Chicago Alderman halted real estate transfer tax hikes

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Alderman Matt Martin, Maria Hadden and Daniel La Spata (Alderman Martin, Maria Hadden for 49th, 1st, Getty)

Chicago’s million-dollar home buyers dodged a “deal killer” bullet as the city council failed to advance a tax hike that would have more than tripled their tax burden on property transfers.

The initiative to raise the issue of increasing the transfer tax on property sales of $1 million or more to fund city programs to provide permanent affordable housing for Chicago’s homeless population was thwarted on Monday, after a special meeting to discuss the question posed to voters failed to meet a quorum.

This means the referendum will not appear on the ballot in the February municipal elections, and although supporters of the Bring Chicago Home campaign have vowed to keep fighting, the way forward for the measure is not not clear. A spokeswoman for the Chicago Coalition for the Homeless campaign supporter said advocates were “regrouping” on Monday afternoon.

Developers have been pushing for the initiative since 2018, saying the city needs a dedicated revenue stream to keep people housed. Real estate industry associations representing both commercial and residential owners oppose the measure, including BOMA/Chicago and the Neighborhood Building Owners Association, saying it increases Chicago’s already high taxes and makes it harder for small and medium housing providers.

Chicago’s transfer tax rate charges buyers $3.75 for every $500 of a transaction’s value, while sellers pay $1.50 for every $500. The proposal would increase what the buyer pays for every $500 to $13.25, while maintaining the same $1.50 burden on the seller. So the taxes on a $1 million purchase would go from $7,500 to $26,500.

“It has to come from the seller’s equity or the buyer’s equity, and the buyers of these properties tend to finance those purchases,” said Rich Aronson, realtor at Berkshire Hathaway HomeServices Chicago. “That extra $19,000 is just a business killer.”

On average, the tax increase would impact 4.2% of Chicago properties, according to the campaign website. It would generate $163 million per year, according to the promoters.

Chicago has more than 32,000 multi-unit properties worth $1 million or more, Aronson said, citing BHHS data. Many of these are small, mixed-use buildings, such as three-unit apartments with downstairs commercial space, or smaller multi-unit buildings in low-income neighborhoods. $1 million is also the average price for a single-family home in the affluent Lincoln Park neighborhood.

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