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  • Writer's pictureRealFacts Editorial Team

Understanding the Vacancy Rate Disparity in Chicago's Multifamily Housing


chicago multifamily housing

As of Q1 2024, Chicago’s multifamily vacancy rate was 8.3% for class A units and 2.9% for class BC units, representing a differential of 540-bps. It was basically the highest level on record, excluding the spread of 550-bps in Q3 2022. In Q1 2019, the A-BC differential was 3.7%. Over this 5 year period, the vacancy rate gap has widened by 170-bps. In contrast, the national average actually narrowed by about 50-bps over the same period.


Graph of Chicago multifamily vacancy rate

The real question is, what is causing higher occupancy rates for class BC units rather than class A units? To start, completions for class A units have far exceeded those of class BC. From 2020 to 2024, completions totals over 20,000 class A units but less than 2,000 class BC units. Wage growth is the main factor leading to a limited supply of more affordable BC units. Median household income in Chicago increased at a compound annual growth rate (CAGR) of roughly 3.9% since 2019. However, asking rents for multifamily housing outpaced wage growth with a CAGR of roughly 4.2%. As a result, the limited supply of class BC units, combined with decreasing purchasing power, has driven up demand for lower-end housing units. Consequently, the disparity in vacancy rates is likely to continue until there is a significant increase in new construction, particularly in the lower-end segment of the housing market.


Graph of cumulative change in Chicago

In conclusion, the growing gap in vacancy rates between Chicago's class A and class BC multifamily units highlights an imbalance in the housing market. The large increase in high-end class A units, combined with a limited supply of affordable class BC units, has led to higher occupancy rates for the latter. Additionally, rent increases have outpaced wage growth, reducing many households' ability to afford higher-end housing. To address this issue, more affordable housing units need to be built to meet the rising demand and create a more balanced housing market in Chicago.


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