It’s just a bill
Wednesday, Jul 24, 2019 - Posted by Rich Miller
* Center Square…
State senators gathered Thursday in Chicago for a hearing to discuss Senate President John Cullerton’s Senate Bill 2259. It would put caps on how much assessments on apartment complexes could rise if the owner commits at least 20 percent of the building’s units to be reserved for families that make less than a set income depending on the area. The caps would gradually be reduced over the course of ten years.
New construction is typically assessed for a higher dollar value once it’s finished because it’s worth more than it was as an open lot. […]
State Sen. Dan McConchie, R-Hawthorne Woods, said he worried that the incentive would push the cost of government services onto other property owners.
“Whenever we create another tax credit, we end up shifting that tax burden to others,” he said. “We do it for veterans, we do it for senior citizens, we do it for other groups.”
Normally, I’m against narrowing a tax base. But doing so in a limited way to achieve a specific policy objective is an interesting idea.
* Hannah Meisel at the Daily Line…
Curt Bailey, the president of real estate development firm Related Midwest, praised the bill during testimony Thursday, telling the Senate’s Subcommittee on Special Issues that the program had worked in “many markets for many developers.” including his firm in New York, Boston, Los Angeles and San Francisco.
“So there’s evidence out there that this works,” Bailey said. “These are beautiful buildings, they’re tremendous places to live…In New York City, they have delivered 38,000 affordable units with this program mostly in the ‘90s through now. Talk about closing that gap of 120,000 units. this is a way to do it and do it fairly quickly.”
Bailey identified “hot” real estate markets like the West Loop and Fulton Market as ideal places for developers to build these so-called “80-20” projects, in which wealthier renters subsidize those not paying market value. For example, he said some renters may be paying $4,000 for their units next to renters who pay $400 for identical units.
But after Bailey mentioned those rapidly developing neighborhoods several times, Cullerton asked if the focus could be shifted to struggling neighborhoods, and if developers like Related Midwest would take advantage of a tax program like the one provided for under SB 2259 in poorer areas.
“What about the Lawndales and Englewoods?” Cullerton asked.
Bailey said it wasn’t out of the question, but said developers “need the 80 to support the 20,” referring to the 80 percent of renters in a development that would pay market price to subsidize the units set aside for affordable housing.
* This appears to be Bailey’s brainchild. He’s quoted in all the stories I’ve seen so far, including this one by Greg Hinz…
As now written, the bill would entitle any developer who builds or substantially rehabs a structure with at least six units to enter a program in which taxes on the new structure would be held at the pre-construction rate for two years. The break would drop an additional 20 percent every two years until hitting zero after 10 years.
In exchange, the developer would have to offer rents on at least 20 percent of the building’s units at rates affordable to tenants with a household income no more than 60 percent of the area median. That’s roughly $41,242 in metropolitan Chicago, according to U.S. Census data. […]
Cullerton said he got the idea from developers, including Related Midwest’s Curt Bailey, who ordinarily are more willing to pay for building off-site affordable units than creating them in high-rent towers. […]
“Look at it this way, it’s not a TIF,” [Cullerton] said, referring to tax-increment financing subsidies that sometimes are used to push affordable housing. “Eighty percent of the units in a building are subsidizing 20 percent.
But the numbers work only if you don’t have to pay the full property tax increase” immediately.
If this is about one guy funding one development, then I’m a hard pass. If there is a significant number of developers out there, then maybe.
But it’ll still slightly raise taxes for everyone else.
- City Zen - Wednesday, Jul 24, 19 @ 12:41 pm:
If I, too, were president of a real estate development firm, I would love this plan.
- A Jack - Wednesday, Jul 24, 19 @ 12:42 pm:
I would say that the tax break would only come if the low income units are actually rented, not just offered for rent. And it may be good that these units are outside of the “struggling” areas to get more income diversity throughout the city.
- Angry Republican - Wednesday, Jul 24, 19 @ 12:43 pm:
Why not cut out all the middle men and just give rent vouchers to people that need financial help, and let them decide where they want to live.
- DuPage Saint - Wednesday, Jul 24, 19 @ 12:47 pm:
The whole property tax system is broken. Someone maybe a for real committee has to figure something new. And I realize this involves schools and is probably impossible. I know the system was fixed and new Cook Assessor has a hell of a job. But my son in law on Wheeling Township has his retail store family owned assessment go up 57%. It is Unsustainable
- Lt. Guv - Wednesday, Jul 24, 19 @ 12:48 pm:
==Why not cut out all the middle men and just give rent vouchers to people that need financial help, and let them decide where they want to live.==
When we don’t require every landlord to accept those vouchers as payment, then it just doesn’t work.
