No Holiday Cheer For Renters As Landlords Eye Tax Hikes
With Cook County property tax bills expected to be mailed by December 1st and due December 30th most Chicago apartment dwellers should expect rent increases in 2023.
Landlords should be able to view the long-delayed second installment of the 2021 tax bill online as early as November 15th or November 16th “assuming there are no glitches,” said Cook County Treasurer Maria Pappas, who is responsible for sending out the bills and collecting payments.
Taxpayers—including homeowners and landlords—will be able to download their bill to print and mail in their payment, pay online at the treasure’s website, at Chase Bank branches, or, in person, at Pappas’ office downtown.
North Side landlords—especially commercial property owners—are especially nervous because the second installment of the 2021 bill will reflect hefty reassessment numbers in the city of Chicago passed on by Cook County Assessor Fritz Kaegi.
Reassessment increases of 38% to 55% in Lincoln Park and Old Town are expected to send real estate tax bills soaring. Hefty rent hikes likely will follow in spring and summer of 2023 when new leases are drafted.
Rent growth in the Windy City soared in 2021 when the pandemic drove up prices rapidly, especially downtown, where rents rose more than 30%, reported Integra Realty Resources, a consulting and appraisal firm.
A 1,000-square-foot luxury (Class A) apartment in downtown Chicago rented for $3,370 per month at the end of 2021, up from $2,550 in 2020, when pandemic-battered landlords were offering huge incentives.
Integra reported that the net rent at high-end Class A buildings in such ritzy neighborhoods as the Gold Coast, Streeterville, the Loop, Near East Side, River North, Fulton Market and West Loop rose 32% in 2021, while net rent at less expensive Class B properties downtown skyrocketed 34%.
The downtown apartment occupancy rate slumped to 86.5% at the end of 2020 from 93.3% a year earlier, according to Integra. So, the 2021 rent hikes were mostly catch-up increases.
By the end of 2021, the downtown occupancy rate rebounded to 94.7%, reported Integra, which forecasted 5% rent hikes downtown in 2022.
For renters who can’t afford luxury apartments downtown, some nice units located in the first ring of neighborhoods outside downtown, noted Ron DeVries, senior managing director of Integra. In some cases, rents in outlying neighborhoods, such as West Town, Logan Square and Avondale, are 20% lower than downtown, he said.
However, apartment hunters searching for those bargain rents in such North Side neighborhoods as Old Town, Lincoln Park, Lakeview, Edgewater and Andersonville may see that dream evaporating next spring and summer.
“How apartment rents are determined is systemic in the sense that each piece in the process affects another piece in a ripple effect until you get to the eventual rents,” explained veteran Chicago landlord Stuart Handler, CEO of TLC Management Co.
“In the end, if real estate taxes go up, rents eventually go up. If utility bills and maintenance go up, rents eventually go up,” Handler said.
“Landlords are nimble, creative and risk-taking people,” Handler said. “If the demand is there, they will find a way to absorb the increased costs of operating their buildings by passing rising expenses along to their tenants in the form of higher rents.”
However, Handler noted that if landlords cannot pass along those increased costs, there likely will be an economic dark side.
“Landlords eventually will cut back on maintaining their buildings causing deterioration, followed by lower rents to fill vacancies and higher evictions for low-credit nonpaying tenants.”
According to Handler, higher rents ultimately are “the result of decisions made by county tax assessors, taxing bodies, utilities companies and legislators.”