“The 2 to 4 unit housing stock plays a unique and critical role in Chicago’s overall housing supply by providing affordable rental housing, homeownership, and wealth-building opportunities. More than any other type of rental housing in Chicago, 2 to 4 unit properties are the most likely to offer lower-cost rents and family-sized units and these units make up a substantial portion of the housing supply in Chicago communities of color, particularly the city’s Latinx communities.
“Building on this work, this analysis uses a unique data set to document the loss of the 2 to 4 stock in Chicago neighborhoods in an effort to understand the different ways that market forces put pressure on this key segment of Chicago’s housing market. For more details on the importance of the 2 to 4 stock in Chicago neighborhoods, see The Characteristics of the 2 to 4 Stock in Chicago Neighborhoods report released in tandem with this research.
“This analysis finds:
- “Every type of neighborhood housing market is losing 2 to 4 unit buildings, but the loss is most acute in higher-cost neighborhoods on the city’s North and Northwest sides. In these neighborhoods, this loss is typically due to the replacement of 2 to 4 unit properties by single-family homes through conversion of the existing building or demolition and new construction. This phenomenon highlights how changing demand for housing, particularly demand for expensive single-family homes, is impacting the overall housing supply.
- “In the city’s more affordable, moderate-cost neighborhoods, the 2 to 4 unit housing stock is generally more stable, but losses of 2 to 4 buildings are concentrated in a small number of census tracts with rising values or near ongoing or planned catalytic investment projects. These findings amplify calls by housing advocates regarding the need for proactive policies to preserve the existing lower-cost rental stock before it is lost to gentrification pressures.
- “In lower-cost neighborhoods, the loss of 2 to 4 unit stock is most commonly seen through demolition and replacement by non-residential use, often vacant land. This phenomenon highlights the need for investment in both the broader community and the existing housing stock to reverse the tide of long-term population loss, historic disinvestment, and the ongoing legacy of the foreclosure crisis and Great Recession.
- “Finally, the analysis shows that lost 2 to 4 unit buildings were far more likely to be associated with a foreclosure filing compared to the remaining, legacy 2 to 4 stock. This finding highlights the vulnerability of this stock, particularly at a time when the COVID-19 pandemic is having a disproportionate impact on lower-wage workers, renters, and small property owners, and raises the specter that the economic fallout of the COVID-19 pandemic could further deplete this unique housing resource.
“These findings highlight the need for a comprehensive approach to preserving 2 to 4 unit buildings that 1) recognizes the stock’s critical importance to providing affordable rental housing, homeownership, and wealth-building opportunities in all Chicago neighborhoods and 2) addresses the spectrum of challenges facing these buildings, their owners, and tenants in different market contexts.
“Background: Buildings with 2 to 4 units are a critical component of Chicago’s housing stock and play a unique role in providing both renter- and owner-occupied housing, comprising 26 percent of all residential units in the City of Chicago. According to forthcoming research from IHS’s 2021 State of Rental Housing in Cook County, 2 to 4 unit properties made up over 35 percent of the city’s rental housing supply. These buildings are often owned by small “mom and pop” landlords who may also occupy a unit as their home while renting out the remaining units, providing affordable homeownership and wealth-building opportunities for these households. In Chicago, roughly 54 percent of 2 to 4 unit buildings had active homeowner exemptions in tax year 2019 and are likely to be owner-occupied.
“Units in 2 to 4 unit buildings are also a critical component of a community’s supply of affordable rental housing for lower-income households, particularly in Chicago’s communities of color. According to national research from the University of Southern California and Enterprise Community Partners, rental units in 2 to 4 unit buildings tend to have the lowest rents of any building type and also serve renters with the lowest incomes. In Chicago, 2 to 4 unit buildings have the highest share of rental units with rents below $900, a key benchmark for affordability. Compared to multifamily properties, 2 to 4 unit properties are much more likely to offer family-sized units with roughly 40 percent containing three bedrooms or more. Additionally, 2 to 4 flats are particularly important to the housing stock in communities of color and to residents of color citywide. Roughly 60 percent of Latinx-headed renter households and 32 percent of African American-headed renter households live in 2 to 4 unit buildings. Nearly 46 percent of the total housing units in majority Latinx census tracts and nearly 30 percent of total housing units in predominantly African American census tracts are in 2 to 4 unit parcels.
“The temporary or permanent loss of the 2 to 4 unit building rental stock is a critical community development issue impacting all Chicago neighborhoods. More than other residential properties, IHS analysis shows that 2 to 4 unit buildings were more significantly impacted by foreclosure during the Great Recession than other property types with nearly 30 percent of 2 to 4 unit parcels associated with at least one foreclosure filing since 2005. In the years following the Great Recession, as rental housing demand and the overall rental supply in Chicago grew, the city still saw losses to the 2 to 4 rental stock. IHS’s upcoming State of Rental Housing in Cook County report finds that between 2012 and 2019, the city lost roughly 6 percent of its 2 to 4 unit rental stock. As this analysis will show, it is likely that many of these units have been permanently lost to conversion or demolition and, once lost, are unlikely to be replaced and if replaced are unlikely to be affordable. Due to the importance of this type of housing, it is critical to affordable housing policy to understand the factors driving the loss and instability of these rental units and buildings in different neighborhood market contexts. Without intervention, this essential component of Chicago’s affordable housing stock could be further threatened by the economic fallout of the COVID-19 pandemic.” (Institute for Housing Studies at DePaul University, May 13, 2021)