Chicago Mayor Brandon Johnson is changing the proposal behind one of his hallmark campaign promises to hike the real estate transfer tax on high-end houses and use the money to fight homelessness.
The new plan, which Johnson introduced this week, would create a tiered tax rate system in which the owners of a home that sells for less than $1 million would pay less in transfer taxes than they would now, while residential properties upwards of $1.5 million would see an higher rate increase than in the earlier proposal.
Shifting from a flat-rate increase for sales above $1 million to a three-tiered system was in part to address concerns about burdening property owners of smaller multifamily buildings. The proposal is expected to be introduced in September to the City Council, which could vote in October on whether to place the measure on the March 2024 primary ballot. It would then be up to voters whether to approve the reject the modifications to the tax.
Christened “Bring Chicago Home,” a nod to its purpose to address the needs of the homeless population, the updated plan from Johnson’s team was being shared aldermen starting Tuesday. The yearslong effort suffered a setback after former Mayor Lori Lightfoot walked back a campaign promise to enact such a tax hike, citing issues with the previous version.
That previous proposal called for two levy tiers: 0.75% on home sales below $1 million and 2.65% on properties above $1 million. Currently, there is a 0.75% flat tax on all property sales in Chicago.
Now, the Johnson administration is hoping that breaking home sales into three categories — properties under $1 million, between $1 million and $1.5 million and above $1.5 million — and using a so-called marginal rate will tamp down earlier opposition, according to briefing materials provided to aldermen. A marginal structure means only the additional dollars above that bracket are subject to the higher tax rate, so an owner of a property just one dollar above $1 million would not pay a drastically higher levy than an owner of a $999,999 property, for example.
For properties below $1 million, owners would actually see their transfer taxes go down, as the rate would drop to 0.6%. Homes selling between $1 million to $1.5 million would see the tax rates on their property sales go up to 2%, while houses selling above $1.5 million would see a 3% transfer tax.
Johnson’s team says in the briefing materials that the lower rate on sales below $1 million would affect almost 96% of property sales in Chicago. The tax structure’s current brackets would also be adjusted annually based on inflation.
Should it be approved by the City Council and ultimately voters in a binding referendum, the updated plan is expected to rake in more than $100 million in revenue per year, based on the current real estate market. That’s down from the Bring Chicago Home coalition’s original projection of $160 million.
Carla Johnson, a leader with the Chicago Coalition for the Homeless and a member of the Bring Chicago Home group, said on Tuesday her team gave a sign-off on the updated measure: “This proposal makes a lot of sense.”
“For the last two months, our coalition has worked tirelessly with the Mayor’s team to come to an agreement on a proposal that both generates the revenue needed to address our homelessness crisis and uses that revenue in a smart way: permanent affordable housing with wraparound services,” Johnson said. “We’re excited to work with the administration and city council to introduce a resolution and house as many of our neighbors as possible.”
