‘If you’re not ready to exceed the $500 list price, don’t even bother’
LOGAN SQUARE — After years of living on the East Coast, newlyweds Stacy Newman and Benjamin Rosenthal moved to Chicago this summer to begin the next chapter of their lives.
The couple hoped to land a two- or three-bedroom apartment on the North Side for around $3,000 a month. But their real estate broker was struggling to find suitable apartments due to the lack of available places and rising rents. The few places that met their needs were picked up within hours of going live, they said.
Then came the bidding wars.
There were five competing bids for a two-bedroom apartment in West Town that they wanted. They were rejected for a townhouse in Lincoln Park despite being offered $200 a month on top of the asking rent, they said.
“We had heard a lot of stories from friends in terms of buying houses and condos, but I had never heard of such a thing as a bidding war for rental. We were very unpleasantly surprised,” Newman said.
The broker told them, “If you’re not ready to go over the $500 list price, don’t even bother coming in,” Rosenthal said of the West Town apartment they wanted.
Chicago’s tight real estate market — transformed by the pandemic and rising inflation — is pushing renters into bidding wars, a challenge more common among homebuyers.
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Apartments in hot North Side neighborhoods such as Lakeview and West Town are renting for more than $500 above their listed rates, real estate experts and tenants said.
The crowded market left little room for preference. Tenants are pushing back their move-in dates, paying more money up front to beat other applicants and settling for apartments they wouldn’t have rented otherwise, experts said.
Meanwhile, rents are rising as landlords and property managers struggle to cope with rising taxes and building costs amid the pandemic, experts said.
“You hear all these horror stories about New York City…it’s really like that,” stockbroker Maggie Bergin Balcarcel said.
“A problem of supply and demand”
Bidding wars for apartments have become the norm in major cities as rents rise across the country, experts said.
Demand for housing in Chicago plummeted to record lows at the start of the pandemic, when some landlords offered potential tenants concessions like two or three months’ free rent to fill empty buildings.
But now that the city has reopened and pandemic fears have subsided, more people are trying to rent apartments – but there aren’t enough to go around, property experts have said. Those same landlords who struggled to find tenants are now turning people away because they don’t have room for more tenants, experts said.
Chicago apartment occupancy is growing at its fastest pace in more than two decades, according to a recent report by real estate analytics firm CoStar. The number of apartments rented over the past year is nearly three times the city’s average, according to the report.
“It’s a matter of supply and demand; at its core, that’s the problem, but it’s a little more nuanced than that,” said Steven Rapoport, senior director of Chicago Real Estate Resources.
Supply is low in part because construction costs are high during the pandemic, which has strained developers and owners, Rapoport said. But demand was outstripping development even as early as the 2008 economic recession, he said.
“Lenders have been more conservative after the lessons we learned in the recession,” Rapoport said.
Tenants who got “incredible deals” on apartments at the start of the pandemic are also staying longer in their apartments, further limiting the number of places on the market, Bergin Balcarcel said.
More people working remotely have given people some flexibility in where they live. Bergin Balcarcel said more than half of his clients this summer were moving to Chicago.
“A lot of my visits were virtual with people coming from out of state,” she said. “They want to be in areas that [feel like] Chicago. They want to be near Wrigley Field, near the lake and downtown.
With too many people vying for too few apartments, money was the deciding factor, experts said.
“I had to warn all the clients I receive this season that they will probably have to put in a little more money and that it is going to be a trip,” Bergin Balcarcel said.
“Probably the bargaining chip for someone else”
Bill S., who asked that his last name not be published, moved from Florida to Chicago during the pandemic to pursue higher education. He and his roommate hired a broker to help them find an apartment on the north side.
A two-bedroom apartment in Lakeview sounded perfect, but their realtor said there were other offers and they would need to sweeten the deal to win the spot. They agreed to pay the first month’s rent upfront, which wasn’t “huge” because they had both saved some money, Bill said.
The broker hit back, asking them to pay two and then three months’ rent up front, Bill said.
It wasn’t ideal, but they agreed, thinking they had landed the apartment, Bill said. Shortly after submitting their offer, the agent said the owner had left with someone else.
“It looked like we were the first. It was kind of mind-boggling waking up the next day feeling like you had an apartment you liked and finding out you didn’t,” Bill said.
Bill and his roommate felt like they were “probably someone else’s bargaining chip”, he said.
“It’s getting really stressful that the same sort of financial game you’re trying to play when buying property is now being applied when you’re just trying to find accommodation for the year,” he said.
The bidding wars aren’t exclusive to the North Side – and in many cases landlords are naming their own terms, which can sometimes seem moot, tenants said.
A man who declined to be named said he and his fiancée tried to rent a $2,700-a-month single-family home in Bridgeport in July. The landlord said he would have to compete with 40 inquiries and eight groups of potential tenants offering $3,400 a month or more for the house.
The man and his fiancée, who are white, moved out after the landlord made racist comments about Asians, he said.
“It made me think of an issue that’s cropping up in other cities — people getting into bidding wars and how much of that is due to discriminatory rental practices,” the man said.
“You’re really starting to worry”
Chicago’s highly competitive rental market is likely to cool off as fall and winter approach, real estate experts said. But the demand seen over the summer is a strong indication Chicago is rebounding from pandemic lows, they said.
“There are only a limited number of major metropolitan cities that have what Chicago has to offer,” Rapoport said. “People need to live around cities, and the most central and desirable parts of cities are only getting more central and more desirable. …These central locations are designed for rent growth to outpace inflation rates.
Newman and Rosenthal sued about 30 apartments in Chicago while living out of state — and most of them were recovered before they had a chance to visit them, Newman said.
After months of searching, the couple rented a two-bedroom apartment in Lakeview. It has the balcony they wanted, but the building doesn’t have a pool, which was on their wish list.
“I think we’re happy,” Newman said. “If it was a normal situation and it hadn’t happened, we probably would have looked at more places and used more discernment.”
Newman said they felt hopeless by the latest showing.
“Ben was laughing at me because I was like, ‘We love it! We’re going to take it today!’” Newman said. “You’re starting to get really worried. We had to break our lease in Connecticut. we needed a place to live.
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