Chicago apartment starts plunge as costs and rules reshape development

The Chicago area is facing a sharp slowdown in new apartment construction in 2025, with a
60.4% drop compared with 2024. The year is expected to bring roughly 3,756 new units, a figure that underscores a broader development squeeze across the metro. Of these units, about 1,371 — or 36% — are projected to come online in the City of Chicago, with the balance spread through the suburbs. The pullback follows a burst of permits in 2021–2022 and far fewer groundbreaking projects in 2023–2024, reflecting higher labor and material costs, steeper insurance premiums, and tighter lending standards that together dampen new construction.

The shift places Chicagoland well behind many other markets in the nation. The metro slipped to 33rd place nationally for new rental apartment development in 2025 and sits fifth regionally in the Midwest, trailing Columbus by roughly 3,000 units. Across the country, the South now accounts for more than half of expected 2025 apartment starts, with the New York metropolitan area continuing to lead annual openings. The regional mix highlights how, even as overall demand remains, supply growth moves toward markets with different cost structures and policy environments.

A companion lens on renters’ priorities shows the top amenities sought are reserved or covered parking and fitness centers, with growing interest in coworking spaces, club rooms, spa features, and rooftop amenities. The combination of elevated construction costs, tightening credit, and shifting demand patterns helps explain why a major Chicago project once flirted with condominium sales but ultimately proceeded as rental housing to capture faster timelines and more certain post-pandemic demand dynamics.

Case study: a notable high-rise and its evolution

A prominent high-rise on Michigan Avenue built as a rental tower represents a case of how developers navigate a choppy funding and design environment. The project contains approximately 738 rental units and stands around 805 feet tall. After opening to renters last spring, the building embodies a pivot from condo sales to long-term leasing, a move driven by pandemic-era construction pauses, financing shifts, and market feedback. The design emphasizes light, openness, and wellness, and includes energy-efficient systems, on-site bicycle storage, charging stations, and a fitness and wellness complex. The project has been recognized with an industry award for multifamily development in the city, reflecting its role as a centerpiece in the local housing landscape.

Financing and structure evolved during construction. Early commitments to finance the project at the outset of the pandemic faced reductions and delays, prompting a pivot to a rental-focused strategy. The project leveraged a mix of debt and equity and introduced tax-advantaged structures to attract investors seeking steadier, long-term returns. The site was tailored to integrate with nearby cultural and commercial anchors, and adjustments to the historic district helped enable the tower’s height and footprint, aligning zoning with a contemporary urban housing vision. The leasing strategy emphasizes mid-to-upper tier renters, while marketing materials highlight mobility, light-filled interiors, and sustainable living.

Permitting activity nearby: a ground-floor project in Noble Square

On a street corner near Eckhart Park, a five-unit residential project has received construction permits for a four-story building without a basement. The site, currently vacant, will house five dwelling units on the upper floors and a single 807-square-foot ground-floor retail space, plus the residents’ entrance. A rear setback variation reduces the previously required distance from 30 feet to 3 feet for the residential portion, enabling a more compact footprint. The plan includes two covered parking spaces at grade and five bicycle spaces inside the building, with additional resources such as a ground-level garbage enclosure and performance-ready access from the street and alley. The project team includes an architectural firm of record and a general contractor ready to begin construction, with no demolition permit needed since the site is vacant. Transit accessibility is a feature, with nearby bus routes and rail lines offering convenient connections to the city’s core and nearby neighborhoods.

Local zoning moves: parking minimum reform near transit

In mid-year actions, the city council moved to eliminate parking minimums for new developments within a defined radius of transit access. The policy eliminates city parking minimum requirements for projects within a half mile of a major rail line or within a quarter mile of a bus line. The reform aligns with broader efforts to reduce zoning barriers that hinder housing production and to promote more compact, transit-oriented development. Local input and community meetings frequently accompany zoning changes, and ward-level adjustments can shape the pace and scale of new housing. The overall aim is to unlock more housing supply in the near term while continuing to weigh parking and mobility trade-offs in dense urban areas.

The policy context notes that most apartment buildings historically feature parking facilities that may not match the latest standards for density and livability, a factor developers weigh as they plan new projects that emphasize walkability, transit access, and shared mobility options.

Implications for Chicago’s development landscape

Taken together, the 2025 market signals, permit activity, a high-profile high-rise rental pivot, and the city’s parking reform point to ongoing development pressure in Chicago even as costs rise and project timelines tighten. The region remains a magnet for residents seeking urban living with access to culture, employment, and amenities, while the policy environment shifts toward more flexible approaches to parking and density. Stakeholders across construction, finance, and planning continue to weigh how to sustain housing production amid elevated costs, evolving financing, and a more networked approach to mobility and public transit.

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