New Illinois Affordable Housing Property Tax Incentive Programs
On July 29, 2021, Governor JB Pritzker, approved House Bill 2621 which was codified as Public Act 102-0175 (“Act”). The Act creates several property tax incentives to facilitate the development of affordable housing in Cook County. The application portal for these programs is now open (link here: Affordable Housing Programs – Cook County Assessor’s Office).
There are two incentive programs. The first program is for taxpayers who qualify for Low-Income Housing Tax Credits (LIHTC) under Section 42 of the Internal Revenue Code. Owners with qualifying properties must apply online via the CCAO website to participate in the program. If approved to participate, CCAO must value properties using actual or projected net operating income and a cap rate that is similar to other Section 42 properties in the local market.
| ELIGIBILITY | ASSESSMENT |
| Any Size Multifamily Property | Actual or Projected Net Operating Income |
| Recipient of Section 42 LIHTC | A Similar Cap Rate to Other Properties w/ Section 42 |
The second program results in an assessed value reduction for newly constructed or significantly rehabilitated multifamily properties with 7 or more units. Properties that have already received a Class 9 designation can qualify for the new program, but owners still need to apply for the program on the CCAO website. To receive this incentive in Tax Year 2022, taxpayers must apply by the deadline on March 31, 2022.
There are 3 Tiers under the assessed value reduction program:
Tier 1: Construct a new 7+ unit multifamily property OR if rehabbing an existing property, invest at least $8 per square foot (adjusted by inflation) in 2 or more primary building systems. Provide 15%-34% of the units in the property to low-income households at affordable rents (60% AMI) for 10 years with potential for renewal up to two times. Property receives a 25% reduction in total assessed value on the property for the duration of the program.
Tier 2: Construct a new 7+ unit multifamily property OR if rehabbing an existing property, invest at least $12.50 per square foot (adjusted by inflation) in 2 or more primary building systems. Provide at least 35% of the units in the property to low-income households at affordable rents (60% AMI) for 10 years with potential for renewal up to two times. Property receives a 35% reduction in total assessed value on the property for the duration of the program.
Tier 3: Construct a new 7+ unit multifamily property in a low affordability community OR if rehabbing an existing property in a low affordability community, invest at least $60 per square foot (adjusted by inflation) in 5 or more primary building systems. Low affordability communities refer to municipalities with less than one million residents where only 40% or less of the total year-round housing units are affordable. For the City of Chicago, low affordability communities mean primarily areas zoned as downtown (“D”), including downtown expansion areas, as well as any areas designated as a low affordability community by ordinance. See map below:
Downtown Expansion Areas (chicago.gov)
Properties in the applicable area must provide at least 20% of the units in the property to low-income households at affordable rents (60% AMI) for 30 years. Property receives a reduction based on a percentage of the difference between the total assessed value in the current year and the base year (the tax year before the owner’s application and affordable units are occupied) as follows: 100% of the difference in years 1-3, 80% in years 4-6, 60% in years 7-9, 40% in years 10-12, and 20% in years 13-30.
Examples of primary building systems include electrical, heating, plumbing, roofing, exterior doors, windows, floors, walls, ceilings, elevators, and improvements to safety, conservation, or accessibility.
| ELIGIBILITY | TIERS | ASSESSMENT | |||||||||||
New Construction or Significant Rehabilitation 7+ Units Multifamily | Tier 1 15-34% Affordable Units For 10 Years (Renewable 2x) Rehab Minimum: $8/sft investment in 2+ Primary Building Systems | 25% Reduction in Improvement Assessment | |||||||||||
Tier 2 35%+ Affordable Units Rehab Minimum: $12.50 Investment in 2+ Primary Building Systems | 35% Reduction in Improvement Assessment | ||||||||||||
Tier 3 20%+ Affordable Units Rehab Minimum: $60 Investment | %* of Difference b/w Assessment in Year X** & Assessment in Base Year
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Please note that these programs are new and many of the details of these programs are still being worked out. Field and Goldberg, LLC is working diligently to stay informed and keep our clients updated as information about the program becomes available. Please consult your real estate tax attorney for further information regarding the special affordable housing program.
Disclaimer: This post is not legal advice, nor does it establish a client-attorney relationship with Field and Goldberg, LLC. This information should not be relied upon without further consultation with your real estate tax attorney.