Profile of the Chicago Renter Pt. 1: Who’s Moving to Chicago
As the U.S. undergoes major demographic shifts, how do these changes affect institutional multifamily investment in Chicago and other markets? In certain cities, Census Bureau data suggest a wide gap between those leaving and those moving in.
Previously, we have discussed how the population loss in the Chicago MSA is not occurring in areas of institutional investment. As new data from the U.S. Census Bureau shows, Chicago is seeing in-migrants that are younger, more educated and higher-earning — with more earners per household. Crucially, these new residents are more likely to be luxury renters than those leaving the Chicago area.
As an investment environment, Chicago is the strongest across these categories of metros with a similar median home price.
In the graph below, created by BuildZoom, Chicago has seen analogous increases in the education levels of in-migrants, despite having a Median Home Value that’s less than half of high-cost metros like San Francisco, New York and Los Angeles.
Intriguingly, markets have also seen a wide range in the difference between the ages of out-migrants and in-migrants. Many Southern and Sunbelt metros (particularly in Florida) have seen older in-migrants than those leaving. Chicago stands out as a metro where in-migrants are younger; and Chicago also stands at a midpoint in terms of median home value.
This leads to a natural question: How many of these new residents are choosing to rent vs. own?
In fact, Chicago also stands out among metros with similar median home values, because it’s attracting more renters than the number of departing homeowners. Numerous hypotheses could explain this: Chicago’s low home appreciation rates in the past two decades (1.1% between 2000–2016 according to JCHS), or hikes in property taxes targeting single family residences. Whatever the reason, this has drawn new Chicagoans to rent in the Windy City.
The high-cost, coastal metros like San Francisco, L.A. and New York City lead the pack in terms of renting in-migrants. Given the prohibitive housing costs in these metros, it should be little surprise that most individuals choosing to move to these areas decide to rent. By contrast, many Southern/Sunbelt metros are seeing more new homeowners than renters — aided by relatively plentiful land and less restrictive zoning policies.
As investors seek to diversify beyond the developer feeding frenzy in coastal metros of the current cycle, Chicago stands as a unique opportunity. The new Chicagoan fits the perfect demographic parameters that many developers have honed in on — young, educated and predisposed to rent.
In the next installment of this series, we’ll investigate where these new renters have moved in the Chicago Area. We’ll also have a precise breakdown of this data by age, income and location of workplace.