Battle Over Proposed Transfer Tax Hike Intensifies

Mayor Brandon Johnson’s proposal to raise Chicago’s transfer tax rate on high-end real estate deals is polarizing its supporters and opponents into protesting factions.

Supporters of the Bring Chicago Home ordinance, which seeks to increase the transfer tax on property sales of $1 million and higher to help fund anti-homelessness initiatives, began protesting in front of the Chicago Association of Realtors’ Michigan Avenue offices Thursday, Crain’s reported.

They planned to deliver a “cease and desist” letter, demanding that the real estate associations’ lobbying against the proposal comes to an end. The activists aim to shed light on the opposition’s financial backing and garner support for the tax plan.

At the same time, Illinois Realtors is distributing a report to elected officials warning of the fragility of Chicago’s real estate market due to “short-sighted policies.” While the report doesn’t explicitly mention Bring Chicago Home, it urges officials to understand the potential impacts of new public policies.

The association previously initiated a postcard campaign aimed at property owners in affluent neighborhoods that would be most impacted by the ordinance.

The current transfer tax — a one time fee charged upon purchasing a property — is at a rate of 0.75 percent regardless of sale price. The revised Bring Chicago Home proposal would raise the rate to 2 percent for the portion of any property’s purchase price above $1 million and 3 percent for any portion of a transaction greater than $1.5 million, while reducing it to 0.6 percent for deals under $1 million.

If approved by the Chicago City Council, a referendum on this tax increase will appear on city ballots in March. The Johnson administration plans to utilize the extra tax revenue to fund affordable housing projects and curb homelessness, if enacted.

Proponents argue that the tax increase will primarily affect wealthier property sellers and generate much-needed funds for Chicago’s affordable housing needs. Opponents, on the other hand, attest that it would wreak havoc on the city’s real estate market by dissuading buyers from investing in Chicago. Plus, many landlords have already stated that they would raise rents to offset the added tax burden.

The debate continues to unfold as the city grapples with a growing homeless population of roughly 68,000 — including people who are living with friends or family in overcrowded housing — and a 16 percent drop in home sales compared to pre-pandemic years, the publication reported.

— Quinn Donoghue