A Cook County judge Friday ruled that a referendum question funding homelessness prevention in Chicago via a real estate transfer tax increase on the March primary ballot is invalid, dealing a major political blow to the measure’s biggest proponent, Mayor Brandon Johnson.
Cook County Circuit Judge Kathleen Burke’s ruling represents a big win for the real estate industry and development groups that sued to block the ballot measure, labeled by backers as the Bring Chicago Home referendum.
A spokesperson for the Chicago Board of Elections said until a more detailed order comes from the judge, the question will remain on the ballot, but votes on it will not be tallied. The board does not plan on pausing early voting as of now, and did not immediately say whether they plan to appeal the ruling. Voters had been already weighing in through mail ballots and in-person early voting.
The Building Owners and Managers Association of Chicago, the Chicagoland Apartment Association, the Neighborhood Building Owners Alliance of Chicago and others were among the industry groups that argued the ballot question was unconstitutional and violated state law by asking voters to approve both a tax cut and tax hike at the same time.
The suit asserted the referendum measure is a “textbook example” of a time-honored legislative tactic known as “log-rolling” — combining a politically unpopular proposal with a popular one to sugar-coat a bitter pill and, therefore, convince voters to swallow it.
Farzin Parang, executive director of the Building Owners and Managers Association, said the judge’s ruling came as no surprise.
“The way that they worded this question was just sort of politics and it was vague and it was trying to manipulate people into thinking that they were getting a tax cut when this is, functionally, a property tax increase on everybody,” Parang said. “We’re just gratified that the judge agreed with us.”
Parang said that, had the binding referendum remained on the ballot, Johnson and his allies would likely have won.
That’s because the March 19 turnout is expected to be low, and the person the mayor assigned to quarterback the campaign — Emma Tai, former executive director of United Working Families, a group affiliated with the Chicago Teachers Union — marshaled field operations for Johnson’s winning mayoral campaign.
That made the lawsuit the real estate industry’s best and possibly only shot at defeating the “Bring Chicago Home” effort.
“We are against a dramatic, dramatic increase in property-based taxes because, on the commercial side, we already have the highest commercial property tax in the country, and it’s impeding our industry’s ability to recruit investment … at a very, very difficult time for the industry,” Parang said.
The ballot question asks voters to decide whether to authorize the City Council to quadruple the real estate transfer tax on the value of property transactions $1.5 million and over and triple the tax on the value of sales from $1 million up to $1.5 million. The tax on homes costing under $1 million would go down.
Changing the real estate transfer tax from a flat tax to that three-tiered structure is estimated to bring in an additional $100 million in revenue annually. The money would be used to address homelessness, with the measure’s supporters pointing to rental subsidies and mental health care as some of the potential uses.
The specific uses of the money would be determined by an advisory board and spending ordinance that would still need to be passed by the City Council if voters approve the measure. Revenue wouldn’t have been expected to be budgeted for use by the city until 2026.
Johnson and supporters of the referendum argued the city needs a dedicated revenue stream to combat the rising number of people experiencing homelessness in the city. The referendum’s backers estimate about 93% of property sales will see a tax cut under the plan.
Former Mayor Lori Lightfoot campaigned on a promise to raise the real estate transfer tax on high-end property sales to create a dedicated funding source to combat homelessness but broke that promise, infuriating what was her progressive base.
Johnson has been determined to avoid that mistake at a time when homelessness has been made worse by the migrant crisis.
The lawsuit was the latest hurdle supporters have faced after pushing for years for voters to weigh in on the issue. A little over a year ago, they couldn’t get a majority of the City Council to hold a hearing on the issue, but a more progressive Council and mayor pushed it to the forefront.
Backers of the referendum said they were pinning their hopes on an appeal. Ald. Maria Hadden (49th) said even if that bid fails, voters should still show up to the polls to support the referendum since it remains on the ballot.
“It’s pretty shameful for a small group of … monied interests to spend more time and money in disenfranchising Chicago voters in trying to obstruct and thwart and invalidate a legitimate democratic process than actually trying to solve the problem,” Hadden said.
“Chicago voters should know that a small group of real estate lobbyists and interests — the same people raising their rents to make it unsustainable to live in our neighborhoods — are also trying to say that their voice doesn’t matter,” Hadden added. “It’s shameful.”
Doug Schenkelberg, executive director of the Chicago Coalition for the Homeless, made no attempt to conceal his anger.
“This is about real estate interests trying to subvert democracy,” Schenkelberg said. “It hurts people experiencing homelessness — the 68,000 people who need permanent housing and supports.
“We’re obviously very upset,” Schenkelberg added. “This is straight out of the Far Right playbook of trying to disenfranchise voters from supporting something they really care about and want to take action on.”
But real estate and development groups said commercial properties that would bear the brunt of the tax increase will be harmed at a time when the industry is still recovering from high vacancy rates brought on by the pandemic. They also argued the city hasn’t laid out a clear enough plan for how the revenue will be spent, and point to the city’s slow spending of federal relief dollars meant to tackle homelessness.
“No plan has been communicated on how they’re going to spend the money,” said Chicagoland Chamber of Commerce President Jack Lavin, calling the ruling a “victory for taxpayers.” “The city’s just asking for a blank check and saying, ‘Just trust us.’”
