(The Center Square) – A proposed hike in the transfer tax on real estate in Chicago valued at $1 million or more is not sitting well with landlords of apartments and multifamily complexes.
Mayor Brandon Johnson says the new revenues from the “mansion tax” will be used to tackle the city’s homelessness problem. His administration said the tax hike could net the city as much as $163 million a year.
Corey Oliver, chief operations officer of the Community Venture Investment Corporation, said not every building worth $1 million is a mansion.
“I think that it is going to create further housing destabilization, causing rents to go higher and make it so people who are already living paycheck to paycheck can longer afford to stay in their apartment,” Oliver said.
A study released by the Neighborhood Building Owner’s Alliance shows that the proposed “Bring Chicago Home” tax increase is likely to lead to higher rents. Because the tax increase would reduce the proceeds from the sale of a building, three out of four respondents (74%) indicated that the measure would make them more likely to raise rents.
The same tax was implemented in Los Angeles, where lenders halted making loans to new multifamily construction projects because of a new transfer tax. The city saw its luxury real estate market come to a standstill after the tax went into effect. As a result, the city is collecting far less than anticipated.
Oliver said property values have been going down and the tax will make it worse.
“You got to believe that even buildings that are transacting are going to transact for thousands and millions of dollars less, which is going to create a situation where the assessor is going to have to reassess the value of properties and you are going to start losing tax dollars across the board,” Oliver said.
Illinois law allows municipalities to restructure their real estate transfer taxes only if voters approve it in a binding referendum. The Chicago City Council must approve the measure before it reaches voters.
