How Chicago Took a Major Step Toward Tackling the City's Housing Crisis

The powerful real estate industry has pushed back vigorously, saying it would discourage investment and landlords would pass the cost onto tenants, making housing less affordable. Advocates don’t buy those arguments.

“One thing we know about rich people — they don’t like paying taxes,” Ramirez-Rosa said. ​“Even though they absolutely have the means to pay this one-time tax, they are pulling out all the stops to keep this from moving forward.”

Popular choice

The City Council does not have authority on its own to introduce a graduated real estate transfer tax. Therefore, the plan would require either state legislation, or approval by a majority of Chicago voters in a referendum. The Bring Chicago Home coalition pushed for the latter route, and Tuesday’s vote means the ballot question will go before the public.

On Sept. 14, Johnson introduced the Bring Chicago Home resolution, and on Oct. 4, a public hearing was held in City Council, as required by state law for potential referenda. Now that City Council has passed the resolution, the referendum is slated to appear on ballots in the March 2024 municipal election.

“We’ve been talking about this for years, organizers have been working on it for years,” said Alderman Matt Martin, who represents the 47^th ward on the city’s North Side.

“It’s great to be in this moment where we can embrace good government and work hand in glove with organizers and experts to implement this. This doesn’t happen without grassroots organizers, without people with lived experience of homelessness organizing themselves and ultimately organizing elected officials. That’s where credit needs to go first and foremost.”

During her 2019 campaign, previous Mayor Lori Lightfoot had proposed a graduated real estate transfer tax. But she balked at committing the resulting funds to affordable housing, and opposed Bring Chicago Home when it was officially proposed in 2018. She and her City Council supporters did not show up at a November 2022 City Council hearing meant to move the proposal toward a referendum, derailing the measure.

“That was a huge disappointment for us,” said Diane Limas, a leader of the Bring Chicago Home coalition and of the grassroots organization Communities United.

“But this coalition is very resilient, we kept on moving forward. The journey has been long, it has been very hard from time to time. But working with the mayor and mayor’s staff for months now, we feel we’re headed in the right direction.”

Industry outrage

Representatives of developers and real estate blasted the plan at the Oct. 4 City Council hearing.

“Simply put, Bring Chicago Home is a blank check to increase taxes on businesses and residents in every neighborhood without a transparent plan to address homelessness in Chicago,” said Brad Tietz, Vice President of Government Relations and Strategy for the Chicagoland Chamber of Commerce. ​“We are already experiencing record vacancy rates in sublease space downtown — the last thing the city needs is another setback to our recovery.”

“We’re not a knee-jerk ​‘no’,” Tietz continued. ​“If a plan was put in place that truly helped our unhoused population, we’re ready to talk. But given the fact that there is no concrete plan and our uncertain economic environment, we should not be adding to our growing tax burden.”

In an op-ed for Crain’s Chicago Business, Chicago and Illinois real estate trade group leaders said Bring Chicago Home could throw the city into an ​“urban doom loop,” with owners ​“turning the keys over” to banks and abandoning investments. The main trade group representing real estate, Illinois Realtors, did not return requests for comment for this story.

The Neighborhood Building Owner’s Alliance issued a report saying Bring Chicago Home would raise rents and hurt small landlords.

Anthony Perkins, a leader with progressive housing group ONE Northside, wrote in a separate op-ed for Crain’s that the building owners alliance has 600 members who together own more than 180,000 housing units, making them a powerful group that controls a large swath of the city’s housing stock.

“In fact, two-thirds of the projected revenue will come from properties worth more than $10 million — not mom-and-pop multifamily homes, but large buildings with hundreds of rental units,” Perkins wrote.

“They know that when voters have the opportunity to ask the rich to finally pay their fair share, and know where this funding will go, the voters will support this in huge numbers. The real estate industry knows if this goes to the ballot box voters are going to say yes.”

Troubling numbers

In fiscal year 2022, then-Mayor Lori Lightfoot’s administration budgeted around $200 million for addressing homelessness. Illinois Answers Project recently reported that the city has only spent about 15% of $52 million federal Covid-relief dollars meant for homelessness-related services, including for people with severe mental health issues, and rapid rehousing.

Supporters emphasize the need to serve the thousands of people who are living ​“doubled up” — in unstable and over-crowded living situations with family members or others. Experts have long defined doubled-up living as a serious part of the homelessness crisis, though it is not reflected in numbers used for federal statistics, which are collected during the annual ​“point in time count” on streets and in shelters and emergency rooms in January.

In 2023, Chicago recorded 6,139 people experiencing homelessness in its point-in-time count, far fewer than the Chicago Coalition for the Homeless report which found 68,440 people experiencing homelessness in 2021, the latest year for which it conducted a comprehensive analysis based on census data.

The coalition’s number includes more than 44,000 people living doubled up. Sam Paler-Ponce, research and outreach manager for the Chicago Coalition for the Homeless, noted that the tally doesn’t include asylum seekers, more than 15,000 of whom have arrived in the city since summer 2022, most having been bussed in from Texas.

Paler-Ponce said the growth of the housing crisis since the pandemic is also demonstrated in numbers of people seeking services for the unhoused. In 2019, 22,182 people accessed such services in Chicago, a number that rose to 36,878 in 2022, according to the Chicago Coalition for the Homeless. Meanwhile, the U.S. Interagency Council on Homelessness, a federal agency, noted in December 2022 that Black people make up 73% percent of Chicago’s unhoused but only 29% of the city’s population.

