As we get moving on the new rental season (lots of Chicago landlords like to rent from October to September), Chicago area landlords need to keep their ear to the ground regarding the recent developments coming out of City Hall. Savvy landlords will hedge their bets by building some of the risk of major cost increases into rents for the new year. Those who don’t might get caught off guard.
First, the mayor has proposed a major real estate tax increase. Not only is 2015 a triennial reassessment year for the Cook County Assessor (meaning that all City of Chicago real estate was re-assessed by the assessor for 2015 and those new assessments will be reflected in the 2016 real estate tax bills), but the mayor’s initial plan indicates about an additional $470.00 in property taxes for a $250,000 piece of property. Landlords should be anticipating this increase when they consider their rents for the new year. Worse yet, the mayor and certain alderman like Joe Moreno have made a number of proposals to provide property tax relief to some property owners. Usually, this relief is in the form of exemptions to be offered to certain low-income owners (under $100,000 of income) or certain low valued property (under $250,000) to avoid the tax increase. Guess what? If those folks (and there are alot of them) avoid the tax increase, do you know who will have to pay their share of the tax? Yep. You. Landlords, commercial property owners, second homes, and industrial property owners will have to split the burden of those tax dollars. Get ready for it. The City of Chicago has a lot of bills and someone has to pay.
Second, City Hall has been talking for a while now about charging residents for garbage disposal. One of the best parts of Chicago is that most residential properties do not pay for trash pick-up. That seems to be about to change. Most multi-unit landlords are used to paying for garbage and scavenger service, however, there are lots of landlords out there who rent out single family homes and their apple cart is about to get upset. And, if I were a betting man, I would think that any “new” charges to residential owners would come with fee increases for the multi-unit properties. Chicago landlords need to consider these fees if an additional monthly bill would dramatically change their cash flow projections. In fact, it is the landlords who only have one or two units out for rent who are most exposed by small changes like this.
Chicago will be an interesting case study in the next five to ten years. Will the City be able to survive and right its financial ship or will Chicago join Detroit in bankruptcy court? I’ve said for some time that “Chicago is for professional landlords” and that is as true today as the first time I said it. Amateurs will get eaten up in this town.