CHICAGO — A plan to raise the city’s real estate transfer tax on higher end property sales to generate funding for homelessness services has landed Mayor Brandon Johnson’s blessing — albeit with some significant changes from how it was originally proposed.
The Bring Chicago Home initiative has for years called for the city to increase the tax rate buyers pay on property sales over $1 million, with the additional funds raised dedicated to providing permanent affordable housing and wraparound services for unhoused Chicagoans.
A key campaign pledge of Johnson’s, the plan now has the mayor’s support, his City Council floor leader Ald. Carlos Ramirez-Rosa (35th) said Tuesday. The proposal now features a tiered, marginal structure instead of a flat hike.
The new structure, which would need to be approved by the City Council and Chicago voters to take effect, was first reported on Tuesday by the Sun-Times’ Fran Spielman.
Under their original proposal, proponents hoped to raise the real estate transfer tax from .75 percent to 2.65 percent on property sales over $1 million. The tax would have applied to the entire value of the sale.
Under the new plan, outlined in briefings to alderpeople this week, property buyers in all price ranges would see changes to their tax rate.
People buying properties under $1 million would see reduced taxes. Real estate sales over $1 million would see higher rates only on the portion of the sale above $1 million.
The new rate proposal:
- Property sales under $1 million would be taxed at .60 percent, down from .75 percent
- Property sales between $1-1.5 million would be taxed at 2 percent
- Property sales above $1.5 million be taxed at 3 percent
“This is the progressive structure that Mayor Johnson and his administration support, and they worked very closely with alderpeople as well as the [Bring Chicago Home] coalition to land at the proposal that was presented in aldermanic briefings today and throughout this week,” Ramirez-Rosa said in an interview Tuesday.
According to Ramirez-Rosa and materials presented to alderpeople reviewed by Block Club, the structured proposal would lower the real estate transfer tax rate for almost 96 percent of all property sales in the city.
For a property sold for $1.2 million, for example, the buyer would pay $10,000, an increase from the current $9,000.
“Your average home buyer will see a reduction in the amount that they have to spend in the real estate transfer tax as a result of this change,” Ramirez-Rosa said. “But we’re also then asking the very top of the market, some of the largest corporations in the world, that as they purchase property in the city of Chicago, that they pay a little more.”
Supporters Say Tax Is Necessary, But Critics Say Real Estate Market Will Suffer
In January, 6,139 people in Chicago were living on the street or in shelters, according to the city’s annual “Point-In-Time” count. Asylum seekers accounted for 42 percent of that count, according to city documents.
A broader count puts the number of people experiencing homelessness in the city around 65,000. That includes Chicagoans who are “doubled-up,” meaning they live with family or friends and do not have “their own space due to economic hardship or housing loss,” according to a presentation at the hearing.
Members of the Bring Chicago Home coalition, which includes numerous homelessness advocacy groups, said at a July hearing that the original proposal would raise around $160 million per year.
Because of the fluctuating real estate market, the tiered tax structure made public this week could bring in over $160 million some years, while falling below that threshold in others, Ramirez-Rosa said. He said he’s confident the new structure would raise “over $100 million” annually.
“There are years in which a lot of sales occur, particularly at the very top of the market. We’re talking about big buildings Downtown. There are years where not as many big sales are occurring at the top of the market. So there will be years under this structure that the revenue brought in will surpass $160 million. There’ll be years where it will be below that,” he said. “As we look over the next decade, you will see that number fluctuate depending on how many sales are occurring.”
Proponents have argued the tax hike is direly needed to help get people off the streets and into permanent housing. Critics say the change would hurt landlords and commercial property owners, especially Downtown where office buildings have been slow to see a return of workers since the pandemic.
In a statement, Farzin Parang, executive director of the Building Owners and Managers Association of Chicago, said the updated Bring Chicago Home proposal would hurt the city’s commercial office industry “at a historically vulnerable time.”
“As Downtown office building values plummet due to a sluggish return to office, the livelihood of tens of thousands of Chicagoans is at risk. In addition, homeowners across the city can expect to shoulder more of the city’s property tax burden,” Parang said.
Miguel Chacon, a realtor, landlord and member of the Neighborhood Building Owners Alliance, echoed those concerns. He said the plan would ultimately result in landlords jacking up rents across Chicago.
“Everyone is going to start raising their rents. And $1.5 million dollars is a very low threshold to get across,” he said. “There’s a lot of different avenues that the city can take to raise additional revenue, but to impact just one industry, as if the real estate market is entirely responsible for homelessness, is just not the right direction.”
But supporters of Bring Chicago Home dismissed those critiques and argued wealthier homebuyers and landlords should do their part to help provide housing and services for those in need.
“This tax is paid by the buyer, people who have the ability to buy properties over 1 million dollars. And that’s not your everyday family in Chicago,” said Hannah Gelder, organizing director with ONE Northside, which is part of the Bring Chicago Home coalition.
“We have 65,000 people who are unhoused, 17,000 of them are CPS students. And people who can afford to buy a million dollar property … can’t afford a little extra to contribute to making sure that people aren’t living doubled up? People aren’t living in shelters? It’s ludicrous,” Gelder said.
Even with the changes outlined this week meant to garner wider support for the initiative, Bring Chicago Home faces a long path toward becoming law.
First, a resolution must be introduced to City Council for the proposal, a move which Ramirez-Rosa said will happen in September. If alderpeople approve the resolution this fall, it will then go to a public referendum, likely during the March 2024 primaries.
If the measure passes that referendum, alderpeople would then craft an ordinance to actually raise the tax structure, which requires another City Council vote to approve it.
Support Local News!
Subscribe to Block Club Chicago, an independent, 501(c)(3), journalist-run newsroom. Every dime we make funds reporting from Chicago’s neighborhoods. Already subscribe? Click here to gift a subscription, or you can support Block Club with a tax-deductible donation.
Listen to the Block Club Chicago podcast:
