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Volunteer Rami Faraj canvasses

Volunteer Rami Faraj canvasses in support of the so-called Bring Chicago Home referendum in the city’s West Ridge neighborhood on Jan. 7, 2024.

Mariah Woelfel

An in-depth look inside the campaigns for and against a tax to pay for homelessness prevention

On a recent Sunday afternoon in the city’s West Ridge neighborhood, Rami Faraj made his way down a tree-lined street of Chicago-style bungalows.

With a chipper attitude and an infographic in hand, he knocked on door after door, eager to talk to anyone who would listen about what organizers are calling Bring Chicago Home — an effort to raise the one-time transfer tax when properties over $1 million are sold, and lower the tax for properties under that amount, to fund homelessness prevention. The referendum question will be on Chicagoans’ March 19 ballot.

“Would that sound like something you’d support?” Faraj asked one man who came to the side entrance of an upscale bungalow. Faraj had knocked on many doors that day but at this moment was facing the stiffest skeptic yet.

“No,” the man responded in a monotone voice.

“I think it’ll deter businesses from coming to Chicago,” the man eventually expounded, prompting a back-and-forth that lasted three minutes or so.

“For sure,” Faraj said. “Why do you think that is?”

“Because of the taxes,” the man said wryly.

Faraj ticked through talking points and finally got to the most altruistic argument supporters of the campaign offer: The policy “makes sure that the super rich are paying their share” to ensure people are housed, he said.

Seemingly unconvinced, the man nonetheless agreed to read more at the QR-Coded website included on the infographic he received. Faraj promised the man he would come back and, later, said he appreciated the honesty and respected the difference of opinion.

Conversations like these are playing out across the city as supporters and opponents of changes to the real estate transfer tax seek support for their side — even as the ballot question’s fate faces a court challenge. Still, the referendum marks one of the most significant questions voters will be tasked with deciding in the March primary. The campaigns for both sides have drawn in hundreds of thousands of dollars so far.

On one side are the progressive grassroots organizers, homelessness prevention advocates and unhoused people themselves who for years have been pushing for the Chicago City Council to pose the question to voters. On the other side are real estate organizations and commercial property owners, who are raising money for mailers and holding Zoom roundtables in opposition to the referendum.

And a day spent on the campaign trail proves that Chicago residents, no matter how they lean on the policy, have real questions about its implications: Will this affect renters or small businesses? How will the money be spent? Will this actually help those most impacted by homelessness?

Homeless man gets warm by fire

A man warms his hands by the fire he created across the street from a homeless encampment under a major interstate freeway Tuesday, Jan. 16, 2024, in Chicago.

Charles Rex Arbogast

Finding funding for homelessness prevention

In an old auto-shop-turned-organizing-space, volunteers with the group United Working Families, 50th Ward, prepared for a cloudy, cold day of canvassing last month. And organizer Matt Ginsberg-Jaeckle urged door-knockers to focus on the tens of thousands of unhoused people at the heart of the initiative.

“There will be people that will want to talk the specifics of tax policy, but I really feel like the strength of this issue is addressing homelessness,” he said.

There are an estimated 68,440 unhoused people in Chicago, according to an estimate from the city’s preeminent homelessness prevention organization, the Chicago Coalition for the Homeless, which supports the ballot measure.

The city of Chicago does not have a dedicated stream to fund homelessness prevention services. Affordable housing, for instance, is currently funded through a mix of federal funding, grant money and money from special taxing districts known as TIFs. The lack of a more reliable revenue source leads to piecemeal, inadequate budgeting, organizers behind Bring Chicago Home argue.

Without direct control over income taxes or other forms of progressive taxation, alderpersons and organizers turned to the real estate transfer tax increase, a method cities like San Francisco and New York have relied on. Illinois law stipulates the city can raise the real estate transfer tax — a one-time tax when a property is sold — if voters agree to it.

Currently, Chicago has a flat real estate transfer tax of 0.75%. The policy proposal would change that to a tiered system depending on the value of a property. For those under $1 million, the tax would decrease to 0.6%. Between $1 to $1.5 million would increase to 2%. Over $1.5 million would increase to 3%. The increase would only apply to the dollar amount that exceeds $1 million.

That means, for instance, someone who buys a home for $500,000 currently pays a transfer tax of $3,750. That would decrease to $3,000 under the proposal. And for someone buying a home for over a million, say $1.2 million, the transfer tax would increase from $9,000 to $10,000.

