Bring Chicago Home
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An article in the Fall 2022 Rogers Park Builder lays out the proposal to increase Chicago’s real estate transfer tax on transactions of $1 million or higher. This proposed legislation is known as the Bring Chicago Home Ordinance. More cynically, many of its promoters like to call it the millionaire tax.
Like a lot of “progressive” legislative initiatives, the recently concluded 2023 municipal elections provided new impetus to get these proposals moving now that the new Mayor and a larger contingent of the Chicago City Council espouses progressive values.
The latest iteration of this proposed legislation would graduate the amount of the transfer tax based by total sales amount.
The Bring Chicago Home initiative appears to fit right in with the new Mayor’s stated goal of raising an additional $800 million in taxes to pay for a wide range of programs designed to reduce inequities and improve the plight of the disadvantaged across Chicago. While these goals are laudable, the Devil is always in the details. Bring Chicago Home is no exception to this rule.
The latest iteration of this proposed legislation would graduate the amount of the transfer tax based by total sales amount. For property sales under $1 million, the transfer tax would actually be reduced from the current 0.75% to 0.60%. For property sales between $1 million and $1.5 million, this percentage would increase to 2%. Property sales above $1.5 million would see an increase in the transfer tax to 3%, even higher than the originally proposed 2.65% rate for sales above $1 million.
Proponents of the legislation claim that any additional revenues from this new tax would directly fund programs to help the homeless by providing direct housing assistance and by increasing the supply of transitional and permanent housing for formerly homeless individuals and families.
But, as outlined in the Fall 2022 article, there are a number of problems with this proposed new tax.
In a saner world, consideration would be given to the amount of taxation Chicago residents already pay and the dubious level of services received in exchange for taxes levied against us. In a saner world, the rationale behind a specific tax against one group of people and entities (those who own properties worth $1 million or more) to the benefit of another (homeless individuals and families) would be considered in all its ethical complexity. In a saner world, some consideration would be given to how transfer taxes in Chicago compare to transfer taxes in other large US cities with which Chicago competes for both talent and jobs.
The Bring Chicago Home legislation appears to be racing toward passage.
We do not live in a saner world.
The Bring Chicago Home legislation appears to be racing toward passage by a Mayor and a City Council that seem oblivious to any of these other concerns, or the wider implications of constantly increasing taxation against constantly declining public services. Look no further than our decrepit public transportation, failing public schools, inefficient government rife with corruption and crumbling infrastructure as proof that we are not getting good value for the taxes we pay.
There is also a very fundamental question about piling additional taxes on a segment of the local economy that is currently facing unprecedented challenges from the COVID pandemic and the fall-out from the George Floyd riots that occurred in the summer of 2020.
It is no secret that many office buildings in the Loop are sitting half empty and that only about half of all office workers in downtown Chicago are currently making the commute downtown compared to the number that did so prior to the pandemic. As office and retail occupancies have cratered, values have tumbled as well, leaving downtown office buildings, retail establishments and restaurant and entertainment venues reeling. If iconic properties like Water Tower Place can be given back to their lenders, then it should be quite obvious that the entire downtown real estate market is in very serious trouble.
So why, at a time of such distress, would the city seriously consider raising transfer taxes by a factor of three? Passing the Bring Chicago Home Ordinance now would only increase the pain to an essential sector of the local economy that is still struggling to recover from the unprecedented challenges and difficulties of the past few years.
It is also worth noting that there are quite a lot of properties in Chicago that are valued at over $1 million, and that you do not have to be a millionaire to own one. Most of these properties are not office towers in downtown Chicago. In fact, just about any small apartment building on the North Side of Chicago – some with as few as two or three units – can easily be valued at $1 million or more. Add a few more units, and most apartment properties anywhere in the city can easily fetch $1 million or more. For the countless small investors whose life savings may be wrapped up in a single building, tripling the transfer tax becomes a real financial burden that many small investors should not be forced to pay.
If the intent of the far-left of the political spectrum is to make the “wealthy” pay for the “poor,” then this is not the tax to make that happen. For many small investors, this transfer tax is simply a cash-grab that unfairly targets them as privileged and, therefore, somehow responsible for the well-being of those less fortunate than themselves.
I guess this is the City playing Robin Hood – taking from the rich and giving to, well… basically, themselves.
Why, at a time of such distress, would the city seriously consider raising transfer taxes by a factor of three?
In response to this push for an increased transfer tax, the NBOA and a host of ten other real estate organizations have banded together to ask the new Mayor for a seat at the table as these discussions and proposals move forward. In a June 7, 2023 letter to Mayor Brandon Johnson, these eleven organizations have requested a face-to-face meeting with the Mayor and his staff on this issue. The letter states:
“Given the importance of this issue, we request that the voices of local business groups, including that of our coalition, be included in any discussions or decisions related to the Bring Chicago Home initiative. Our organizations are deeply invested in the success of our city. We believe that by working collaboratively, we can find innovative and sustainable solutions that support those experiencing homelessness while ensuring the continued growth and prosperity of Chicago.”
James Cappleman, former 46th Ward Alderperson, has also become involved in this issue through a new initiative – the Chicago Solutions Forum – a non-profit organization intended to get people from various backgrounds to collaborate on difficult issues and find common ground solutions. Homelessness is certainly such an issue, and finding permanent solutions to this problem is an important one for Chicago and across the country. Mr. Cappleman expressed frustration at how polarizing the proposed Bring Chicago Home Ordinance has become, and how little attention has been paid to the “possible negative repercussions” it could bring.
Mr. Cappleman also notes the dire straits of the downtown real estate market at the current time and questions the wisdom of increasing taxes at a time when the industry is struggling to recover from unprecedented upheavals in the real estate industry.
Worryingly, the new Mayor has already shown himself to be unwilling to include business groups in such decision-making as the future of pension funding. As of this time, the June 7 letter has not been answered.
If Johnson is sincere in his desire to be the Mayor for all Chicago, and not just those who elected him, he will reach out to those interests upon which the city’s future depends, regardless of whether those interests supported him in his race to become Mayor. By failing to do so, he increases the changes that these individuals and companies despair of having a voice in the city’s future, and simply take their money and their energies to greener pastures somewhere else. This is a risk that the Mayor should not take. Everyone loses if this is the outcome that awaits us.
