P r o p e r t y T a x . c o m   b y    F I T Z G E R A L D   L A W   G R O U P

P R A C T I C E   L I M I T E D   T O   T H E   T A X A T I O N   O F   C O M M E R C I A L ,  I N D U S T R I A L  &  I N V E S T M E N T – G R A D E   R E A L   E S T A T E            

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WPTA Webinar on Real Estate Valuation

METHODS AND MYTHS OF REAL PROPERTY VALUATION FOR AD VALOREM TAXATION

A Three Part Series
Part 1: Appraisal Concepts: the Foundation of Methodology
Please mark your calendar for an informative webinar hosted by the WPTA:
February 22, 2022
Noon
Register for GoToWebinar HERE
The Women’s Property Tax Association is pleased to present the first part of our Methods and Myths of Real Property Valuation for Ad Valorem Taxation Series.
On February 22, 2022, Bruce Darata, MAI and Peter Helland, MAI, AI-GRS will be presenting an abbreviated version of the course they developed and taught at the Appraisal Institute: Assessment Appeal Report Writing. This webinar will examine key appraisal concepts for developing an opinion of value for ad valorem tax purposes.
This meeting is expected to run for approximately 2 hours, and the WPTA will be seeking approval to issue CLE credit for any Illinois attorney that watches a live-stream of the program and completes the survey immediately following. Attorneys seeking CLE credit must register individually, as well as watch the live broadcast and complete the survey under their own registration.
All are welcome to view!

Cook County Assessor’s Office Announces Launch of New Affordable Housing Property Tax Relief Program

https://chicago.poah.org/sites/default/files/styles/flexslider_full/public/property-photos/19e11thPlace1.jpg?itok=0CtNRq7n

Cook County– Assessor Fritz Kaegi was joined by state legislators and affordable housing advocates today to launch the Affordable Housing Special Assessment Program, a new form of property tax relief that was recently signed into law.

Assessor Kaegi worked with legislative partners who passed the law in the spring of 2021, including State Sens. Sara Feigenholtz, Ann Gillespie, and Mattie Hunter and State Reps. Will Guzzardi and Delia Ramirez. Community housing advocates Allison Clements, executive director of the Illinois Housing Council, and Stacie Young, President and CEO of Community Investment Corporation, along with other affordable housing supporters, advocated for the change to the law and worked to craft the language for it.

In a press conference, Assessor Kaegi, legislators, and advocates discussed how affordable housing property owners could apply for this new type of property tax relief and how they, as well as tenants, will benefit from it.

“Without this coalition of leaders and organizers, we would not have been able to take this important step toward encouraging more affordable housing in Cook County,” said Assessor Kaegi. “The implementation of this law by my office will clear the way for property tax relief for developers who create and maintain this valuable housing category, and will expand the availability of rental units for low-income households.”

WATCH THE PRESS CONFERENCE

The Assessor’s Office is asking potential applicants to apply by March 31, 2022. Interested parties can visit cookcountyassessor.com/affordable-housing to access the application and read more information.

A series of webinars about the Affordable Housing Special Assessment Program will take place in February and March for those who provide and utilize affordable housing. The first webinar will focus on properties that have previously taken advantage of Cook County’s Class 9 incentive program. The date for this first webinar will be Tuesday, February 15, 2022. Attendees can sign up by emailing assessor.affordablehousing@cookcountyil.gov. Future webinars will focus on institutional-grade properties, naturally occurring affordable housing, and low-affordability communities.

“One of Illinois’ biggest challenges has always been affordable housing, which was amplified during the pandemic,” said Sen. Feigenholtz. “Providing incentives to local mom-and-pop landlords and new developments to keep rent affordable for future and existing tenants was the goal of this legislation.”

“Creating options for working families in every neighborhood will diversify and grow our communities in a way that works for everyone, not just those with wealth,” Sen. Gillespie said. “I encourage local developers to apply for this program so we can build an equitable future of housing for all Illinoisans in every corner of the state.”

