Homebuilding in Rockford has hit its highest level since the Great Recession

By Kevin Haas
Rock River Current
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ROCKFORD — Aided by tax incentives and a strong demand for housing, last year saw the most single-family homes built in the city since the Great Recession.

There were 71 single-family home construction permits taken out last year in Rockford, according to city permit data tracked by the Rock River Current. That’s the most since 157 in 2007, the year before a nationwide housing crisis took hold. The number of single-family home permits taken last year marked a 163% increase from 2023.

“Confidence has returned to the Rockford market,” Mayor Tom McNamara said. “People now again want to build their homes and grow their businesses in the city of Rockford.”

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Rockford has been in the national spotlight several times over the past year for its in-demand housing market, including ranking as the hottest housing market in the country in December.

The spotlight has come as the city lacks the inventory of homes for sale it needs to meet demand, local Realtors say. Increases in mortgage rates have kept many homeowners from selling to avoid taking on a new mortgage at a higher rate. The combination of high demand and a low volume of homes for sale have sent prices soaring to record highs.

Homes sold for an average price of $215,666 throughout 2024. That’s a 12% increase from the previous high annual average of $192,431 in 2023.

“We are certainly very cognizant of the cost of living for our residents,” McNamara said. “We’re still an incredibly affordable market compared to the state, compared to our peers and compared nationally. With that being said, you are seeing rents and home prices continue to escalate, and we know we need to get more product and new product onto the market.”

Building more homes is considered key to both meeting demand and controlling price growth, but home construction has its own challenges as inflationary costs on materials have often made building significantly more expensive than buying an existing home.

Continuing incentives

The city approved a three-year property tax rebate program in 2023 intended to incentivize homebuilding, something local homebuilders credit to increase in construction last year. The program expired at the end of 2024, but McNamara said there are discussions underway about extending it for a year.

The program provides a three-year property tax rebate for newly built homes and multifamily structures. If the city, Rockford Public Schools, the Rockford Park District and Winnebago County all agree to the program again, it means roughly 85% of a property tax bill can be rebated for three years.

“Taxes are a huge component of affordability,” said Dennis Sweeney, executive vice president of the Home Builders Association of Rockford. “The fact you got (taxes back for three years), take that money and invest it into a 401K or the stock market for three years.”

Increases in supply prices have brought the cost of building a home to nearly $300 per square foot in order to meet the quality customers want, Sweeney said.

“You can’t give them anything less,” he said. “There’s existing houses out there that are better value. … The problem there is there aren’t as many existing houses as there use to be. So your choices are somewhat limited.”

Residential growth goals

Aside from single-family homes, construction permits were also taken for eight duplexes with 16 total units and 12 multifamily buildings 44 units in the city last year.

McNamara said the city has approved more than 1,600 new residential units across the city over the past two years, some which have phased construction plans starting over the course of several years. Many others are being rehabilitated through the land bank program, the Rockford Community Investment Fund loan initiative and the critical home repair program done in partnership with Rockford Area Habitat for Humanity.

Those programs all play a role in the city’s goal to create or preserve between 6,000 and 9,000 residential units by 2035.

Conor Brown, CEO of the NorthWest Illinois Alliance of Realtors, said extending the tax rebate program will be key making buying a newly built home affordable.

“While some of the material costs have retreated a little bit, it’s not to prepandemic levels,” Brown said of the cost to build a home.

Brown said taxing bodies that offer the rebate get a return on their investment by increasing the property tax base for years after an initial three-year rebate.

“It’s not a stress on services. These are existing lots with existing infrastructure that people are choosing to build on,” Brown said. “It’s really a long-term smart play by the taxing bodies because everyone wants more new residents as part of a growing community and this is a great way to achieve that.”

This article is by Kevin Haas. Email him at khaas@rockrivercurrent.com or follow him on X at @KevinMHaas or Instagram @thekevinhaas and Threads @thekevinhaas