Proposal to Hike Taxes on Sales of Million-Dollar Homes to Fight Homelessness Clears Key Hurdle

A push to ask voters during the March election to hike taxes on the sales of properties worth $1 million or more in an effort to fight homelessness in Chicago cleared a key hurdle Wednesday as members of the City Council listened to dozens of impassioned pleas for — and against — the proposal known as Bring Chicago Home.

The public hearing that took place Wednesday represented a crucial step in the complicated process required before voters in the March primary election can decide the fate of the years-long effort to confront the growing number of unhoused Chicagoans.

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The plan would slash the real estate transfer tax paid by Chicagoans who sell residential and commercial properties for less than $1 million by 20%, while hiking taxes on transactions of more than $1 million by as much as 400%.

That would generate approximately $100 million annually, which supporters say would be enough to address the root causes of homelessness by building new permanent housing that offers wraparound services like substance abuse counseling in an effort to combat crime and poverty throughout Chicago.

The public hearing featured emotional testimony from Chicagoans who said they had been, or were, unhoused, or simply struggling to stay in their homes.

An August report from the Chicago Coalition of the Homeless, a member of the coalition that crafted the Bring Chicago Home proposal, found that the number of Chicagoans who do not have a permanent home grew 4% between 2020 and 2021 to 68,440 people.

More than 80% of unhoused Chicagoans are Black or Latino, with Black Chicagoans making up 53% of those who are unhoused in Chicago, according to the coalition.

Precisely 324 days ago, former Mayor Lori Lightfoot blocked a public hearing that would have been the first step in putting the measure to voters during February’s election, which saw her lose her bid for a second term. Johnson not only supports the measure, but he made it a central plank of his campaign platform.

The hearing served as a preview over what promises to be a fierce debate if the measure does make the ballot, with leaders of business and real estate groups warning it would cause the city’s already-struggling commercial real estate market to collapse amid the shift to remote work.

Farzin Parang, executive director of the Building Owners and Managers Association of Chicago, said city officials should not pile “on this additional tax” which he said would make it hard for Chicago to attract new corporations and “compete for investment” against other cities.

Other landlords have warned that the hike will mean rent hikes for those least able to afford them, potentially exacerbating Chicago’s affordable housing crisis.

But April Harris of the Chicago Coalition of the Homeless said that was false.

“These landlords have been raising rent way before Bring Chicago Home,” Harris said.

In his post-City Council news conference, Johnson called the growing number of unhoused Chicagoans an “embarrassment” and said the city must act, regardless of the concerns.

“Of course you’re going to have some push and pull, that’s what democracy does,” Johnson said.

State law does not give the City Council the power to change the transfer tax on its own authority. Without legislation passed by the General Assembly and signed by the governor, the measure needs the support of Chicago voters through a referendum before the City Council can levy the tax and collect the funds.

Under the current law, the buyer of a home worth $300,000 pays the same flat transfer tax as the buyer of a multimillion-dollar mansion or downtown skyscraper — a fact that supporters of the change contend is unfair.  

The seller of a home sold for $500,000 now pays $3,750 in real estate transfer taxes, a 0.75% tax rate. If voters pass the binding referendum and the City Council agrees to levy the tax, that cost would drop to $3,000, or a 0.60% tax rate, officials said.

Nearly 94% of all properties sold in Chicago have a final purchase price of less than $1 million, officials said.

The transfer tax on properties sold for more than $1 million would spike by 233% percent, but apply to just to the amount of the sale greater than $1 million, in an effort to ensure the measure withstands a legal challenge and reduces the incentive for sellers to artificially lower sale prices.

For example, the seller of a property that sells for $1.2 million now pays $9,000 in transfer taxes. Under the revised proposal, that would rise to $10,000, with the higher tax rate of 2% applied to just $200,000 of the sale price.

Using the same mechanism, the transfer tax on properties sold for more than $1.5 million would spike by 400% with the increase only applying to the amount of the sale greater than $1.5 million.

The plan would exempt developments subsidized to be affordable.

The City Council must still vote in the coming weeks to put the question to voters, which ensures that the debate is far from over.

Contact Heather Cherone: @HeatherCherone | (773) 569-1863 | [email protected]

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