Was Chicago still building “too much” in 2016?

A year ago, I put up a post in which I pointed out that, given Chicago’s population losses, there seemed to be an enormous amount of building in the Chicago urban area, or at least an enormous amount of building-permit filing.

No other American urban area that was losing population was the scene of even a small fraction as much permit filing. More new buildings were being planned in Chicago than in several urban areas (San Francisco, for example) where population was growing by many tens of thousands of people a year.

I’ve recently compiled two new graphs that show exactly the same data for the most recent year available.1

This chart shows the relationship between residential building permits issued in 2016 and estimated change in population from 2015 to 2016 for American metropolitan statistical areas:

And this chart shows the relationship between the valuation of these 2016 residential building permits and (as in the earlier graph) estimated change in population from 2015 to 2016 for American metropolitan statistical areas:

Note (again) the following:

[1] The data shown are for metropolitan statistical areas (MSAs), not cities and not “combined statistical areas” (CSAs). Thus, for example, San Francisco and San Jose as well as Los Angeles and Riverside are shown as two separate data points on these charts. It is possible to get building permit data for “places” (like Chicago), but, because different cities have very different relationships to their MSAs, MSA-level data may be more useful for urban-area-to-urban-area comparisons.

[2] The graphs identify a few large urban areas by codes that (I hope) are easy to interpret. “Chi” = Chicago.

[3] 2015-2016 population change is estimated data from the American Community Survey. The Census Bureau’s estimates of urban populations have sometimes been off by quite a lot.

[4] Not every housing permit leads to construction.

There is generally a close relationship between both the number and the value of building permits on the one hand and the size and direction of population change on the other. The correlation for the new data in both cases rounds to .897 (r-squared = .804; both figures are a little higher than a year ago). This correlation is not exactly surprising. Urban areas that are growing fastest need to build more. But some urban areas are outliers. Generally speaking, on the charts above, the further a data point appears from the regression line, the more its level of building differs from what one would expect on the basis of change in population.

Chicago is perhaps the most striking outlier of all. Just as was the case last year, it is building much more than its population loss would lead one to expect. So to a much lesser extent are New York and Los Angeles. In San Francisco, however, there were fewer building permits than one would have expected—although the value of these permits was a little higher than San Francisco’s population growth would have suggested.

The reasons for the Chicago anomaly are of course somewhat speculative. I’ll rephrase what I suggested a year ago, which still seems reasonable.

The major factor is probably that large parts of Chicago are actually growing like crazy. Several neighborhoods close to the Loop and (to a lesser extent) on the North Side have been the scene of substantial population gains. Much of Chicago’s population loss is concentrated elsewhere, in a few, mostly African-American neighborhoods. The data on building permits do not identify the location of new building, but it’s pretty clear that, in the city of Chicago at any rate, most new building (and especially high-value building) is in the areas with substantial population gains.

The relative ease of gaining building permits in central Chicago may be another factor here. Since much of the area where new building has been most intensive has until recently been used for factories, warehouses, and parking lots, NIMBYism has played a smaller role than it would have in long-established neighborhoods. Also significant is the fact that there is definitely a consensus among Chicago’s most important decision makers that the growing residential density and “vibrancy” of the central city are good things.

Honesty compels me to admit that it’s also possible that Chicago’s outlier status is in part a function of some bias in the data. Building-permit figures are collected and distributed by the Census Bureau, but local jurisdictions compile the data. I’m sure that the Census Bureau does what it can to make sure that the data are reasonably consistent, but there are probably limits to how much work it’s willing to do here. Chicago has a reputation among Chicago builders for demanding permits for everything. It’s conceivable that some other jurisdictions are not quite so fussy. Any inconsistency in the extent to which building permits are required and reported would somewhat undermine the value of the data.

Let me add that anyone who’s lived on Chicago’s North Side or close to the Loop in recent years can testify that these areas have been doing very well despite the city’s population loss, well-publicized shootings, and financial issues. The sidewalks in commercial areas are full, and new buildings are going up everywhere. The Census Bureau’s building-permit data seem completely consistent with what one can observe every day.

  1. Data for building permits can be found here and data for population change here. The graphs were generated with PSI-Plot. The straight lines are best-fit least-squares linear regression lines.
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