At a time when the supply of affordable housing is shrinking and the demand is growing, Illinois needs more money to build and preserve affordable housing. BPI, together with several partner organizations, has developed a proposal that would generate roughly $50 million a year in new funding for affordable housing, while providing broad-based tax relief. The proposal would restructure the state’s Real Estate Transfer Tax, which is the primary source of funding for the state’s Affordable Housing Trust Fund. That would double the amount of money that goes into the Trust Fund each year.
Currently, 37 states have real estate transfer taxes. Only one's is lower than Illinois. Other states have transfer taxes anywhere from three to twelve times higher than Illinois. Under the proposal, transfer tax bills would still be lower in Illinois than in many other cities and states.
It is not surprising, then, that many states spend substantially more on housing than Illinois does. For example, California spends three times more per capita than Illinois; New York spends four times more per capita; Florida spends seven times more per capita and Massachusetts spends ten times more per capita.
The proposal would raise the transfer tax on higher-end transactions, but lower it on transactions up to $1 million. That means that 98% of property transactions across the state would get some tax relief.
The proposal would also generate $50 million a year in new funding for open space preservation since, under current law, half of the real estate transfer tax receipts go to the Open Space Lands Acquisition and Development Fund and the Natural Areas Acquisition Fund.
$100 million in new affordable housing and open space funding annually could be used to:
- Expand Cost-Effective Supportive Housing Programs Through a 20% Set Aside. Supportive Housing provides those who are homeless or have special needs with permanent affordable housing and support services.
- Preserve Existing Affordable Housing. Approximately 39,000 subsidized housing units are at risk of loss within the next five years.
- Reduce Cost to Business Through Live-Near-Work Initiatives. Living far from work increases business costs, traffic congestion, and air pollution.
- Develop and Expand Public Parks and Outdoor Recreation. The demand for fishing, hunting, ball fields and playgrounds continues to increase.
- Restore Important Ecosystems. High-quality natural communities, which provide a healthy and diverse habitat for wildlife and endangered species, need protection.
- Increase Flood Management and Water Quality. Wetlands and open spaces absorb water during rainfall and so naturally reduce flooding and preserve water quality during storms.
To date, the proposal has attracted strong support among legislative leaders in both the Illinois House and Senate and a long list of affordable housing and environmental advocates. In the context of the legislature's consideration of the biggest tax increase in the state’s history, however, the proposal faces an uphill battle. With our partners and allies, we will continue to work to move the proposal forward and substantially increase our state’s commitment to affordable housing and the environment.
More information on State Policy Initiatives:
