The Chicago area’s slow housing market recovery comes at a price: $107 billion. That’s the difference between the current market value of all residential property in the six-county area and what it would be worth if the Chicago real estate market’s recovery were keeping up with the nation’s.

The pace of Chicago’s recovery has accelerated in recent months, and in several affluent areas of the city and suburbs, home prices have recovered past their old peaks. But regionally, the recovery in home values remains about 20 percentage points below the national figure, according to the latest data from the S&P CoreLogic Case-Shiller Indices, released in May.

All the residential property in the six-county area has a combined market value of about $528 billion, Crain’s determined with figures provided by the assessor’s departments in Cook, DuPage, Kane, Lake, McHenry and Will counties. If that figure were 20.25 percentage points higher—putting it equal to the index’s latest estimate of the nationwide recovery in the decade since the housing crash—all our homes would be worth a combined $634.9 billion.

“That is a huge negative wealth effect,” says Mark Glennon, a former venture capitalist who now runs Wirepoints, a news and opinion website focused on Illinois’ economy and politics.

The missing wealth has wide-ranging implications for the economy of the region. While “there’s no way to pinpoint where ​ that money would be spent if we had it,” Glennon says, “people are very aware of how much wealth they don’t have in their real estate, and it shakes out in their spending behavior.”

For middle-class people, home equity is often the major share of household wealth. “There are no stocks, there are no bonds, there are no investment properties,” says Alden Loudry, director of research at the Metropolitan Planning Council. “The house is all that mom and dad have to transfer wealth to their kids.” Chicago’s suppressed home equity pool “hangs a dark cloud over a lot of families,” he says.

RIPPLE EFFECTS

In the simplest terms, when people feel less wealthy, they spend less money. But the implications of Chicago’s missing home equity go further. Here are a few of them, some negative, some positive:

For senior citizens, “a bad real estate market can really impact the quality of their lives,” says Richard Johnson, who directs the program on retirement policy at the Urban Institute in Washington, D.C. He says senior citizens most commonly rely on their home equity if and when declining health forces a move to a nursing home or assisted living. “To the extent that your home’s value is lagging, that is going to make it hard to get the money you need when you develop disabilities and can’t stay in your home.”

Suburban school districts have curtailed their use of referendums in the post-recession years, leading to fewer upgrades of their facilities. In the April elections, 20 school districts put questions about building bonds out to their electorates, according to Illinois Association of School Boards data. That’s less than half the bond questions that were floated in the last round of elections during the housing boom.

“Absolutely, there’s a hesitancy to go to property taxes,” says Roger Eddy, executive director of the school boards association. “Part of being a local elected leader is understanding your community, and many of our boards are aware that it’s difficult to ask people for (additional) property taxes when the property owners aren’t realizing an increase in value.”

Illinois famously has more units of local government than any other state, with inefficiency built into the overlap of school, park, library and mosquito abatement districts. Recent efforts to cut back on units of government and increase shared services “are definitely tied to the slow recovery,” says Cory Poris Plasch, research associate at the Northern Illinois University Center for Governmental Studies. “With a stagnating tax base, government budgets have remained pretty static since the recession.”

A recent study by Poris Plasch and another senior research scholar at the center shows suburban municipalities’ service-sharing efforts are on the rise. An example is the Govit Consortium, a shared information technology program that includes Buffalo Grove, Highland Park and Oswego. “Governments are dealing with ransomware and hacking and cybersecurity and backup servers,” Poris Plasch says. “These are new things they didn’t have to worry about before the recession, but all of a sudden you have the increased cost of handling them but without necessarily an increased budget.”

In its unrecovered state, Chicago housing remains comparatively affordable, while better-recovered cities like San Francisco and Portland, Ore., grapple with affordability crises. “Low home prices, as long as they’re around, are going to help attract more tech employers into the region,” Glennon says.

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