Chicago apartment starts plunge as costs and rules reshape development

Chicago apartment construction plunges in 2025 as local projects and zoning shifts reshape development

New apartment starts across the Chicago area fell sharply in 2025, with the region posting a 60.4% decline in newly started units compared with 2024. The drop leaves the metro with an estimated 3,756 new units expected this year, of which about 36% (roughly 1,371 units) are located inside the City of Chicago and the remainder in the suburbs.

Why starts plunged

The slowdown reflects projects that were permitted in 2021–2022 moving forward while far fewer projects broke ground in 2023–2024. Developers across the region are contending with higher labor and material costs, rising insurance premiums, and tighter lending standards, all of which have damped the appetite for new apartment construction.

Where Chicago stands nationally and regionally

The Chicago metro slipped out of the top 30 U.S. apartment markets in 2025 and landed around 33rd nationally. Regionally in the Midwest it ranks fifth, trailing the leading Midwest market by about 3,000 units. Other Midwest metros are on pace to start between roughly 4,000 and 5,600 units in 2025. Nationwide, the Midwest is expected to deliver about 12% of the roughly half-million units projected for 2025, while the South accounts for the largest share at about 52%.

Market notes and renter demand

Some large Southern metros and fast-growing Sun Belt cities are driving the national pipeline, while the New York metro remains the single largest market, with about 30,000 units scheduled to open in 2025. Survey data indicates renters are focusing on a mix of practical and lifestyle amenities, with reserved or covered parking and fitness centers among the top priorities, and interest also strong for coworking and communal spaces.

Local permit: a small Noble Square project shows neighborhood-level activity

At the neighborhood level, a permit issued in late August 2025 cleared the way for a small residential project at 1361 West Chicago Avenue in Noble Square. The approved plan calls for a four-story building with five dwelling units, an 807-square-foot ground-floor retail space, two covered parking spaces accessed from the alley, and five indoor bicycle spaces. The reported construction cost is approximately $1.2 million. A zoning variation reduces the rear setback for the residential floors from 30 feet to 3 feet, and because the lot is vacant no demolition is required before work begins. Transit connections near the site include a nearby bus route, a Blue Line subway station reachable by bus, several north–south bus lines within a few blocks, and a public bike-share rack by the adjacent park.

Large-tower pivot highlights shifting product demand

A major downtown tower that began life as a high-end condominium project shifted to rental product during development after pandemic-era financial strain and reduced condo demand. The tower rose to a height reported near 805 feet and contains roughly 738 rental units. Construction began with foundation work in late 2019, paused during pandemic uncertainty, and later resumed with a new financing mix. The project opened to renters in the spring and is reported to be fully occupied. Rent listings for the building range from about $2,400 per month for a small studio to more than $14,000 per month for a large unit. The building includes a suite of amenities intended to support wellness and mobility, such as bike storage, electric vehicle charging stations, fitness spaces, and outdoor terraces.

City policy changes and parking reform

In July 2025 the city council passed an ordinance removing parking minimum requirements for developments located within a half mile of rail transit or within a quarter mile of a bus line. The measure is part of a broader effort to eliminate zoning rules that have been cited as barriers to new housing. Local land-use changes remain politically contentious in many wards, and community meetings over projects continue to shape approvals.

What this means for the near term

The large year-over-year decline in starts suggests a quieter construction rhythm for the near term as higher costs and careful lending slow new projects. That said, smaller neighborhood projects and conversions are continuing, and zoning changes such as the parking-minimum repeal could make some development more feasible near transit over time. Developers report demand for rental product remains solid in certain segments, particularly luxury and amenity-rich buildings that cater to specific renter profiles.

Key data at a glance

• 2025 Chicago-area starts estimate: 3,756 new units
• City share: ~36% (about 1,371 units)
• Year-over-year change: -60.4% vs. 2024
• Midwest share of national pipeline: ~12%
• South share of national pipeline: ~52%
• Local permit example: 1361 West Chicago Ave — 5 units, $1.2M reported cost
• Large tower example: ~738 rentals, opened spring 2025, reported fully occupied