Taxes on Multifamily Rental Housing to be Reduced

On September 17, the Cook County Board of Commissioners approved Cook County Assessor Jim Houlihan's proposal to reduce the number of property assessment classifications from seven to two, and to simplify assessment levels to either 10% or 25% of market value.

While this change will primarily make tax bills easier to understand, one important class of buildings will see a lower tax bill – multifamily rental buildings larger than six units (Class 3 properties).  These buildings are an important priority for The Preservation Compact, since that is where much of the affordable housing in Cook County is found.  The new ordinance is a continuation in the reduction of assessment level that began in 2003.

Mike Stone, Keystone Initiative lead partner and Chief Deputy Assessor, explains,  "The primary goal of the changed ordinance is to provide clarity so that taxpayers will not have to go through mathematical gymnastics to determine how the assessed value relates to the market value of their homes.  For owners of Class 3 properties, the assessment levels will be brought down in line with other residential properties, which will end a bias against rental properties under the current classification system."  Under the new ordinance, Class 3 will drop from its current assessment level of 20% to 10% by 2011. 

Class 9, a special classification for buildings where all or a portion of the units for low- and moderate-income families are being rehabilitated, will see assessment levels drop down from 16% to 10% for the 2009 assessment year.  Even with the new classification system, Class 9 remains a worthwhile program for owners.  A secondary and ongoing benefit for Class 9 buildings is the impact on a building’s assessed value.  The Assessor considers a combination of income generated and expenses incurred, capitalized for normal rates of return, return of equity and risk, to determine the market value of a building and ultimately a building's assessment.  For Class 9 buildings, the Assessor’s process acknowledges the lower income, higher levels of expenses and other factors that affect the capitalization rate, all of which result in lower assessed values for Class 9 buildings.

Assessor Houlihan's proposal is a win for The Preservation Compact and a win for taxpayers, who will benefit from more clarity and transparency with respect to their tax bills.

How it works:
For comparison, a seven unit apartment building (Class 3 building) with a Property Value (on tax bill) of $500,000 and a property tax bill of approximately $15,623, would be assessed in 2007 at 22%, whereas under the new ordinance, the building would be assessed at 10% in 2011 with a property tax of approximately $7,100.  This amounts to a decrease of 37% of the annual Property Tax. This example assumes no change in Property Value, Equalization Factor, or Local Tax Rate or Tax Levy - all of which can fluctuate.  The example further assumes 2007 State Equalization Factor of 2.8439, and a Local Tax Rate of 4.994% which varies among taxing districts.

The Chicago Community Loan Fund Joins The Preservation Compact

The Preservation Compact welcomes the Chicago Community Loan Fund as a Keystone Initiative partner.  The Chicago Community Loan Fund (CCLF) will enhance the suite of products being offered through The Preservation Compact's Preservation Fund by providing purchase contract loans and supplemental predevelopment and acquisition loans as well as gap financing for select projects during construction and/or rehab.

With support from Bank of America, The John D. and Catherine T. MacArthur Foundation and the CDFI Fund of the U.S. Treasury, CCLF is starting its participation in the Compact with a $2 million pool from which it will make low interest rate preservation loans.  “We are uniquely situated to help with The Preservation Compact because of our uncommon flexibility and our affordable housing focus throughout the metropolitan area.  We’re excited to be a partner,” explains Calvin Holmes, CCLF Executive Director.

The Local Initiatives Support Corporation’s Chicago Office (LISC Chicago), the Community Investment Corporation, and Chase Bank, along with a consortium of other banks are also Preservation Fund lenders. 

CCLF was established in 1991 with the goal of filling the community development credit gaps across the Chicago region for owners and developers of low- and moderate-income housing (and other community real estate). 

Pictured at right is Hollywood House, a recent investment of CCLF.  Hollywood House is a 197-unit senior housing complex in the Edgewater neighborhood, which is being preserved by Heartland Housing, Inc., with funding from city and state agencies, Low Income Housing Tax Credits, TIF financing, and CCLF, among others.

Energy Savers Ramps up Activities

The Cook County Energy Savers Program (CCES), a Keystone Initiative of The Preservation Compact, has nearly doubled the number of assessed units in multifamily buildings since June of this year.  In addition, many of the owners of the more than 3,500 assessed units are following up on activities and recommendations made by Center for Neighborhood Technology (CNT) staff, who conduct the assessments.

Loans from the Community Investment Corporation for energy saving improvements at sharply reduced interest rates makes it easy for owners to act on those recommendations.

CNT estimates that some of the new interest in retrofitting and repairs is directly linked to the cost of gas, which has gone up by about 30% this summer.  Owners are becoming increasingly concerned about what it will cost to heat their buildings this winter, and many have noted that heating hot water this past summer has been more expensive than usual. 

That’s because the price of a “therm” which is equal to 100,000 BTUs (or roughly 100,000 times the heat generated by a single match) has gone up from approximately $1.00 to $1.30. Depending on the size of the building and the efficiency of the equipment, this increase can have an enormous impact on energy bills. 

In working to help bring down operating costs, CNT staff has also distributed more than 8,000 CFL light bulbs, primarily to nonprofit organizations that own and manage affordable housing.  These bulbs have been donated by the City of Chicago to help reduce energy costs and introduce people to easy money-saving changes.

In August, Anne Evens, director of CNT Energy, spoke to the Metro Mayors Caucus' Housing Committee meeting about the Energy Savers program and how to access energy audits and loan funds.  Peter Ludwig, Energy and Performance Analyst at CNT, spent a week last month in Monterey, California where he participated in the 2008 Summer Study hosted by the American Council for an Energy-Efficient Economy (ACEEE).  The ACEEE Summer Study takes place every other year and emphasizes noteworthy innovations and activities in energy efficiency across the country, for more than 700 participants.  At the conference, Peter presented New Problems, Same Solutions: How Energy Efficiency in Affordable Rental Buildings Has Evolved to Meet New Housing Challenges in Chicago, highlighting the work of The Preservation Compact's Energy Savers Program.