- Anon Y - Wednesday, Jul 24, 19 @ 12:55 pm:
80 20 based on actual renters a clear definition and universal practice/ process for the program with an application and long-term leases with annual audits along with a repayment and fine provisions. Otherwise it will be a program for the connected.
- DuPage Saint - Wednesday, Jul 24, 19 @ 12:57 pm:
lt Guv: in Cook County it is illegal to discriminate against section 8 and for some reason also illegal in Naperville. Called income discrimination
- Fav Human - Wednesday, Jul 24, 19 @ 1:20 pm:
” slightly raise taxes”
But perhaps you should think of it as
” I’m getting affordable housing at a deep discount”.
I’m only paying the taxes I lose.
- Nagidam - Wednesday, Jul 24, 19 @ 1:29 pm:
===Why not cut out all the middle men and just give rent vouchers to people that need financial help, and let them decide where they want to live.===
In this scenario “Government” needs to fund the vouchers. Under the bill the payments are “Funded” by spreading the tax credit to all other properties not getting the tax break. Basically any tie a certain property type class gets a break it is paid by all other property type classes that do not get the break. The biggest property tax break goes to farmers. Property tied to business/manufacturing get no breaks.
- 17% Solution - Wednesday, Jul 24, 19 @ 1:31 pm:
If the eighty percent of the renters are paying for the rental difference of twenty percent of the renters then the owner of the building doesn’t lose any money. So why does the owner need a property tax break?
- Just Observing - Wednesday, Jul 24, 19 @ 1:35 pm:
The problem with these programs is that they require a tremendous amount of administrative costs and energy, and it increases housing costs on everyone else — and not just the rich — there are plenty of people in the middle who don’t qualify for subsidized housing but are still struggling with their housing costs and day-to-day living that will have to make up the difference.
- Chicagonk - Wednesday, Jul 24, 19 @ 1:53 pm:
A solution in search of a problem.
- wonkavist - Wednesday, Jul 24, 19 @ 1:57 pm:
These sorts of programs almost never work as intended, so caution is warranted. As others have pointed out, there may be more effective and efficient ways of providing assistance to low-income renters. And every additional distortion tacked onto an already overly complex property tax system only makes it less transparent, less fair, and more disliked.
- Soccermom - Wednesday, Jul 24, 19 @ 2:01 pm:
“But it’ll still slightly raise taxes for everyone else.”
Not necessarily. This proposal would change the math for developers, and might provide a “but for” incentive that would encourage building on otherwise vacant lots. That expands the tax base.
- NoGifts - Wednesday, Jul 24, 19 @ 2:33 pm:
17% solution - I think the 80% are paying market rate and still subsidizing the 20%. They aren’t charging over market rate for 80%, so for the building to feasible, they have to reduce the cost somewhere else.
- Homer Simpson's Brain - Wednesday, Jul 24, 19 @ 6:36 pm:
To Senator Cullerton,
I am not particularly fond of this idea. Instead of more tax giveaways to wealthy developers, we should focus on other sources of increasing housing stock. Off the top of my head we can: ban anonymous shell corporations and foreign nationals from buying in Illinois (we know that money is laundered in this way, artificially inflating prices, especially in Chicago, Seattle, NYC, etc.); banning Airbnb for everything except for short term rentals (e.g. a family can rent their home via Airbnb when they go on vacation); introducing a progressive property tax that gets progressively steeper as a percentage of median wages (3x-5x the median income is the sweet spot for affordable housing) where the proceeds can be used to build affordable housing; make the real estate transaction tax progressive as well, mimicking the progressive property tax as above, with proceeds being used to build affordable housing; imitate the residential zoning practices of Tokyo, Japan, which for a large city, has many affordable housing units.
If we really want to solve this housing crisis, everything needs to be on the table. We should also copy successful social housing programs from around the world. The two social housing programs I prefer at this moment are from Singapore, and Vienna, Austria (especially Vienna, Austria).
Sincerely,
Homer Simpson’s Brain
- NorthsideNoMore - Thursday, Jul 25, 19 @ 7:31 am:
So peple move in, pay reduced property taxes that eventually go to zero?…school districts will love this (snark) They will get impacted but less funding, great idea for developers not so much for local uits of gov.