Chicago transfer taxes could more than triple on many real estate sales if a major independent, nonprofit, nonpartisan, civic organization gets it way. The Metropolitan Planning Council (MPC) is proposing a graduated rate of up to 3.3% for commercial and residential property worth more than $5 million. The Council says the tax could raise $150 million a year to fight homelessness.
Plan Revamps Transfer Taxes
The MPC proposal seeks to expand the city’s current transfer tax, which is an across-the-board levy of $5.25 per $500 of property value, or just over 1%. It would lower the tax to .35% on the first $500,000 of a sales price and leave it at 1% on properties worth up to $1 million. The tax rate would hit 2.5% on values of $1 million to $5 million. Any sales price above $5 million would face a tax of 3.3%. For example; a seller of a $100 million commercial property would pay a higher real estate transfer tax at roughly a 214% increase, and millions more than the existing levy.
Officials say the funds are needed to build more affordable housing. Chicago currently has a shortage of 120,000 low-income units.
Any changes in the real estate transfer tax would require new state and local laws. Other major cities have comparable rates, according to the MPC. New York, San Francisco, and Philadelphia all have transfer taxes in the range of 2% to 3.3%. New York’s top rate of 2.65% applies to commercial properties worth more than $500,000.
The transfer tax hike is just one of the changes the MPC would like to see in city policy. Other proposals include boosting the use of the South and West Side Metra Lines and revamping the density bonuses that some developers get to encourage more work in low-income neighborhoods
Other Possible Tax Ramifications
As business reporter Greg Hintz, with Crain’s Chicago Business recently noted, “The proposal comes as newly-elected Cook County Assessor Fritz Kaegi is beginning an internal review that widely is expected to shift part of the property tax load from low-end homeowners to business properties. It also comes as the city continues to roll out major increases in property taxes to pay for worker pensions, with other increases possible under the new mayor.”