Supporters estimate the tax increase will bring in at least $100 million a year. An analysis by University of Chicago Harris School of Public Policy assessing historic data estimated the proposal would raise approximately $160 million on average annually in additional revenue.

But noting the volatility of the current tax, the amount can vary dramatically, from a low of $106 million in 2020 and as much as $324 million in 2016, they found.

Opponents have pointed to the tax’s inconsistent nature as a reason it shouldn’t be hiked to fund homelessness prevention. Johnson’s own administration forecasted revenue from the tax would be about 37% under budget last year because of a slowdown in the real estate market.

Christopher Berry, director of the Mansueto Institute for Urban Innovation and a professor at the University of Chicago, said without an income tax on the table, cities looking for revenue sources are largely left to choose from sales taxes, property taxes and various fees.

“And so the question is, what options do you have as a mayor when you want to finance some of your more ambitious programs?” Berry said. “And this transfer tax, I think, is a creative way to try to find a progressive revenue source from a relatively limited set of options.”

Voters approving the ballot question next month would authorize the City Council to enact the tax change. A dedicated fund and advisory board would be created via ordinance that would also outline how exactly the revenue would be spent. Supporters have said affordable housing with legally restricted agreements that are receiving public funding would be exempt from the tax. Businesses in the city’s six so-called “enterprise zones” — which are meant to spur economic development — are also already exempt from the real estate transfer tax.

Volunteers take selfie

Volunteers Rami Faraj (left) and Aida Conroy take a selfie as they canvass in support of the so-called Bring Chicago Home referendum in the city’s West Ridge neighborhood on Jan. 7, 2024.

Mariah Woelfel

Ballot language and spending specifics

The funding would be used for “addressing homelessness, including providing permanent affordable housing and the services necessary to obtain and maintain permanent housing in the City of Chicago.” That’s the language voters will rely on from the March ballot question.

Compared to Los Angeles’s measure, Chicago’s ballot language is sparse which, according to one expert, has both benefits and pitfalls.

In Los Angeles, voters were equipped with specific percentages and buckets that dollars from their tax would go into, from 22.5% devoted to developing multifamily affordable housing to 10% for legal aid for renters facing eviction.

“It’s all in there and was very clearly communicated to the voters,” said Shane Phillips, the housing initiative manager at the UCLA Lewis Center for Regional Policy Studies who has studied the potential impacts of Los Angeles’s measure.

But if Los Angeles’s buckets of funding were to be changed, it would require another ballot initiative to amend the language, which would be unlikely, Phillips said.

“We’re kind of stuck with what we’ve got indefinitely,” Phillips said. “I think having that flexibility where future councils can change this, there’s obviously a risk to that if they choose to completely get rid of it or spend it on something that people really don’t agree with. … All things considered, I think a little more flexibility is probably for the best.”

Vaughn Roland, the political director for Bring Chicago Home, said that though the Chicago ballot language does not include specific percentages, there is no question about what the money will be spent on: affordable housing construction, rental subsidies and wraparound services.

“I don’t think it’s that broad in terms of how funds are allocated. The funds are specifically going towards homelessness in the three buckets … you won’t see it go anywhere else,” he said.

Specific percentages for each of those categories will come in the “third phase” of the campaign if the referendum passes, Roland said. That’s when the City Council would convene to pass an ordinance actually implementing the tax.

But Illinois Realtors say the broader ballot language means voters would be cutting the city “another blank check.” They point to the city allocating hundreds of millions to support migrants in recent months, and they argue the city hasn’t proved itself to be good stewards of the money it has already received to address homelessness.

An Illinois Answers investigation last year found the city has been slow to spend one of the largest pots of federal funds it received to help move people into housing, with just 15% of about $52 million used.

The city is essentially saying “let us collect all of these taxes first, and then we’ll figure out how to spend it later,” Jeff Baker, CEO of Illinois Realtors, said of the plan. “And the only evidence for how well money on this issue gets spent that we have to rely upon is just in the last couple of years, and that doesn’t bode well for how the new money will get spent either.”

Who the tax will affect

Organizers and aldermanic proponents say 93% of all property sales in Chicago will fall under the $1 million threshold that will be seeing a tax cut. That means the tax increase will largely be falling on sales of commercial properties and large apartment buildings, the University of Chicago analysis found.

