Proposed Tax Relief for Affordable Rentals


There has been no lack of legislative initiatives in Springfield lately to preserve and expand the supply of affordable housing in Illinois. Unfortunately, several of these legislative initiatives focus on Rent Control as a cure-all to the region’s affordable housing woes. The Rogers Park Builders Group firmly opposes any effort to adopt rent control in the state. RPBG believes that, far from solving our affordable housing problems, rent control will only make them worse with considerable collateral damage to our livelihoods and the wider economies of the city, region and state.

But a recently introduced bill approaches the affordable housing problem from an entirely different vantage point – one that our organization can and will enthusiastically support. House Bill 2168 is currently up for consideration in the Illinois Assembly and was introduced by Representative Sara Feigenholtz’ (D-Chicago, 12th District). Rep. Feigenholtz has represented the 12th District since 1994, an area that extends along Chicago’s North Side Lakefront from the Gold Coast to Uptown.

HB 2168 is based on a proposal developed by a working group formed under the auspices of the Preservation Compact – a coalition of public, private and nonprofit leaders all working together to preserve affordable rental housing in the region. Steve Thomas, President of 5T Construction Inc., and Rafael Leon, Executive Director of the Chicago Metropolitan Housing Development Corporation (CMHDC), chaired the working group. The challenge was to create a tax incentive program that would provide sufficient incentives to the developers and owners of rental housing for them to create new affordable units, without busting the budget of the taxing bodies that would ultimately award these incentives.

At the time the working group got started, a number of other initiatives were already underway to craft a tax relief program, including efforts by the Illinois Housing Council, SRO owners and large developers. All of these groups were brought into the working group effort, ultimately resulting in the legislation now being proposed. If passed, HB 2168 would amend the Property Tax Code to provide tax incentives to create affordable rental units in exchange for a reduction in the equalized assessed value of the rental properties in which those units are located.

Members of RPBG may recall reading an article in The Builder“New Incentives for Affordable Housing” Spring 2018 – that detailed how this tax relief would work. HB 2168 puts these ideas into legislative form. If passed, the bill will become law in Cook County and may be implemented in any other Illinois county where the local county board votes to adopt it.

To qualify for the proposed tax relief, buildings must contain at least six rental units and include an affordability component. The proposed tax relief is only available to buildings that are newly built or that have undergone qualifying rehabilitation, defined as compliance with local building codes and replacement or renovation of at least two primary building systems. The affordability requirement can be met by lowering rents to required levels, renting to Housing Choice Voucher holders, or using another rent subsidy where households do not pay more than 30% of income. The affordability thresholds work as follows:

Mathematical testing of this proposal demonstrates that the first option (15% restriction for 25% reduction in assessed value) would provide a net benefit to property owners in stronger markets, such as Rogers Park, where rising rents have resulted in the displacement of some lower-income households. The second option (35% restriction for 35% reduction in assessed value) would provide a net benefit to property owners in weaker markets where price appreciation has not been as pronounced, but where lower rents will still provide much needed relief to low and moderate-income households. This program is unlikely to provide a net benefit to property owners with rental properties in the strongest markets where rents are high, such as the greater downtown area or Lincoln Park.

While this program may not work for every property in every neighborhood, it is likely to provide a net benefit to property owners across a wide range of urban, suburban and rural areas across the state. This includes Rogers Park where many of our members are most active.

There are many reasons to support HB 2168:

We applaud the Preservation Compact for crafting the proposal that led to this legislation and are grateful to Representative Feigenholtz for sponsoring it. HB 2168 provides a common sense, market-based solution to a difficult problem. We encourage those individuals and organizations that purport to care about affordable housing to support this proposal, and to work with property owners to find other effective and workable solutions. We will continue to reject any “solutions” that seek to demonize property owners, or that punish us by shifting an undue share of the cost onto our shoulders.

HB 2168 demonstrates that property owners, progressives and tenants’ rights groups can find common ground and work together in our effort to solve the affordable housing problems in the Chicago region. There should be many other areas of agreement that the two sides can find in this effort. We hope that HB 2168 represents just a first step in building a better working relationship between property owners and affordable housing advocates.