On Tuesday evening, polls will close in the March primary election in which Chicago voters will decide the fate of a yearslong grassroots campaign to raise taxes for a fund to address homelessness, also known as Bring Chicago Home. Some Chicagoans have already cast their ballots early.
The measure, centered on raising the city’s real estate transfer tax for property sales above $1 million, has taken a bumpy and winding road to get there, including an eleventh-hour court fight from the real estate lobby. Should it prevail, the referendum would be the first win from Mayor Brandon Johnson’s “tax the rich” agenda that he campaigned on during the 2023 mayoral race.
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What is the Bring Chicago Home campaign, and who is against it?
Since 2018, a coalition of homeless advocacy organizations, labor unions and progressive politicians has been pushing the city to designate a special revenue stream for Chicago’s homeless population. Christening themselves as the Bring Chicago Home campaign, they argue the city must address its dearth of affordable housing by raising the one-time tax on property sales.
Johnson’s predecessor, Mayor Lori Lightfoot, championed the idea but grew reluctant after taking office in 2019 and presiding over a pandemic. That conflict came to a head in 2022, when a special City Council hearing failed to establish a quorum by just one alderman — despite several members being present just outside chambers.
Meanwhile, Johnson’s campaign to unseat her the following year gained momentum with Bring Chicago Home emerging as a key campaign pledge. The City Council approved placing a version of the question pushed by his administration on the ballot by a 32-17 vote last November, setting up a citywide referendum for the March 19 primary.
Those who oppose the measure include the Building Owners and Managers Association of Chicago, the Chicagoland Apartment Association and the Neighborhood Building Owners Alliance. The groups argue that if the referendum passes, it will dampen sales in an already-fragile market and say the city does not have concrete plans for how to spend the money.
Pro- and anti-referendum groups have roughly matched each other in terms of fundraising, with the race attracting a total of $4.5 million in contributions since November, when the City Council approved placing the question on the March 19 ballot. A total of $2.28 million has flowed to the three main campaign committees launched in opposition, and $2.23 million has been contributed to the lead fund supporting it.
What is the real estate transfer tax, and how would the March 19 referendum change it?
Bring Chicago Home aims to enact a graduated hike on a tax levied once on all property buyers. The city currently charges a flat 0.75% rate, but the referendum would increase it on the purchase of all properties that sell above $1 million, while reducing it for less expensive sales. Supporters describe the proposal as a “mansion tax,” while opponents argue it will in fact hurt regular Chicagoans, not just the wealthy.
Tiered changes to the tax structure cannot be enacted by the Chicago City Council alone, only via a voter referendum or through the Illinois General Assembly.
The Johnson administration last summer devised a proposal that establishes three tax brackets: for properties under $1 million, between $1 million and $1.5 million, and above $1.5 million.
It also deploys a marginal rate, which means only the additional dollars above that bracket threshold are subject to the higher tax rate. So the buyer of a property that sells for just one dollar above $1 million would pay essentially the same amount as the buyer of a $999,999 property, for example.
Under the new proposal, properties purchased at less than $1 million would actually see their rate cut to 0.6%. Sales between $1 million and $1.5 million would have a 0.6% tax on the first $999,999 of the price and 2% on the rest. Properties above $1.5 million would be taxed 0.6% on the first $999,999, 2% on the next $500,000 and 3% on the rest.
So the $45 million sale of the 29-story office building at 230 W. Monroe St. back in September, for example, would face a $1.3 million one-time charge under the new structure, compared with $337,500 under the current rate. A $500,000 home, by contrast, would get a break on the transfer tax, paying $3,000 instead of $3,750.
Backers estimate 93% of sales would be subject to the lower tax rate, while larger commercial properties such as offices, large apartment buildings, stores and industrial sites would shoulder a much bigger burden. Properties with agreements to provide affordable housing will be exempt from the increases.
The measure is not a property tax increase, which Johnson as a candidate vowed not to enact.
What is the referendum’s legal status?
The three-tier question on the ballot replaced an earlier proposal that would have kept the 0.75% tax on home purchases below $1 million and set a 2.65% tax on properties above $1 million. That Johnson administration revamp ended up causing an explosive, weekslong legal battle for the referendum.
In January, opponents including BOMA, CAA, NBOA and other real estate groups filed a lawsuit in Cook County Circuit Court against the Chicago Board of Elections. The referendum’s three-part question combining a tax increase with a decrease was the basis of the suit, which argued that was logrolling: bundling a popular proposal with an unpopular one to garner voter support.
On Feb. 23, Cook County Judge Kathleen Burke ruled in BOMA’s favor and invalidated the question, meaning that while the question remained on the physical ballot — which was already printed — votes would not be counted or reported out. The Bring Chicago Home campaign continued to encourage Chicagoans to vote “yes” in the hopes of a successful appeal, but supporters worried people would not turn out to do so if they believed the issue was dead.
