Appeals Court Rules Chicago Transfer Tax Hike Can Move Ahead

Key Takeaways:

– Voters will decide on March 19 whether to quadruple the tax on real estate purchases over $1.5 million
– Realtors argue that this tax increase is a secret tax and rent hike
– The measure was challenged in court by real estate groups but has been allowed to proceed to the ballot
– The tax would create a three-tiered rate system for different property price ranges
– Mayor Brandon Johnson supports the measure, which was nearly blocked by a circuit court judge
– The appellate court reversed the lower court ruling, allowing the measure to move forward
– Campaigns are now working to educate voters on the potential impacts of the tax increase
– The tax hike is seen as harmful to homeowners, renters, union workers, and businesses by opponents

inman:

Voters are set to decide on March 19 whether they want to quadruple the tax buyers pay on real estate purchases above $1.5 million. Realtors say it amounts to a secret tax and rent hike.

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The Illinois Appellate Court has ruled that a proposal asking voters to hike the tax buyers pay on real estate transactions over $1 million will be on the ballot in two weeks, reversing a lower court ruling last month that would have kept the question off the ballot.

Realtors and groups representing the city’s commercial real estate sector challenged the measure in court, saying it would amount to a hidden property tax hike that would drive up the cost of living for everyone in the city.

Currently, in Chicago, buyers of residential and commercial real estate pay a flat tax of 0.75 percent on all purchases, regardless of price. The measure would create a three-tiered rate system moving forward.

For properties that cost less than $1 million, buyers would see a slight tax cut, to 0.6 percent. For properties between $1 million and $1.5 million, the rate would increase to 2 percent, and for all properties above that, the tax would be 3 percent of the purchase price.

The measure was a key policy initiative of Mayor Brandon Johnson, who took office last year. The initiative was nearly upended last month when a circuit court judge ruled in favor of the real estate groups challenging the measure.

The judge in that case didn’t elaborate on her reasons for her ruling, which apparently left the appellate court with its own questions.

“Like the parties, we are left guessing as to the basis for the circuit court’s ruling because the lower court gave no reasons for its ruling,” Presiding Justice Raymond Mitchell wrote in his opinion reversing the circuit court ruling. “Courts do not, and cannot, interfere with the legislative process.”

The opinion sets up a final sprint for campaigns that only formally began when the City Council voted in November to put the measure on the March primary ballot. 

“As we’ve said since the trial court’s decision, this harmful measure remains on the ballot and we haven’t stopped trying to educate voters,” said Jeff Baker, CEO of Illinois Realtors. “Those who are suffering from housing instability deserve a plan.”

“We are disappointed in the outcome of this case, but felt it was important to challenge this misleading and manipulative referendum question,” said Farzin Parang, executive director of the Building Owners and Managers Association of Chicago, which led the legal challenge.

“This massive tax increase would hurt homeowners, renters, union workers, and businesses throughout the neighborhoods,” Parang said. “Even worse, a yes vote on this referendum is a vote to deliver huge blank checks to the City with no plan for how millions will be accountably spent.”

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Property Chomp's Take:

The upcoming vote on March 19 in Chicago has sparked a heated debate among voters and real estate professionals alike. The proposed measure seeks to quadruple the tax that buyers pay on real estate transactions above $1.5 million, a move that has been met with strong opposition.

Realtors argue that this tax increase would essentially act as a hidden property tax hike, ultimately driving up the cost of living for everyone in the city. Currently, buyers in Chicago pay a flat tax of 0.75 percent on all real estate purchases, regardless of the price. The new measure would introduce a three-tiered rate system, with rates ranging from 0.6 percent for properties under $1 million to 3 percent for properties above $1.5 million.

Mayor Brandon Johnson, who introduced the initiative, sees it as a necessary step to address housing instability in the city. However, opponents, including groups representing the commercial real estate sector, argue that this tax hike would have far-reaching negative consequences.

The Illinois Appellate Court's recent ruling to allow the measure to proceed to the ballot has only heightened tensions surrounding the issue. Both sides are now gearing up for a final push to sway voters before the upcoming vote.

Despite the challenges, real estate groups remain committed to educating voters about the potential impact of this tax hike. They argue that a yes vote on the referendum would not only hurt homeowners, renters, and businesses but also fail to provide a clear plan for how the additional revenue would be allocated.

As the debate rages on, it is clear that the outcome of this vote will have significant implications for the city of Chicago and its residents. Stay tuned for updates on this developing story.

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