Vallas: 8 ways to fix Chicago housing crisis without Johnson’s tax hike

Now that Mayor Brandon Johnson’s real estate transfer tax has failed, here are eight practical ways Chicago can provide more affordable housing without raising taxes.

The resounding defeat of the “Bring Chicago Home” real estate transfer tax referendum will be spun by supporters as a casualty of business interests mobilizing their financial resources to stifle the initiative.

Never mind the ballot referendum had full Chicago Teachers Union resources at its disposal, including knocking on 300,000 doors, making over 600,000 phone calls, $400,000 in donations and taking a parade of students they lobbied to vote.

Chicagoans said loud and clear they couldn’t trust City Hall with an unspecified slush fund. The vote was a rejection of CTU, Democratic Party boss Toni Preckwinkle and Chicago Mayor Brandon Johnson.

The referendum failed because most voters saw through proponents’ lies.

They saw through the claim the tax increase was a “mansion tax,” understanding businesses and renters would have borne the burden. With no plan or guarantee for how the revenue would be used, they questioned the intent of the referendum, especially when CTU’s contract demands included that the tax should partially funding subsidized teacher housing. Trust further crumbled when the mayor unilaterally diverted $95 million in pandemic relief funds to pay for migrant housing when it was intended to help Chicagoans.

Now that the referendum is defeated, the mayor and his allies would do well to get serious about addressing Chicago’s homelessness issues. Chicago leaders should leverage $44 million in unused federal funds, plus the other $200 million already budgeted for homelessness.

There are better ways to help solve homelessness than taxing mom-and-pop shops, multi-family units and grocery stores.

Some solutions include:

1. Streamline housing approvals

Simplify and expedite the process for approving new affordable housing construction and conversions. This includes removing unnecessary regulatory obstacles, updating outdated building codes and expediting project approvals. This streamlining should ideally coincide with a comprehensive governmental reorganization, strengthening the city’s Department of Housing, and granting it control over the Chicago Housing Authority.

2. Restore unoccupied properties

The city can partner with local developers and community-based organizations to renovate thousands of vacant residential properties for middle- and low-income families and to address special needs such as temporary housing for victims of domestic violence, those with chronic drug addictions, returning citizens and immigrants. According to the U.S. Census Bureau, there are over 103,000 vacant housing units in Chicago. More than 13,000 of the units are vacant because they need repairs, are abandoned or condemned.

3. Encourage private-sector involvement

Engage existing landlords to create more affordable housing units by facilitating conversions of unused spaces. The additional income would be incentive enough if the impediments were removed for such conversions and the approval process were streamlined and less costly. There are as many as 130,000 apartment buildings, ranging from two-flats to multi-unit buildings of 24 apartments or more, that have space available for conversions.

4. Simplify tax relief programs

There is an array of programs designed to reduce the impact of property taxes through exemptions, credits, grants or deferrals. The process for accessing these programs is cumbersome and confusing. Also, benefits must be renewed annually, imposing a particular hardship on the elderly. A simple, one-stop process should be established to access the programs and to secure renewals. The foreclosure statutes need to be modified to keep families and seniors from losing their homes.

5. Fully utilize resources and assets of the Chicago Housing Authority

Chicago has an affordable housing institution: the Chicago Housing Authority. The authority has immense resources, some often squandered, as it operates independently of the city, divorced from any comprehensive city affordable housing strategy. The authority must be part of the solution and brought under the direction of the city’s Department of Housing by having the housing commissioner select the authority president, or the commissioner or a designee should serve as the authority board president.

6. Cap property taxes

Capping local property taxes for individual residential and commercial properties is critical to combating gentrification in at-risk neighborhoods. This will allow residents to reap the benefits of rising home values, urge small business development, and foster greater job opportunities while avoiding sharp increases in rents and home values in low- and moderate-income urban neighborhoods.

7. Strategically use property tax abatements

The strategic granting of property tax abatements can be offered for a fixed period to encourage the restoration of residential property and conversion of unimproved space to garden units. Longer-term, tax-exempt status can be provided for housing dedicated to addressing specific housing needs. Those include temporary housing for homeless families, victims of domestic violence, individuals in drug rehabilitation programs and transitional housing for returning citizens.

8. Create a city housing trust

A city housing trust can be created and funded by dedicating a share of developer fees, a share of the city’s annual tax increment financing surplus, housing-related fees and fines, or dedicated revenue from legalized gaming. Additional funding can be secured by issuing bonds financed by future, freed-up revenue from retiring tax increment financing districts. The Johnson administration has proposed this move, but a portion of the proceeds must be dedicated to the housing trust.

Voters did well to reject Johnson’s proposed tax increase. Thankfully he failed to get support for his other taxes, such as the city income tax, the head tax, the hotel-motel tax increase and the jet fuel tax. Chicago’s affordable housing crisis can be addressed without raising taxes by harnessing the potential of the housing market and implementing these eight pragmatic alternatives.