The coalition’s wishes were heard. Earlier this month, the Illinois Appellate Court tossed out Burke’s judgment, arguing that state courts have declined to exercise jurisdiction over matters that are a step in the legislative process and not fully enacted. The Illinois Supreme Court then rejected a petition filed by BOMA to appeal that ruling last week, clearing the way for votes to be counted.
But opponents could still dispute the referendum results after Election Day, legal experts warn. Attorney Michael Forde said, “The court’s opinion said nothing about the merits of the case one way or the other. It just said that it was brought too soon. … That’s an understatement to say there’s an opening to challenge it after the fact.”
How much money would it generate?
The Johnson administration estimates the rate change would yield an average of $100 million annually, but the one-time transaction tax is historically quite volatile.
Revenues from the tax since 2003 have been fickle and followed fluctuations in the real estate market, spiking at $242 million in 2006 and tumbling to $62 million at the height of the Great Recession in 2009. Property sales have recently dipped because of higher interest rates, inflation and a distressed commercial market.
When passing what would be her final budget, Lightfoot counted on $221 million in receipts from that levy by the end of 2023, but Johnson’s administration later predicted the city will end the year with 37% less “due to a slowdown of activity in the real estate market.”
A recent Civic Federation analysis found the city ended 2023 with $140.5 million in those receipts, a roughly 36% difference.
Johnson administration officials acknowledge the tax’s volatility, but say their projections are especially conservative for that reason and are based both on historical data and broader market forces.
Researchers from the University of Chicago’s Harris School of Public Policy found that if the new rates had been in place during the last decade, the tax would have boosted annual revenue by $160 million on average, mostly from property sales worth more than $10 million.
But sales of Chicago’s more valuable commercial properties — potential sources of the biggest individual transaction tax infusions — have plummeted.
“Commercial real estate sales in the Chicago area were down 44% in 2023 from the prior year,” the Civic Federation analysis pointed out, with downtown seeing “vanishingly few sales,” and much lower sale prices than a decade ago. They argue the city has not fully accounted for how the new charge might affect investment.
What will the money be used for?
If voters approve the referendum by a simple majority, the City Council would then hammer out a final ordinance with the new rates taking effect in 2025, to be adjusted for inflation every five years.
The ballot question lays out the following use for the additional revenue: “The purpose of addressing homelessness, including providing permanent affordable housing and the services necessary to obtain and maintain permanent housing in the City of Chicago.” The mayor has declined to elaborate on the breakdown beyond that, telling reporters earlier this month that it would be incumbent on the City Council to dial up the specifics.
The city has previously said it would set up a community-led advisory board to recommend appropriations, establish goals and track outcomes.
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Johnson’s 2024 budget allocates more than $250 million on homelessness services. Last year, the city spent more than $200 million under Lightfoot’s final spending plan that included investments in increasing permanent affordable housing, mental health and jobs counseling, homeless shelters and resources for domestic violence survivors. Critics contend the city has been slow to spend federal pandemic relief funds set aside on homelessness.
In 2023, the Department of Family and Support Services tallied more than 6,100 homeless Chicagoans at one point in time, with most residing in shelters and just under 1,000 on the street. The Chicago Coalition for the Homeless, the nonprofit torchbearer of the Bring Chicago Home drive, has argued the city’s homeless count is actually more than 68,400 because it also counts those couch-surfing with relatives or friends.
Chicago’s recent population of 37,000-plus asylum-seekers, many arriving impoverished from Venezuela, are included in the DFSS homeless count but reside in a separate shelter system. Asked whether the additional revenue would benefit them, the Bring Chicago Home coalition said on its site, “This initiative is not a direct response to the recent influx of migrants. … The migrant crisis caused by Republican lawmakers in Texas and Congress will ultimately require both federal and state resources.”
Have similar measures passed in other cities?
Earlier this year, Los Angeles hiked a transfer tax imposed on pricey real estate purchases, a move also designed to generate revenue to fund homeless services. It has so far failed to fill Los Angeles coffers. S. Mayumi “Umi” Grigsby, Johnson’s chief of policy, acknowledges that but said the Chicago proposal has critical adjustments including a tax cut for many property buyers.
Evanston in 2019 decided to raise one-time taxes on property sales valued at more than $1.5 million to fund a reparations program for Black residents. The change raised far less than expected in its first year, but in 2022, after city officials forecast raising $3.75 million through the tax, it brought in nearly $5.5 million.
And after New York City also imposed higher transfer taxes, buyers and sellers after several years just accepted higher rate as the cost of doing business there.