I put up posts in 2016 and 2017 in which I pointed out that, given Chicago’s continued population losses, there was an enormous amount of building in the Chicago urban area, or at least an enormous amount of building-permit filing.
Here are two new graphs that show exactly the same data for 2017, a year later than the data in last year’s post.1 Like the earlier data, these figures are for new, privately-owned housing units only.
This chart shows the relationship between residential building permits issued in 2017 and estimated change in population from 2016 to 2017 for American metropolitan statistical areas:
And this chart shows the relationship between the valuation (in thousands of dollars) of these 2017 residential building permits and (as in the earlier graph) estimated change in population from 2016 to 2017 for American metropolitan statistical areas:
These charts look very much like the earlier ones. There is, in general, a very high correlation between the number of building permits issued and the change in population (.906, r-squared = .822) as well as between the value of these building permits and the change in population (.909, r-squared = .826), but a few urban areas are outliers. Chicago is arguably the greatest outlier of all. Its “residual” from the regression line is larger than that of any other urban area in proportion to the number and value of its permits.
The simple explanation for the Chicago anomaly seems to be that, while some parts of the Chicago area are indeed losing population, there is considerable growth close to the city center and in the few places on the North Side where large-scale construction is possible. There is an enormous amount of building in these areas. (The earlier posts contain a bit more analysis, as well as some caveats.)
There’s another obvious partial explanation for Chicago’s apparently anomalous showing. Note that all three of America’s largest urban areas—New York and Los Angeles as well as Chicago—have consistently been building more than their relatively modest population growth suggests that they “should” be doing. This is not surprising. Larger metropolitan areas, other things being equal, are likely to do more building than smaller ones. Even in a badly depressed, declining city, older housing stock will sometimes get replaced. And none of America’s three largest urban areas, even Chicago, could be described as depressed.
I set up regressions in which housing permits and housing-permit valuations were dependent variables, and 2016-2017 population change and 2017 population were independent variables.2 Both independent variables turned out to be highly significant. Population change was much more significant than population. Still, adding the latter to the equation increased the correlation considerably (for the two independent variables and permits, correlation = .976 and r-squared = .953; for permit valuations, correlation = .969 and r-squared = .939).
The correlations came as close to 1 as correlations normally do in real-life situations, but there were still some modest “residuals.”
On the basis of their 2016-2017 population change and their 2017 population, the following urban areas had “too many” building permits (these are the highest ten out of 382 urban areas;3 the figures show the number of excess permits):
Dallas 7994
Chicago 7991
Nashville 7495
Austin 7306
Denver 7156
Charlotte 4237
Houston 3220
Raleigh 3216
Myrtle Beach 3085
The following urban areas had too few (these are the bottom ten in order):
Riverside 9794
Miami 6121
San Antonio 5458
Phoenix 4280
Columbus 3892
Minneapolis 3742
Las Vegas 3285
Philadelphia 3167
Sacramento 3156
Boston 2840
Similarly, on the basis of their 2016-2017 population change and their 2017 population, the following urban areas’ building permit valuations were “too high” (only the first ten are listed; the figures show by how much in thousands of dollars the valuations were high):
Dallas 1919301
Los Angeles 1647122
Chicago 1607408
San Francisco 1458704
Nashville 1389825
Denver 1313374
Seattle 863914
Orlando 829254
Greenville 791324
And the following urban areas’ building permit valuations were “too low” (bottom ten only):
Riverside 1799008
Las Vegas 1725791
New York 1587580
San Antonio 1558862
Washington 1494855
Philadelphia 1237660
Columbus 852732
Miami 625441
Atlanta 573035
Lakeland 533558
Chicago, in other words, still appears to be the odd city out. It ranks among several fast-growing, prosperous Sunbelt cities in having much more building than one might expect rather than with the admittedly mixed group of cities at the bottom of the list that are mostly either older places (like Boston) with many barriers to new construction or else are Sunbelt cities (like Las Vegas and Riverside) that are still recovering from pre-Great-Recession overbuilding.
As I noted in the earlier posts, the figures that suggest that Chicago has a surprisingly robust building industry for a northern urban area that is losing population jibe completely with what one can observe every day in many parts of the city.
(The last paragraphs, starting with “There’s another obvious partial explanation,” were added on November 2.)