Cook County Assessor Fritz Kaegi is pictured at an event with Board President Toni Preckwinkle in 2022. [Don Vincent/The Daily Line]

As part of the ongoing reassessment of Chicago, Cook County Assessor Fritz Kaegi’s office has reclassified numerous mixed-use properties as it works to address a loophole that the county inspector general said was allowing some commercial properties to unfairly get tax breaks. 

While the affected properties were previously assessed as Class 3-18 multifamily properties, their commercial components are being assessed separately after a definition in the property tax classification code was revised — causing their total assessed values to skyrocket in many cases.

The assessor’s office said the change was made to ensure that buildings mostly made up of commercial space with some residential units were no longer being assessed under a residential classification and therefore earning a 10 percent level of assessment instead of a 25 percent level of assessment. 

“If some commercial properties are given a reduced level of assessment, that means other properties in the same area must take on a greater share of the tax burden,” a spokesperson for the assessor’s office told The Daily Line. “We made this clarification to ensure equity in commercial assessments across Cook County – in other words, to ensure that commercial property is assessed as commercial property.” 

The assessor’s office is now assessing the residential and commercial portions of the affected properties at 10 percent and 25 percent levels, respectively. 

Since he was elected in 2018, Kaegi has been seeking to shift the majority share of the property tax burden from homeowners and landlords to businesses, arguing that commercial properties in the city are undervalued. But he’s bumped up against the Cook County Board of Review, which for Tax Year 2021 used the appeals process to reverse the assessor’s designation that gave commercial properties most of the tax burden and shifted the property tax burden back to homeowners.

A Cook County Office of the Independent Inspector General (OIIG) report covering the fourth quarter of 2022 drew attention to the loophole and recommended changes.

“Multiple [Assessor’s Office] employees reported to our office their concern about the practice at the [Assessor’s Office] of classifying what would appear to be a Class 5 Commercial property as a Class 3 Multifamily, at a substantial tax reduction, if the property contained one livable apartment unit,” the OIIG wrote, further stating that its employees described it as an “apartment loophole.” 

Assessor’s office employees told the OIIG that even the presence of a single apartment unit allowed certain Class 5 commercial properties to reduce their assessment levels and be classified as Class 3 multifamily properties. The OIIG recommended the assessor’s office address this “statutory issue” by directing the County Board of Commissioners to change the vague ordinance that allowed the loophole.

The board did not change the ordinance. The assessor’s office told The Daily Line that the assessor is authorized under county code to “interpret property classifications,” so the office determined that the assessor instead had the authority to amend the definition himself.

The revised definition of the 3-18 classification, which covers mixed-use properties between 20,000 and 100,000 square feet that have a mix of at least seven commercial and residential units, went into effect in 2023 and was applied to last year’s reassessment of the south and west suburbs, the assessor’s office told The Daily Line.

The new definition capped the square footage of 3-18 properties at 99,999 square feet. It also added a new requirement that at least 65 percent of the rentable square footage be residential space. 

The assessor’s office told The Daily Line that the 35 percent cap on commercial space was intended to ensure that many three-flat buildings, with first-floor retail and apartments above, maintained their 3-18 classifications. 

The new definition was first applied to Chicago this year as part of the city’s reassessment. Rogers Park Township was the first township to be reassessed, and the assessor released valuations in March. 

In Rogers Park, 49 Property Index Numbers (PINs) were inspected by the assessor’s office for potential reclassification, the office said. As a result, 24 PINs, a little more than 2 percent of commercial parcels in Rogers Park, had their 3-18 classifications removed, the office said.

Letters have been going out to affected property owners to notify them of the potential reclassifications and forthcoming field inspections. A follow-up letter will inform a property owner of their new split-class assessment if they lose the 3-18 classification.

The assessor’s office noted the 24 PINs represented 1.6 percent of the total market value of commercial property in Rogers Park this year, up from 1.5 percent of the total market value of the township’s commercial property in 2023. But the split assessments have caused many of the individual affected properties’ valuations to skyrocket. 

To name some examples, a mixed-use building at 7023 N. Clark St. that lost its 3-18 classification saw its total assessed value jump from $122,736 last year to $293,001 this year, a 138.7 percent increase. 

The mixed-use property at 2538 W. Devon Ave. saw its assessed value rise more than 139 percent, from $80,193 last year to $192,200 this year, under its split assessment. 

A mixed-use building at 6410 N. Western Ave. that was also reclassified saw its total assessed value jump by 140 percent this year when compared to 2023, from $151,888 to $365,401. 

The reclassified mixed-use property at 2504 W. Devon Ave. saw its assessed value spike by a whopping 181 percent — from $27,020 last year to $76,008 this year. 

A former Class 3-18 property at 2309 W. Howard St. saw its assessed value rise from $57,810 last year to $195,968 this year, a 238.9 percent increase. 

Finally, a former Class 3-18 property at 7247 N. Western Ave. saw its assessed value rise from $65,860 last year to $236,950 this year — more than a 259 percent increase. 

“Rather than just drop this bomb on everybody and sneak it in like this, [Kaegi] should probably go to the county board and say, hey, look, we’ve got this problem,” said Roman Viere, the owner of two buildings in Chicago’s Austin neighborhood he said are likely to be affected. 

“I don't understand what the assessor is trying to accomplish here,” Viere added. “This is not going to move the needle on any kind of fairness scale that he's trying to achieve in balancing out the levy.” 

Drexel Properties owner Jeff Weinberg, who has multiple buildings citywide that have received letters warning of potential reclassifications from 3-18, said the split assessments could lead to commercial vacancies as the higher assessments could make it tough to keep the commercial rents comparable to the worth of the space. 

“In all of those vintage commercial spaces, the value per square foot of the commercial space is worth less than the value of the apartments above it,” Weinberg said. “Assessing at a higher rate is just going to cause it to be impossible to rent those spaces … Who’s going to rent them at a loss? So, they’ll keep them vacant.” 

Building owners will recover that cost by raising rents on residential tenants, Viere said. He said the impact would be passed on to residential tenants in those buildings before commercial tenants.

“I'm not going to be able to get more rent for those storefronts,” Viere said. “I'll have to reach upstairs to the tenants in the building … and increase their rent in order to cover that cost. So those tenants upstairs are going to basically subsidize those units down below.”