Chicago skyline with cranes and a new rental tower, reflecting a slowdown in apartment starts and a shift toward transit-oriented projects.
Chicago metro, September 2, 2025
New apartment starts across the Chicago metro plunged sharply as rising construction and insurance costs, higher labor expenses and tighter lending undercut the post-pandemic building boom. The region saw a steep year-over-year decline that pushed it down national rankings and shifted growth toward other metros. Roughly a third of the limited new units remain inside the city, while large projects pivoted from condos to rentals and small infill permits continue in neighborhoods. Local policy changes removing parking minimums near transit aim to reduce costs and encourage denser development, even as builders prioritize amenities tied to mobility and wellness.
Top line: New apartment starts across the Chicago metro area fell sharply in 2025, with estimated starts down 60.4% compared with 2024, leaving roughly 3,756 new units expected to come online this year. That steep pullback reflects rising costs, tighter finance conditions and a wider regional shift of multifamily activity to other U.S. metros.
The most recent national data compilation, drawn from industry project-tracking and software records, shows Chicagoland experienced the deepest year-over-year drop in apartment construction among U.S. metros in 2025. Only about a third of those expected units — roughly 1,371 — are slated inside the city limits; the rest are in surrounding suburbs.
Developers and analysts attribute the downturn to a combination of factors that make new projects harder to launch: higher labor and material costs, sharply increased insurance premiums, and tighter lending standards. Many projects opening this year were permitted back in 2021–2022; far fewer projects actually broke ground in 2023–2024, a lag that is showing up now in lower 2025 starts.
On a national scale, Chicagoland slipped out of the top 30 new-rental markets and landed around 33rd in 2025. Within the Midwest, the metro ranks roughly fifth, trailing the regional leader by about 3,000 units. The Midwest as a whole is expected to deliver about 12% of roughly a half-million new rental units forecast nationwide for 2025. By contrast, the South is projected to capture a majority of new builds, accounting for roughly 52% of national production, with a few Southern metros together starting tens of thousands of units.
Surveyed renter preferences show strong interest in reserved or covered parking and fitness centers, with other sought amenities including coworking and communal spaces, club rooms, spa-like features and rooftop pools. Those amenity demands affect design and operating costs as developers try to win tenants in a challenging market.
The Chicago City Council moved in mid-2025 to remove citywide parking minimums for projects located near public transit. The reform eliminates minimum parking requirements for developments within a half-mile of rail transit or Metra, or within a quarter-mile of a bus line. The policy is intended to reduce zoning barriers that can raise project costs and block housing production near transit-rich locations.
A recently issued construction permit on a vacant lot at 1361 West Chicago Avenue in Noble Square illustrates small-scale infill activity that continues despite the wider slowdown. The approved plan calls for a four-story building with five dwelling units above a ground-floor retail space. The project shows features increasingly common in new small multifamily work in the city: limited automobile parking, dedicated bicycle storage and alley access. Specifics include:
A high-profile downtown tower planned originally as a condominium project pivoted during construction to become a full rental tower, highlighting how market conditions can force major changes in development strategy. The project, completed and opened to tenants last spring, totals roughly 738 units and rises more than 800 feet. The conversion unfolded amid pandemic-related financing changes and sales slowdowns; developers ultimately repositioned the building to capitalize on demand for luxury rentals. The building reports full occupancy and includes amenities aimed at wellness, mobility and sustainability, plus storage for bikes and electric vehicle charging points. Monthly rents range from lower-end studio pricing in the low thousands to premium multi-thousand-dollar units for large floors.
The steep drop in new construction starts will likely tighten supply growth for rental housing in the near term, potentially keeping upward pressure on rents in desirable neighborhoods. Local zoning reforms that reduce parking burdens and make transit-adjacent building easier could help some projects pencil out in the future, but broader cost and financing headwinds remain the dominant forces shaping development in 2025.
A: Starts fell about 60.4% year-over-year, leaving an estimated 3,756 new units expected to open in 2025.
A: About 36% of the expected new units are in the City of Chicago; the remainder are in suburban areas around the metro.
A: Higher construction labor and materials costs, rising insurance premiums and tighter lending criteria have made new projects harder to finance and build.
A: The city removed parking minimums for projects near rail or bus service, eliminating those minimums within a half-mile of rail or a quarter-mile of bus lines to encourage transit-oriented development.
A: Yes. Smaller infill projects continue to be permitted, such as a recently approved five-unit building in Noble Square with limited car parking and bike storage.
| Feature | Details |
|---|---|
| Total 2025 Chicagoland starts | Approximately 3,756 units |
| Year-over-year change | -60.4% |
| Share in city | About 36% (1,371 units) |
| Midwest rank | Roughly 5th |
| Major headwinds | High labor/material costs, insurance, tighter lending |
| Local policy change | Parking minimums eliminated near transit (half-mile rail / quarter-mile bus) |
| Sample small project | 5-unit, 4-story building in Noble Square; $1.2M estimated construction cost; 2 covered parking spaces; 5 bike spaces |
| Sample large pivot | Luxury high-rise converted from condos to 738 rental units; opened to renters in spring 2025; reported full occupancy |
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