Chicago Is a Renters' Market

Chicago Is a Renters' Market CHICAGO, IL - More apartments are available in Chicago, and at prices that have slipped since the beginning of the year, creating a renter's market and allowing some consumers to trade up to better housing.

But what's good news for apartment dwellers isn't good for landlords and threatens the overall supply of affordable rental housing in Chicago, according to a study scheduled to be released Monday by DePaul University's Institute for Housing Studies.

More than 6 percent of apartments in two-to-four-unit buildings were empty during the year's second quarter, with vacancy rates in some parts of the city close to 10 percent, the study found. A normal vacancy rate would be 5 percent.

"If anything, I think [DePaul] is reporting less than what I see," said Jack Markowski, president of Community Investment Corp., a non-profit mortgage lender to multifamily buildings that started seeing increases in multifamily mortgage delinquencies 18 months ago. Multifamily buildings, he said, "are vulnerable right now."

High jobless rates and the duration of unemployment are forcing renters to seek alternative living arrangements, such as moving in with friends and relatives. When the unemployed do find work, it frequently is for lower wages than previously earned, so their disposable income is affected long term.

Landlords, seeking to cover their costs, are lowering rents to attract tenants, and the study found that rents declined in all sizes of buildings and in all city neighborhoods except for the North Side.

The strategy, however, doesn't always yield a tenant. As a result, more owners of multifamily buildings are defaulting on loans and losing buildings in foreclosure.

The level of multifamily mortgages foreclosed on in Chicago during the year's second quarter, at 0.8 percent of the total supply, was twice as high as it was in the comparable year-ago period, said James Shilling, a DePaul professor and director of the institute.

"It only gets worse," Shilling said of the predicament the rental market finds itself in. "There's downward pressure on rents and upward pressure on vacancy rates. I think for the rest of 2009 and 2010 we'll see more defaults."

DePaul's conclusions are similar to those reported this month by research firm Reis Inc., which pegged apartment vacancies in Chicago-area buildings with 40 or more units at 6.7 percent, up from 5.2 percent in last year's second quarter. Similar trends, and the concerns they are generating, are occurring across the nation. The apartment vacancy rate nationally rose to 7.6 percent in the second quarter, from 6.1 percent in the year-ago period.

Adding to the gloomy forecast for landlords, Shilling said, is that the first-time buyer's tax credit and depressed housing prices are nudging qualified renters into the real estate market. The tax credit of up to $8,000 is set to expire Dec. 1, but the housing industry is lobbying to extend it and make it available for all buyers.

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