{"id":4889,"date":"2024-03-19T21:58:15","date_gmt":"2024-03-19T21:58:15","guid":{"rendered":"http:\/\/billingsrealtybrokers.paradiseinnovations.com\/index.php\/2024\/03\/19\/chicago-set-to-vote-on-mansion-tax-and-it-could-dent-demand-in-ultrarich-neighborhoods\/"},"modified":"2024-03-19T21:58:15","modified_gmt":"2024-03-19T21:58:15","slug":"chicago-set-to-vote-on-mansion-tax-and-it-could-dent-demand-in-ultrarich-neighborhoods","status":"publish","type":"post","link":"http:\/\/billingsrealtybrokers.paradiseinnovations.com\/index.php\/2024\/03\/19\/chicago-set-to-vote-on-mansion-tax-and-it-could-dent-demand-in-ultrarich-neighborhoods\/","title":{"rendered":"Chicago Set To Vote on \u2018Mansion Tax\u2019\u2014and It Could Dent Demand in Ultrarich Neighborhoods"},"content":{"rendered":"

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Getty Images<\/p>\n

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Chicago voters will weigh in Tuesday on a ballot measure that would fundamentally change the way real estate deals are taxed in the city.<\/p>\n

Dubbed a \u201cmansion tax\u201d by supporters, the measure would raise taxes on property sales above $1 million and cut the tax rate for transfers below that threshold, with the additional revenue targeted at alleviating homelessness.<\/p>\n

Critics of the measure<\/a> say it will mostly affect commercial real estate transactions, potentially raising the tax burden on landlords and small businesses and increasing costs for renters and consumers.<\/p>\n

Supporters of the ballot initiative, formally known as Bring Chicago Home, argue that it is a needed reform to the city\u2019s current flat tax on property transfers. They say it will generate an additional $100 million annually to assist Chicagoans experiencing homelessness.<\/p>\n

Chicago Mayor Brandon Johnson supports the measure which will generate an additional $100 million annually to assist Chicagoans experiencing homelessness.<\/p>\n

Vincent Alban\/Chicago Tribune\/Tribune News Service via Getty Images<\/p>\n

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\u201cI am pleased that Chicagoans will have the opportunity to weigh in on Bring Chicago Home which is intended to provide a dedicated revenue source to combat homelessness,\u201d Chicago Mayor Brandon Johnson<\/strong>, a Democrat who supports the measure, said in a statement earlier this month.<\/p>\n

\u201cI encourage all Chicagoans to make their voices heard by voting in this election,\u201d the mayor added.<\/p>\n

In Los Angeles, a similar tax increase on property transfers of more than $5 million prompted a flurry of megamansion sales before it took effect in April 2023, sharply increasing the cost of buying such properties.<\/p>\n

Among those last-minute deals was the sale of Brad Pitt<\/strong>\u2019s Los Feliz compound for $33 million, while Mark Wahlberg<\/strong> sold his megamansion for $55 million after moving his family to Las Vegas.<\/p>\n

The Los Angeles tax increase, also intended to fund homelessness initiatives, has since been blamed for a lull in the city\u2019s high-end real estate market. It has failed to raise as much new revenue as its supporters projected.<\/p>\n

Under Chicago\u2019s current law, all real estate transactions are taxed at a flat rate of 0.75%, or $3.75 for every $500 of the transaction price. The tax is typically paid by the buyer.<\/p>\n

The new measure would reduce the tax to 0.6% ($3 for every $500) on any portion of the transfer price under $1 million, while taxing any portion between $1 million and $1.5 million at 2% ($10 for every $500).<\/p>\n

An even higher rate of 3%, or $15 for every $500, would apply to any deal valued above $1.5 million, but only for the portion of the deal above that threshold.<\/p>\n

\u201cThe revenue from the increase is to be used for the purpose of addressing homelessness, including providing permanent affordable housing and the services necessary to obtain and maintain permanent housing in the city of Chicago,\u201d the text of the referendum reads.<\/p>\n

Tax threatens to further dent demand in wealthy neighborhoods<\/h2>\n

For the sale of a $5 million home, the new measure would raise the tax burden on the buyer to about $121,000, more than triple the current assessment of $37,500.<\/p>\n

That kind of increase could further dent buyer demand in Chicago\u2019s exclusive Gold Coast neighborhood, where multimillion-dollar listings are already struggling.<\/p>\n

Currently, there are more than 100 listings for homes priced at more than $1 million in the Gold Coast, according to Realtor.com\u00ae<\/a> data.<\/p>\n

According to Bloomberg<\/a>, billionaire hedge funder Ken Griffin<\/strong> has struggled to unload several of his Gold Coast properties since leaving Chicago for Miami in 2022.<\/p>\n

At No. 9 Walton, where in late 2017 Griffin paid $59 million for four floors in the biggest residential real estate deal in Chicago\u2019s history, he put two of the apartments up for sale before pulling the listings.<\/p>\n