Opponents of the tax increase have argued renters will be hurt. Jeff Weinberg, the founder and president of Drexel Properties, a property management and investment company in Chicago, said owners of apartment buildings would be forced to choose between forgoing renovations and upgrades or raising rents to make up for the increased tax.

“If you’re taxing an apartment building, ultimately it goes back to the people who are paying the mortgage, which are the residents,” Weinberg said.

Downtown Chicago buildings on a rainy day

Opponents of an increase to the real estate transfer tax say approving it would exacerbate high vacancy rates plaguing downtown buildings, causing a domino effect of higher property taxes for residents.

Tyler Pasciak LaRiviere

However, the University of Chicago analysis estimates the tax increase’s impact on rent would be minimal with “a unit that currently rents for $1,000 per month would be likely to see an average rent increase of less than $1.”

On a Zoom call this week organized by the Neighborhood Building Owners Alliance of Chicago, more than 70 people gathered to hear opponents to the transfer tax tick through reasons a downturn in the commercial real estate market will extend to hurting homeowners and renters too.

High vacancy rates are plaguing downtown buildings still recovering from the pandemic. A 29-story office building in the Loop sold at a 63% discount — the first sale in more than a year. Another 12-story office building sold for nearly 90% less than it was valued at its last sale, Amy Masters, director of government and external affairs for the Building Owners and Managers Association of Chicago, laid out for attendees.

When it comes to property taxes, commercial properties are taxed at two-and-a-half times the rate of residential properties in Cook County, and a downturn in commercial buildings’ value will ultimately cause homeowners’ property taxes to rise, Masters said.

“And so for the rest of us left in the city who have homes, somebody has to pay that levy,” Masters said.

A University of Chicago research brief estimated a 10 to 40% decline in downtown commercial real estates’ valuation could increase average residential property tax bills by as little as $43 annually to as much as $479, respectively.

“The Cook County property tax system is a zero sum game: if the market value of Downtown offices, retail sites, or commercial establishments goes down, then residents and homeowners must cover the resulting tax shortfall,” the brief read.

Opponents also argue the measure will hurt the supply of housing by deterring new construction. To offset a potential slowdown, Phillips recommends the first sale of a new development be exempted from the tax if it occurs within the first 10 years of its construction.

“If you don’t exempt the first sale, if that leads to less housing production overall, and housing becomes more scarce across the city and rents rise more quickly over time as a result — absolutely, that kind of thing is possible,” Phillips said. “That’s a much slower burn.”

Roland said those types of exemptions could be decided after the referendum. But overall, Bring Chicago Home organizers are telling a different story about new construction. In a brief titled “Debunking the Myth On Industry Impact,” they argue that the initiative would actually have a positive impact on new construction, citing housing construction growth or post-pandemic rebounds in cities such as San Francisco, Seattle and New York after an increase in the real estate transfer tax.

Campaign strategy

Bring Chicago Home, built in part by formerly and currently unhoused people, is taking a grassroots, boots-on-the-ground approach to the referendum — similar to the strategy many of the same organizers used to propel Mayor Brandon Johnson into office.

Late last year, Electa Bey, who has experienced homelessness herself and is an organizer with the group Communities United, spoke to WBEZ’s Reset and summed up the pitch to voters.

“Listen, this is for all of us. Homelessness is not something we want. What we need to do is get out there, let everybody know this will not hurt your pocket. This is only going to improve Chicago,” Bey said. “We’re going to do this, guys. You got to go out there, push ‘yes.’ We are tired of seeing our families homeless. It may not be you, it may be somebody you know, somebody you love that may be homeless. We want to stop this.”

Organizers have estimated they’ve reached more than 200,000 Chicagoans through door knocking, phone banking and other events. The group ended 2023 with $733,824 in the bank, and broke the $1 million mark this year. That includes a $200,000 donation from the Chicago Teachers Union and $500,000 from the Michael Reese Health Trust. The group will begin to ramp up digital advertising soon, Roland said.

The messaging is somewhat simple: Push people to sympathize with their unhoused neighbors, with people who are doubled up or couchsurfing, or sleeping at a nearby tent encampment in their neighborhood.

But it’s a strategy that real estate and commercial property owners who oppose the referendum and pursuing, too: Sympathize with the small business on your corner.

