A new study shows Illinois has a housing shortage of 142,000 homes and would need to build 45,000 homes each year for the next five years to meet demand.

Researchers from the Illinois Economic Policy Institute and the Project for Middle Class Renewal at the University of Illinois Urbana-Champaign found that rising incomes, employment growth and higher rates of homeownership have increased demand for housing.

The study shows employment in Illinois has increased more than 9% since 2010, and the state now has more than 5 million households — a 4% growth over the past five years.

Frank Manzo IV, co-author of the report and economist with the Illinois Economic Policy Institute, said there aren’t enough houses on the market to accommodate rising interest in homeownership.

“The number of active listings of homes that are for sale are 64% lower than they were prior to the pandemic,” Manzo said. “So, a huge drop-off in the number of homes for sale right at the time when more people are working and more people are earning incomes and wanting to buy their first homes or upgrade to better homes.”

The study shows a 37% increase in the average value of an Illinois home over the past five years.

It also shows the state has averaged only 19,000 building permits for new homes annually since 2020, which is below pre-pandemic levels.

Manzo said the homes that are available cost more as time goes on.

“Improving affordability would require a substantial increase in housing supply to boost inventory, the number of homes for sale and the number of homes being built,” he said. “Illinois could take a number of steps, and these could be statewide.”

He also said easing zoning restrictions, fast-tracking permits and increasing surtaxes on short-term rentals like Airbnb and Vrbo could bring more homes to the market.

While the report shows Illinois is more affordable than most other states, Manzo said there are some factors that can’t be controlled, such as mortgage rates or tariffs on building supplies.

However, Manzo said taking steps to increase affordability will benefit both current and future residents.

“They can take action to reduce the barriers for prospective buyers, for renters, for developers,” he said. “And the data certainly argues in favor of policy changes that boost the number of homes that are available for people to purchase and the number of homes that are affordable for people to purchase.”