At the end of Chicagoans’ March primary ballot — all the way past candidates for president, Congress and Cook County State’s Attorney — will be a citywide policy question that could have big implications for the city’s ability to fund homelessness programming.
It boils down to this: Do you want to allow the Chicago City Council to raise a tax when properties valued above $1 million are sold, and lower it for properties sold under that amount? Revenue would be used to fund homelessness prevention, but critics say details are sparse.
The policy is a longtime priority of grassroots organizers, backed by the council’s progressive wing and mayor, but is facing stiff opposition from real estate and commercial property owners. (Read our in-depth examination of the campaigns for and against.)
With early voting underway and Election Day fast approaching, here’s an overview of what you should know before filling out your ballot.
How will my taxes change?
They won’t — unless you’re buying property. Chicago’s real estate transfer tax is currently a flat tax rate that is assessed at the time of sale. All property — regardless of the sale price — is subject to a 0.75% real estate transfer tax, or $3.75 for every $500 of transfer price.
The measure slated to appear on the March ballot would change that tax to a tiered, marginal one, with the tax rate based on a property’s value.
There would be three tiers. Under the proposal, 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 will this question look like on my ballot?
You’ll know it’s time to vote on the real estate transfer tax when you get to this lengthy question on your March ballot. It will read:
Shall the City of Chicago impose:
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
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
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.
What will the money be used for?
Revenue generated from the tax increase (the difference between revenue generated under the increased rate and the current rate) will be devoted to preventing homelessness.
Supporters estimate at least $100 million annually be generated from the tax increase. A University of Chicago analysis pinned the additional revenue at approximately $160 million annually on average — although how much is brought in each year will ultimately be influenced by the state of the real estate market.
Supporters of the measure say the city needs a dedicated funding source to address the rising numbers of people experiencing homelessness in Chicago.
The Chicago Coalition for the Homeless, which supports the measure, found there was a sharp increase in 2021 of the number of people living on streets and in shelters. An estimated 68,440 people were unhoused at the time, which includes those who are staying on the street and people who are living “doubled up,” such as temporarily staying with others.
That data, which was the most recently available, doesn’t include the more than 35,000 asylum-seekers who have arrived in Chicago since August 2022.
Revenue would be used to maintain and create permanent, affordable housing and wraparound services. The Bring Chicago Home campaign says that could take the form of rental subsidies and capital funding, or mental health services, substance use counseling and job training.
If voters approve the ballot question, it would grant the City Council the authority to enact the tax change by passing an ordinance creating a dedicated fund and specifying how the money would be allocated.
But the ballot language itself is broad. It does not lay out specific areas that would receive funding or what percentage of the revenue would be dedicated to each. That’s been a point of criticism for opponents, who argue there isn’t transparency about how the tax revenue would be spent. And they argue the city hasn’t been good stewards of the funds it’s already received to prevent homelessness.
An Illinois Answers investigation last year found that 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.
How will this impact Chicago’s real estate market?
Mayor Brandon Johnson’s administration has said 96% of property sales fall below the $1 million threshold, meaning most Chicagoans would experience this as a tax cut.
The revenue will largely come from high-end property sales, like commercial real estate and multifamily developments. While the tax increase will impact the construction and sale of property across the city, opponents argue it will especially harm downtown’s recovery at a time when large office building sales have slowed and vacancy rates still persist. They argue that could lead to a downturn in commercial real estate property, which will in turn raise property taxes for residential homeowners.
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.
Will this affect me if I’m a renter?
This has been a frequent point of contention in the campaign, with supporters arguing the tax would not trickle down to renters, because it would mostly affect commercial property owners. Opponents argue owners of apartment buildings would be forced to raise rents to make up for the increased tax, and that the tax would deter the construction of new housing across the city.
However, a 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.”
Should I still be voting on the ballot measure even though there’s a pending lawsuit?
Yes. Early voters and vote-by-mail residents will see this question appear on their ballot and should vote on it. The next court hearing for the lawsuit is on Feb. 14 (Valentine’s Day!), and the Chicago Board of Elections — a defendant in the lawsuit — is moving forward business as usual. If a judge rules the ballot question should be stricken, then “those results [on the referendum] would not be public and there ultimately would not be a contest,” Elections spokesperson Max Bever said.
When would the tax changes go into effect?
There’s still a long way to go if this measure gets approved by voters. 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 craft and 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.
Tessa Weinberg and Mariah Woelfel cover Chicago government and politics at WBEZ.