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The Illinois Association of Realtors plans to spend $1 million fighting a referendum that would increase the tax buyers pay on residential and commercial real estate in Chicago if voters approve it during a March election.
Saying the real estate transfer tax hike would hurt the city rather than help it, a representative of the group said the Illinois Realtors were preparing a short but effective campaign to defeat the measure.
“This is a real estate tax on everybody,” Illinois Realtors CEO Jeff Baker told Inman on Wednesday. “Don’t be fooled by some of the ads and some of the language you see.”
Crain’s Chicago Business first reported on the group’s upcoming campaign against the tax increase.
The proposal would create a tiered transfer tax that gets larger for properties valued over $1.5 million. The city currently has a flat tax of 0.75 percent for all properties, regardless of their price.
If passed, the city could raise the tax to 3 percent on properties valued over $1.5 million and 2 percent for sales between $1 million and $1.5 million. Buyers of properties that cost less than $1 million would actually see a decrease in the amount of transfer taxes they pay, to 0.6 percent.
Someone buying a $2 million property would pay $15,000 under the existing structure. That would increase to $60,000 under the new tax.
Meanwhile, buyers who are purchasing the median home in Chicago — $279,118, according to Zillow — would see their transfer tax decrease from $2,093 to $1,674.
The measure is expected to overwhelmingly impact commercial real estate, which commonly involves sales of properties that are worth far more than $1 million. If passed, the tax hike would be the latest headwind for the commercial real estate industry, which is already struggling amid high interest rates and high office vacancy rates.
Baker said falling commercial real estate values will force the city to shift the property tax burden onto residential real estate. He said drastically increasing the transfer tax will cause commercial values to fall further, forcing the city to hike property taxes for homeowners should the measure pass.
“Even if it’s a rate reduction for some properties, it’s going to be an overall rate increase on a lot of property that you wouldn’t naturally think of,” Baker said. “This is a real estate tax that’s going to hit a lot of people. It’s going to increase property taxes.”
The Illinois Realtors’ campaign will involve direct mailers, fieldwork, digital ads and commercials on streaming services, Baker said. Those ads will start rolling out within the next week.
The state-level group is taking the lead in the campaign, the Chicago Association of Realtors told Inman.
“Our focus now at the Chicago Association of Realtors is to ensure that our members are informed on the impacts of the proposed increased transfer tax, have the tools necessary to share that information with their clients, and get out and vote in March,” CAR CEO Michelle Mills Clement said.
The Realtor campaign is actually more expensive than that of the measure’s supporters, who had raised about $700,000 as of mid-January, Crain’s reported.
The campaign’s supporters estimate the tax hike would bring in $100 million annually. The money would be used for unspecified affordable housing projects.
The group says that recent polling shows the referendum is favorable with 72 percent of voters in support. The campaign has been endorsed by a collection of the region’s powerful union groups.