“Walk outside your house, walk up and down the street and identify the first five small businesses that you can,” said Baker, with Illinois Realtors. “This isn’t just buildings in the Loop. This is your three-flat on the corner, in every single neighborhood in this city. This is the mixed-use building … This is on the entire community.”

Mayor Brandon Johnson

Chicago Mayor Brandon Johnson listens during a City Council meeting on Jan. 31, 2024. Johnson has made the Bring Chicago Home referendum a priority of his first year in office, but supporters say the effort has really been years in the making among grassroots organizations.

Pat Nabong

Real estate groups are also going on the offensive. Illinois Realtors is dubbing the proposal as a property tax, despite it being a one-time tax enacted when a property is sold — which Roland with Bring Chicago Home called an untruthful “scare tactic.” Illinois Realtors have raised nearly $330,000 since the start of last year, and Baker said in total the group plans to devote about $1 million to opposing the ballot question with mailers and digital ads.

Greg Goldner, the founder of Resolute Public Affairs, is helming Chicago Forward, a 501(c)(4) nonprofit that allows donors to shield their identity while contributing to oppose the tax.

“If Bring Chicago Home is able to craft this as a giveback — you know, unicorns and rainbows — then we’re going to lose. And frankly, that is what they’re trying to do. They’re going to be aggressive, they’re going to be effective, they have a great operation,” Goldner told attendees on the Neighborhood Building Owners Alliance call. “We are starting so late, we’re not trying to replicate it. We can’t.”

Goldner touted a coalition of business, real estate and labor groups working together to oppose the tax by questioning the credibility of the proposal and painting it as an extension of reportedly low approval ratings of Johnson’s tenure in office that will lead the city in the wrong direction.

“Frankly, Mayor Johnson’s numbers are not very good … That’s before anyone’s run a negative ad against him,” Goldner said, later adding: “The mantra of saying people aren’t paying their fair share. Well, every year you get a tax bill, and you’re paying your fair share every single year, not just when there’s a transaction.”

But Roland discounted the effort to tie Bring Chicago Home solely to Johnson, noting this has been a roughly six-year organizing effort.

“BCH has had a long history that predates this mayor,” he said. “Community organizations have been organizing around this effort for far too long. And it’s time for someone to do something about it. And it just so happens to be Mayor Brandon Johnson.”

Some have argued that BCH has failed to appeal to businesses and investors. Berry, with the University of Chicago, said the argument of the wealthy paying their fair share won’t be effective for investors who can take their capital elsewhere rather than pay more.

“The message has to be: Invest in Chicago because our economy is dynamic. There’s gonna be more growth here. We’ve got great workers. We’ve got great amenities,” Berry said. “What I’m not hearing from the mayor is, what’s the argument to the investor?”

Roland noted their message to investors has been that supporting the unhoused population in Chicago is good for business.

“Having a city where every individual [is housed] and people [come] first is good for Chicago. It only makes the city look better. It only makes the city operate more effectively when we can ensure that people are housed right,” he said.

At the end of the day, voters must weigh competing crises.

“What you’ve got is a proposal that may help on one crisis, may hurt the other. We don’t know exactly the magnitudes on either one,” Berry said. “And voters are being asked to make a trade-off between the two of them. It’s really hard.”

Ballot’s fate is up in the air

Even as resources and money pour in, the ballot question’s fate is still up in the air.

A lawsuit filed by real estate, business and construction groups last month asks a Cook County Circuit Court judge to declare the ballot question unconstitutional and strike it from the March ballot. Ballots have already been printed and mailed out with the referendum question, and for now voters should still weigh in, said Max Bever, a spokesman for the Chicago Board of Elections.

“If there is a court decision, that’s a bridge that we’ll cross when we get to it,” Bever said. “Ultimately, when people receive their ballots, they should vote on every contest and race — do their civic duty.”

Both supporters and opponents are plowing forward despite the legal action. With less than six weeks until Election Day, they’re stressing they don’t have time to lose.

“We can’t wait until we hear back from the lawsuit,” Goldner told attendees on the recent call. “If we do hear back in a positive way on the lawsuit, our spending stops, we halt and we hold to understand what the next step is, if there’s going to be an effort in City Council to put it on the November ballot. Again, we’ll stop and assess. But in the meantime, we have to move forward.”

Mariah Woelfel and Tessa Weinberg cover Chicago government and politics.

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