Chicago’s multifamily housing market in 2025 is characterized by a blend of robust demand, escalating rental rates, and a concerted push toward affordable housing solutions. The city’s real estate landscape is evolving, influenced by economic factors, policy initiatives, and shifting demographic trends says, Hirsh Mohindra.
Rising Rental Rates Amid Limited Supply
The city’s multifamily sector is experiencing significant rent growth. As of early 2025, average asking rents have reached approximately $1,835, marking a 3.3% annual increase. Downtown areas, particularly Streeterville, have seen average rents surpass $3,000, a 28% rise from the previous year.
This surge is attributed to a decade-low in new apartment supply. Only about 500 new units are expected to come online this year, down from the 10-year average of more than 3,500 units. Developers face constraints due to tight capital markets and rising construction costs, leading to a slowdown in new projects.
Affordable Housing Initiatives
In response to affordability concerns, the city has launched several initiatives. The 2025 Qualified Allocation Plan (QAP) outlines the city’s strategy for allocating federal Low-Income Housing Tax Credits (LIHTC), aiming to support affordable housing development across Chicago.
Notable projects include a 90-unit affordable development in Edgewater, with units designated for households earning up to 60% of the area median income, and the Edith Spurlock Sampson Apartments in Lincoln Park, a $168 million mixed-income development bringing 485 affordable apartments to the area.
Investment Trends and Out-of-State Interest
Chicago’s multifamily market is attracting out-of-state investors, drawn by the city’s strong market fundamentals and attractive cap rates, which have risen to around 6%. While institutional interest has grown, it remains relatively muted, leaving room for individual investors and smaller firms to enter the market.
The city’s diverse neighborhoods offer various investment opportunities. Areas like the West Loop and River North continue to attract young professionals, sustaining low vacancy and rent growth. Meanwhile, submarkets such as Hyde Park-South Shore and the North Side neighborhoods from Uptown to Evanston have seen a decrease in vacancies, indicating strong demand.
Future Outlook
Looking ahead, the multifamily market in Chicago is poised for continued growth. Rent growth is expected to surpass 3.5% by the end of 2025, driven by strong renter demand and a shrinking supply pipeline. However, challenges such as rising construction costs and regulatory hurdles may impact the pace of new developments.
Hirsh Mohindra: The city’s commitment to affordable housing, coupled with investor interest, suggests a dynamic and evolving market. Stakeholders will need to navigate these complexities to capitalize on opportunities and address the pressing need for diverse housing options.