“We need a local dedicated revenue source to address housing solutions, and more flexible and local funding so the city can provide housing for the whole scope of people experiencing homelessness outside of the restrictive HUD [federal] definition,” Paler-Ponce said. ​“The permanent supportive housing… program model already exists, it proves to be successful, there’s just not enough funding behind it.”

Nationally notable

Raghuveer said that Chicago has led national policy on housing in problematic ways over the years, including with the devastating move to privatize and dismantle centralized public housing a quarter-century ago. Now, Bring Chicago Home gives Chicago a chance to become a national leader in creating a dedicated funding stream with a progressive financing model, she said.

Chicago currently spends significantly less than other major cities on addressing homelessness, according to an analysis by the Bring Chicago Home coalition.

Julie Dworkin, policy director for the Chicago Coalition for the Homeless, said her analysis of Chicago’s 2023 budget shows $45.9 million in city funds dedicated specifically to services and housing for those experiencing homelessness, not counting state or federal funds. That figure pales in comparison to the funding levels devoted to addressing homelessness provided in the FY2023 budgets of New York and Los Angeles, according to her review.

A dedicated funding stream is particularly important in Chicago, given the perennial stresses on the annual budget, including the pension crisis recently described as among the nation’s worst.

Other major cities have adopted various strategies for dedicated funding for affordable housing and addressing homelessness.

Last November, Los Angeles voters approved a ​“mansion tax” similar to Bring Chicago Home, levying a 4% tax on properties sold for above $5 million and a 5.5% tax on sales over $10 million, to fund affordable housing and address homelessness. On Oct. 24, a Los Angeles Superior Court judge dismissed lawsuits challenging the plan, clearing the way for it to take effect.

Much of Los Angeles’s funding for homelessness comes from Measure H, approved in 2017 by two-thirds of voters, which created a ​“quarter-cent” sales tax to generate funds for fighting homelessness for 10 years (through 2027).

In 2020, Denver adopted a 0.25% sales tax for a Homelessness Resolution Fund that is creating supportive affordable housing developments. Four years earlier, Denver approved its first dedicated funding stream for affordable housing, combining a small portion of property taxes ($12 a year for an average household at the time) and a one-time development fee, based on square footage: $0.66 per square foot for single homes and duplexes, $1.64 for multi-family developments and $1.86 for commercial developments. (That would mean around $37,000 for a 20,000-square-foot office building.)

Houston has been touted as a model for the success of a housing-first approach, then providing supportive services. Houston reportedly reduced its homeless population by almost two-thirds in the past decade and moved 25,000 people into housing through a housing-first program.

Houston’s initiatives rely on a mix of federal, state, county, city, corporate and philanthropic dollars, combined with a streamlining of bureaucratic processes and the efforts of different agencies and organizations.

New York City’s Department of Homeless Services’ projected fiscal year 2024 budget is $4.1 billion, including an increase to help serve asylum seekers. The funds, as in Houston, come from a mix of federal, state, local and private sources.

Raghuveer noted that cities have also considered municipal bonds as a way to fund affordable housing. But that leads to debt that falls essentially on all residents, whereas Chicago’s graduated real estate transfer tax charges only people and companies who are most able to afford it.

“The real estate transfer tax is definitely the progressive model, over a sales tax which would be regressive, and the municipal bond which is also problematic,” she said.

Growing hope

Passing Bring Chicago Home is only the first step. Raghuveer and other advocates emphasize that if the plan is adopted, residents — especially those with experience facing homelessness — must have a central role in designing the program structure.

At the City Council hearing in early October, some criticized the plan for a lack of specifics about how housing and services would be provided and who would provide them. As policy experts often say about any complicated program, ​“the devil is in the details” — and success will depend on overcoming significant challenges including serving a vulnerable population and bringing together multiple city agencies and private sector entities. Advocates of Bring Chicago Home acknowledge the difficult work that lies ahead if the ballot referendum passes, but note that, for the time being, the priority is building support for the proposal.

Bring Chicago Home’s website provides some details about the plan, including that permanent affordable housing would include new units, preservation of existing units, and housing vouchers providing rent subsidies.

“We need to develop affordable housing outside of the private market,” said Raghuveer. ​“We also need to regulate the private market. The biggest loss of housing is because landlords keep hiking the rent.”

Limas and other advocates are hopeful that Bring Chicago Home will actually become reality, once it is put to a vote of regular Chicagoans.

Educating regular residents and City Council about the measure will be key, according to Limas, including to overcome myths pushed by opponents, including the framing of the transfer tax as adding to the county’s high ​“property tax.”

“People who oppose what we’re doing to end homelessness are really powerful — the real estate agencies — they’re doing a lot of smack-talking,” Limas said. ​“I can’t say it’s going to be easy. But working with the mayor instead of working against each other, we have a real good chance of getting the support we need.”

Proponents have also tried to allay fears that landlords would raise rents to account for the transfer tax.

“For the opposition to stand here and say Bring Chicago Home will cause a rent increase, that is lies,” said Chicago Coalition for the Homeless leader April Harris at the City Council hearing, where she described her own experiences with homelessness.

“I’m here to say these landlords have been raising rent way before Bring Chicago Home was introduced, okay? People deserve to be housed and to have stable housing over their head. Housing is a human right in a just society and the time is now to bring Chicago home.”