Posted on November 7th, 2024.

Living in the often unpredictable environment of the Chicago real estate market, you may find yourself pondering the subtle shifts taking place right before your eyes. As someone either actively renting or considering a change in your housing situation, you recognize that shifts in political tides often translate into tangible changes in your living expenses.

Yes, we're talking rent increases—a topic that might stir a mix of curiosity and concern.

If you've ever wondered why rent prices seem to fluctuate more around election periods, this post is for you. We'll explore potential increases following the recent election, which has put Donald Trump in office as the new president-elect, and provide strategies to prepare for potential rent increases.

Exploring the Historical Election Impact on Rent

Political shifts have historically impacted rental markets, with some presidential terms sparking notable increases in rental prices. Here, we explore a few key elections where policy changes contributed to rental market shifts.

2016 Election – Donald Trump

The 2016 presidential election, which brought Donald Trump to office, marked a significant turning point for the housing market. Trump’s administration promoted policies centered around tax cuts, deregulation, and economic growth.

The Tax Cuts and Jobs Act of 2017 was one of the most impactful policies affecting the real estate sector. It provided substantial tax cuts to corporations and reduced individual tax rates, which fueled investment in various industries, including real estate. This economic growth often led to inflationary pressures, with rising costs trickling down to the rental market. In metropolitan areas like Chicago, landlords responded by increasing rent to offset their own higher operating expenses, such as property taxes and maintenance costs.

Moreover, Trump’s administration relaxed regulations in several sectors, aiming to stimulate growth. While this led to a housing development boom in some areas, it also resulted in a sharper increase in demand as the economy strengthened and job opportunities expanded. Cities that saw significant economic development attracted more residents, adding strain to already limited rental markets. The increase in demand, combined with inflation, led to noticeable rent hikes during Trump’s term. As renters adjusted to higher costs, some shifted from urban to suburban areas where housing remained more affordable.

2008 Election – Barack Obama

The 2008 election of Barack Obama took place during a critical period in U.S. history, as the nation faced a severe economic downturn due to the housing market collapse. Obama’s administration introduced the American Recovery and Reinvestment Act (ARRA) in 2009, which aimed to stabilize the economy and address the housing crisis. A key aspect of Obama’s economic recovery plan was to make homeownership accessible, which indirectly impacted the rental market. Despite this focus on homeownership, many Americans found it difficult to qualify for mortgages due to tightened lending standards. Consequently, demand for rental housing surged, especially in cities like Chicago, as many potential buyers remained renters.

Moreover, Obama’s emphasis on affordable housing initiatives created more supply for low-income renters but did little to alleviate pressures on mid-range and high-end rentals. As urban centers saw increased demand, rental prices continued to climb, particularly in neighborhoods with desirable amenities and job access. This period highlights how, even in efforts to promote housing stability, economic policies can drive people towards renting, especially in financially unstable times.

2000 Election – George W. Bush

George W. Bush’s election in 2000 came at a time of economic expansion, with the country experiencing growth in employment and the stock market. Bush’s administration emphasized tax cuts and homeownership, aiming to make property ownership more accessible for middle- and lower-income Americans. The "Ownership Society" philosophy promoted during Bush’s term encouraged home buying through policies such as the American Dream Downpayment Act and looser lending regulations. Initially, this increased homeownership rates, which led to a temporary stabilization of rent prices as more people purchased homes instead of renting.

However, these policies had unforeseen long-term effects on the rental market. By 2008, the subprime mortgage crisis had emerged as a consequence of risky lending practices, leading to a wave of foreclosures. Many former homeowners found themselves re-entering the rental market, driving up demand in urban areas. This influx of renters created a spike in rental prices, particularly in cities where the rental supply couldn’t keep up with sudden demand.

Analyzing Potential Rent Increases

With Donald Trump as the new president-elect, the anticipation of economic policies that may impact rental rates is high. Here’s a look at how potential policy changes could influence the rental market.

Economic Factors Influencing Rent Increases

With Trump returning as president-elect, economic factors are likely to play a central role in determining rental trends. His administration’s emphasis on pro-growth policies, including tax cuts and economic stimulus, could stimulate economic activity, increasing disposable income for some segments of the population. However, such economic stimulation often brings inflationary pressures, which tend to affect the cost of living, including housing. Landlords may find themselves facing higher costs for property maintenance and taxes as inflation rises, prompting them to adjust rents accordingly to maintain profitability.

Trump’s economic focus could also spur job growth in urban areas, driving up demand for rentals. If job opportunities increase in metropolitan centers, demand for nearby housing will rise, potentially leading to rent hikes as more people compete for limited rental spaces. Inflation combined with higher demand is likely to impact rent prices, especially in cities where supply is already limited. For renters, this means preparing for potential rent increases and considering budget adjustments if they plan to live in high-demand areas.

Supply and Demand Dynamics

Trump’s administration may influence housing supply through regulatory adjustments and zoning policies, which are often key determinants of rental prices. A relaxed regulatory approach could encourage new housing developments, particularly in high-demand areas, potentially easing rent increases by adding more units to the market. For example, reducing restrictions on zoning could make it easier for developers to build multi-family units, which could help meet the demand in dense urban areas and keep rental prices from rising sharply.

However, if Trump’s administration implements stricter building codes or favors high-end developments, rental supply may fail to keep up with demand, pushing prices higher in response. Areas that see investments in infrastructure, like public transit, may experience rising rental demand as these regions become more attractive to renters. As a result, rent increases could become more pronounced in neighborhoods with improved accessibility and amenities.