Two other Griffin properties, in Park Tower and the Waldorf Astoria, both sold at a $3 million discount from what he originally paid for them. Another of his properties in Park Tower remains listed.<\/p>\n

The Gold Coast slump comes after many wealthy Chicagoans fled the city for locations with lower taxes, less crime, and warmer weather. Those who remained in the city are gravitating toward modern homes in trendier neighborhoods, according to Bloomberg.<\/p>\n

Controversial tax measure draws support, criticism<\/h2>\n

Mayor Johnson and other supporters of the tax reform say it will lower taxes on most home sales in Chicago, while raising additional funds to fight homelessness.<\/p>\n

The mayor\u2019s office says that more than 68,000 people in Chicago are currently experiencing homelessness, and that the city \u201cneeds flexible, dedicated revenue to create long-term, structural solutions to address this challenge.\u201d<\/p>\n

Johnson has cited a University of Chicago analysis<\/a> claiming that the new tax could bring in more than $160 million annually.<\/p>\n

However, a similar tax on property transfers of more than $5 million that Los Angeles passed in 2022 has fallen far short of the $900 million it was expected to raise, bringing in just $142 million.<\/p>\n

Last week, the Chicago Civic Federation, a nonpartisan research organization, issued an analysis<\/a> expressing \u201cserious concerns about both the tax as proposed and the program it is intended to serve as currently articulated.\u201d<\/p>\n

The Civic Federation and other groups point out that the measure does not specify how the funds will be used to address homelessness, as their allocation would be determined by future City Council ordinance.<\/p>\n

The group also raised concerns that the tax change \u201cpresents the risk of negatively impacting the real estate market, especially for a commercial sector already in distress.\u201d<\/p>\n

As well, the business-friendly Tax Foundation argued<\/a> that the proposed tax change \u201cwould affect average Chicagoans\u2014including renters, small business owners, customers, and employees\u2014not just the wealthy.\u201d<\/p>\n

Because commercial properties make up the \u201cvast majority\u201d of properties valued at more than $1 million, the higher brackets would primarily affect businesses and multifamily apartments, the group argued.<\/p>\n

While the transfer tax could reduce buying costs for homes under $1 million, it could also raise rents in apartments and \u201cdo little to help those truly struggling to make ends meet,\u201d the Tax Foundation argued.<\/p>\n

Even if the measure passes on Tuesday\u2019s ballot, it still faces an uncertain future in the courts.<\/p>\n

Earlier this month, the Appellate Court of Illinois vacated an earlier ruling that had struck the measure from the ballot, in response to a lawsuit challenging the wording of the ballot question.<\/p>\n

However, the appellate ruling left open the question of the new measure\u2019s legality, finding only that the state courts could not preemptively interfere in ballots that are part of the legislative process.<\/p>\n

If the measure passes, it will still face a test of constitutionality in state court.<\/p>\n

The post Chicago Set To Vote on \u2018Mansion Tax\u2019\u2014and It Could Dent Demand in Ultrarich Neighborhoods<\/a> appeared first on Real Estate News & Insights | realtor.com\u00ae<\/a>.<\/p>","protected":false},"excerpt":{"rendered":"

Getty Images Chicago voters will weigh in Tuesday on a ballot measure that would fundamentally change the way real estate deals are taxed in the city. Dubbed a \u201cmansion tax\u201d by supporters, the measure would raise taxes on property sales above $1 million and cut the tax rate for transfers below that threshold, with the…Read More→<\/a><\/p>\n","protected":false},"author":0,"featured_media":4890,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[],"class_list":["post-4889","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-uncategorized"],"_links":{"self":[{"href":"http:\/\/billingsrealtybrokers.paradiseinnovations.com\/index.php\/wp-json\/wp\/v2\/posts\/4889","targetHints":{"allow":["GET"]}}],"collection":[{"href":"http:\/\/billingsrealtybrokers.paradiseinnovations.com\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"http:\/\/billingsrealtybrokers.paradiseinnovations.com\/index.php\/wp-json\/wp\/v2\/types\/post"}],"replies":[{"embeddable":true,"href":"http:\/\/billingsrealtybrokers.paradiseinnovations.com\/index.php\/wp-json\/wp\/v2\/comments?post=4889"}],"version-history":[{"count":0,"href":"http:\/\/billingsrealtybrokers.paradiseinnovations.com\/index.php\/wp-json\/wp\/v2\/posts\/4889\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"http:\/\/billingsrealtybrokers.paradiseinnovations.com\/index.php\/wp-json\/wp\/v2\/media\/4890"}],"wp:attachment":[{"href":"http:\/\/billingsrealtybrokers.paradiseinnovations.com\/index.php\/wp-json\/wp\/v2\/media?parent=4889"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"http:\/\/billingsrealtybrokers.paradiseinnovations.com\/index.php\/wp-json\/wp\/v2\/categories?post=4889"},{"taxonomy":"post_tag","embeddable":true,"href":"http:\/\/billingsrealtybrokers.paradiseinnovations.com\/index.php\/wp-json\/wp\/v2\/tags?post=4889"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}