Living in Chicago just got a bit more expensive.
It will go down in history as the “great Chicago Property Tax of 2016”! Let’s just say that property owners are just a tad bit upset because once again the politicians have failed to to keep up with the budgets and continue to spend too much of our money. This time, our genius politicians decided to pass a Chicago property tax increase to fund other liabilities.
We have been expecting this, but the day has finally come where property owners are beginning to learn about the recent Chicago Property tax increase and what it means to them. Earlier last month, the Cook County assessors office released the 2nd installment of the 2015 property tax bill.
Let’s just say that some people have been shocked to say the least, but others not so much. The areas that are affected the most are where real estate prices tend to be the most expensive. Other areas like the south and west side of the city did not see an increase. This map below spells it out for you.
On average the Chicago home owner will see 12.8% Chicago property tax increase. This marks the largest Chicago property tax increase in modern Chicago history.
To back track, homeowners in cook county pay their taxes in arrears meaning that we are one year behind on payments. Taxes are due March 1st and August 1st for the first and last 6 months of the previous year (typically come out at this time, but never guaranteed). The tax bill that just came out which reflects the Chicago property tax increase was for the latter part of 2015 otherwise known as the second installment.
In addition to the 12.8% Chicago property tax increase, it is also a reassessment year! This means that in addition to a Chicago property tax increase the the assessors office is also reevaluating current property values and adjusting taxes what they see as fit. In the past 3 years, values have gone up considerably so expect an increase in addition to the 12.8%.
Cook County reassesses property values every three years. The county is split into three districts for taxing purposes; southwest suburbs, City of Chicago and northern suburbs. Each are reassessed every three years. City of Chicago’s values were re-assessed last year and have resulted in an almost 10% increase in equalized assessed value in addition to the Chicago property tax increase of 12.8%.
This means that some property owners could see as much as a 22.8% increase in taxes.
The actual tax bill is largely based on the amount of funds sought from the taxing districts and the property’s assessed value. Values have gone up considerably so we did expect an increase as it relates to values. A big part of the increase however is the city of Chicago seeking more money to fund the pension of city workers.
It’s a can that has been kicked down the road until the tax hikes were proposed last year to tackle the issues. Rahm Emanuel is seeking a $588 property tax hike over the next 4 years targeting properties valued over $250,000.
What To Watch Up For…
Do you escrow your property taxes? If you do, you can expect your new tax bill to be part of your monthly increased payment. The lenders estimate their monthly tax portion on the most available tax information. They project how much money they will need to pay an accurate amount when the due dates come. Since the spike was sharp, it is expected that there will be many escrow deficiencies and that lenders will need to increase overall payments. This will be especially concerning to folks who are on tight budgets where a couple hundred dollar spike in their mortgage payment will not be affordable.
What Will This Do For The Real Estate Market?
Nobody knows for certain what the Chicago property tax hike will do for the real estate market, but it doesn’t take brain surgeon to figure it out. If the cost of owning a property goes up, then so does the amount of buyers who can afford it. It’s no different than when interest rates go up. They go up and the amount of buyers decreases.
If you are selling this can effect your sales price. If you are looking to buy, make sure you take note of what your monthly property tax payment going to be.
I Don’t Own So This Doesn’t Affect Me..
Sorry Charlie it will affect you, because your landlord has taken a larger expense of carrying the property you live in. Don’t be surprised if the Chicago property tax increase cause them to increase your rent. My prediction is by next year at this time you will start seeing more rent increases because many of folks who own investment properties will pass this cost on to their tenants.
Rents have dramatically increased already over the last several years making living the city expensive for anyone. Yes, the rent is too DAMN HIGH, but don’t get mad at your landlord, get mad at the ones responsible for the largest Chicago property tax increase that exists!