Chicago proposal would triple transfer tax on property buyers at $1 million or more

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Ron Tabaczynski, director of government affairs for the Building Owners & Managers Association of Chicago, adds, “Commercial properties in Chicago face incredible challenges. I’m working hard to reinvigorate the Loop.”

“Instead of offering policies that will motivate investors to buy or build elsewhere, we support policies that will encourage greater investment in our city, increase our tax base and create meaningful jobs.”

The higher transfer tax is imposed on buyers, but a senior commercial real estate executive said it was essentially a charge against the seller. “The buyer includes it in the cost” of the property, said Cody Hundertmark, executive director, United States, at Cushman & Wakefield, a Chicago-based real estate services firm. He warns sellers that it basically comes “straight out of your pocket.” ”

Chezi Rafaeli, a Coldwell Banker agent who in March represented buyers of a $20 million penthouse at the Trump International Hotel & Tower, said he believed the increase in transfer taxes would “essentially kill the market for these houses”.

Rafeli’s clients, who purchased through a bank trust that hides their names from public records, paid $155,000 in transfer taxes. Under the Bring Chicago Home proposal, they reportedly paid $530,000, including $375,000 to address homelessness.

“I agree that there is a real problem with homelessness in the city and across the country, but the feeling is that landlords are being overtaxed in Chicago as it is,” Tim Sheahan said. , agent of Compass. He represented buyers who paid $12.55 million for a Lincoln Park mansion in December, the most expensive home sale in the Chicago area of ​​2021.

Sheahan declined to comment on what his clients would have thought of paying more than three times the $94,125 in transfer tax they paid. But he noted that “although the luxury market has been strong recently, it is volatile and can change quickly.”

It’s a sentiment shared by Lawrence Msall, president of the Civic Federation. “Let’s say this tax creates a dedicated funding stream for homelessness programs, and then the market changes and the funding stream isn’t enough,” Msall said. He cited as examples the Illinois Lottery, set up to fund education and generally understaffed, and a 2008 attempt to solve the Chicago Transit Authority’s pension deficit with an increase in transfer taxes. real estate, which also proved to be insufficient.

“This proposal does not end homelessness,” said Mary Tarullo, associate director of policy and strategy for the Chicago Coalition for the Homeless. “We want to have a meaningful impact on homelessness,” she said, and balance that with “a politically viable proposition.”

The dollar amount of the proposal, Tarullo said, “we think it’s politically viable, yes.” The coalition says 11 aldermen are in favor of putting the referendum on the ballot.

Tarullo adds that in San Francisco, a proposed tax to fund homeless services “has been backed by business leaders, including the CEO of Salesforce.” In 2018, Salesforce’s Marc Benioff was instrumental, according to Forbes, in garnering support for a special tax on corporations with annual gross revenues of $50 million or more. The measure was expected to raise $250 million to $300 million a year for the fight against homelessness.

One of the key differences between San Francisco and Chicago, multiple sources point out, is that the tech sector there was in sonic boom mode in 2018, generating abundant wealth.

In Chicago, homeowners, who may have stock market wealth and other high-flying investments, “have not seen any significant appreciation on their property in a decade,” Sheahan said.

In San Francisco, home values ​​increased 180% over the decade between January 2012 and January 2022, according to the S&P/Case-Shiller Home Price Index. In Chicago, house prices rose 58% over the same period, less than a third of the growth in San Francisco.

The difference between the two could weigh on the willingness of affluent Chicago real estate buyers to accept a surcharge on the cost of purchasing a property.

Alby Gallun contributed to it.

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