(The Center Square) – Gov. J.B. Pritzker has signed a landmark housing bill that incentivizes landlords to create more affordable housing.
Bob Palmer, policy director of the advocacy group Housing Action, said that developers and proponents of moderately-priced housing have worked together for a long time to come up with the key provisions of House Bill 2621.
The legislation passed both Houses of the Illinois legislature in May with unanimous, bipartisan support.
“The idea is to support owners of rental housing who want to invest in their properties and keep rents affordable,” Palmer said. “By reducing the property taxes, you make it possible for people to charge affordable rents.”
The incentives appealed to developer Related Midwest, the builder of a new 300-unit building soon to break ground near Fulton Market. Related President Curt Bailey told the Chicago Tribune that the new tax formula will allow the company to reserve 60-units in the 43-story high rise for low to moderate income families.
Under the law’s definition, an affordable apartment is one that a family making 60% of the area’s median income can afford. In Chicago, a family of four with a combined income of $54,500 a year, meets that qualification. The family’s monthly gross income is $4,542.
Under the provisions of the bill, an affordable rent payment for the family must be no higher than 30% of their monthly income, or $1,300 a month.
Housing Action says that Illinois needs 108,000 more affordable housing units in order to accommodate all the Illinois families who need them. The need for low-income housing in Illinois is even greater, with about 270,000 units needed. The Illinois affordable housing shortfall means that many low-to-moderate-income families are forced to pay as much as 50% or more of their monthly incomes for rent.
Palmer said most of the landlords who will take advantage of the new tax incentives will not be big developers, but rather owners of existing buildings that have seven units or more.
“When it comes to basic operating expenses, property taxes are a significant piece for a building owner,” Palmer said.
Owners who charge their tenants more affordable rents cannot cover their operating and maintenance expenses and pay their property taxes, according to Palmer.
“It just doesn’t work,” he said.
Illinois’ new housing bill will lower property tax assessments for owners who charge affordable rents.
“When they need to finance major upgrades, such as roof or HVAC replacement, or modifications to make a unit handicapped accessible, assessed value reductions will make finding the financing much less challenging,” Palmer said.