Chicago Mayor Johnson’s Proposed Property Tax Increase to Add $5K to a $25K Tax Bill in Downtown Market

“Sanctuary City” blank check spending largely to blame for the tax increase as condo market spirals further down

Chicago has spent hundreds of millions on migrants it didn’t budget for but was happy to pay for (often with no-bid contracts).

Specifically, $230 million in 2024, according to CBS News (plus additional state and federal funding). Unfortunately, the bill is now coming due, and property owners are about to cover this gap, along with an additional $70 million, thanks to Mayor Brandon Johnson’s proposed incremental property tax levy of $300 million — stacked on top of the $1.6 billion property owners already pay.

Downtown Chicago property owners will face thousands more per year if the levy passes, with condo owners wondering if the "sanctuary" in "sanctuary city" was supposed to include their bank accounts.

Moreover, it’s a far cry from Johnson’s campaign promise of “no new property taxes.” But in politics, promises are like Stanley mugs — useful for Instagram poses until they're left behind at a kid's soccer game and become a $50 sunk cost.

‍The numbers don’t lie

According to Chicago Contrarian, a property currently paying $25,000 in annual property tax (common for properties worth $750K-$1.25MM) will fork over an additional $4,685 annually based on the proposed 18.75% tax hike.

And while the real estate market hasn't yet processed this latest curveball (it’ll take a few months for closed transactions to reveal the impact), October downtown condo transactions suggest the market is already in a steep nosedive. This move could only sharpen that trajectory.

The old trader’s adage “don’t try to catch a falling knife” seems to be the guiding principle for today’s Chicago buyers. Even though single-family homes in the under $2MM range are holding steady in many neighborhoods, due in part to limited supply and post-Covid building costs, condos in the Gold Coast, Streeterville, and Near North areas are proving that real estate doesn’t always go up, especially when property taxes are on a bender.

“I took a loss on my last investment, but I got out just in time before rising property taxes, which were already killing me,” a former Chicago real estate investor noted. He pointed us to recent closed deals that suggest the condo market was already in trouble, even before "Mayor Johnson’s new property price death sentence."

Properties value continues to fall in 2024

Consider 132 E Delaware Place, Unit 4902: This high-end 3-bedroom with all the culinary clout you’d expect (Sub-Zero, Gaggenau, Franke — take your pick) sold on October 30th for $1.4 million, down from $1.725 million in 2018. Perhaps the carrying costs, including taxes and assessments totaling $61K annually (set to rise to nearly $70K under Johnson’s proposal), had something to do with the decline.

Then there’s 180 E. Pearson, Unit 4507, which fetched $1.02 million on October 18, down from $1.3 million in 2016. The 2,754-square-foot, 3-bedroom condo tells a similar tax-and-assessment story as its neighbor.

High-end properties are feeling the pinch, too. 11 E. Walton, Unit 4802, sold for $3.55 million in October, down from $4.95 million in the summer of 2021. That was when the “riot discount” had already started creeping into downtown pricing, according to the Contrarian’s source.

This 4,000-square-foot, 3-bedroom unit declined 30% in three years but may fall even further if its $99,000 annual tax bill hikes by another $20,000 to $120,000 under Johnson’s plan. Here’s hoping the new owners enjoy that “Chef’s kitchen” and the “spa-like bath with private balcony and two closets” before Brandon the Tax Man comes calling.

Finally, 800 N. Michigan, Unit 301 sold in October for $2.6 million, down from $2.75 million in February. After factoring in real estate commissions, we estimate a seller’s loss of $250,000 in just six months.

In a city that can’t seem to get out of its own way, the message to downtown property owners is clear: brace yourselves. Because when politics and property values clash, the only certainty is a bill due soon and a continued Chicago condo price massacre.