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The Night Ministry's case manager Sylvia Hibbard offers services from the street medicine van, such as free health care, food and other survival supplies, at a homeless encampment near North Green and West Kinzie streets, in January 2022.

The Night Ministry’s case manager Sylvia Hibbard offers services from the street medicine van, such as free health care, food and other survival supplies, at a homeless encampment near North Green and West Kinzie streets, in January 2022. In November, the Chicago City Council approved a ballot question that would raise taxes on high-end real estate transfers to help pay for services for homelessness prevention.

Ashlee Rezin

Here’s what you need to know about the tax increase Chicago voters will consider in March

This spring Chicago voters will be asked whether they want to increase a tax on the sale of high-end properties to fund homelessness prevention.

Chicago’s City Council approved the citywide referendum Tuesday, handing Mayor Brandon Johnson a political win on one of his major campaign promises and achieving a long sought-after milestone for advocates that aim to prevent homelessness.

The campaign, known as Bring Chicago Home, seeks to adjust the real estate transfer tax, a one-time tax imposed on the sale of property. Voters would be asked to authorize City Council to adjust Chicago’s current, flat tax to a tiered, marginal tax that would increase the tax rate on portions of property above $1 million — while implementing a tax cut on property valued under that amount.

The proposal passed by a 32 to 17 vote, and is the culmination of years of advocacy by supporters who just a year ago couldn’t secure a committee hearing on the proposal after it was blocked under former Mayor Lori Lightfoot.

“The voters are going to tell us what they want and then we’re going to work even harder and we’re going to come up with a plan, and we’re going to spend the money like we’ve been spending the money,” Ald. Maria Hadden, 49th Ward, said, later adding: “Every member of this coalition, every member of this body, and so many residents have worked hard on trying to solve a problem. And it’s not perfect and it won’t be perfect, but it’s going to be a much needed solution.”

The resolution’s passage starts what’s likely to be a heated campaign, with Chicago voters deciding the tax’s fate in a March primary.

Here’s a rundown of what’s being proposed and next steps.

How will my taxes change?

Your taxes would not change unless you are buying. The measure proposes implementing a tiered, marginal tax increase on the portion of property sold over $1 million – while giving a tax cut to property valued under that amount.

The city’s current real estate transfer tax rate is 0.75%, or $3.75 for every $500 of transfer price.

Under the proposal, if passed by voters and then City Council, the tax rate would change depending on the value of the property. The tax rate for the proportion of property valued at:

  • Under $1 million would decrease to 0.6%, or $3 for every $500 of the transfer price. This is a 20% decrease from the current tax rate of 0.75%.

  • Between $1 to $1.5 million would increase to 2%, or $10 for every $500 of the transfer price. This is a 166.67% increase from the current rate.

  • Over $1.5 million would increase to 3%, or $15 for every $500 of the transfer price. This is a 300% increase from the current rate.

What do people say about the proposal to increase the real estate transfer tax?

Advocates estimate the plan will bring in at least $100 million annually, and say the city needs a dedicated funding source to address the rising number of people experiencing homelessness.

In its analysis of the most recent available data, the Chicago Coalition for the Homeless found an estimated 68,440 people were unhoused in Chicago in 2021 – with a sharp jump in the number of people staying on the street or in shelters. The Coalition, which is in support of raising the real estate transfer tax, included in its analysis those who are staying on the street, in addition to the number of people who are “doubled up” or temporarily staying with others.

That number doesn’t represent the over 20,000 asylum seekers that have arrived in the city since August of last year. The city conducts an annual point-in-time count that captures a snapshot of the number of people living on the street or in shelters on a single night in January. The 2023 count found that 6,139 residents were experiencing homelessness, with asylum seekers accounting for 42% of those staying in shelters.

“If you can afford to buy a house, then you should be able to afford to help somebody else be able to have their own apartment,” said Germaine Dixon, who testified in support of the tax on SEIU’s behalf.

Affordable housing projects would be exempt from the tax increase, and the tax cut on property valued under $1 million dollars accounts for nearly 96% of all property sales in Chicago, Johnson’s Chief of Policy S. Mayumi “Umi” Grigsby said.

“That means for 96% of homeowners in Chicago, they will experience this change as a tax cut,” Grigsby said last week.

The tax is often described in terms of a “mansion tax,” but it would apply to all property sales. Real estate groups have argued the tax will harm an industry still recovering from the pandemic, that increased costs will be passed onto renters and that the tax itself is an unreliable source of revenue.

