Operating expenses are rising faster than rent increases.
- Half of respondents experienced utility, labor, and property tax increases of more than 10% (48%, 49% and 52% respectively), and many of them experienced increases of more than 13%. These are year over year increases.
- Half (48%) of respondents experienced more than 10% increase in utility expenses (such as gas, water and waste removal). Almost a quarter (23%) experienced increases of more than 13% for utilities.
- Half (49%) of respondents experienced more than 10% increase in labor expenses (that is, routine maintenance and contract services). Almost one in five (18%) experienced increases of more than 13% for labor.
- Half (52%) of respondents experienced more than 10% increase in property taxes. Almost a third (30%) experienced increases of more than 13% for property taxes.
- Half (52%) of respondents experienced more than 10% increase in insurance expenses. Almost one in six (15%) experienced increases of more than 13% for insurance.
- The pace of these inflationary pressures appears to be accelerating: in January 2022, only a third of respondents indicated increased year over year expenses of more than 10%.
- Renewing rents have not increased on the same scale as operating expenses. Two thirds (66%) of renewing tenants faced increases of 4% or less. For 90% of renewing tenants, rents increased by less than 8%.
- New leases increased at a greater rate: although only a quarter (24%) of new leases were 4% or less, three fifths (59%) of new leases increased by less than 8%. It should be noted that some of these increases may be due to capital improvements and unit upgrades.
These results are consistent with a recent report by Redfin, a technology-powered real estate company, which showed rents in Chicago rising by 6.6%, compared to a national average increase of 15%.
The “tale of two cities” has become even more pronounced since the beginning of the year.
- The South and West sides continue to see large numbers of buildings with unstable rates of collections, with only 41% of buildings reporting stabilized collections. Buildings in those communities are ten times more likely to have low rates of collections (less than 95%).
- The North side and downtown have the best collection numbers since the beginning of this survey two years ago (75% have stable collections).
Finance costs are also rising, increasing pressures to sell for some respondents.
- Nearly one-quarter of respondents are facing a loan maturity date within the next 12 months.
- One in five (22%) of those respondents facing re-financing are experiencing pressure to sell their buildings.
About the Survey
The Neighborhood Building Owners Alliance (NBOA), in cooperation with its affiliate members, and Kiser Group conducted an online survey of 168 Chicago housing providers to determine the current state of the City’s (and surrounding MSA) rental housing market. The survey was conducted July 11th through July 17th, 2022.
Profile of Survey Respondents
The respondents collectively own approximately 25,000 rental units throughout Chicagoland. As was the case with previous survey iterations, almost three fourths (approximately 74%) of the respondents consisted of small and mid-sized housing providers who own fewer than 100 rental units and/or own ten (10) or fewer buildings. Further, almost half the respondents (46%) reported owning fewer than 20 properties. As such, this survey is representative of Chicago’s smaller to medium-sized housing providers who make up the bulk of the City’s rental housing stock.