Voters to decide whether to raise Chicago tax on sales of million-dollar homes to fight homelessness
CHICAGO (CBS) -- Chicago voters will decide next March whether to give the City Council authority to increase the tax on sales of million-dollar properties in order to fund efforts to fight homelessness.
The City Council voted 32-17 on Tuesday to place a binding referendum on primary election ballots to approve the so-called "Bring Chicago Home" ordinance, which would create a tiered system for the real estate transfer tax for property sales in Chicago:
- The transfer tax for properties valued at less than $1 million would drop from 0.75% to 0.60%.
- Properties sold for between $1 million and $1.5 million would pay a 2% transfer tax, nearly triple the current rate.
- Properties sold for $1.5 million or more would pay a 3% transfer tax, four times the current rate.
The proposal is a key initiative of Mayor Brandon Johnson's progressive agenda. The mayor has said the ordinance would lower the real estate transfer tax for 95% of homeowners, while increasing the tax on more expensive buildings, creating approximately $100 million in annual revenue for efforts to combat homelessness.
"We know that homelessness is up since 2019, and that Black Chicagoans account for 69% of our city's unhoused population, and one in four Black students in the Chicago Public Schools, unfortunately, will experience homelessness at least once during their lives. Bring Chicago Home is an important measure that I believe will help rectify this wrong," Johnson said after Tuesday's vote. "My administration will continue our mission to support Chicago's unhoused, and I will remain resolute in my belief that housing is truly a human right."
Opponents have said the ordinance does not specify exactly how the approximately $100 million in annual revenue created by the "Bring Chicago Home" tax plan would be spent on reducing homelessness.
But Ald. Maria Hadden (49th), the lead sponsor of the ordinance, said the City Council can decide those specifics if and when voters give the City Council authority to impose the tax changes.
"We are going to send this to the voters, the voters are going to send this back to us, and we're going to have to keep talking about it," she said.
If the tax referendum were approved by voters in March, the City Council would then have to approve a separate ordinance next spring officially establishing the new tax rates, and designating how the estimated $100 million in new annual revenue would be spent. City officials said the earliest Chicago could begin collecting the new taxes would be 2025.
Ald. David Moore (17th) said, while he supports the idea behind the "Bring Chicago Home" ordinance, he could not vote for it on Tuesday, in part because he believes the city should be trying to get even more money to fight homelessness. The original version of the ordinance called for tripling the transfer tax on all properties sold for $1 million and above - from 0.75% to 2.65% - and would not have reduced the tax rate on properties sold for less than $1 million. That plan would have generated an estimated $160 million in annual revenue for the city.
"If our focus is on getting money for the homeless, then we shouldn't have been decreasing anything," Moore said.
Critics have said the tax plan would result in landlords increasing rents on tenants, limit future development, and hurt downtown commercial property owners still struggling to fill vacant office spaces in the wake of the COVID-19 pandemic.
Tom Benedetto, director of local advocacy for Illinois REALTORS, said in a committee meeting earlier this month that the city's economy and housing market are already in trouble and "on the verge of further decline," and would be hurt even more with the proposed tax hike for more expensive properties.
"Should a market in decline, with residents hurting as a result, be taxed further?" he said. "Is a volatile revenue source like a transfer tax, which changes every year based on market performance, an appropriate source of funding for our most vulnerable population? If you care about protecting the housing market from further harm, and you care about having stable sources of revenue for the unhoused, the answer to both of these questions is no."
Hadden has said alderpersons would continue working with downtown businesses to continue supporting their efforts to help the city's Central Business District thrive, regardless of what voters decide on the tax plan.
"You're not going to be let down and abandoned by Chicago City Council. Our economies are connected, whether we like it or not," she said earlier this month. "So the success of downtown is important to every single one of us, not just downtown alderpeople, not just downtown residents, and not just commercial real estate folks. So I hope you can see that as we're looking for this as a solution, this is a motivation for every single person here who supported Bring Chicago Home to also make sure that our downtown succeeds."
Farzin Parang, executive director of the Building Owners and Managers Association of Chicago, has argued it's unfair to ask building owners to bear the brunt of the burden for increasing efforts to fight homelessness, and argued the cost should be spread out more evenly across the entire city.
"There's no reason it all has to be funded from a transfer tax. The biggest disproportionate impact of that is on office buildings. Office buildings don't create homelessness. They don't create housing problems. These aren't really connected concepts," he said during a committee hearing on the proposal. "We can figure out some proposal that works better for more people."
Critics have argued, while the real estate transfer tax might be lowered for the vast majority of homes in Chicago, homeowners ultimately will end up paying more in property taxes, because large residential and commercial buildings will see their property values drop, requiring homeowners to make up the difference in lost property tax revenue.
Michael Mini, executive vice president of the Chicagoland Apartment Association, an advocacy group which represents Chicago landlords, said the tax plan could slow or even halt construction of new apartment projects in Chicago, making housing less affordable.
"There's no doubt in our mind that the tax increase that we're looking at today will impede development and maintenance of affordable and market-rate apartments, especially at a time when providers are facing rising interest rates, increased costs, and unpredictable and excessive property taxes," Mini said.
However, Mayumi "Umi" Grigsby, the mayor's chief of policy, argued that even if landlords passed on the cost of the higher taxes to tenants, based on 2021 data, rents would rise less than $2 per month on a $1,300-per-month apartment.