Chicago could be hit with a controversial new real estate transfer tax increase on properties above $1 million to build permanent supportive housing units for the homeless.
But the proposal could place an additional burden on an already-struggling real estate climate in the Windy City, some realtor groups fear.
The proposal, known as the Bring Chicago Home plan, was discussed at length during a subject hearing by the city’s housing committee Thursday afternoon. The tax rate would jump from 0.75% to 2.65%.
The so-called “mansion tax,” proponents claim, could bring in upward of $163 million annually. In a January 2023 point-in-time count, the city estimated it had more than 6,100 homeless people.
“The money generated by the tax would be legally dedicated to programs that alleviate homelessness, including assistance for children, veterans, and women recovering from domestic violence,” the campaign website reads.
No votes were taken Thursday, as the meeting was more of a symbolic gesture to bring the initiative back into the spotlight. Former Chicago Mayor Lori Lightfoot sidelined the proposal last year because most of the council members failed to attend the designated discussion meeting for it, NBC Chicago reported.
Chicago isn’t the only liberal city making such considerations. Los Angeles voters imposed a similar measure this year, also known as a “mansion tax,” enacting a 4% tax rate on property sales above $5 million.
Chicago’s newly elected mayor, Brandon Johnson — who was backed by the Democratic Socialists of America during his campaign — expressed support for the proposal.
“My administration is committed to Bring Chicago Home, and to building consensus around providing affordable housing to combat homelessness in our city,” Johnson tweeted Thursday.
City officials heard testimonies from housing advocates, city employees and realtor groups during the three-hour meeting. One of those groups, which included the Chicago Association of Realtors, expressed concern the new tax would further burden Chicago’s real estate and nearly triple some property transfer taxes up to $30,000.
“Market studies suggest that Chicago’s office buildings have lost 50% of their value, and we estimate that almost half of Chicago’s office buildings are in some state of financial distress,” spokesperson Amy Masters said during the meeting.
According to the Illinois Realtors group, a trade association representing the real estate industry, housing sales were down year-over-year by over 25% in June, and the supply of homes is down over 30% versus 2022.
“Adding to the concern is the increasing number of commercial vacancies and office building defaults,” the group said Thursday in a statement. “Just here in Chicago the office vacancy rate has almost doubled since before the pandemic began.”
Chicago’s City Council will have to bring a resolution to a vote later this year to get the mansion tax on the 2024 ballot as a referendum. The city has taken criticism from business leaders like Ken Griffin, who moved his hedge fund Citadel to Miami in 2022.