Zoning restrictions are making housing unaffordable and shrinking the middle class in Chicago

Bad zoning laws drive up the cost of home ownership and put a middle-class lifestyle out of reach for too many Chicagoans.

Fewer Chicagoans can still count themselves among the middle class, according to a May 2016 study from the Pew Research Center. Today barely half of all Chicago households can claim an income that puts them in the middle class. Many factors contribute to this decline, but restrictive zoning laws play an important role in a rising cost of living that puts a middle-class lifestyle out of reach for many residents.

The Pew study looks at incomes in the Chicago area, adjusted for the cost of living, to measure the number of people who can consider themselves middle class. In Chicago a family of three would need an income of $44,000 to $133,000 to be considered middle class. A sluggish Illinois economy, fewer jobs and the decline in manufacturing all play a part in the declining middle class. But so too does a rising cost of living, driven in part by the rising cost of rent and home ownership, which means that formerly middle-class incomes can no longer pay for a middle-class lifestyle.

For many Chicagoans the cost of housing is their biggest expense. But fewer people can afford to live in some of Chicago’s most desirable neighborhoods for the simple reason that zoning laws restrict the amount of housing developers can build there. High prices are not the result of a booming economy or more people trying to live in those neighborhoods. Quite the opposite: Chicago’s economy is sluggish, and people are leaving even prestigious neighborhoods such as Lincoln Park.

Here’s how the process should play out in more affluent neighborhoods: As some Chicagoans’ incomes rise, they want more space, so they buy up family homes that formerly accommodated four or five people. In such cases, those family homes may now only house two to three people. If developers are allowed to respond to this new demand, there shouldn’t be a problem. When a neighborhood becomes more popular, developers can replace single-family homes with multifamily buildings or high-rise complexes. The extra development eases the price pressure created by the additional demand for housing from affluent families. It also alleviates some of the demand in nearby neighborhoods, meaning those who can’t afford the more expensive neighborhoods can still aspire to home ownership in nearby areas.

But neighborhoods aren’t able to ebb and flow to meet demand as it arises – and changes. All too often, developers are prevented from replacing single-family homes with multifamily buildings or high-rise complexes. Much of Chicago outside the downtown area is zoned only for single-family homes; and even downtown faces restrictions on the size of buildings.

The city’s inflexibility when it comes to zoning rules triggers a ripple effect. As a result of these laws, developers cannot build more housing in desirable neighborhoods, and residents are then pushed out of the most desirable areas due to restrictions in housing supply. When residents move to lower-cost neighborhoods nearby they push up prices in those neighborhoods and displace those residents. The constant pressure pushing people farther out of the city has been identified as a major contributor to urban sprawl and Chicago’s traffic problems. Furthermore, for those who do not already own homes and cannot manage a long commute, these zoning restrictions leave increasingly little opportunity to get a foothold in a middle-class Chicago neighborhood.

Zoning is not Chicago’s only problem. Illinois’ lackluster economy has done little to generate middle- class jobs, and the fact that the state has some of the nation’s highest property taxes also contributes to the decline of the middle class. So while on the one hand, zoning restrictions make it more costly to own a home, on the other hand, a weak economy reduces the demand for homes.

Relaxing zoning restrictions can create more housing for middle-class residents. And reducing property taxes as more building arises would allow municipalities to broaden their tax bases. While zoning is not the only difficult issue Chicago faces, it is a significant problem policymakers need to address so that Chicago can once again become a city where the middle class can rise.