Aldermen advance plan to increase Chicago tax on sales of million-dollar homes to fight homelessness
CHICAGO (CBS) -- Mayor Brandon Johnson's plan to raise the city's tax on the sales of million-dollar properties in Chicago to fund efforts to fight homelessness has cleared its first major legislative hurdle, setting up a vote by the City Council to ask voters next March to approve the so-called "Bring Chicago Home" plan.
The City Council Rules Committee on Tuesday voted 32-16 to approve a resolution authorizing a ballot referendum during the March primary approving the tax plan. The proposal now goes to the full City Council for consideration on Wednesday.
The so-called Bring Chicago Home Ordinance 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.
Johnson's office 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.
"Bring Chicago Home will ensure that our unhoused do not bear the weight of the affordable housing crisis by investing in people and providing the dedicated and flexible resources needed for one of our most vulnerable populations to survive and thrive," Johnson said after formally introducing the proposal in September.
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 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."
Ald. Maria Hadden (49th), one of the more vocal supporters of the Bring Chicago Home Ordinance, said that 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. "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, 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. "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.
Ald. Anthony Beale (9th) said he fears the city's business community is nearing a tipping point after the City Council already approved a plan to phase out the subminimum wage for tipped workers, and the mayor and his allies are also pushing to expand paid time off requirements for Chicago employers.
"I mean, when does it stop? When does it stop? There's other ways to address it. I think we all are very conscious about addressing homelessness. It's no doubt about it. We all are sensitive to addressing homelessness," Beale said. "I think what we need to do is regroup and try to figure out a better way."
Ald. Raymond Lopez (15th) said the City Council shouldn't vote to send the measure to voters on the March ballot before determining how the money will be spent on efforts to fight homelessness.
"I want to know exactly and specifically what it means to provide necessary services. What does that include?" he said. "That is a very expansive range."
Hadden said, even if voters approve the Bring Home Chicago plan in March, the City Council would still have to determine exactly how the money is spent, meaning aldermen will still have a say on what specific efforts to fight homelessness will be funded.
"The voters aren't being asked to decide all those things. The voters are being asked to give us the authority to take it back to the council to work out the details and decide how we spend the revenue," 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.