Mayor Johnson’s Real Estate Transfer Tax Will Make Housing Instability Worse
Letter to the Editor, Chicago Sun-Times | February 17, 2024
In response to the recent letter to the editor on the transfer tax referendum, I offer an alternative perspective from 19 years of providing affordable housing across Chicago’s South and West sides. I emphasize private ownership, especially naturally occurring affordable housing, or NOAH, at the community level. (NOAH properties are affordable, but there are no federal subsidies).
“Big A” affordable housing, which would be shielded from the transfer tax, relies on substantial federal funding. But NOAH developers, who are crucial contributors to Chicago’s affordable housing stock, face increased financial strain with the proposed transfer tax.
I argue the transfer tax could harm vulnerable communities. Operational challenges, like rising material costs and the tax’s impact on struggling property owners, could reduce the number of affordable units, raising rents.
Second, the tax might destabilize communities by inducing unintended consequences. Rent hikes could push stable, paycheck-to-paycheck individuals into housing instability, potentially increasing the need for subsidies and worsening homelessness.
Third, the economic impact could be significant. The tax aims to generate funds, but may result in fewer units and a focus on extremely low-income voucher holders. This shift could harm small businesses, particularly in communities where Black, Indigenous and people of color live, due to decreased expendable income.
Despite good intentions, the transfer tax may not be the solution. Regarding transfer tax specifics:
- The idea that the tax targets only the ultra-wealthy is debunked; small family businesses using real estate for stability will also be impacted.
- While 93% of real estate transactions might see a tax decrease, the implications for the city budget remain unclear, potentially affecting homeless initiatives.
- The estimated $100 million annual revenue is questionable. Comparisons with Los Angeles, where a similar tax fell short due to legal challenges and a slow real estate market, cast doubt on Chicago’s anticipated revenue. Legal hurdles and market conditions may undermine reaching the projected amount.
- The claim that the transfer tax won’t directly increase property taxes is challenged. A density reduction may indirectly lead to higher property taxes for all owners.
A nuanced understanding of the proposed transfer tax reveals potential drawbacks requiring further consideration for a sustainable approach to affordable housing in Chicago.
Corey Oliver, CEO, Strength In Management LLC