Rent Control
Hi Terry,
I am from Chicago, but have been working and living in Tokyo, Japan for quite some time. I love the city and still consider myself to be a “Chicagoan”. After years of struggle with student loans and having built a bit of a career here, I want to buy an investment property. I can buy something anywhere in the world just about, but want to own a piece of Chicago. The problem is that the prospect of rent control scares me. I am not wealthy so would need to at least break even month to month on rent. Do you think that rent control will actually happen in Chicago? As I said, I love the city, but things need to make economic sense. I would be interested to hear your thoughts on this.
Terry Says
Rent control is the quickest way to destroy the city’s housing stock. It is a misguided effort to provide relief from the cost of housing. But as you correctly intuit, why would a landlord every buy a property if he could not raise rents to keep up with rising property costs — especially property taxes! And what landlord would make improvements for tenants — from a new refrigerator to painting the hallways — if he/she could not get the cost of the improvements back through raising the rents? You’d have a city of increasingly dilapidated housing and no incentive to fix it!
But the real and very immediate issue with buying property in Chicago is the fact that real estate taxes MUST rise to deal with the city’s oncoming pension crisis. Or there will be some other kind of tax. And the situation with Illinois is even worse — so you would see higher income taxes if you lived here. I love Chicago — but I can think of a dozen other states where it makes more sense to invest in housing.
