City’s Average Rents Surpassing Mortgages
According to the latest survey from real estate firm Zillow, housing prices are accelerating across the US. While the company now deems Denver, San Diego, San Jose, San Francisco, and Los Angeles unaffordable for both renters and mortgage owners, plenty of other US cities are also becoming increasingly expensive to live. In Chicago, Crain’s Chicago Business reports that Zillow found that during Q2 2015 the average city renter paid nearly 31% of their monthly income for rent, while mortgage owners paid just under 14% of their monthly income on mortgage payments. However, Crain’s notes these results don’t consider homeowner costs like insurance, homeowners association fees, or property taxes. Still, low interest rates for mortgages are contributing to the gap between rental and ownership payments. Zillow projects a rise from the current average mortgage rate of 4% to 6% would boost monthly home payments for Chicago-area residents to about 18% of income. Despite rising costs, housing prices for home owners as a percentage of monthly income are still lower in Chicago than at previous times. Zillow found that from 1985 to 2000, Chicago renters paid around 22% of monthly income for rent, while home owners spent about 23% of monthly income on mortgage payments.
What This Means For Small Businesses
Chicago’s small business owners need affordable housing for themselves and their employees. However, as Zillow’s latest report shows, this is increasingly becoming tough to find in the metro area. Ultimately, small business owners may not be able to afford to live in the city where they run their business, and their workers may face increasingly arduous commutes. Or, some businesses may decide rising real estate costs aren’t worth the added burden, and relocate to other cities. This would have a negative effect on Chicago’s economy, and on its small business community.
Additional Reading
The Denver Business Journal also noted Zillow’s latest survey.
Note: this article is intended to keep small business owners up on the latest news. It does not necessarily represent the policy stances of NFIB.
