AUG 02, 2023
As we explore policy initiatives to tackle housing affordability challenges, a crucial question arises: "how will we fund it?" The Chicagoland Apartment Association (CAA) remains committed to collaborating with policymakers at all levels to address affordable housing solutions. However, we strongly oppose the proposal to increase the real estate transfer tax, as it poses negative economic consequences for both residential and non-residential segments of our communities.
Housing affordability is a pressing issue for many Illinois and Chicago residents. The number of families renting their homes stands at an all-time high and is growing, yet the supply of new apartments continues to fall short of demand. To address homelessness and housing affordability, bipartisan legislation aiming to reduce barriers to housing development and foster transparency in the community development process. The Yes in My Backyard (YIMBY) Act would shed light on discriminatory land use policies, encourage localities to cut burdensome regulations, and bring a new level of transparency to the community development process. The U.S. needs to build 4.3 million new apartment homes by 2035 to meet the demand for rental housing; the Chicago Metro market alone needs 48,000 new units by 2030, and renovation of existing apartments is also critical, with approximately half built pre-1980.
Real estate transfer tax increases can impede the development and maintenance of affordable and market-rate rental apartments, especially at a time when providers face rising interest rates, increased costs, and unpredictable and excessive property taxes. By increasing transaction costs and reducing renovation funds and return on investment, developers may opt to conduct business elsewhere.
Studies on increased real estate transfer taxes in California show adverse effects, including slowed or halted housing construction, particularly in multifamily projects, leading to less affordable housing. Higher rents, reduced property valuations, and diminished homeownership are among the associated consequences. In other words, the proposed transfer tax would slow or even stop construction of new housing, particularly multifamily projects; reduced expansion of the housing base will make housing less affordable.
Our multifamily housing providers invest not only in neighborhoods but also in communities and our neighbors. The proposed transfer tax could hinder new housing construction at a critical time when we need to bolster affordable and market-rate housing in communities with high demand.
We must recognize the unintended impacts of increasing cost burdens on the private housing industry and seek collaborative solutions with business and industry to address housing challenges.
Mike Mini is the Executive VP for the Chicagoland Apartment Association
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