the market. That spilled over to the rental markets in places like the South and West sides of Chicago, he said, and now that the market scenario has changed and the values of those properties are no longer increasing, rental properties have become much more difficult to manage. The turbulence in the markets has attracted people who want to make a quick buck but don’t have the skills or knowledge to manage the property, Ashton said.
Roettig noted that the cost of owning multi-unit rental property is increasing with property taxes and utility costs on the rise, and that this is one of the major reasons landlords are increasing rents. “Rents are definitely driven by costs,” she said, “but they’re also driven by what the market will bear.”
Foreclosure rates are high in some communities–”particularly in black neighborhoods–”and they have been for a number of years, said Geoff Smith, vice president of the Woodstock Institute, a community economic development organization in Chicago. And investment properties are foreclosing at higher rates, Smith said. People are more willing to stop payments on investment properties than on their own homes if they’re forced to make the choice, Smith said.
Others believe, however, that renters are in a better situation. “It’s a great time to be a renter in Chicago,” said Maurice Ortiv, marketing director of The Apartment People, a free apartment locating service. He said that there are some great bargains as long as the renters are flexible on what neighborhood they want to live in, as long as it’s not a trendy one, and they are open to getting a basic apartment.
If renters do have a preference in the neighborhood, there is a lot less availability the closer the individual gets to their move date, Ortiv said.
“In terms of having an effective housing delivery system–”what’s needed for the real incomes of real Chicagoans–”we’ve got some work to do,” Jackson said.