socastcmsRssStartBy Cole Lauterbach | Illinois News NetworksocastcmsRssEnd
Some municipalities have approved, or are considering, charging a “transfer tax” on homes of a certain value.
A proponent of the additional fee is on incoming Gov. J.B. Pritzker’s transition committee, but there’s no plan to implement a statewide tax. Supporters say it generates revenue to fund needed programs, but the real estate community says it’s likely to backfire, costing renters more and ultimately depressing property values.
The city of Evanston now charges a <a href="https://www.chicagobusiness.com/residential-real-estate/evanston-passes-mansion-tax">higher transfer tax</a>, sometimes referred to as an “exit tax,” on property sold for more than $1.5 million. Properties that sell for more than $1.5 million come with a transfer tax of $5 per $1,000 of sale price. A referendum voters approved raises that to $7 per $1,000 of sale price. For properties that sell for more than $5 million, the transfer tax will now be $9 per $1,000 of sale price.
The seller of a $2 million home, storefront, or apartment complex, for instance, would be charged an additional $3,500 on top of the other taxes and fees already in place.
Chicago aldermen have tried to do the same, but Mayor Rahm Emanuel shot down the proposal, saying the transfer tax would “treat homeowners like an ATM machine.”
Marisa Novara, vice president of the Metropolitan Planning Council, said the money is needed more than ever in a time of decreasing federal help for programs to fight homelessness.
“We are in an era of declining federal resources for things like affordable housing,” she said. “This is a way that a city can take action locally.”
Daniel Kay Hertz, research director with the Center for Budget and Tax Accountability, said this type of tax could produce a good amount of revenue for cities like Evanston, Chicago, or any of the <a href="https://www.iml.org/homerule-municipalities">215 home-rule municipalities</a> in Illinois.
“That’s a power that they already have,” he said. “[Middle-class homeowners] either aren’t going to feel anything from this or they’re actually going to have their taxes lowered, which is more likely.”
A home-rule municipality would have to make the change with approval from voters via a referendum. Voters in Evanston approved the increased transfer tax at the ballot box earlier this month.
Ralph Martire, executive director of the CBTA, sits on incoming governor J.B. Pritzker’s transition committee. Hertz said he hasn’t heard of any plans for a statewide progressive transfer tax. Pritzker’s campaign didn’t respond to a request for comment.
Critics say the tax would hurt businesses and rental property owners, potentially depressing property values once investors start looking to areas without the higher fees.
“There’s nothing progressive about this tax. It will hit everyone, not just property investors,” Jon Broadbooks, vice president of Illinois Realtors, said. “If you do the math, an investor in even a modest apartment building might have to come up with tens of thousands of dollars more to close a transaction. For a seller, that means increasing the price of a property to account for the new taxes. For a buyer, that would mean raising rents to cover the increased costs of purchasing the property.”