Aurora homeowners pay a higher effective property tax rate than those in Chicago
A new report from the Lincoln Institute of Land Policy shows that the owner of a median-valued house in Aurora, Illinois, pays the second highest effective property tax rate in the country of 3.76 percent. The report analyzed 73 large U.S. cities, including the largest city in each state.
The effective property tax rate is the tax bill as a percentage of a property’s market value. If the market (or assessed) value of a house is $816,160 and your tax bill was $15,846.61, then the effective tax rate is 1.94 percent. (This particular example is a large single-family house in Humboldt Park.)
The median home values were sourced from the American Community Survey’s 1-year data from 2016 — not an ideal source — but it’s probably the best non-proprietary source. One-year datasets are very weak because they use extremely small sample sizes, surveying less than two percent of Illinois households.
Chicago homeowners, comparatively, have the 26th highest effective property tax rate in the country, among the 73 cities, at 1.64 percent. The difference between Aurora and Chicago homeowner property tax rates is because Chicago has a higher reliance on commercial property taxes than Aurora, a lower reliance on property taxes overall than Aurora, and higher home values.
Separately, Chicago has a lower effective property tax rate for apartment buildings worth $600,000, ranking 39th among the largest cities in each state, plus Washington, D.C., Aurora, Illinois, and Buffalo, New York (53 in total). Aurora and Buffalo were included “because the tax systems in Chicago and New York City are significantly different from the rest of the state”.
Aurora is one of our focus cities, where we’ve recently added their zoning map.
The apartment building effective property tax rate, 1.24 percent, is lower than the effective property tax rate in Chicago for owner-occupied houses, which is 1.64 percent for the median-valued home.
The report suggests that because the effective property tax rate in Chicago in 2017 was higher for owner-occupied houses (of the median value) than for apartment buildings worth $600,000, that homesteaders (owner-occupied primary residences) are subsidizing renters.
The opposite is true in New York City, where “homeowners are heavily subsidized at the expense of renters and businesses”.
This could mean that apartment buildings are undervalued in the market in 2017 in Chicago compared to apartment buildings in Aurora and cities in other states, or it could mean that they’re underassessed relative to houses. The report says “The preference [in a lower effective property tax rate] given to apartments in these cities is not the result of statutory provisions, but is simply the result of greater underassessment for apartments relative to homesteads.”
New York City is a major outlier in the apartment-homestead classification ratio, with an effective tax rate on apartments that is nearly five times higher than the median valued home.
The report also points out that apartment building owners, and by extension the renters who pay that property tax, are usually not given the same kinds of exemptions from their local assessor that homeowners receive. Additionally, renters cannot deduct their expenses on federal income tax like homeowners with a mortgage can.
The report adds, “Since renters have lower incomes than homeowners on average, preferences given to homesteads relative to apartment buildings will tend to make the property tax system more regressive.”
Effective property tax rates vary so much between cities (like Aurora and Chicago) mainly because of each city’s reliance on property taxes as a funding source, and the level of property values. It’s difficult to compare Aurora and Chicago this way. Chicago doesn’t use property tax revenues for its corporate (daily operations) fund, but Aurora does. Chicago’s property taxes pay for debt, pensions, and some library expenditures.
Last year, the Chicago Tribune, later joined by ProPublica Illinois, found that poorer homeowners were subsidizing wealthier homeowners because of unfair assessments and appeals. This greatly affected the election, and Fritz Kaegi was elected in the March 2018 primary to replace Joe Berrios as the property tax assessor in Cook County.
It’s difficult to make any connections between their reporting and the Lincoln Institute’s report. The Tribune/ProPublica analyzed data across Cook County, among multiple tax years, while the Lincoln Institute looked at one year in one municipality of Cook County (Chicago).
The Chicago Metropolitan Agency for Planning published a report last fall with some good looking and easy to understand maps showing property tax burdens across the Chicagoland region. However, the maps don’t have county or municipality names, making it difficult to find a particular place.
