Chicago Property Transfer Tax Hike Rejected by Voters

After nearly a week of counting the results of the March 19 election, the Chicago Board of Elections has certified that voters in the city have rejected Mayor Brandon Johnson’s plan to raise one-time real estate transfer taxes on transactions above $1M.

About 53% of these who voted rejected the measure, which was known as “Bring Chicago Home.”

Under Johnson’s plan, the tax for transactions of more than $1M would have been increased incrementally, with properties between $1M and $1.5M incurring a tax increase of $10 per every $500, and properties valued at more than $1.5M facing charges of $15 for every $500.

Proponents of the measure were hoping it would raise more than $100M a year to combat homelessness in Chicago. Opponents said the transfer tax increase would stymie any recovery of Chicago’s commercial real estate market.

Earlier this month, the Appellate Court of Illinois overturned a ruling last month by a Cook County judge who had invalidated the March 19 city referendum on Bring Chicago Home.

Because the proposal also would have lowered transfer taxes on trades below $1M, a local chapter of the Building Owners and Managers Association (BOMA) filed a lawsuit challenging the ballot question, arguing that it would mislead voters by raising and lowering the transfer tax at the same time.

Opponents of the property transfer tax increase were able to cite the experience of Measure ULA, a transfer tax hike that was approved by voters in Los Angeles in November 2022, as an example of a tax increase that failed to deliver anticipated results.

Measure ULA imposed a 4% tax on property transfers with a gross value ranging from $5 million to $10 million, while a 5.5% tax applies to transfers of properties exceeding $10 million in gross value.

After it was enacted in April of last year, Measure ULA fell far short of generating a windfall of new tax revenue that had been projected by proponents of the tax, revenue that was earmarked to support a homelessness initiative known as the House LA Fund. Instead, transaction volume plummeted in L.A.

A year-end report from USC’ Gould School of Law detailed the discrepancy between the expectations and the results generated by Measure ULA.

“Measure ULA’s was expected to generate $600M to $1.1B annually, earmarked for subsidized housing development, property acquisitions and refurbishments, rent assistance, and other programs addressing housing and homelessness issues,” the report said. The USC report noted that Mayor Karen Bass had dedicated $1.3B to address homelessness in her budget plan for Los Angeles in part based on the estimates for new revenue from Measure ULA. “However, after the bill went into effect, the projected revenue from Measure ULA has been significantly lower, expected to be only $150 million,” the USC report said. “Out of this amount, $62 million is earmarked for property acquisition and rehabilitation, $25 million is designated for eviction defense, and $20 million is set aside for providing short-term emergency assistance to tenants. “The shortfall has raised concerns about the initiative’s efficacy and its impact on the real estate market,” the report said.