“Affordable housing is an essential right that needed to be addressed long before the pandemic, and I am glad that much-needed change is coming to fruition,” said Sen. Hunter, Majority Caucus Chair. “This measure will help families stay in their homes. I am proud of the work we’ve done and I hope that affordable and equitable options prevail long after the COVID-19 pandemic is gone.”

“This new program is a critical policy tool that will incentivize investment in affordable rental housing across all types of communities,” said Allison Clements, executive director of the Illinois Housing Council. We appreciate the collaboration of the Cook County Assessor’s Office to ensure a successful implementation of the program.”

Created by state statute, this exciting new program provides property tax relief to incentivize the creation, rehabilitation, and maintenance of affordable housing units in Cook County for eligible applicants, beginning with the 2022 assessment year.

“We need to use every tool at our disposal to encourage the creation and preservation of affordable housing in our communities,” said Rep. Will Guzzardi. “Assessor Kaegi’s implementation of our legislation in Springfield will incentivize developers and housing providers to keep units affordable at a time when renters desperately need it. I’m grateful to Fritz and his team for their leadership on equity and affordability.”

“We had a historic session last year advancing housing issues in the General Assembly,” said Rep. Ramirez, House Assistant Majority Leader. “This new property tax relief program for those who develop and maintain affordable housing was a key component of our comprehensive affordable housing legislation. This program will help Illinois continue to lead on making housing accessible and affordable for all.

While similar to existing housing incentives, this new program provides improved benefits for housing providers as well as low-income households by providing more expansive property tax benefits, more ways to qualify, and by encouraging the development of affordable housing in low affordability communities.

“Thanks to many partners working together, this is one of the rare housing policies that works across different markets and building types – including the unsubsidized, naturally occurring affordable housing which comprises the vast majority of the affordable rental stock here and across the country,” said Stacie Young, President, and CEO of Community Investment Corporation.

The applications for the program are available now. To apply, and for more information on the Affordable Housing Special Assessment Program, visit cookcountyassessor.com/affordable-housing.

BACKGROUND

The lack of affordable housing remains a crisis nationwide. According to a Pew Research Center 2021 survey “about half of Americans (49%) say the availability of affordable housing in their local community is a major problem, up 10 percentage points from early 2018.” For decades, Cook County administered an affordable housing incentive known as the Class 9 program, which encourages new construction and/or rehabilitation of affordable housing. However, participation in the program has not seen consistent growth over recent years, and the supply of affordable units continues to be outpaced by demand.

With the policy revisions within the Affordable Housing Special Assessment Program, Cook County Assessor Fritz Kaegi, state legislators, and affordable housing advocates have taken proactive steps to lobby for and aggressively implement new legislation that provides greater incentives to encourage a greater supply of affordable housing units.

Q: How do properties prove eligibility for the new program?
A: Owners must show that they have made substantial improvements to the rental units, that they are maintaining the property, and that affordable units are rented to households with qualifying household income paying no more than 30% of their income for housing, among other criteria.

Q: What are the dates/deadlines?
A: To be assured of receiving the special assessment on the 2023 tax bill for the 2022 assessment year, eligible applicants must submit parts 1 and 2 of the application no later than March 31, 2022, so that we can apply the reduction on eligible properties during our regular township calendar. Applications received after March 31 will be processed as speedily as possible. Thereafter, applications must be received January 31st to ensure that the property will receive the benefit.

Q. What are the tiers of affordability and how does that affect the reduction of assessed value that can result in reduced property taxes?
A. There are three tiers of affordability: 15, 20, and 35 percent. For properties offering 15% affordable units, the assessed value reduction is 25%. For 35%, it’s 35% of assessed value. For the 20% tier, the reduction is 100% of the difference between the value of the property one year before the affordable units are occupied and post-construction assessed value (the “base year”[1]).

Q: I have further questions about the particular aspects of a building or this program.
A: The Assessor’s Office will be hosting a series of webinars to help guide interested housing providers through the application process. The first webinar will be aimed at current and recent Class 9 properties and will be held on Tuesday, February 15. Subsequent webinars will focus on properties in Low Affordability Communities and other types of properties.

