Report: Chicago lost out on 43,000 homes because of zoning mandates
After 20 years of affordable housing mandates, Chicago has only built 2,798 units; city leaders have better options 

CHICAGO (Oct. 1, 2025) – The Chicago City Council has taken modest steps to ease housing restrictions, but experts found decades of city efforts to boost affordable housing have had the opposite effect.

According to a new report from the Illinois Policy Institute, “Mandating unaffordability: How Chicago’s housing affordability requirements decrease supply and increase costs,” Chicago’s affordable requirements ordinance has led to the city granting one-third fewer permits per 1,000 residents than the nine other largest U.S. cities.

Between 2003 and 2024, Chicago only built 2,798 affordable housing units under its affordable requirements ordinance, which forces developers to offer a portion of the units in new buildings at an “affordable” price to low-income residents. The institute found the city could have constructed an additional 43,597 market-rate units of housing between 2016 and 2023 if it had kept pace with other major cities and wasn’t holding itself back with zoning policies that fail to work as intended.

“The affordable requirements policy was enacted to ensure housing was available for low-income families. But it does the opposite because developers are forced to take losses on the affordable units. Developers are disincentivized to build 10-plus unit buildings and either stop at nine or raise prices on the remaining units to make up the difference,” said Josh Bandoch, head of policy at the Illinois Policy Institute.

Enacted in 2003, Chicago’s ordinance mandates 20% of new buildings with over 10 apartments be offered at an “affordable” or discounted price for 30 years. The program has been revised two times – in 2015 and 2021 – with each revision hurting development more. Chicago permitted 1.36 units per 1,000 residents in 2023, less than half the number permitted in 2002 before it started mandating affordability.

Inclusionary zoning increases the price of housing:

• A study of 383 inclusionary zoning programs nationwide found 33% produced zero units.
• Research shows a 10% increase in housing stock lowers nearby rents by 1% and condo prices by 0.9%.
• Inclusionary zoning’s higher costs hurt middle-class families the most and either keeps them out of the housing market or forces them to move.

How to increase housing supply in Chicago:

• Sunset the affordable requirements ordinance by 2026, or test different “affordable” thresholds and building sizes.
• Further reduce or eliminate parking minimums to make it easier to build larger properties.
• Give developers more certainty by mandating objective criteria and automatically approving permits that are not processed within 60 days.
• Allow more housing types in residential areas, including granny flats, basement apartments and other accessory dwelling units.

“After over 20 years, it’s clear this policy is not making housing more available or more affordable,” Bandoch said. “Inclusionary zoning is a shadow tax on housing that limits supply, increases costs and worsens the housing crisis. Chicago should adopt a new approach and learn from cities that have embraced growth instead of punishing it: make housing affordable by increasing supply and reducing regulations. The city can help its residents by building more housing of all shapes and sizes to meet diverse needs.”

To read the full report, visit illin.is/zoning.

For bookings or interviews, contact media@illinoispolicy.org or (312) 607-4977.