Rental Bidding Wars in the Chicago Housing Market
House hunters and homeowners are familiar with the bidding war game, but 2022’s real estate market is showing a massive surge in rental bidding wars throughout Chicago. On its own merit, apartment hunting entails an inherently stressful process. Balancing budgets, syncing timelines, finding the perfect location, and other factors add to the complexity.
With Chicago’s housing market facing a strained inventory, demand greatly surpassed supply. While hundreds of articles detail the side effects facing the home buying regimen, news of the rental market begins to asset center stage. As a result, tenants compete against one another for rental units in one of the country’s hottest metropolitan markets.
What is a Rental Bidding War?
For those jumping into the rental game a decade ago, the concept of a rental bidding war may seem foreign, possibly even incredulous. While many renters won’t go through the process, numerous others face long stretches of competition. For the unacquainted, a rental bidding war takes place when multiple renters vie for the same unit. Rather than leaving the landlord to choose between the applicants, prospective renters up the ante with an offer for higher rent.
For renters, this sets a devastating precedent, especially as inflation rises and wages remain relatively stagnant. However, it fosters a much more long-term problem, too. By agreeing to pay above market value for rent, neighborhood rent as a whole faces artificial inflation. In layman’s terms, perception is reality. As a matter of fact, the City of Chicago saw rent rise by more than 25% year-over-year, well ahead of typical inflation rates.
The Cause of Rental Bidding Wars
Aside from upping the ante, what causes rental bidding wars? First, the United States faces long-term low housing inventory, despite data showing slight improvements. In addition, the country faces historically low vacancies and high interest rates. This challenging amalgamation of factors makes it far more expensive to buy a home than to rent.
In doing so, the rental population expanded over recent years. In the first quarter of 2022, a typically quiet time for the rental market, apartment occupancy in Chicago reached 97.6% with rents up 15.2% nationally.
How Does a Rental Bidding War Impact Renters?
Rental bidding wars generate several negative outcomes for the rental population. First, as mentioned, rents saw artificial inflation contributing to high rents. Next, the competition pool grew exponentially, forcing potential renters to battle it out for fewer units. Holistically, what was a typically stressful process, now has additional challenging layers. For low-income renters that rely on below-market-rate rent prices to live in their neighborhoods, rental bidding wars hold the probability of completely shutting them out.
In already difficult times, adding potential bidding wars for apartments is another layer of costs and stress for renters and landlords alike. As we continue our path away from the COVID-19 pandemic, experts monitor the housing situation closely to keep their finger on the pulse of the economy. More specifically, the housing market in its entirety grasps their full attention halfway through 2022.
For legal guidance on real estate law, schedule an appointment with the attorney at Lee Scott Perres, P.C.
