Chicago's historic property tax increase expected to burden working class
The largest property tax increase in Chicago’s modern history was written into the city’s $7.8 billion budget
January 2, 2016 5:00AM ET
by Ryan Schuessler @RyanSchuessler1
CHICAGO — Helen Alexander tried to make her new apartment building a little nicer when she moved in a year and a half ago.
The 56-year-old grandmother scrubbed the hallways and planted a garden outside the four-unit building in the Belmont Craigin neighborhood on Chicago’s northwest side. She lives in a two-bedroom apartment with her 21-year-old granddaughter and shih tzu. A lifelong resident of Chicago, she can name the address of the house in which she was born.
“It’s scary,” Alexander said. “It’s scary when you not knowing where you’re going to be, where you’re going to go, and if you can stay in your apartment.”
Alexander pays $1,050 per month in rent, but that’s likely to increase. In October, Chicago’s city council passed a historic property tax increase — said to be the largest in the city’s modern history. Chicago landlords are likely to pass that cost onto tenants like Alexander, who is barely getting by as is.
That burden, activists say, is going to displace long term, lower-to-middle income residents in Chicago’s diverse communities, hastening gentrification of the city that has already been called the most segregated in the United States. Overall rent in the city jumped more than seven percent between 2013 and 2014.
Around half of all Chicago’s residents are renters, according to the Chicago Rehab Network. According to real estate website Zillow, Chicagoans put an average 21 percent of their income towards rent between 1985 and 2000. That percentage is now more than 30 percent. According to Census data, more than half of Chicago’s renters are paying more than a third of their incomes in rent — a rate that the federal government defines as unaffordable.
And that was before the new property tax.
“I don’t have no more money to give that landlord,” said Alexander, who lives on a fixed income and pays more than a third of her income on rent. “I’m just one of those scared as hell, just waiting to see what’s going to happen.”
On Oct. 28, Chicago’s city council passed Mayor Rahm Emanuel’s $7.8 billion budget in a 35-15 vote. The budget included a 72 percent property tax increase worth some $550 million, to be fully implemented by 2019, raising the overall tax bill 13 percent. For every $250,000 of a home’s appraised value, property owners will see a $500 increase in annual property taxes.
“It’s now to the point where working families cannot give anymore,” said Diane Limas of Communities United, a grassroots organization in Chicago. “Our backs are bending already, and I’m afraid that this tax increase on working families is the straw that’s going to break the camel’s back.”
For tenants, this means higher rent. Nearly one-third of the city’s rental stock is composed of two-to-four-flat buildings, according to the Institute for Housing Studies at DePaul University. A higher property tax will be spread between fewer tenants in buildings like these. In 2014, Communities United, a grassroots advocacy organization in northwest Chicago, analyzed census data and found that, in some neighborhoods, the property tax increase could translate to a rent hike upwards of $100 per month.
Data for 2015 is not yet complete, but according to rental service Zumper rents were still on the rise even before the property tax increase. Rent for one-bedroom units in Chicago have increased by more than 13 percent this year — though cities like Oakland and Phoenix saw higher increase of 19 and 15.4 percent, respectively.
“I don’t have secure income,” said Veronica Solis, who supports her family by selling corn flour in Chicago’s Albany Park neighborhood, where she’s lived for two decades. “And with the increase of property tax, it’s going to affect me even more.”
Solis pays $1,100 per month in rent, and said her friends and neighbors share her concerns of having their rents hiked to account for the property tax and a $9.50-per-month garbage fee that was also tacked on to the new budget.
“That’s not enough to pay the rent and bills,” Crescencia Delgado, a resident of Albany Park — a diverse neighborhood on Chicago’s northwest side — said of her husband’s minimum wage job. “So how are we going to be able to afford that [property tax increase]?”
Helen Slade, an Albany Park property manager, said she will have to pass the property tax hike onto her tenants. The most conservative estimate she’s been able to come up with is an additional $20 per month.
“That’s a lot for some of our tenants,” She said. “It’s unavoidable. We’ll have to pass it on.”
Proponents of the increase say it is needed to stabilize the troubled finances of the country’s third largest city. The property tax hike will largely go toward backing up Chicago police and firefighter pensions. Earlier this year, Moody’s Investors Service knocked the city’s credit to junk status because of its $20 billion pension deficit.
The city’s public school system is also facing a looming crisis. If state money doesn’t come through, Chicago Public School District officials are warning of possible layoffs amid discussion of school closures, consolidation, and cuts. Chicago Public Schools relies on the state for nearly $500 million.
“It’s one thing to raise our taxes, but our services aren’t getting better,” Limas said. “Our services are getting worse and worse. As working families are paying more and more, the services from our city are getting less and less.”
“All of this affects the children,” Solis said. “Everything goes hand in hand. And they’re the future of this country, and this is the problem.”
Limas and others have informally proposed alternatives to the tax increase, including a so-called “luxury tax” or raising taxes on the city’s wealthiest residents, who they say can afford to pay more.
“There’s ideas on the table,” Chicago Alderman Carlos Ramirez-Rosa said at a Communities United press conference ahead of the city council’s October vote. “Whether it’s a TIF surplus, whether it’s the revenue ordinances the Progressive Caucus brought forth that are now being held in the Finance Committee — there’s more that we could do to mitigate this property tax increase before Oct. 28.”
He added: “Unfortunately, I don’t think that we have a partner in the mayor’s office that’s willing to do that.”
Mayor Rahm Emanuel’s office did not respond to a request for comment.
In a statement released by the Mayor’s office the day the budget was passed, Emanuel commended the city council for moving to stabilize the city’s troubled finances.
Back in Chicago’s northwestern neighborhoods, residents and property owners are trying to plan — or brace — for the next step.
“The diversity and the areas that look like this, they’ll be gone,” Limas said. “To lose that, it would be a catastrophe.”
“I think the desire to make money off real estate is the problem,” Slade said. “I think if we as a society saw housing as a protected right instead of a way to make money, we wouldn’t have this problem.”
Helen Alexander of Belmont Craigin said she’s waiting to hear from her landlord if her rent will go up.
“I’m just hurt, confused, and don’t know what’s going to happen,” she said.
“I just hope somebody will look out for us.”