Q: What happens if a property owner sells the property?
A: The program runs with the property, it’s not based on ownership. New owners will still be required to provide affordable housing in order to receive the assessment reduction.

Q: Do units paid for with Housing Choice vouchers (formerly called Section 8 vouchers) count as “affordable” units?  
A: Yes, the test is based on rent paid by a tenant with eligible income. Whether the owner receives supplemental payments or not is irrelevant.

Q: What are the filing fees?
A: Same as Class 9. The application is in two parts and the fee is $500 for Part 1 and $100 for Part 2.

Q: Does the reduction apply to the value of the land?
A: No, just the AV of the building.

Election year or real?

Would proposed grocery, gas and property tax breaks be big enough to help Illinoisans?

BY KELSEY LANDIS UPDATED FEBRUARY 04, 2022 12:38 PM

J.B. Pritzker this week proposed a set of temporary tax breaks aimed at helping Illinoisans struggling with record inflation and pandemic woes. But how much relief would the plan, which needs state lawmaker approval, actually provide if it goes into effect in the coming year? A 1% grocery tax would be suspended for a year and the gas tax would remain the same. Annual property tax breaks up to $300 would be available to individuals earning less than $250,000 or $500,000 for couples filing jointly.

A family that spends $1,000 on groceries per month would save $10 on their bill, and they might save a dollar or so at the gas pump. Pritzker’s plan would freeze the motor fuel tax at 39.2 cents per gallon. It was supposed to increase to 41.4 cents on July 1 to pay for infrastructure investments, Capitol News Illinois reported. On 12 gallons of gas at Thursday’s average unleaded price in Illinois of $3.59 per gallon, a driver would pay $43.08 to fill up, including $4.70 in tax. If the gas tax were to increase, the difference would be roughly 26 cents. A driver who fills their tank once a week at that price could see about a dollar a month in savings. $2 for 2 months

Republicans called the governor’s plan a “gimmick.” “I appreciate that the Governor somewhat recognized the need to get our fiscal house in order as well as the need to provide financial relief to our taxpayers,” said state Sen. Terri Bryant, R-Murphysboro. “However, the people of our state need more than his one-year, election gimmick relief proposals.”

Even if the savings are relatively small, “it’s an important relief for those families,” said Rick Funderburg, a public administration professor at the University of Illinois whose expertise includes tax incentives. Gas and grocery prices are abnormally high, and “any relief that can be brought” to them helps, he said. “Groceries being a necessity that we all have, that’s going to relieve the tax burden on low-to moderate-income families. Not every state taxes groceries for that reason,” Funderburg said. “It’s an essential part when we’re dealing with times of high inflation.”

Only 13 states of 45 with a sales tax collect taxes on groceries, according to Eric Figueroa, an analyst for the Center on Budget and Policy Priorities. The nonpartisan research institute focuses on reducing poverty and inequality. Today’s top headlines

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People with lower incomes spend more on groceries for home consumption than those who earn more money, Figueroa found in a study using federal data. Grocery taxes naturally have a higher impact on low-income people. Eliminating the tax, even temporarily, “undoubtedly benefits to folks with lower and middle incomes,” he said.

Making the cut temporary might provide enough relief to tide people over until inflation subsides, Funderburg said. “The high rates of inflation that we’re experiencing right now will most likely soften. We’ve already seen some signs that’s happening,” he said. “So, that would be the justification for approaching this as a short-term fix rather than a long-term.”

Some of the remaining 13 states with grocery taxes are exploring eliminating it. In Kansas, Gov. Laura Kelly has proposed cutting the state’s 6.5% grocery tax rate, the second-highest in the country behind only Mississippi’s 7%. A bill lawmakers are considering in Mississippi would reduce it. “We think that getting rid of the grocery tax is good,” Figueroa said, “but we caution to make sure it’s not at the cost of making a bigger hole later.” Pritzker said the state would make up for lost revenue from the grocery tax, which goes to local governments.

