Chicago’s million-dollar property buyers dodged a “deal killer” bullet as the City Council failed to advance a tax hike that would have more than tripled their real estate transfer tax burden.
The initiative to put the question of raising the transfer tax on property sales of $1 million or more to fund city programs to provide permanent affordable housing for Chicago’s homeless population was thwarted Monday, after a special meeting to discuss putting the question to voters failed to meet quorum.
This means the referendum won’t appear on the ballot in February’s municipal election, and while supporters of the Bring Chicago Home campaign vowed to keep fighting, the measure’s path forward isn’t clear. A spokeswoman for campaign supporter Chicago Coalition for the Homeless said advocates were “regrouping” Monday afternoon.
Proponents have been pushing for the initiative since 2018, saying the city needs a dedicated revenue stream to keep people housed. Real estate industry associations representing both commercial and residential property owners oppose the measure, including BOMA/Chicago and the Neighborhood Building Owners Association, saying it adds to Chicago’s already-high taxes and makes things harder for small and medium-sized housing providers.
Chicago’s transfer tax rate charges buyers $3.75 for every $500 of a deal’s value, while sellers pay $1.50 for every $500. The proposal would raise what the buyer pays for every $500 to $13.25, while keeping the $1.50 burden the same for the seller. So, taxes on a $1 million purchase would increase from $7,500 to $26,500.
“That either has to come out of the seller’s equity or the buyer’s capital, and buyers of these properties tend to finance these purchases,” Rich Aronson, a realtor with Berkshire Hathaway HomeServices Chicago, said. “That additional $19,000 is a deal killer, it just is.”
On average, the tax increase would impact 4.2 percent of Chicago properties, according to the campaign’s website. It would generate $163 million annually, proponents say.
Chicago has more than 32,000 multi-unit properties worth $1 million or more, Aronson said, citing BHHS data. Many of those are small mixed-use buildings, such as three-flats with commercial space on the ground level, or smaller multi-unit buildings in lower-income neighborhoods. $1 million is also the average price of a single-family home in affluent Lincoln Park.
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Chicago transfer tax hike on $1M-plus deals hits setback