New study shows why Chicagoans were right to reject ‘Bring Chicago Home’
A little over a year ago, Chicago became the first major city in the country to reject a “mansion tax” referendum at the ballot box.
“It was cowardly,” Mayor Brandon Johnson said after the loss. “And I will be punching back.”
But did voters make the right choice?
A new study out of Los Angeles suggests yes, they did.
The unintended consequences of Los Angeles’ “mansion tax”
Chicago voters rejected Bring Chicago Home in March 2024, with 52% voting no.
The measure would have nearly tripled the real estate transfer tax on all property sales between $1 million and $1.5 million and quadrupled the transfer tax on all sales above $1.5 million, generating an estimated $100 million a year in new tax revenue.
Proponents of the effort in Chicago cited a similar “mansion tax” measure in Los Angeles as an inspiration.
In 2022, LA voters passed Measure ULA, which slapped a 4% transfer tax on properties selling for more than $5 million and a 5.5% transfer tax on properties selling for more than $10 million.
ULA has generated $288 million a year in new revenue so far. But it’s also imposed significant hidden costs, which are now coming to light.
According to a new study from nonprofit research organization RAND and UCLA’s Lewis Center for Regional Policy Studies, ULA:
Cut commercial, industrial and multifamily property transactions by 30-50%
Cut new housing production by about 1,910 units per year, an 18% drop compared with the pre-election level of new development
Led to a $25 million loss in property tax revenue, which compounds year after year
“We found that it is having a pretty strong negative effect on both market rate housing and affordable housing,” said Shane Phillips, a housing policy researcher at UCLA.
By rejecting Bring Chicago Home, it looks like Chicagoans dodged a bullet.
Don’t look to LA for housing reform
Chicago needs more affordable housing.
But as my colleague Micky Horstman recently explained in the Chicago Tribune, Chicagoans should look toward Austin, not Los Angeles, for solutions.
Chicago’s leaders must abandon their self-strangling, restrictive approach to affordable housing. Regulation coupled with market manipulation is not working. Just this year, average one-bedroom rents have grown to more than $1,900 per month in Chicago.
They should look toward another blue city, Austin, Texas. Austin has shown you can only build your way to affordable housing. You can’t regulate it.
This year, rents in Austin dropped again to $1,436 per month. How?
In 2019, the city eased zoning restrictions and provided incentives for higher density in affordable and mixed-income developments.
In May of last year, the city boosted its commitment to housing affordability by passing local ordinances to allow single-family homes to be built on smaller lots.
Last month, the City Council voted to expand single-stair housing developments to provide more affordable options for families. Buildings no longer are required to have two staircases per floor when taller than three stories, which eliminates the need for a central hallway and allows compact designs.
Austin’s experience echoes that of Minneapolis, where pro-growth housing reforms have led to more construction and falling rents.
The same story is playing out in New Zealand, where Auckland made it easier to build housing while Wellington did not. The results are clear, per the Financial Times.
Rent relative to income is now falling in Auckland while rising in the rest of the country.
How can Chicago create more affordable housing?
Johnson has pointed to his “Cut the Tape” initiative as evidence of efforts to spur development through pro-business reforms. But a recent analysis of the mayor’s progress on that initiative by LyLena Estabine found most of that red tape remains tangled.
Mayor Brandon Johnson promised to “Cut the Tape” holding Chicago back from housing and economic growth, but a year later most of his proposals just rearrange regulations, some are close to useless and almost no real change has been achieved …
Roughly half of the items marked as “completed” create new committees, roundtables, checklists or training. Any red tape they might eliminate seems to be inside city hall, not on the ground for those trying to create housing. Another quarter of completed tasks simply put forms online, accept digital signatures or launch software portals. That spares applicants a trip downtown, yet the underlying regulatory hurdles remain.
Some of these “complete” metrics might also be misleading. For example, recommendation No. 19, which discusses consolidating the design review process and moves Chicago toward objective criteria for approval and clear guidelines, could have a big impact. Only, the to-do Johnson wrote down wasn’t to implement this change, but merely to “consider” it. The city marked this as complete. They’ve successfully considered it, and no change has been made.
The Cut the Tape initiative does include some great recommendations for reform, such as scrapping Phase 1 and 2 environmental reviews on pre-cleared city lots, converting vacant storefronts to housing without discretionary rejections, allowing barber shops and nail salons to open without a Zoning Board of Appeals hearing, and repealing parking minimums.
But none of these recommendations have been implemented. And the report ignores some of the most effective reforms available to the city. Estabine lists several:
Automatically approving delayed permits. Thirty-, 60- or 90-day deadlines for each permit stage, with automatic approval if the city misses the clock.
Mandating objective criteria across the board. Aldermanic prerogative has stopped many development projects for subjective reasons that keep permit rates low. This veto power held by each of the city’s 50 aldermen should be limited in light of the city’s housing crisis to ease development of light-touch density properties – four- to 10-unit buildings.
Removing discretionary hurdles for additional dwelling units across the city. A pilot program unfairly restricts development of additional dwelling units to a few small pilot areas and creates unfair limitations to development on the South and West sides of Chicago.
Allowing for more multi-family housing in single-family zones. With 40% of Chicago restricted to single-family housing, it is difficult to build cheaper and denser alternatives. Having to seek special approval to circumvent these restrictions adds time and complications to housing development.
Johnson told voters in February he would try again to pass Bring Chicago Home.
Any energy devoted toward rehashing a plan voters have already rejected would be better spent pushing proven reforms to encourage more building.
P.S. I joined The Mincing Rascals podcast on WGN Radio last week to discuss the U.S. Senate race in Illinois, displaying the cost of tariffs in Amazon prices, and the Chicago Teachers Union taking students out of class for May Day protests. My “green light” recommendations: Numero Group’s Soul Music of Illinois and Season 2 of The Rehearsal.
Trying to wrap my head around this! If I understand you, the LA case study implies that good intentions and a snappy slogan aren’t enough to fix an urban problem. Wow. It’s almost like policy proposals need to be analyzed in advance, running through potential scenarios of cost-benefit outcomes and likely new incentives and disincentives. If only we had university graduate programs to train people to do something like that. Somebody should suggest that to Northwestern, UChicago, UIC, etc. The city could even hire the graduates to create and staff a department devoted to the discipline, if that doesn’t sound too crazy.
Rent for a one bedroom apt. is $1900 in Bucktown, Downtown, and Andersenville, which are not areas for Chicago natives.