Lake County housing construction falling ‘woefully’ behind population growth; ‘There’s a need for a greater diversity of housing’

By 2027, Lake County could be short by more than 19,000 needed housing units.

The rate of new housing construction is “woefully” below projected population growth, revealed a housing analysis from Kretchmer Associates, an Evanston-based urban planning consultant.

In the past five years, the county averaged 1,244 building permits issued per year; a pace that is well below projected five-year household growth and the Chicago Metropolitan Agency for Plan (CMAP) long-term 2050 population projections.

If the construction rate doesn’t change, there will be a continued deficit of new housing, said Valerie Kretchmer, president of Kretchmer Associates.

“There’s a need for a greater diversity of housing, for people of different ages, life stages, incomes,” Kretchmer said.

After an economic development assessment of Lake County revealed housing supply and costs were impacting the economic future of the county, Lake County Partners, a nonprofit economic development agency that works with the county government, commissioned the countywide housing analysis.

Limited housing supply and high costs are impacting employers in Lake County, as well as the county’s ability to attract future employers, said Brenda O’Connell, community development administrator for the county.

Of the anticipated deficit, the largest shortfall will be in market-rate housing units. The analysis predicts a shortage of 11,400 market-rate units.

Affordable housing units are also lacking countywide, particularly for senior citizens.

The study anticipates the county will need 1,200 more affordable units for seniors with incomes under $50,000, and 6,700 units for families with incomes under $75,000.

Zoning that favors single-family housing, high land and construction costs and bias toward multifamily housing are some of the primary reasons why the county lags in housing production, Kretchmer said.

If an older person wants to downsize from a multifamily home, they would struggle to find a smaller home or apartment in Lake County due to a lack of apartments in general, let alone units that are affordable, she said.

“In general, and it’s not just in Lake County but lots of places, there’s a bias against multifamily housing,” Kretchmer said. “Historically, people have felt that these people are not as potentially affluent as the rest of us.”

An affordability problem

Home prices are appreciating faster than income growth, putting pressure on affordability.

Median single-family detached homes have increased in price by 37% since 2019, while the median income for a four-person household has only increased by 19% in that same time period.

Half of renters and 24% of owners in Lake County are living in unaffordable housing and considered cost-burdened, meaning they are paying more than 30% of their income on housing.

Of those who are cost-burdened, either in a rental or owner-occupied unit, over 70% have incomes under $50,000.

“Workers in low- and moderate-income occupations are hard-pressed to afford housing in Lake County,” the study said. “The maximum four-person household income at 60% area median income (AMI) is $66,180. Occupations such as educators, EMTs, pharmacy technicians, home health aides, food preparation and servers, retail, and protective services have median wages below this, and some are less than half this amount.”

Home prices vary significantly across the county. In 2022, the median single family home price in Lake County was $377,000, but in the northeast the median home was $195,000, and $752,000 in the southeast.

Kretchmer was shocked by the high numbers of people who are cost-burdened. She was particularly surprised by how many were cost-burdened in the southern and southeast region of the county, but the region is the most expensive.

In the southeast, 57% of renters and 28% of owners are paying more than 30% of their income for housing — the highest share of cost-burdened residents of any region in Lake County.

Median rent for a two-bedroom apartment in the southern half of the county ranges from $1,512 in the southwest, to $1,676 in the southeast, and $1,723 in the south central. Comparatively, median rent in the county as a whole is $1,286.

The shortage of rental units puts price pressures in all areas of the county, but especially in the southern region, according to the study.

Kretchmer suspects the reason so many residents in the southern part of the county are cost-burdened is because a predominance of jobs are located in the region.

“A lot of jobs are in the southeast area, and it’s a desirable place to live,” Kretchmer said. “People are obviously stretching quite a bit to be able to live there.”

Job-housing mismatch

The largest job concentration is in the south-central region of the county, with over 100,000 jobs primarily in Vernon Hills, Buffalo Grove, Mundelein and Libertyville, according to data from the analysis.

The second highest concentration is in the southeast with nearly 70,000 jobs in Highland Park, Deerfield and Lake Forest.

However, the northeast region has the largest stock of affordable apartments, with 54% of its units considered affordable. At 13%, the south central region has the lowest share, and the southeast has the lowest number of affordable units at 1,304, according to the analysis data.

Government affordable housing programs are also heavily concentrated in the northeast and northwest parts of the county.

In 2022, 91% of homes that sold for less than $250,000 and 71% of those that sold for $250,000-$400,000 were in the northern part of the county. Very few homes sold for less than $400,000 in the southern regions.

Due to the job-housing mismatch, the study reveals an outflow of over 60,000 people who live in the northwest and northeast but commute to other areas for work due to the limited employment opportunities.

Most people are commuting to the south central and southeast parts of the county for work, the study shows.

The majority of workers in those regions only work in the area — over 1500,000 people are employed in the south central and southeast regions, but live in another part of the county.

Because of the spatial mismatch, people are commuting long distances. O’Connell said housing shortages are an environmental issue as well, not just an economic problem.

“The housing-jobs mismatch is where people can afford to live and where their jobs are,” O’Connell said. “When they’re further apart, it’s more wear and tear on the roads, on your individual car, it’s more gasoline you have to put in the tank which has environmental impacts.

“This is really an intersectional issue around quality of life,” O’Connell continued.

In the county’s community development department, O’Connell said the housing analysis will be used to inform the next five year plan that is submitted to the Department of Housing and Urban Development for federal funding.

To improve the rate of construction, Kretchmer suggests prioritizing the redevelopment of former retail and office properties for housing. A zoning analysis of the county with suggestions on how to improve could also help accelerate new construction.

Strategies for increasing the housing supply will vary city to city due to different rules around land use and community visions for the future, O’Connell said.

“We know that the barriers (to housing development) are not the same for every community,” O’Connell said. “The county’s role in this will be to help leverage resources to help communities have the tools to make those (development) decisions.”