Apartment Rents Will Rise As Landlords Battle Tax Hikes
Real estate tax hikes in Chicago next year are as inevitable as death. All landlords and renters should plan ahead for the falling axe.
The expected massive tax increases in 2022 will be fueled by the 2021 triennial reassessment in Chicago, and Mayor Lori Lightfoot’s plan to link future property tax increases to the rise in inflation.
As a result of this double-tax tsunami, renters in the North Side neighborhoods of Streeterville, Gold Coast, River North, Old Town and Lincoln Park should brace themselves for hefty rent increases next year.
In 2021, the entire City of Chicago is being reassessed. The assessment level is 10% of market value for residential property. The 2021 assessment increases will be reflected on the second installment of the property tax bill issued in summer of 2022.
Cook County Assessor Fritz Kaegi noted that the Near North Side—bounded by Fullerton Avenue on the north, Lake Shore Drive on the east, and the Chicago River on the south and west—posted “surprisingly robust” real estate values in 2021.
The City Council recently approved a 2022 budget that is the first to include an automatic property-tax increase of $76.5 million. About $22.9 million of the tax increase will be driven by the Consumer Price Index. Another $25 million will go to pay for Lightfoot’s capital spending plan. And, $28.6 million will be assessed on new properties.
Chicago’s outstanding $47 billion in pension debt—an amount higher than the pension burden in other 44 states—is the elephant in the room, according to the Illinois Policy Institute. Since 2010, spending for police, firefighter and teacher pensions has skyrocketed 239%, while city services cost rose 18%.
As a result, many North Side apartment building owners are planning hefty rent increases next year to pay the expected sharply higher 2021 tax bills.
Kaegi said the reassessment process is reducing the property tax burden on residential taxpayers and placing more of it on owners of high-rise apartments, office buildings and other commercial properties.
However, a spot survey by the Home Front column revealed that statement is far from true. The following examples show hefty North Side residential assessment hikes in buildings owned by small “Ma and Pa” owners:
Old Town. The 2021 estimated fair market value on a historic red brick 6-flat near Crilly Court rose a whopping 55.5% to $1,560,000 from $1,002,980 in 2020. The assessed value jumped to $156,000 from $100,298. The 2020 tax bill was $21,331.
Lincoln Park. The 2021 estimated fair market value on a vintage red brick 4-flat rose 38% to $1,570,000 from $1,137,100 in 2020, according to the assessor. The assessed value jumped to $157,001 from $113,710. The owner paid a 2020 tax bill of $25,331.
Logan Square. A graystone 3-flat owner was surprised when the assessor reported his property’s fair market value rose 39.3% to $800,000 from $574,210. The building is near the CTA Blue Line. The assessed value jumped to $80,000 from $57,421. The 2020 tax bill was $12,144.
Avondale. The fair market value of a Victorian graystone 3-flat in this neighborhood just north of Logan Square skyrocketed 66.4% to $630,000 from $378,460. The assessed value rose to $63,000 from $37,846. The owner paid a 2020 tax bill of $7,767.
Old Irving Park. The assessor reported that the fair market value of a vintage red-brick six-flat in the neighborhood rose 46.3% to $800,000 from $546,560 in 2020. The assessed value rose to $80,000 from $54,656. The 2020 tax bill was $12,224.
North Lincoln Square. The fair market value of a yellow brick 4-flat skyrocketed 63.2% to $560,000 from $343,080 in 2020. The assessed value rose to $56,000 from $34,308. The owner paid a 2020 tax bill of $7,642.
The assessor’s lofty market-value increases translate into sharply higher assessed values. And, that could spark some shocking real estate tax hikes—and rent increases—when the second installment bills arrive in late 2022, analysts say.
“The property-tax bill is determined by four factors: the assessment, the equalization factor, or ‘multiplier,’ the tax rate and the exemptions,” said Michael Griffin, a Chicago real estate tax appeal attorney.
However, predicting a hefty property tax increase when the second installment of the 2021 bill arrives in late 2022 really centers on two wild cards—the tax rate and the state equalization factor, which can’t be challenged by taxpayers.
The equalization factor, or “multiplier,” is established each year for Cook County to bring property tax assessments in line with other parts of Illinois. The factor is determined by the Illinois Department of Revenue.
The main engine that drives up property-tax bills is the amount of money spent by local government.
Property owners who think they are over assessed should appeal now; Griffin advises. If the assessment increases are not appealed, the hikes will take effect on the 2021 tax bill. A homeowner cannot fight the tax bill. It is too late to appeal when the bill arrives.
Visit the assessor’s website: www.cookcountyassessor.com, or call 312-443-7550 to find comparable properties or start the appeal process. The assessor’s deadline for filing an appeal in North Chicago Township is October 19.
A taxpayer can file with the Cook County Board of Review (312-603-5542) or www.cookcountyboardofreview.com and later with the Illinois Property Tax Appeals Board (217-785-6076), or www.ptab.illinois.gov. Or, call Michael Griffin, an expert tax-assessment lawyer, at 312-943-1789.