Johnson’s September budget forecast estimated the real estate transfer tax would end the year about 37% under budget, or $82.1 million, because of a slow down in the real estate market.

Farzin Parang, executive director of the Building Owners and Managers Association of Chicago, warned the measure will increase costs on office buildings that are seeing a sluggish return to pre-pandemic use, and said a drop in downtown buildings’ value will lead to increases in residential property taxes throughout the city.

“We’re all connected in this,” Parang told City Council members. “The reality is that you’re really talking about a property tax increase as our market is collapsing — for all of residential property, not even just apartments.”

How will the Bring Chicago Home money be used to prevent homelessness?

The ordinance specifies that the additional revenue generated from the tax increase will be deposited into a fund specifically to be used for, “combating homelessness, including providing permanent affordable housing and the services necessary to obtain and maintain permanent housing.”

Mayor Brandon Johnson’s administration says it aims to prioritize creating more permanent, supportive housing with the revenue, and has pitched a special advisory board that would give recommendations as to how the money should be spent.

But several alderpersons have said they want more clarity on how the city has already spent funds dedicated toward homelessness prevention. An Illinois Answers investigation found that the city has spent at most 15% of one of the largest pots of federal funds it received to help move people into housing.

“Everybody that’s here that says they want money for homelessness is owed an answer as to how that $100 million is going to help them. Because raising taxes for the sake of raising it to say we’re going to grab a headline and we’ve committed a revenue to address homelessness does squat,” Ald. Raymond Lopez, 15th Ward, said, “when we have literally gotten hundreds of million dollars in grants, direct corporate dollars and others to address homelessness which we still have not moved the needle on.”

Hadden stressed that alderpersons will still have time to work out the specifics.

“So as a point of clarification, those questions and the consternation about vague language is because the voters aren’t being asked to decide all those things,” Hadden said. “The voters are being asked to give us the authority to take it back to council, work out the details to finalize the plan and to decide how we’re going to spend the potential revenue created by this.”

Why are voters being asked to decide about Bring Chicago Home?

It’s required by state law. Illinois statute specifies that a majority of voters must authorize any increase to the real estate transfer tax or the addition of transactions that the tax applies to.

When will voters get to weigh in on the real estate transfer tax increase?

The referendum is slated to appear on the 2024 primary ballot. So along with deciding who will be the presidential nominee for each political party, among other local offices on the ballot, Chicago voters will also see on their ballot a question on raising the real estate transfer tax.

To pass, the measure requires a majority of voters to approve.

When will my taxes be affected if the Bring Chicago Home proposal passes?

It won’t be immediate. The ballot question simply authorizes the City Council to increase the real estate transfer tax, meaning the issue would then go back to alderpersons to actually enact the proposal. Johnson’s Budget Director told alderpersons the tax will likely be effective in 2025, meaning revenue won’t be budgeted until 2026.

What would the ballot question on raising the real estate transfer tax actually say?

State law provides parameters for how the ballot question needs to be worded, and voters will be asked:

Shall the City of Chicago impose:

  1. a real estate transfer tax decrease of 20% to establish a new transfer tax rate of $3 for every $500 of the transfer price, or fraction thereof, for that part of the transfer price under $1,000,000 to be paid by the buyer of the real estate transferred unless the buyer is exempt from the tax solely by operation of state law, in which case the tax is to be paid by the seller; AND

  2. a real estate transfer tax increase of 166.67% to establish a new transfer tax rate of $10 for every $500 of the transfer price or fraction thereof, for that part of the transfer price between $1,000,000 and $1,500,000 (inclusive) to be paid by the buyer of the real estate transferred unless the buyer is exempt from the tax solely by operation of state law, in which case the tax is to be paid by the seller; AND

  3. a real estate transfer tax increase of 300% to establish a new transfer tax rate of $15 for every $500 of the transfer price, or fraction thereof, for that part of the transfer price exceeding $1,500,000 to be paid by the buyer of the real estate transferred unless the buyer is exempt from the tax solely by operation of state law, in which case the tax is to be paid by the seller?

The current rate of the real estate transfer tax is $3.75 per $500 of the entire transfer price, or fraction thereof, and the revenue is used for general corporate purposes. The revenue from the increase (the difference between revenue generated under the increased rate and the current rate) is to be used for the purpose of addressing homelessness, including providing permanent affordable housing and the services necessary to obtain and maintain permanent housing in the City of Chicago.

□ Yes

□ No

Tessa Weinberg covers Chicago government and politics for WBEZ.

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