Chicago Voters Appear To Reject New Real Estate Transfer Tax, CRE Breathes A Sigh Of Relief

Chicago’s monthslong, bitterly contested battle over a proposed real estate transfer tax ended in an apparent victory for the commercial real estate industry after voters rejected a tax that would have increased taxes on property sales over $1M Tuesday.  

Though the Associated Press had not yet called the result as of 10 p.m., the measure appeared set for defeat, with the vote count at 54% to 46% with 96% of the vote reported and referendum supporters all but conceding defeat. 

The projected result is a major win for CRE players still struggling to get a handle on rising vacancy rates, a tight capital market and a national image problem scaring away skittish investors.

Mayor Brandon Johnson and his allies, who put the “Bring Chicago Home” referendum on voters’ ballots, failed to win out over the city’s business interests, with the rejected tax marking residents’ first rebuke of his progressive policies since he took office last May. 

The tax would have established a tiered system to lessen the tax rate on property sales of less than $1M to 0.6% and up the rate on larger sales. The transfer tax on sales between $1M and $1.5M would have been 2%, while the transfer tax on property sales over $1.5M would have gone up to 3%, quadrupling the existing rate. The city would have put tax revenue toward fighting homelessness in Chicago. 

"The Bring Chicago Home campaign exists in the long lineage of past and present struggles for fair housing, civil rights, and economic justice," the Bring Chicago Home Coalition said in a statement. "While tonight’s election results are disappointing, we are nowhere near the end of our journey."

Turnout for the election was the lowest ever for a Chicago presidential primary since the city began collecting turnout data in 1942, with voters casting just under 350,000 ballots. Only 20.24% of registered voters participated in the election, according to Max Bever, a spokesperson for the Chicago Board of Elections.

In comparison, the 2020 presidential primary saw a 37.78% turnout, and the 2016 presidential primary had a 53.52% turnout. 

Voters 55 and older made up a majority of the electorate, accounting for over 53% of the total vote count, while voters 34 and younger cast just 17% of the total votes. The turnout numbers are unofficial and there are approximately 109,000 outstanding vote-by-mail ballots, which election officials will process and count on a rolling basis through April 2, Bever said. 

Both proponents and opponents of the referendum pumped millions into the race since the start of 2024, according to a Bisnow analysis of contribution reports filed with the Illinois State Board of Elections. 

The Realtors in Opposition to Real Estate Transfer Tax, led by the Illinois Realtors group, received $635K from the Illinois Realtors and another $750K from the National Association of Realtors in the first quarter of the year, according to reports filed with the Illinois Board of Elections. In the final two quarters of 2023, the group spent about $250K on mailers and digital advertising. 

The campaign committee supporting the referendum got big contributions from the Chicago Teachers Union with $400K, The American Federation of Teachers with $100K and Friends of Brandon Johnson with $100K. It also received in-kind contributions from the State Power Fund with $636K, SEIU Healthcare Illinois & Indiana with $200K and The Center For Housing and Health with $100K. Dozens of smaller contributors also helped to bankroll the failed efforts to pass the transfer tax. 

In addition to CRE players raising sizable sums of cash to fight the transfer tax, BOMA Chicago also spearheaded an eleventh-hour legal campaign to knock the measure off the ballot through the state’s court system, though it ultimately failed.

We are grateful to everyone who spoke out against the constant real estate tax increases in our city. This massive tax increase would hurt homeowners, renters, union workers, and businesses across Chicago,” BOMA Chicago Executive Director Farzin Parang said in a statement late Tuesday.
 
“Homelessness is a critical problem, and all stakeholders must be at the table to solve it. We hope that both sides of this issue will be invited together to develop a detailed plan that provides genuine support to the homeless while bolstering our city's competitiveness and protecting all the workers who depend on it.”

With months of drawn-out political and legal warfare now behind it, Chicago’s CRE industry will turn its attention back to the crisis at its doorstep. While key industry players won’t have to worry about a new tax adding kindling to an already raging fire, they’ll need a lot more than a bucket and a ladder to douse the pessimistic flames lapping at the city’s commercial real estate. 

CRE will likely turn its focus to angst over property tax assessments, a particularly thorny office environment in the central business district and mitigating headline risk over issues like crime, said Collete English Dixon, executive director of the Marshall Bennett Institute of Real Estate at Roosevelt University.

While the failed tax measure means the city won’t get a new uptick in tax revenue to fight homelessness, city collaboration with CRE industry to revitalize the CBD is important to “feed the engine” that funds a good amount of Chicago’s property tax rolls, she said.

The city working with CRE players to address a struggling downtown could have a ripple effect on the entire area ecosystem, English Dixon said. 

“People really want things to come back to being a good, solid, vibrant, viable marketplace, but there are just a lot of headwinds,” she said.