Chicago Tried to Make Neighborhoods Denser. Instead They Got More Expensive.

A close-up of the Marina Bay Towers in Chicago.
This is not what happened. Kyler Trautner/Unsplash

Chicago Mayor Rahm Emanuel wanted developers in his city to build more apartments around the city’s El stations. So in 2013 and 2015, Chicago changed its zoning code near transit to allow bigger buildings, with more apartments, requiring fewer parking spaces. By 2035, the Metropolitan Planning Council estimated these changes—which affected some 6 percent of the city’s land area—would stimulate 65,000 new homes within walking distance of the city’s vaunted transit system. More apartments, less traffic, dense and amenity-rich neighborhoods along the train… what’s not to like?

Six years after the first rezoning, the results are in—and they’re… not what the city expected. In research published in the Urban Affairs Review, MIT doctoral candidate Yonah Freemark found no difference in construction permitting in the five years since the first rezoning. At the same time, he found that property prices in the affected areas had jumped by 15 to 23 percent, and even existing apartment buildings had seen a boost.

In short, rezoning made prices go up—but additional supply hasn’t followed.

That seems counterintuitive, in part because that’s not what the literature on cities suggests usually happens. Looser zoning generally accompanies lower prices at the metropolitan scale; recent research from California and Massachusetts suggests tighter zoning is associated with higher prices.

At the neighborhood level, many homeowners believe allowing larger buildings around them will lower their property values, as their streets become more crowded and their schools more diverse. Tenant organizations, by contrast, have feared rezonings cause tear-downs and attract new, amenity-rich luxury towers that make neighborhoods less affordable. The evidence from Chicago upsets each of those assumptions.

Perhaps most importantly, Freemark’s research sends a warning to planners and politicians who are trying to deploy Chicago-like strategies in cities across the country to combat segregation, high rents, and congestion-causing sprawl. In California, for example, State Sen. Scott Wiener is trying to permit larger buildings around transit lines statewide. In Minneapolis, planners have made a similar effort to allow more units along transit corridors. Across the country, restrictive zoning is in the crosshairs as cities try to permit a denser, more affordable, and more varied housing stock.

The paper doesn’t at all disprove the theory that more housing units will ease regional affordability problems. The increased transaction prices in Chicago appear to indicate that buyers are paying for the future ability to build more units, which is what the city wanted. But they’re not moving quickly to do so, and in the meantime, prices have gone up even on the less likely development sites. “Even if the long-term outcome is affordability,” Freemark told me this week, “my paper suggests that the short-term affordability problem is real.”

Why aren’t they building bigger buildings? Maybe because Chicago—vast and with stagnant population growth—isn’t one of the country’s many cities in which high land prices and a tight zoning envelope have made it prohibitively difficult to build. The Chicago-based planner Pete Saunders has often criticized the city’s pro-growth planning on the grounds that it is exacerbating inequality and disparity between neighborhoods, as developers build to their hearts’ content in high-demand areas on the North Side and near Downtown but ignore the city’s South and West Sides. If growth didn’t happen after the rezonings, it might be because developers haven’t had such a hard time finding places to build in Chicago in the first place.

But then why did speculation happen? Maybe there’s a bottleneck before projects get underway. Maybe existing apartments are becoming more valuable because buyers are anticipating new fancy grocery stores and higher-income neighbors to arrive with a development boom. Or maybe it’s because Chicago only increased zoning in a small portion of the city, funneling speculation into a handful of parcels. If planners had enacted this zoning change throughout the city, not just by El stops, speculators would have quickly adjusted their offers to recognize that the opportunity to build more on a site was, all of a sudden, nothing special.

Something like that may in fact be on the way: Last week, the radio station WBEZ released interviews with the city’s 13 mayoral candidates on issues including zoning and affordable housing. Eight of the 13 said they would support eliminating the single-family zoning designation in the city of Chicago, as Minneapolis is doing and Oregon aims to do this year. That would bring multi-family buildings to neighborhoods that haven’t previously permitted them.

It’s only been six years since Chicago deployed its transit-oriented development zones, and local builders may yet take advantage of the policies to build new apartments around transit. After all, they wasted no time in ascribing higher values to covered properties. For residents, however, those new prices suggest that higher rents are here before new apartments have arrived—bringing financial stress before the promised relief of new housing supply. That might not be a lesson specific to Chicago.