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Mayor Brandon Johnson says the new revenues from the “mansion
tax” will be used to tackle the city’s homelessness problem. His
administration said the tax hike could net the city as much as
$163 million a year.
Corey Oliver, chief operations officer of the Community Venture
Investment Corporation, said not every building worth $1 million
is a mansion.
“I think that it is going to create further housing
destabilization, causing rents to go higher and make it so
people who are already living paycheck to paycheck can longer
afford to stay in their apartment,” Oliver said.
A
study released by the Neighborhood Building Owner's Alliance
shows that the proposed “Bring Chicago Home” tax increase is
likely to lead to higher rents. Because the tax increase would
reduce the proceeds from the sale of a building, three out of
four respondents (74%) indicated that the measure would make
them more likely to raise rents.
The same tax was implemented in Los Angeles, where lenders
halted making loans to new multifamily construction projects
because of a new transfer tax. The city saw its luxury real
estate market come to a standstill after the tax went into
effect. As a result, the city is collecting far less than
anticipated.
Oliver said property values have been going down and the tax
will make it worse.
“You got to believe that even buildings that are transacting are
going to transact for thousands and millions of dollars less,
which is going to create a situation where the assessor is going
to have to reassess the value of properties and you are going to
start losing tax dollars across the board,” Oliver said.
Illinois law allows municipalities to restructure their real
estate transfer taxes only if voters approve it in a binding
referendum. The Chicago City Council must approve the measure
before it reaches voters.
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