Why is Chicago so affordable?

Shepard

Shepard

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This question really bothers me, because I feel there are a lot of answers that are given - but none are really satisfactory.

It's not that Chicago is "a little" more affordable than the large cities on the coasts, including Boston. It's qualitatively different. Take a look at Zillow: large renovated condos in the loop for the low 300's, new construction condos in high rises in Lincoln Park for mid 500's. Prices in the urban core are easily half that of Boston, and a third that of Manhattan. Same dynamic with inner-suburban single-family homes.

Chicago is third in the US by GDP by many measures https://en.wikipedia.org/wiki/List_of_U.S._metropolitan_areas_by_GDP and often (but not consistently, depending on methodology) ranked in the top ten world cities http://www.citylab.com/work/2015/03...orlds-most-economically-powerful-city/386315/

No other top ten world city has housing prices anywhere as cheap as Chicago.

Chicago is also a great city in general. Loads to do. Culture. Restaurants. Nightlife. Shopping. Sports. Parks. Water. I've heard Chicago described as 90% of NYC for half the price, and I think that's true.

What gives? I feel like the answer to this could actually be very impactful and solve a lot of problems when applied to other cities' housing crises. But I think the answer is more elusive than it appears.

I was just there last week, and asked around. Some answers I heard (my hesitations in parentheses):

- Chicago isn't a real estate bubble like Boston, NYC, LA, SF, etc (hard to say there's a bubble in these places when demand is real. But even if that's true, what's kept Chicago from bubbling too?)
- Chicago already suffered a bubble - overbuilt luxury condos, and that popped (did the city overbuild, or, in retrospect, did it "right-build"? And if so, how and why did that happen?)
- Midwest is cheaper in general (this just compounds the question without explaining it)
- Midwestern values work against flashy high prices (I doubt the invisible hand of the market respects Midwestern values)
- It's in flyover country (so?)
- Terrible weather (so?)
- Highly segregated with some terrible neighborhoods (but shouldn't this raise demand in the more attractive neighborhoods?)

I'm looking to crowdsource some thoughts here, with better explanatory power than these.
 
One component, I think, is that it has generally been pretty easy to build in the downtown and surrounding Near North, Near West, and Near South sides - lots of new construction preventing housing prices from getting out of hand. And although it is can be quite difficult to build in many of the "desirable" North Side neighborhoods (like Lincoln Park), perhaps the ease of building in nearby neighborhoods helps keep a lid on how high prices can go in those desirable neighborhoods?

How do housing prices in Chicago compare to Philadelphia, a similar city in many ways? Both have successful downtowns/central areas and also large swathes of the city that suffer from significant decline and high violent crime rates.
 
This is pure guesswork, but I've always assumed that it was because of fewer natural obstacles. Building out flat prairie land is a lot easier and cheaper then developing on the coasts which feature far more diverse geological terrain.
 
Couple thoughts:

Permitting and density - Chicago isn't as dense as SF, Bos, NYC, DC so you can't say they solve it by density, but they do seem to be able to build tall, relatively quickly, and relatively cheaply, so you don't see the city or neighborhoods price spikes because the supply can stay in much closer sync with demand. It's maybe more simplistic than you are looking for, but the demand has flipped relatively quick in the already dense other major metros and the regulatory regime is not set up to accomodate the growth. So prices spike.

Also, I think there is a lot industrial working class jobs still close to the city. From a purely housing perspective, I think this limits expenses in certain areas no matter how close to amenities. You don't pay $500k to live near a refinery or rail yard so those areas stay affordable for the people that work there.

Transportation - Chicago's transit is pretty good and extensive especially heavy rail- Not that NYC or Bos isn't, but it seems much more that people are willing to go a couple stops down and prices stay level as opposed to getting huge neighborhood price disconnects. Also, Chicago's lack of density on the level of the comparative metros and quick permitting mean that the local supply can match this response.
 
I have wondered the same thing and have an idea. My theory is that Chicago has/had a very diverse economy, more so than NY, BOS, SF, DC, etc and that different parts of its economy boom and bust out of sync. There was a huge industrial sector inside Chicago city limits that never really was present in Boston/DC/SF/Manhattan, at least not at the same scale. The same industrial scale was arguably present in Brooklyn and Philly at one time and obviously greater scale in Detroit, Pitt, and the other major rust belt cities. Anyway - the point is that Chicago is part transportation hub, part general business/media/culture regional capital metropolis, and part rust-belt city. The significant rust belt component of Chicago (and this applies to Philly too) has meant that part of the city's economic foundation has been circling the drain while other parts have been booming. This provides relief to real estate demand.

