Illinois is short 142,000 homes. Here’s how to fix that.
Illinois faces a critical housing shortage that has increased home prices and rents, leaving many families unable to find or afford housing.
There were many causes of the shortage. Strong employment growth and demographic trends boosted demand. Rises in materials costs due to inflation and tariffs on Canada and China and interest rate hikes increased construction costs for developers and homebuilders, resulting in fewer new homes being built, according to the National Association of Home Builders. Meanwhile, institutional investors bought up properties with cash and jacked up rents, leaving fewer homes available for everyday Americans to purchase.
However, the extent of the problem in Illinois was not fully known — until now.
A June 2025 report from the Illinois Economic Policy Institute and the Project for Middle Class Renewal at the University of Illinois at Urbana-Champaign assessed that Illinois is now short 142,000 homes. To meet current needs, address “pent-up” demand, and account for future growth, Illinois must build 45,000 homes per year — more than double recent levels of production.
Researchers found the primary culprit was a lack of inventory. Last year, homes listed for sale were 64% below 2019 levels. There are fewer building permits issued for new housing units annually than before the pandemic. Meanwhile, institutional investors increased their share of the Chicago area housing market from 8% of properties up to 14%, further restricting supply.
More people are working, earning incomes, and wanting to buy their first homes or upgrade to better homes, but there’s nothing available. And the limited supply that is available costs 60% more per month all-in for the same exact house than it did just three years ago.
Put simply, you can’t buy what you can’t afford.
To be sure, housing remains more affordable in Illinois than in many other states. Illinois still ranks 36th nationally in average home values and 26th in median rent. Extra costs that come with ownership, such as homeowners’ insurance, have risen faster in states such as Florida, North Carolina, and Texas.
But the trendline for Illinois is one of worsening affordability. While rising home values are beneficial to current owners who experience equity gains, they afflict and price-out renters, first-time buyers, and future residents. Higher housing costs also worsen homelessness.
The good news is that Illinois can take steps to address this problem.
To boost inventory, Illinois could ease zoning restrictions that hinder new construction projects. Illinois could join other states in allow multifamily zoning in our largest cities, reform minimum parking requirements, and fast-track permitting by adopting a “shot clock” to speed up reviews.
Illinois could encourage developers to build more housing through tax incentives to convert commercial buildings to residential units as well as low-interest loans and stronger tax incentives to build more low-income housing units.
Illinois can make it easier for individuals to compete with institutional investors by enacting legislation to give current renters and nonprofits the first opportunity to purchase properties before they are listed. Illinois also could increase surtaxes on short-term rentals like Airbnb and Vrbo properties, which would generate additional tax revenue, encourage more visitors to stay in hotels, and incentivize more owners to either rent their properties to long-term tenants or list them for sale for Illinois residents.
At the same time, Illinois could expand career opportunities for the working class. Construction apprenticeships have grown by 62% since 2015, and our apprentices earn high wages exceeding $40 per hour. Employing registered apprentices on taxpayer-subsidized housing projects, such as those receiving tax incentives and property tax abatements, would combat labor shortages that can halt or delay new construction and build a stronger, more resilient Illinois.
Real-world data confirms that a housing shortage is plaguing Illinois. By enacting popular, bipartisan solutions, Illinois can resolve the crisis and improve affordability for current and future residents.
• Frank Manzo is an economist at the nonpartisan Illinois Economic Policy Institute.