Vallas: Fix Chicago’s affordable housing needs without tax hikes

Vallas: Fix Chicago’s affordable housing needs without tax hikes

They call it a “mansion tax” that can “Bring Chicago Home,” but those are false labels that hide a tax threat to the city’s economic health. There are better ways to create affordable housing and help homeless Chicagoans.

The spin doctors trying to sell “Bring Chicago Home” to voters would not get very far if they called it what it really is: “Bring Chicago Down.”

Chicago Mayor Brandon Johnson and his allies are asking voters in March for more money on the premise that higher taxes on property owners and buyers able to spend over $1 million will help fix Chicago’s homelessness problem. But there are relatively few mansions sold that they can tax, so it really means going after commercial and rental properties. If the city wants to fund affordable housing, there are better ways than going after its commercial heart.

The business district is already suffering with record-high office vacancies, reeling from a historic increase in violent crime and burdened with some of the nation’s highest taxes and fees – which keep going up. Chicago’s commercial property taxes rose to $3.82 billion in 2022 from $1.98 billion in 2012 – a 93% increase in 10 years.

Importantly, this tax increase proposal fails to provide any plan for how any new revenue will be used. It is conspicuously absent of any comprehensive affordable housing strategy beyond depositing revenue from increase real estate transfer taxes into a new fund. While supporters have suggested initiatives such as housing vouchers, building new housing and rehabilitation to preserve existing housing, taking the mayor’s word and seeing what happens later is a mistake.

If Johnson and the City Council are genuinely committed to addressing Chicago’s homelessness crisis, there are better ways. They should:

1. Streamline housing approvals

Chicago must simplify and expedite the process for approving new affordable housing construction and conversions. This includes removing unnecessary regulatory obstacles, updating outdated building codes and expediting project approvals. This streamlining should ideally coincide with a comprehensive governmental reorganization, strengthening the city’s Department of Housing and granting it control over the Chicago Housing Authority.

2. Restore unoccupied properties

The city can partner with local developers and community-based organizations to renovate thousands of vacant residential properties for middle- and low-income families and to address special needs such as temporary housing for victims of domestic violence, those with chronic drug addictions, returning citizens and immigrants. According to the U.S. Census Bureau, there are over 103,000 vacant housing units in Chicago. More than 13,000 of them are vacant because they need repairs, were abandoned or are condemned – vacant, even as the unhoused population continues to grow.

3. Encourage private-sector involvement

Engage existing landlords to create more affordable housing units by facilitating conversions of unused spaces. The additional income would be incentive enough if the impediments were removed for such conversions and the approval process was streamlined and less costly. According to an analysis, there are as many as 130,000 apartment buildings, ranging from two-flats to multi-unit buildings of 24 apartments or more, that have space available for conversions.

4. Simplify tax relief programs

There are an array of programs designed to reduce the impact of property taxes through exemptions, credits, grants or deferrals. The process for accessing these programs is cumbersome and confusing. Also, benefits must be renewed annually. This imposes a particular hardship on the elderly. A simple, one-stop process should be established to access the programs and to secure renewals. The foreclosure statutes need to be modified to keep families and seniors from losing their homes.

5. Fully utilizing the resources and assets of the Chicago Housing Authority

Chicago has an affordable housing institution: the Chicago Housing Authority. The CHA has immense resources, some often squandered, as it operates independently of the city, divorced from any comprehensive city affordable housing strategy. The CHA must be part of the solution and brought under the direction of the city’s Department of Housing by having the housing commissioner select the CHA president. The commissioner or a designee should serve as the CHA board president.

6. Cap property taxes

Capping local property taxes for individual residential and commercial property is critical to combating gentrification in at-risk neighborhoods. This will allow residents to reap the benefits of rising home values, urge new small business development and foster greater job opportunities while avoiding sharp increases in rents and home values in low- and moderate-income urban neighborhoods. Those price spikes result in actual or imminent displacement of residents. Tax caps will also protect existing small businesses.

7. Strategic use of property tax abatements

While the most sustainable, permanent solution to creating affordable housing would be to ease the burden of property taxes and the city’s regulatory environment to encourage continued housing development, intermediate measures such as allowing for property tax abatements for certain residential projects could provide immediate relief. The strategic granting of property tax abatements can be offered for a fixed period to encourage restoration of residential property and conversion of unimproved space to garden units. Longer-term, tax-exempt status can be provided for housing dedicated to address specific housing needs. Those include temporary housing for homeless families, relocation for victims of domestic violence, shelter for individuals in drug rehabilitation programs and transitional housing for returning citizens. Similar tax incentives already exist for certain non-residential properties in the city.

While much can be accomplished without new funding, additional revenue can be secured without raising taxes. A city housing trust can be created, annually funded with a share of developer fees, a share of the city’s annual tax increment financing surplus, housing-related fees and fines and potential revenues from the legalization of gaming. Additional “project specific” funding can be secured by issuing bonds financed by future freed-up revenue from retiring tax increment financing districts.

Chicago’s affordable housing crisis can be addressed without raising taxes by harnessing the potential of the housing market and implementing these pragmatic alternatives. But don’t count on the “Bring Home Chicago” spin doctors to back off. They need the “mansion tax” referendum to rally their base.

Opponents must show the tax for what it is and champion these real measures that can address the city’s housing needs.

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