By Dennis Rodkin 

November 19, 2008

Two recent reports from expert analysts of the Chicago housing scene
shed new light on the impact of the recent troubles affecting the local
residential real-estate market. One report shows that renters of
high-end apartments are benefiting from the downtown condo glut, while
the other indicates that the foreclosure wave is sweeping into Latino
neighborhoods after initially hitting African American neighborhoods
hardest.

Last week, in its report on the downtown housing market for the
third quarter of 2008, Appraisal Research Counselors noted that the
number of new condos rented out over the past year equaled about 60
percent of the number of vacant downtown rental apartments. According
to the report, luxury apartment buildings—the ones most likely to
compete for tenants with new condo buildings—are, on average, 7.2
percent vacant. The report goes on to point out that, if all the
renters who went into condos in the past year had taken apartments
instead, that percentage would be cut in half.

Ron DeVries, Appraisal Research’s vice president, forecasts that
the number of condos rented out in 2009 will exceed total apartment
vacancy. The result, he says, will be a “downward pressure on rents
downtown.” Condos typically rent for about 10 percent less than
comparable apartments, DeVries says, because they offer less
in-building maintenance and repair service. (Typically, they are also
expected to turn a profit, though the owners of rented condos these
days may only be hoping to cover the mortgage via the rent.) So if
large numbers of less-expensive condos are drawing renters, the obvious
competitive response by landlords of big apartment buildings will be to
bring down rents. “The person looking to rent a luxury apartment is the
winner in this picture,” DeVries says.

The losers in Chicago’s foreclosure crisis are disproportionately
people of color, according to a report released Monday by the Woodstock
Institute. While the heaviest concentration of foreclosures has been in
African American neighborhoods, there has been a sharp spike in
foreclosures in Latino neighborhoods. This suggests that, in the
future, those neighborhoods “will be the hardest hit,” says Sarah Duda,
the Woodstock research and project associate who cowrote the report
with Geoff Smith, the institute’s vice president.

While just 8.7 percent of mortgageable real estate in the Chicago
area is in neighborhoods with mostly African American populations, 35
percent of all local mortgaged properties that have reverted to lenders
are in those neighborhoods, according to the Woodstock report. (Those
figures are flip-flopped for mostly white neighborhoods, which have
23.2 percent of the mortgageable property, but only 6.6 percent of the
foreclosures.) The number of properties that became bank-owned in
Latino areas rose by 464.7 percent between 2005 and 2007, compared to
an increase of 231 percent during that time for the general population.
And neighborhoods that are primarily Latino have the highest
proportion—47.9 percent—of multi-family (rental) housing that has gone
back to the banks. That means “a lot of affordable rental housing is
being taken off-line,” Duda says.