Chicago’s 2024 Budget: Analyzing the Implications of the Recent Mansion Tax on Real Estate
Shawn King, Principal 312.980.1127 | shawn.king@ryan.com
The City of Chicago Mayor Brandon Johnson recently released a 2024 budget that includes the updated Bring Chicago Home legislation, also referred to as the mansion tax, which would create a tiered increase of Chicago’s real estate transfer tax. The goal of this legislation would be to fund programs to assist the homeless. Mayor Johnson’s original plan was to increase the transfer tax on residential and commercial property sales of $1,000,000 or more from .75 to 2.65%. The updated version would be a graduated rate broken into three tiers:
- property sales less than $1 million, transfer tax rate would be lowered to .60%
- property sales between $1–1.5 million, transfer tax rate would be increased to 2.0%
- property sales greater than $1.5 million, transfer tax rate would be increased to 3.0%
The Chicago City Council approved a resolution on November 7, which will put the Bring Chicago Home proposal on the March 2024 primary ballot for the voters to decide. The proposal will require a simple majority of votes to be approved.
The concern for real estate deal making would be increased transfer taxes during a time of increasing interest rates and plummeting property valuations, particularly for office buildings where there have been almost no large transactions in the last year.
Another concern is the potential impact of the legislation on multifamily housing projects. The significant tax increase associated with the proposal could hinder new housing developments, resulting in a decrease in the availability of units. This reduction in housing options could lead to increased competition and higher rent costs, contradicting the goal of providing safe and affordable housing.
The experts at Ryan will continue to closely monitor this potential measure and its impact on the commercial real estate industry. We will provide updates and analysis as the situation unfolds, ensuring our clients and partners are well-informed to make sound business decisions in this evolving landscape.