Kiss the ring: The Ballad of Brandon Johnson

Brandon Johnson isn’t the mayor Chicago real estate wanted, but he’s the one they got.

Johnson, a progressive former Cook County commissioner and Chicago Teachers Union organizer, hasn’t backed down from policy proposals — including more than tripling the transfer tax on property sales of $1 million or more — that alarmed brokers and investors. But through early meetings and transition team appointments, Johnson has assured real estate pros that they’ll have a seat at the table and some common goals.

“We might differ in how to get there, but we want to start from that place where we agree,” Illinois Realtors lobbyist Gideon Blustein said.

The transfer tax proposal is at the forefront of real estate issues the industry will be keeping a close eye on as it prepares to check and balance Johnson’s ambitions over the next four years.

Tax the rich

Bring Chicago Home, an initiative to fund housing and services for the unhoused by hiking the real estate transfer property sales of $1 million or more, would generate $163 million annually, advocates say. Industry heavyweights are unified against the idea.

Multifamily players say about a fifth of that new revenue, if the tax is imposed, would come from apartment sales, negatively impacting small business owners, landlords and, in the long term, renters. The additional transfer tax of 1.9 percent of the sale price would come on top of the 0.75 percent tax already in place for deals meeting the threshold.

“If someone has to pay a higher price because of a transfer tax, where does it come from? Each additional tax adds more pressure to increase rents,” Neighborhood Building Owners Alliance member Michael Chioros said.

Johnson has signaled both his commitment to the proposal and to hearing the other side by appointing advocates and opponents of it to his transition team. Julie Dworkin, the director of policy at Bring Chicago Home backer Chicago Coalition for the Homeless, is a housing subcommittee co-chair, while the Chicagoland Apartment Association’s Michael Mini is also a member.

So far, there isn’t much clarity on how the industry might fight back against the proposal.

Downtown debate

What’s also uncertain is Johnson’s support for a big real estate spending initiative from his predecessor, Lori Lightfoot, that could turn underutilized office space in the city’s historic financial corridor into 1,650 apartments. It would make a third of them affordable by using more than $300 million in property tax subsidies in total for all the proposals.

In her final days in office, Lightfoot expanded her “LaSalle Street Reimagined” initiative to advance a total of five finalists. The groups’ proposals total $890 million in development costs, with more than 600 of the apartments set to be marketed as affordable.

Johnson has made clear affordable housing is top of mind as he takes office, and he’s expressed support for using tax increment financing to fund it.

“Rent in Chicago continues to go up year after year after year, while the development of both affordable and market-rate housing stagnates,” he said in his inauguration speech, also nodding to the Loop’s challenges. “Our downtown commercial corridors still bear the scars of the pandemic with higher vacancy rates and lower foot traffic.”

But he’s demurred regarding giving away tax dollars to certain areas of the city he deems able to lure new development without.

“We don’t need to give out tax dollars if it only benefits the city’s most well-off,” Johnson said during the campaign.

Developers believe public assistance is essential to bringing housing to the Loop. “Without this TIF program we don’t believe there’s going to be any residential units added to LaSalle Street in the near term,” AmTrust Realty Corp.’s Patrick Kearney, the lead of one of the conversions under city consideration, told officials in March.

Developer scaffolding 

Johnson wasn’t seen as an ally of developers during the runup to the election, but some builders have been heartened by his support for their projects.

Sterling Bay CEO Andy Gloor joined several of the prolific Chicago developer’s executives in backing Johnson’s runoff opponent Paul Vallas. Gloor since changed his tune, saying he’s confident the new mayor will help get his firm’s $6 billion Lincoln Yards megadevelopment to the finish line.

“I can’t say enough just of my initial meetings with Brandon and his team,” Gloor told Bloomberg ahead of Johnson’s inauguration. “I’m super encouraged that he understands the importance of these large developments for Chicago.”

Johnson signaled that Gloor’s confidence was warranted in his inaugural address. “We’ll create a Chicago where the big development projects get done,” Johnson said.

While still a candidate, Johnson expressed support for another major development: Bob Dunn’s One Central project. The plan from Dunn’s company, Landmark Development, calls for 9,000 residential units and 11 million square feet of office and retail space to be built on top of train tracks across from Soldier Field. Johnson called it a “pretty promising idea.”

Developers also snagged spots on Johnson’s transition team. Keiana Barrett, Sterling Bay’s director of diversity and strategic development, was named to Johnson’s subcommittee on economic vitality and equity.

The Rev. Byron Brazier was named to the same subcommittee, indicating that Johnson wants to hitch his wagon to the $895 million Woodlawn Central megaproject. Brazier is pastor at the Apostolic Church of God, which will retain ownership of the 18-acre South Side development site; his son, J. Byron Brazier, is the lead of the project, which is set to feature workforce housing, a hotel and minority-owned businesses.

To the real estate lobby, Johnson’s early maneuvers indicate that he’s at least willing to listen. Either way, those invested in the city have little choice but to hope Johnson is good for Chicago, as David Goss, co-founder of multifamily brokerage Interra Realty, said in the wake of the election after loudly supporting Vallas on social media.

“Our lives and businesses are here. Be hopeful. Wish Mayor-elect Johnson nothing but success. Don’t panic, the world is not ending,” Goss wrote.