February 08, 2011
Edward Glaeser is full of praise for the reign of Chicago Mayor Richard Daley. Among the items that he gives Daley credit for is a build-everywhere construction policy that Glaeser credits with keeping housing in Chicago affordable. He reports that the average condominium is about 30 percent cheaper in Chicago than in either New York or Boston.
Much of the reason for lower house prices in Chicago than in New York or Boston is that its housing market took a sharper plunge with the collapse of the housing bubble than in the other two cities. Prices were already lower in Chicago at the start of Daley’s tenure in 1989, however they increased by an almost identical amount as in Boston through the peak of the bubble in the summer of 2006 (137 percent for Chicago versus 138 percent for Boston), although the cumulative rise was 21 percentage points less than New York’s 158 percent. The biggest difference in housing costs between the three cities stems from the fact that house prices fell 27.8 percent from their peak in Chicago, compared to 21.0 percent in New York and just 14.0 percent in Boston.
It is not clear that Daley’s housing policy can be blamed for the greater volatility in Chicago’s house prices and it is always possible that the prices will fall more rapidly in New York and Boston going forward. However, if Glaeser had written his piece at the peak of the bubble, it would not have been possible to highlight lower housing costs in Chicago as one of the benefits of Daley’s tenure.
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