When Melissa Dwarneke and her husband decided to sell their five-bedroom house in Chicago last year and rent instead, the plan was to rethink their asset portfolio, take a pause and see where the market was heading.
But Dwarneke, who works for a global consulting company, says that one big reason for scaling down was property tax, which had risen on their historic home in the city’s desirable Lincoln Park neighbourhood, from about $10,000 a year when they bought it in 2010 to more than $15,000 last year.
“It was a huge motivating factor in selling,” she says. “Property taxes are a big concern for everyone here and not knowing where they’re heading creates a lot of frustration.”
On paper, Chicago is a real estate dream: the city’s 77 areas offer historic homes on a scale unparalleled in just about any other US city. Meanwhile, the downtown area known as the Loop contains some of the most spectacular high-rise architecture anywhere in the world.
But for all that, agents and brokers say the seemingly relentless increase in Chicago’s property taxes in recent years is one of several factors sucking dynamism from the market, which has long struggled to keep pace with other leading US metropolitan areas, such as New York and San Francisco.
Bryce Hill, research analyst at the independent Illinois Policy think-tank, says that the annual property-tax take in Cook County, which includes Chicago, increased 76 per cent more than median home values between 1996 and 2016.
“Both the city and the state are wrestling with unbalanced budgets, massive amounts of pension debt, and limited solutions,” he says. “As they fight these worsening financial conditions, businesses and homeowners have been saddled with high property taxes that far outpace growth in property values.”
Until last year, homeowners in Chicago could write off property taxes against their taxable income. But President Donald Trump’s 2018 reform establishes a $10,000 cap, leaving many homeowners suddenly forking out huge sums. “It has really put the brakes on sales,” says Nicholas Apostal, a principal broker at Keller Williams in Chicago.
Apostal is listing a fully renovated 19th-century brownstone in Lincoln Park with five bedrooms and four bathrooms. The $1.45m sales tag is far below the pricier markets of New York and San Francisco, but it comes with annual property taxes of just under $22,000 — and no guarantee that they will not increase in years to come.
Source: www.ft.com