Housing shortage drives up Illinois prices 49%

The state’s home prices are up 49% since 2019, while available housing lags the rest of the nation.

Illinois homebuyers face a tough reality: Rising prices are pushing once-affordable communities out of reach for many households.

The average Illinois home price is $277,483, up from $186,366 in January 2019, according to Zillow’s Home Value Index, which tracks prices of similar homes over time.

That means buyers need much larger down payments and must take on bigger mortgages than they would have just five years ago. A home that required a $37,000 down payment in 2019 now needs about $55,000 up-front.

The price increases haven’t hit all Illinois communities equally. Some have seen dramatic jumps that far exceed the statewide average.

A major reason prices have jumped climbed is simple supply and demand: There just aren’t enough homes on the market. That increases competition for what’s available, driving up prices.

Every single one of the 26 Illinois metro areas Zillow tracks has seen its available housing inventory shrink since March 2019.

Chicago’s available inventory has fallen more than half, from 38,250 homes in 2019 to just 18,331 this year. That’s more than 19,000 fewer homes available for Chicago-area buyers.

Eleven Illinois metro areas have seen even steeper inventory declines than Chicago. Low inventory means buyers have fewer options and less negotiating power.

The inventory problem extends statewide. Data from Realtor.com shows Illinois has only 32% as many active listings as it did before the pandemic.

That puts the state well behind the national average, where available inventory has recovered to 75% of pre-pandemic levels.

The obvious solution is to build more homes. Unfortunately, housing construction in Illinois continues at disappointing rates, failing to keep up with demand or replace the lost inventory.

Illinois’ housing shortage didn’t happen by chance. It’s primarily because of policy decisions that complicate new construction.

Stringent zoning regulations throughout the state hinder builders from creating the kinds of homes that could ease the scarcity.

Many practical measures could simplify housing construction. Cities could allow greater density and approve structures with eight to 10 units in high-demand, bustling zones.

Mandating parking spaces is unnecessary when residents can use public transit instead of cars. Chicago and other areas have begun easing these demands near transit, which opens up room for housing.

Another viable approach comes from accessory dwelling units, often referred to as “granny flats” or “in-law suites.” These compact, secondary dwellings on current lots can help early-career individuals or seniors looking to scale down while staying in their community. Making these units legal across the state would introduce more housing choices without significantly altering the essence of neighborhoods.

Municipalities also could decrease minimum lot sizes for single-family houses, a change analysts project could result in Illinois building 10,000 additional units annually.

Along with zoning, families in Illinois encounter an additional hurdle: keeping their homes.

The state’s property taxes continue to be the steepest in the U.S., putting ongoing pressure on family finances. Even households that can make a down payment and cover regular mortgage payments might face foreclosure because of unmanageable tax obligations.

Addressing the housing crisis in Illinois demands confronting zoning and property taxes simultaneously.

Zoning reforms can boost the availability of homes and reduce costs. But without property tax relief and other fiscal improvements, many Illinois families will find it tough to buy and keep homes – regardless of how much the state boosts construction.