For property owners, staying informed on regulatory changes and focusing on high-demand areas might provide an opportunity to attract tenants willing to pay a premium for location benefits. Meanwhile, tenants can anticipate potential rent increases in areas targeted for infrastructure development and consider alternative neighborhoods if they aim to avoid high rental costs.

Policy-Driven Housing Trends

Trump’s previous tenure demonstrated an interest in deregulation, which, if continued, could affect housing trends and the rental market. Deregulation may encourage luxury property developments, potentially limiting affordable rental options. While high-end developments attract a different tenant base, a lack of affordable rentals may lead to increased competition for mid-range properties, driving up prices for tenants. Conversely, if policies support affordable housing through tax incentives or subsidies, this could alleviate rental pressure by increasing the availability of lower-cost units, possibly stabilizing rent for some demographics.

Incentives for green building and energy-efficient upgrades may also emerge under Trump’s administration, reflecting a growing national focus on sustainability. Landlords who choose to implement these upgrades may do so with the expectation of offsetting upfront costs through rent adjustments. These eco-friendly improvements, while beneficial in the long term, could lead to temporary rent hikes as landlords recoup initial investments. For tenants, knowing these policy-driven trends can help in negotiating rental terms, particularly in buildings with planned upgrades. For property owners, strategic investments aligned with policy shifts can attract eco-conscious tenants, balancing rental income with sustainable practices.

Preparing for the Housing Market Post-Elections

After an election, both tenants and property owners need to stay adaptable and proactive. Tenants may face rising rents or changing lease terms, while property owners must balance profitability with market competitiveness. In light of these post-election uncertainties, taking steps to manage housing costs or optimize property investment can make a significant difference. Here, we outline strategies for both tenants and property owners to prepare for potential impacts in the rental market as new policies and economic conditions unfold.

Strategies for Tenants

• Secure a Longer Lease: Securing a lease term longer than 12 months can protect you from sudden rent hikes and provide stability in a fluctuating market. By locking in your rate, you shield yourself from annual increases that may arise due to inflation or market demand shifts. Longer leases often benefit both tenants and landlords, as landlords appreciate the security of a committed tenant, and tenants avoid the inconvenience of frequent moves or lease renegotiations.
• Budget Adjustments: Anticipating potential rent increases is key for financial planning, particularly if your current lease is set to renew soon. Start by examining your monthly budget to identify areas where you can save, setting aside funds specifically for housing-related costs. Consider adjusting discretionary spending or other financial obligations to prepare for higher rental expenses. Building a buffer in your budget now can help ease the transition if rent hikes occur.
• Explore New Housing Options: If rent increases are expected in your area, exploring different neighborhoods or housing types can reveal more affordable alternatives. Some areas may offer lower rents due to factors like new development projects, transportation options, or zoning changes. Consider broadening your search to include suburbs or less densely populated areas, where rental prices tend to be lower.
• Negotiate Lease Terms: Discuss the possibility of incremental rent increases, which might be more manageable over time, rather than a sudden, substantial hike. You could also offer to take on certain maintenance responsibilities in exchange for rate stability, which may appeal to your landlord. If your landlord is considering upgrades, propose contributing to minor costs in return for a rent discount.

Strategies for Property Owners

• Adjust Rental Agreements: To remain competitive in a shifting market, property owners may need to adjust rental agreements by incorporating gradual rent increases or offering flexible lease terms. Consider offering variable lease terms, such as shorter-term leases at higher rates, or extending leases with fixed rent increases after a certain period. This approach accommodates market fluctuations while maintaining tenant retention.
• Invest in Property Upgrades: Upgrading property amenities, such as energy-efficient appliances, smart home features, or security systems, can justify higher rent while attracting quality tenants. Tenants are often willing to pay a premium for properties with enhanced features that improve comfort, convenience, and sustainability. Property improvements can also increase property value, yielding potential tax benefits or appreciation over time.
• Offer Rent Incentives: Providing rent incentives, such as a free month’s rent on lease renewal or discounts for early payment, can help retain tenants and reduce vacancy rates. These incentives are appealing to tenants and demonstrate a willingness to accommodate their needs in exchange for loyalty. Moreover, flexible payment plans or waiving certain fees can show goodwill, fostering a positive tenant relationship.
• Implement Rent Guarantees: Rent guarantee programs provide property owners with stable income by ensuring rent payments, even if tenants face financial difficulties. These programs can attract tenants who value the security of such an arrangement, as they provide a layer of financial stability for both parties. In areas with high rental turnover, rent guarantees reduce vacancy-related income loss.

Final Thoughts

Preparing for potential rent increases post-election requires a proactive approach and a keen eye for detail. It’s not solely about knowing how past policy shifts may influence future changes, but actively positioning oneself to handle potential outcomes wisely.

At Rent 5469 LLC, we bring our extensive experience in the Chicagoland area to help you comprehend the rental dynamics during this period of uncertainty. Our real estate rental tours are designed to give potential tenants a well-rounded view of available properties, whether it’s for immediate leasing or future considerations.

Our diverse range of listings available ensures there is something for every preference or priority, addressing both immediate needs and future rental scenarios. Take a peek into what might just be your next home. Check Out Our Listing!

Do you have questions? Reach out to us today at (773) 988-5469 or email us at [email protected] for personalized assistance. A simple conversation can open doors to new opportunities while ensuring you have all the pertinent information at your disposal.