Judge rules proposed Chicago transfer tax hike is invalid

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In a major win for the real estate industry, a judge in Chicago has blocked a referendum that, if passed, would have quadrupled the tax buyers pay on the most expensive property purchases in the city.

Residents were scheduled to vote in less than four weeks when Judge Kathleen Burke ruled on Friday that the measure was invalid. The question will remain on the ballot, but the votes won’t count, Crain’s Chicago Business reported.

“We are gratified in the judge’s ruling, which underscores the necessity of presenting policy questions to the public with fairness, detail, and transparency,” said Farzin Parang, executive director of the Building Owners and Managers Association of Chicago. “This referendum would be a backdoor property tax on all Chicagoans, and it is important that our elected officials not mislead voters otherwise.” 

BOMA and other commercial real estate groups filed the lawsuit to block the measure in January, saying the measure as written illegally combined multiple questions into one.

The Illinois Realtors pledged to spend $1 million on the measure, sending out mailers and running digital ads that pegged the tax hike as a hidden property tax and rent hike on all Chicagoans.

The measure would have implemented a tiered tax hike. The lowest rate would apply to properties worth less than $1 million. A middle rate would apply for sales between $1 million and $1.5 million. And the highest rate would have applied to properties over $1.5 million.

Homes priced less than $1 million would have seen a slight tax cut under the proposal.

The measure was a key political goal for Mayor Brandon Johnson, who is early in his first term. Johnson and the measure’s supporters had hoped to use the money that may have been raised from the tax hike to pay for unspecified homelessness services.

Critics said the city didn’t have a plan for the money, said the tax hike wouldn’t raise as much as expected, and accused the city of not spending available federal funds on homelessness services.

They also said the measure would further hamper the commercial real estate industry that’s already struggling across the nation.

Realtors and other opponents said the tax hike would cause commercial real estate values to decline further, which would force the city to increase the property taxes in the residential market. Chicago’s property taxes are already among the highest in the nation.

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