Why Is Chicago So Cheap? Examining The Factors That Keep Costs Low In The Windy City

Chicago is regularly ranked as one of the most affordable major cities in the US. For a destination with so much to offer, from world-class museums and dining to iconic sports and architecture, the relatively low prices in Chicago can seem almost unbelievable.

If you’re short on time, here’s a quick answer: Chicago keeps costs low due to factors like affordable housing, low taxes, and policies attracting new businesses and development.

In this comprehensive guide, we’ll explore why the Windy City has remained so budget-friendly compared to other large metro areas. We’ll look at everything from the city’s tax structure to its public transit system and housing market. We’ll also see how Chicago competes to bring in new companies and developments that enhance affordability. Let’s dive into the many factors that make Chi-Town a haven for savings.

Chicago Has a Comparatively Low Cost of Living

When it comes to affordability, Chicago stands out as a city with a lower cost of living compared to other major metropolitan areas. There are several factors that contribute to the city’s affordability, making it an attractive option for residents and newcomers alike.

Housing prices are reasonable compared to other big cities

One of the main reasons why Chicago is considered cheap is its relatively affordable housing prices. While housing costs in cities like New York or San Francisco can be exorbitant, Chicago offers more reasonable options for both renters and homebuyers.

According to recent data from Zillow, the median home price in Chicago is significantly lower than in other major cities. This means that individuals and families can find affordable housing options without breaking the bank.

Another advantage of Chicago’s housing market is the diversity of neighborhoods available. From trendy downtown apartments to cozy suburban homes, there is a wide range of options to suit different budgets and preferences.

This allows residents to find a home that fits their needs without sacrificing affordability.

Groceries, utilities, and other costs are lower

In addition to affordable housing, Chicago also offers lower costs for groceries, utilities, and other daily expenses. According to a study conducted by Numbeo, a website that compares cost of living across different cities, Chicago ranks lower than many other major cities in terms of overall cost of living.

When it comes to groceries, Chicago residents can enjoy a variety of options at reasonable prices. The city is home to numerous grocery stores, including national chains and local markets, which offer competitive prices and a wide selection of products.

In terms of utilities, Chicago’s rates for electricity, water, and gas are generally lower compared to other big cities, helping residents keep their monthly expenses in check.

Other costs, such as transportation, healthcare, and entertainment, are also relatively affordable in Chicago. The city has an extensive public transportation system, which provides convenient and cost-effective options for getting around.

Additionally, Chicago offers a vibrant cultural scene with numerous museums, theaters, and festivals, many of which offer affordable or even free admission.

All these factors contribute to making Chicago an attractive choice for those looking for a city with a lower cost of living. Whether you’re a young professional starting your career or a family looking to settle down, Chicago offers a great balance between affordability and quality of life.

The City and State Tax Structures Help Keep Prices Affordable

One of the key factors that contribute to the affordability of Chicago is its favorable tax structures at both the city and state levels. These tax structures help keep prices low for residents and visitors alike.

There is no municipal sales tax on everyday purchases

Unlike many other cities in the United States, Chicago does not impose a municipal sales tax on everyday purchases. This means that when you buy groceries, clothing, or other goods in the city, you won’t have to pay an additional tax on top of the state sales tax.

This absence of a municipal sales tax helps keep the cost of living lower in Chicago compared to other major cities.

State income and property taxes are moderate

In addition to the absence of a municipal sales tax, Chicago benefits from moderate state income and property taxes. While tax rates can vary depending on income level and property value, overall, these taxes are relatively affordable compared to other major metropolitan areas.

This allows residents to keep more of their hard-earned money and contributes to the overall lower cost of living in the city.

According to the Illinois Department of Revenue, the state income tax rate for individuals is currently 4.95%, which is lower than the rates in some neighboring states. Furthermore, property taxes in Chicago are assessed at a rate of 2.13% of a property’s assessed value, which is generally lower than the rates in other major cities.

By having a favorable tax structure at both the city and state levels, Chicago can attract businesses and residents while maintaining affordable prices for goods and services.

Chicago Invests in Public Transit

One of the factors that keeps costs low in Chicago is its investment in public transit. The city boasts a world-class train and bus system, which not only provides convenient transportation options for its residents but also helps reduce transportation costs.

World-class train and bus systems reduce transportation costs

Chicago’s train system, known as the “L” (short for “elevated”), is one of the best in the country. With an extensive network of elevated and subway lines, the “L” connects various neighborhoods and suburbs, making it easy for residents to commute to work and explore the city without relying on cars.

The buses in Chicago are equally efficient, covering almost every corner of the city and offering a more affordable alternative to private transportation.

By investing in a robust public transit system, Chicago has managed to keep transportation costs relatively low for its residents. Instead of spending a significant portion of their income on owning and maintaining a car, Chicagoans can rely on the efficient and affordable public transportation options available to them.

