On Nov. 16, 2022, the Chicago City Council approved an ordinance designating the development site for a proposed multi-family residential development as eligible to obtain a new property tax incentive for the creation of affordable rental housing. The 30-year property tax incentive is valued at approximately $9 million. The incentive will facilitate the construction of a multi-family residential project in the Illinois Medical District containing 125 residential dwelling units, of which 25 will be affordable to households earning 60% of the area median income.
In 2021, the State of Illinois enacted Public Act 102-0175, an amendment to the state’s Property Tax Code that directs county assessors to implement special assessment programs to create and preserve greater numbers of affordable rental housing.
The 2021 law established three tiers of incentives that vary in affordability requirements and reductions in assessed property value:
- Tier One – 15% Affordability: New construction or rehab rental multi-unit housing developments that provide at least 15% of units as affordable units are eligible for a 25% reduction in assessed value for a period of 10 years, with two renewable 10-year terms.
- Tier Two – 35% Affordability: New construction or rehab rental multi-unit housing developments that provide at least 35% of units as affordable units are eligible for a 35% reduction in assessed value for a period of 10 years, with two renewable 10-year terms.
- Tier Three – 20% Affordability: New construction or rehab rental multi-unit housing developments that provide 20% of units as affordable (and have a project labor agreement) are eligible for a phased reduction in assessed valuation for a period of 30 years, starting with a three-year freeze and stepping down over time, as follows: a 100% reduction in the assessed value (AV) of the property for taxable years one through three; 80% reduction in AV for years four through six; 60% reduction in AV for years seven through nine; 40% reduction in AV for years 10 through 12; and 20% reduction in AV for years 13 through 30.
Tiers one and two are available for eligible projects located throughout Cook County. In the City of Chicago, however, eligibility for tier three is limited geographically: the incentive is only available “by right” for properties and projects that are within a “Downtown” zoning district. Projects that are located outside of the Downtown area may become eligible to receive the incentive if they are designated by the City Council as a “low affordability community” by passage of an ordinance.
The Taft Chicago Land Use and Zoning team secured approval of an ordinance designating the client’s development site as a “low affordability community” for purposes of the tier three property tax incentive. The approval is significant in that it is only the second time the Chicago City Council has taken such action, and the first time at the request of a private applicant.
Taft's Land Use and Zoning team is pleased to have acted as legal counsel to Owlcrest Development, LLC in connection with securing the approval. The Taft team was led by Chicago Partner, Liz Butler.