Real estate tax hikes in Chicago next year are as inevitable as death. All landlords and renters should plan ahead for the falling axe.
15-Nov-21 The expected massive tax increases in 2022 will be fueled by the 2021 triennial reassessment in Chicago, and Mayor Lori Lightfoots 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 Gold Coast, Lincoln Park, Old Town, River North, and Streeterville should brace themselves for hefty rent increases next year.
In 2021, the entire City of Chicago is being reassessed. The assessment level is 10 percent 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 (left) 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 Chicago 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 Lightfoots capital spending plan. And, $28.6 million will be assessed on new properties.
Chicagos outstanding $47 billion in pension debt an amount higher than the pension burden in 44 other 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 percent, while the cost of city services rose 18 percent.
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.
Reassessment burdens property owners big and small
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 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 six-flat near Crilly Court rose a whopping 55.5 percent 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 four-flat rose 38 percent 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 greystone three-flat owner was surprised when the assessor reported his propertys fair market value rose 39.3 percent 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 greystone three-flat in this neighborhood just north of Logan Square skyrocketed 66.4 percent 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 percent 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 four-flat skyrocketed 63.2 percent 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 assessors lofty market-value increases translate into sharply higher assessed values. 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, according to 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 cant 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, advises Griffin (left). 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.
Contact the assessors office to find comparable properties or start the appeal process. A taxpayer can file with the Cook County Board of Review and later with the Illinois Property Tax Appeals Board. Or call Michael Griffin, an expert tax assessment lawyer.