Commuter rail network allows living in affordable suburbs

In addition to its comprehensive train and bus systems, Chicago also benefits from a well-developed commuter rail network. This network enables residents to live in affordable suburbs outside of the city while still enjoying easy access to downtown Chicago for work or leisure.

The Metra, Chicago’s commuter rail system, offers an extensive network of routes that connect the city with its surrounding suburbs.

Living in the suburbs can often be more affordable compared to living in the heart of the city. By providing reliable and convenient commuter rail options, Chicago allows its residents to save on housing costs while still benefiting from the amenities and opportunities the city has to offer.

According to a study conducted by the American Public Transportation Association, households in areas with access to public transportation save an average of $9,823 annually compared to households without such access.

This is due to reduced transportation expenses, lower car ownership rates, and the ability to live in more affordable neighborhoods.

Benefits of Public Transit in Chicago
Reduced transportation costs Chicago’s efficient train and bus systems offer affordable transportation options, reducing the need for car ownership and related expenses.
Affordable suburban living The commuter rail network allows residents to live in more affordable suburbs while still having easy access to downtown Chicago.
Savings for households A study by the American Public Transportation Association found that households with access to public transit save an average of $9,823 annually.

Sources: www.transitchicago.com, www.metrarail.com, www.apta.com

Pro-Business Policies Attract Companies and Development

Chicago has been able to maintain its affordability due to several factors, including its pro-business policies that attract companies and encourage development. These policies have created an environment that fosters economic growth and allows for cost savings that are passed on to residents and consumers.

Tax breaks incentivize companies to locate in the city

One of the key ways that Chicago attracts businesses is through tax breaks and incentives. The city offers a range of tax incentives to companies that choose to locate within its boundaries. These incentives can include property tax abatements, sales tax exemptions, and tax credits for job creation.

By providing these incentives, Chicago is able to entice companies to set up shop within the city, which in turn contributes to job growth and economic prosperity.

For example, companies in certain industries, such as technology and manufacturing, may qualify for tax breaks if they meet certain criteria, such as creating a certain number of jobs or investing a certain amount of money in the city.

These tax breaks can help companies save money and make Chicago an attractive option for business expansion or relocation.

New development creates jobs and housing

Another factor that contributes to Chicago’s affordability is the continuous development happening within the city. New development projects not only create jobs but also increase the supply of housing, which can help keep costs down.

Chicago has seen a surge in new construction in recent years, with residential and commercial buildings being erected across the city. This development not only provides employment opportunities for local residents but also helps to meet the demand for housing, which can help prevent prices from skyrocketing.

Furthermore, the development of new commercial spaces attracts businesses, which can lead to increased competition and lower prices for consumers. With more options available, companies are encouraged to offer competitive prices to attract customers, resulting in cost savings for residents.

Chicago’s pro-business policies and commitment to development have played a significant role in keeping costs low within the city. By attracting companies through tax breaks and incentives and promoting new development, Chicago has created an environment that benefits both businesses and residents alike.

The Midwest Location Keeps Overhead Low

One of the main reasons why Chicago is known for its affordability is its Midwest location. Being situated in the heart of the Midwest has several advantages when it comes to keeping costs low.

Salaries and operational costs are lower than on the coasts

Compared to cities on the coasts like New York or San Francisco, Chicago offers lower salaries and operational costs for businesses. This is primarily due to the lower cost of living in the Midwest. Companies in Chicago can attract top talent at a more affordable rate, allowing them to keep their overhead expenses in check.

Additionally, the cost of office space and other operational expenses, such as utilities and taxes, tend to be lower in the Midwest compared to coastal cities.

According to a study conducted by Bureau of Labor Statistics, the average annual salary in Chicago is lower than the national average. This is partly due to the lower cost of living in the city. Lower salaries, combined with lower operational costs, contribute to the overall affordability of Chicago.

Midwestern values include affordability and prudence

Another factor that contributes to the low costs in Chicago is the Midwestern values of affordability and prudence. Midwesterners have a reputation for being practical and financially responsible, which is reflected in the cost of goods and services in the region.

This mindset translates into businesses operating in a cost-effective manner, which ultimately benefits consumers in terms of lower prices.

Midwestern values also influence the overall culture of the city. Chicagoans tend to prioritize affordability and strive to find cost-effective solutions in their daily lives. This mindset extends to businesses and helps keep costs down across various industries.

Furthermore, the city’s government and local authorities also play a role in maintaining low costs. They prioritize policies that support affordability and attract businesses to the area. This includes offering tax incentives, streamlined regulations, and investing in infrastructure that supports a cost-effective business environment.


From its reasonable housing prices to low taxes and transportation costs, Chicago offers a mix of factors that keep the city surprisingly affordable. By luring new companies with business-friendly policies, Chicago continues to enhance its budget-friendly status.

While the Second City may lack the glamour of New York or LA, its Midwestern pragmatism and smart investments in infrastructure and growth have kept costs low. For visitors and residents alike, Chi-Town remains a city of abundant culture, dining, and attractions all available at a fraction of the price.

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