1-Sep-19 – With the battering ram of real estate tax increases hammering away at Chicago apartment owners this year, experts are wondering how much longer “Ma and Pa” landlords can compete with downtown luxury rental developments and stay in business.

Skyrocketing tax assessments on homes, condominiums, and small apartment buildings in 2018 led to dramatic increases in real estate tax bills payable in 2019 for hundreds of thousands of property owners on Chicago’s North Side and Northwest Side.

Outgoing Cook County Assessor Joseph Berrios raised the estimated fair market value of some properties from 30 percent to more than 140 percent in North and Northwest Side neighborhoods. This comes as a parting shot from Berrios after he lost his re-election campaign to challenger Fritz Kaegi, the newly elected assessor.

In 2018, the entire city of Chicago was reassessed. The sharply higher assessed valuations sparked mind-bending real estate tax hikes when bills arrived this month.

Facing huge tax increases, many apartment building owners are planning to strike back with large rent increases to pay the expected sharply higher 2018 tax bills – but the tax hikes may take years to recoup.

Apparently, the expected Herculean rent hikes have not yet hit the Windy City. Chicago apartment rents rose only 1.4 percent between August 2018 and August 2019, slightly below the national average of 1.6 percent, reported Apartment List, a national rental survey.

Currently, median rents in Chicago stand at $1,095 a month for a one-bedroom unit and $1,288 for a two-bedroom layout. Experts say renters should brace themselves for hefty rent hikes on new leases offered by landlords in spring of 2020.

However, one Old Town landlord who was slapped with a 33 percent real estate tax hike said he is planning a six-percent-plus increase on a 1,000-square-foot rental unit in a Victorian walk-up, hiking the rent from $2,495 to $2,650.

Meanwhile, rents are skyrocketing more than 4.5 percent in Henderson, Nevada, and Mesa, Arizona, and more than three percent in Austin, Texas; Phoenix, Arizona; and Raleigh, North Carolina. Another national rental study by Yardi Matrix reported that multifamily rents in 127 markets for the year through July 2019 rose a hefty 3.4 percent to $1,469. (Right) SoNo East apartments in Lincoln Park. (Above) Kitchen at Trio Apartments in Chicago’s West Loop.

Rents are going up faster in so-called lifestyle buildings – fancy high-rises with a concierge, swimming pool, rooftop grilling, and other expensive amenities. Lifestyle rents increased 3.1 percent in July, showcasing the strongest growth for the segment since September 2016, according to the report.

However, for the past six years, in “renter by necessity” buildings – those lowly walk-ups without the bell-and-whistle amenities – rents have grown faster. Despite the rent increases, the national apartment occupancy rate declined only 0.1 percent to 94.8 percent.

Yardi Matrix reported that rent increases stem from several economic changes such as the nation adding 172,000 jobs per month in 2019.

The United States Census Bureau reported that the number of renter households increased by more than 600,000 to 43.8 million, its highest level during the first quarter of 2019.