Chicago Property Tax Hike “Likely” Amid Shortfall

Chicago is staring down a projected $1 billion budget gap for next year, its largest in years. A familiar fix, putting real estate first in line to foot the bill, could be back on the table this fall.

Alderman Nicole Lee at a recent budget roundtable said she’s already warning constituents of this fall’s “very, very difficult” negotiations that “will likely include a property tax levy” despite widespread resistance from residents and fellow councilmembers, Crain’s reported.

“I don’t think any politician in their right mind would ever want to be in this position” this close to the 2027 election, said Lee, who voted against Mayor Brandon Johnson’s last budget. “But here we are.”

Her prediction suggests the prospect of a tax hike is more real than the mayor is letting on. Johnson has largely avoided mentioning new taxes in public forums, but the city is quickly running out of alternatives.

The city came out of last year with a $161 million deficit. Chicago’s emergency reserve has run dry, now lower than its 2008 recession nadir. Add to that a $7 billion tab from a new state pension law, the continued failure of Chicago Public Schools to repay a $175 million pension contribution, underwhelming casino revenues and the potential $80 million loss from a state grocery tax that Gov. J.B. Pritzker took out of the 2025 budget, should Chicago not reinstate it.

Johnson has doubled down on his “no-cuts” stance and progressive agenda. He’s tasked EY consultants with finding efficiencies in real estate, procurement, benefits, fines and fees, and he convened a budget working group to deliver ideas by August. But with limited home-rule authority, new city revenue sources often require state approval, slowing or killing off bold ideas.

For developers and property owners, the fiscal crunch collides with another uncertain front: the city’s ambitious affordable housing goals. Without new revenue streams, Johnson’s vows to accelerate affordable unit production and to push for more by-right zoning near transit are less clear. Simmering tensions over aldermanic control of zoning decisions, meanwhile, could escalate as council members attempt to shield their wards from politically unpopular cuts, fees or density increases.

The policy landscape is increasingly unpredictable for real estate just as City Hall may need private investment more than ever. Even moderate proposals are drawing resistance. Some council members have refused to replace the now-expired 1-percent state grocery tax with a city version. Others, like Alderman William Hall, are warning that obstructionism is leaving City Hall with no viable path forward.

“Somebody’s going to have to support something,” as Alderman Nick Sposato put it. “Pick your poison.” Property taxes may be the one most councilmembers fear, but fewer now believe they can avoid it.

— Judah Duke