A real estate donnybrook is shaping up in Cook County in 2006, with homeowners pitted against the owners of big apartment buildings, office towers and industrial property over the issue of real estate tax assessments.
The 7 percent real estate tax assessment freeze for Cook County homeowners, pushed through the Illinois Legislature by Cook County Assessor James Houlihan in 2004, created a groundswell of opposition from business groups. Three years ago, they worried that the tax burden would be shifted from homes to commercial property – offices, apartment buildings and industrial structures.
Studies show that the move saved homeowners $200 million to $300 million in property taxes and that taxes shifted mostly to commercial real estate owners and businesses. Cook County government continues to spend at the same rate no matter who’s paying the bill, so it’s no surprise that the burden has been transferred to another group of property owners.
A coalition of business groups, including the Chicagoland Chamber of Commerce, the Building Owners and Managers Association, the Chicago Development Council and the Chicagoland Apartment Association (CAA), is opposed to the assessment freeze, which is up for renewal in Springfield.
The measure passed the state senate but is bogged down in the house, and legislative insiders say it might not be called for a vote until the fall session – and that it might not be called at all without the support of House Speaker Michael Madigan.
The assessor’s office reassesses the value of the 1.5 million parcels of property in Cook County every three years through a “mass appraisal system,” which compares each property to similar properties in a given area.
The reassessment is done on a rotating basis among three regions of Cook County. Homes in the city of Chicago are reassessed every three years. So, under the 7 percent freeze, assessments could increase a total of 21 percent during the three-year period, but no more. The assessor grants this exemption automatically and homeowners do not have to file any appeal paperwork.
However, without an extension of the assessment freeze, Assessor Houlihan, with the support of Mayor Richard M. Daley, warns that home values in Chicago and Cook County have soared over the past three years, and it is possible that Chicago homeowners face an average assessment hike of 41 percent this year.
Real estate tax assessment notices already are in the mail to homeowners in Rogers Park, and other North Side and South Side Chicago neighborhoods will follow in the coming months.
The freeze does not offer the same protection for the owners of luxury homes and buyers of new homes, whose assessments can be sharply boosted.
Because downtown office towers remain in a leasing slump and have had their assessments eased, experts say it is likely that owners of rental apartment buildings with more than seven units may be socked hardest.
Unfortunately, downtown apartment managers are just beginning to see a reduction in record high vacancies in Chicago, according to the CAA. And, although rents have not been raised substantially in five years, landlords say they are being hit with soaring expenses for natural gas, taxes and other operating costs.
“The cost to operate a multi-family building in Cook County has skyrocketed, with double-digit property tax increases, a 272 percent increase in Chicago’s natural gas tax, and safety regulations that have added millions of dollars to a building’s bottom line,” said Judy Roettig, executive director of the CAA, which represents more than 300 members who own or manage more than 136,000 apartments in the six-county Chicago area.
Apartment owners won some concessions from the Cook County Board when assessment levels for apartment buildings with more than seven units in Chicago and nearby suburbs were cut from 33 percent of the market value to 30 percent in 2003, and were reduced to 26 percent in 2004, the CAA said.
However, apartment managers and owners say the skyrocketing assessments will erase all of the benefits of the phased-in assessment reductions, which were designed to keep rents more affordable. This year landlords are asking the assessor to lower rental apartment assessment levels to 20 percent from 26 percent.
Real estate columnist and media consultant Don DeBat has written about Chicago-area housing and mortgage markets since 1968. He is chief executive officer of DeBat Media, Inc., www.dondebat.net.