Contrast that with Boston - with Meds and Eds and Finance dominating our economy in recent decades - and we see all of our major industries booming together. Obviously I'm not saying that Boston never had any industrial component, but I am saying that Boston had a lower percentage of heavy industry and therefore had little rust-belt meltdown. White flight, yes we had that as bad as anyone.

Similarly contrast with Detroit - which is/was completely dominated by heavy industry - you have a husk of a city with mansions selling for a song.

In summary, Chicago has struck a certain kind of balance through the post-war era. It didn't tank as hard as many cities and it didn't boom quite as hard. That has left many many disrupted, but not decimated neighborhoods to take turns being rediscovered and reinvented and gentrified. They simply haven't run out of transit accessible neighborhoods to gentrify and so prices have not gone completely stratospheric yet.

Yet.
 
Short answer: our economy is more competitive...it's the same principle that makes property in belize cheaper than in Boston.

https://en.wikipedia.org/wiki/Optimum_currency_area#cite_note-2

Is the US an optimum currecny area?: http://www.chicagofed.org/digital_assets/publications/working_papers/2001/wp2001-22.pdf

this-map-shows-what-100-is-actually-worth-in-your-state.jpg


8410648033_511d6c1150.jpg
 
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Chicago
-both sprawl (like Houston) and tall (like NY),
-vast legacy rail transit system that supports both (and is unified as CTA+METRA+Bus=RTA*)
-fewer political boundaries (unlike Boston's chopped city/towns & NYC's NJ/CT)
-fewer geographical boundaries (unlike Manhattan island)

It just means that, even assuming absurd/corrupt politics, you have a lot fewer barriers to putting stuff where it is needed, or putting it in some equally good location elsewhere on "the grid". Development goes where its needed and works well.

Regional planning works so much better when you really have just 6 counties (Cook & 5 Collar Counties)
sr0906_clip_image004.jpg


Jurisdictions 1 thru 7 on the map above (from the RTA's site) are really just Chicago and Rest-of-Cook, and then you have the Collar Counties (8 thru 12)

Contrast that with NYC which has 6 rail operators (NJT, PATH, CDOT and the 3 MTAs (NYSub, LIRR, M-N)) spanning 3 states.

*Except for NICTB.com
 
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fattony said:
Ridiculous. The crime in Chicago's bad neighborhoods has no effect whatsoever on the good neighborhoods....
Click to expand...

Sometimes perception is reality. Right now Chicago is perceived as a dangerous city by the (maybe uninformed) masses. Every single person who sees the stats and becomes discouraged from moving there lowers the demand of the city. Right or wrong, I don't think too many wealthy people are rushing to buy real estate in the "murder capital of the US." Hence, a more affordable city.

Wealthy Person A: "I'm thinking of moving to Chicago."

Wealthy Person B: "You mean Chiraq, where all the murders happen?"

Wealthy Person A: "Hmmmmmmm, maybe I'll move to Boston instead."

Wash, rinse, and repeat enough times, and you suddenly have people wondering why the heck Chicago is so affordable.
 
It seems they more easily add supply to every category of housing, whether it be apartments, housing subdivisions, or high rises in the city. Suburban development occurs on a scale not seen here, large tracts of farmland are developed into subdivisions with hundreds, if not thousands, single family homes and apartments. The south and the west side of the city have relatively massive amounts of underutilized or abandoned land. There are hyper expensive city neighborhoods and suburban towns, but there seems to be so much more other moderately priced housing located elsewhere.
 
Chicago lost population between 2000 - 2010, census data shows a loss of 200k(!). The job market in Chicago is good but not as robust as NYC, SF, Seattle, Boston, etc. I would say there's lots of factors but a loss of population throws the supply/demand toward cheaper.
 
At least one reason is that Chicago used to have tons of railyards and stuff downtown, leaving swathes of open space to this day. Fortunately, it wasn't all squandered with low-rises. Compare these images:

http://historicaerials.com?layer=2012&zoom=16&lat=41.86620519009862&lon=-87.62736082077026

http://historicaerials.com?layer=1962&zoom=16&lat=41.86620519009862&lon=-87.62736082077026

Also, my understanding is that downtown was devoid of residential for a long time due to lingering memories of the fire, meaning that there were no NIMBY's to block highrise development.
 
I've never heard the "fear of the fire" idea. I think it was just that central business districts in many (most?) cities were, for many years, almost exclusively business districts with little residential - the Loop included. The surrounding neighborhoods were largely warehouse or railroad-related districts.
 
I haven't seen any serious evidence, but both Chicago architectural foundation tours I've been on have made that claim.
 
Moving to Chicago has crossed my mind for the future especially if I eventually go the contractor / consulting route career-wise. I see no reason to live in Boston when most of the work I would be doing is remote and would require occasional travel to both coasts (SF, Seattle, Boston, NYC). The weather doesn't bother, i'm used to New England already as it is.
 
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