2016 BUDGET BACKGROUND

Impact of Proposed Property Tax Increase on Rental Properties

In the 2016 budget proposal, Mayor Emanuel outlines a plan forward that addresses the legacy
liabilities associated with the police and fire pension funds and stabilizes the retirements for our
first responders. The budget proposal calls for a phased-in property tax increase starting with
2015 through 2018, solely committed to funding the Citys police and fire pension obligations.
The impact of the property tax increase will be largely borne by those who can most afford it,
including the central business district and wealthier homeowners.
The impact of the property tax increase will vary by renter, but like homeowners, the increase in
property taxes will be borne by those who can best afford it. If landlords were to pass any
increase on to their renters, then it is more likely that renters in more affluent neighborhoods
would see a modest increase of $15 or less in rent, while the City expects that many low-income
renters will see little to no increase in their rent.
Summary
Multi-unit rental properties pay 12% of the overall tax levy. The proposed Homeowners
Exemption would be responsible for less than a 5% increase in an apartment buildings
property taxes.

A quarter of the citys renters live in two to six unit apartment buildings that currently
receive the homeowners exemption because the landlords occupy a unit. These renters
would benefit from the Mayors proposal to expand the exemption.

Most landlords will be able to take a tax deduction of 15-35% of the property tax increase,
which should further reduce the impact if landlords choose to pass through the cost.

Many low-income renters will see little to no increase in their rent due to the property tax
increase:
o Two-fifths of Chicago renters are low income (under $25,000 in household income)
and live in neighborhoods where landlords are unlikely to raise rents due to market
conditions.
o Many of these buildings are Class 9 properties, with lower market values than
similar buildings in higher income neighborhoods
o The 37,000 households that receive housing choice vouchers should see no impact
because landlords have limited ability to set rents