The governor expects the state to have a $1.7 billion surplus at the end of this fiscal year in June, but how successful the state is going forward depends on how Illinoisans recover from the pandemic, Funderburg said. If downstate in particular sees sustained growth from opportunities such as infrastructure investment, there might be enough make a grocery tax cut permanent. “If we have a trajectory of long-running, sustainable growth, then I think we could easily do without something like the grocery tax,” Funderburg said.

 

Property Tax has Outpaced Inflation

Chicago property taxes nearly doubled in a decade

Chicago property taxpayers face a nearly 5% hike this year after a decade in which their bills nearly doubled. The city failed to capitalize on the COVID-19 stimulus windfall like others did.

During the COVID-19 pandemic, monetary and government stimulus that disproportionately benefited the wealthy led to higher stock prices and housing valuations. Booming markets and growing housing values, coupled with federal aid, boosted tax revenues for states and local governments.

While Chicago could have used the windfall to freeze property taxes, Chicagoans will have no such luck. This year, the city’s gross property tax levy will increase by another 4.9%. This tax increase will disproportionately hurt low-income, cash-strapped homeowners and renters. This is because the city’s budget includes large increases in debt service and pension payments.

Pension fund contributions are increasing by 24.7% from the prior year. That adds up to nearly $1 billion in pension spending increases since Lori Lightfoot became Chicago’s  mayor. Over the decade, the city’s public pensions cost has increased 239%, despite spending for city services only growing 18% during that same period.

Although the city of Chicago, a home rule unit of government, is not subject to the Property Tax Extension Limitation Law, it has its own self-imposed property tax limitation. That annual property tax extension is limited to 5% or the increase in the Consumer Price Index, whichever is less. However, the city’s tax cap does not completely limit the total extension since some funds  – such as bond funds and pension funds  – and some of the tax base, such as new property, are excluded from the calculation.

With inflation topping 7% in 2021 – the highest in 40 years – the city’s property tax levy is likely to increase even more in 2022, and Chicagoans will face even larger property tax bills.

Historically, low-income families have paid an unfair share of property taxes. In addition, renters will also be negatively affected because landlords shift most of the increased tax burden to tenants. Given an 11.4% increase in housing values in 2021, due in large part to a shortage of housing units, many renters – and prospective buyers have been kept on the sidelines, and rents have increased. The increase in property taxes will push rents even higher.

Low-income Chicagoans are already feeling the inflation squeeze

For years, Chicagoans’ property tax bills have increased faster than home values and incomes, with lower income residents paying an unfair share of property taxes.

While the tax levy is set to increase by less than the increase in housing values this year, worker earnings adjusted for inflation fell in 2021.

Falling worker earnings mean that scheduled property tax increases will disproportionately hurt cash-strapped – liquidity constrained – families. In addition, it is renters who will suffer the most from the tax hikes because research shows that landlords shift most of the increased tax incidence to tenants.

In 2021, U.S. consumer prices rose by 7%. One third of that increase came from an increase in shelter costs, according to data from the Bureau of Labor Statistics. While housing prices increased by 11.4%, rents also increased by 8.5% in the Chicago area.

Pre-existing housing shortages and lagging construction contributed to bidding wars and rapid housing price increases that left many young families priced out of homeownership, resulting in them paying more rent.

Low-income households are already seeing a higher share of their income go to shelter, food and utilities. In addition, inflation has already wiped out any “excess” savings accumulated during the pandemic, and further price increases will disproportionately cause more pain for the have-nots than for wealthier Chicagoans.

Pension reform is progressive government policy

In 2022, Chicago’s pension costs will consume more than $2.3 billion of the city’s budget – 21.4% of the city’s own source revenue. Pension costs already exceed the city’s total property tax levy of $1.7 billion this year. Amending the Illinois Constitution to allow for adjustments to the future growth in pension benefits for current workers and retirees can accomplish at least one of two progressive objectives: increase city spending on its poorest residents, or stop further property tax hikes that disproportionately hurt low-income and middle-income families.

Orphe Divounguy

Chief Economist                                           FEBRUARY 3, 2022

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