I became a property owner in Chicago in May of 2015. Upon becoming a property owner, I took a great interest into how taxation worked in Chicago. I’d heard plenty on the news, but it seemed like it was all noise. I decided if I wanted to understand how Chicago’s horrible fiscal situation would affect me going forward, I’d have to start reading, and researching.
On July 20th, 2018, I came across this piece in Bloomberg. It’s an Opinion piece, and although I disagree with the writer, I found it a very interesting read. The author starts out by talking about Chicago’s complex population, which is spot on in my opinion. The ebb and flow of Chicago’s population is a critical issue, and the city knows it.
At the moment, the city has a population decline issue, as the chart above shows. Chicago’s population peaked in the year 2000. Since then, it’s down 6%. I think this population decline has been engineered by the city. Why? Because Chicago has an even bigger problem than population decline: infrastructure decay. What does that mean? It means that Chicago’s roads, sewers, electrical grid, and sidewalks can’t handle population growth. As a result, Chicago is in “taxing out” a portion of its population.
The city will say that the population decline is insignificant, and that tax increases must be done to put the city back in a fiscally sound position, but given the liabilities it has just on pensions, fiscal soundness is a long way off. In the above mentioned Bloomberg piece, the author provides a good history of Chicago’s good old days. An era when factory jobs were plentiful and the middle class thrived. He also mentions an even earlier time in Chicago when the railroads brought a boom to the city. The railroads and the stockyards where livestock came to be slaughtered, defined Chicago in the pre-Depression years. If you haven’t read the American classic by Upton Sinclair, The Jungle, you really should.
Something else the author points out that’s quite shocking, even to a Chicago resident, is that only 29% of murders in Chicago are solved; the rest are cold cases. When this article by WGN was written in July of 2017, the year-to-date solve rate was 37%. This is awful, and probably something the city would prefer be kept under wraps. The reason for such low solve rates has mostly to do with the fear that comes with living in gang infested neighborhoods. People are scared to rat out crime, for fear of retaliation from gangs This makes a Chicago detective’s job very difficult, understandably.
“Chicago continues to add young, affluent households in its urban core, just like many other cities across the country. It added a lot of Mexican immigrants in the 1990s, and Chicago suffered when Mexican immigration to the U.S. declined and ultimately reversed 10 years ago. Its net population loss is primarily due to two factors: a steady outflow of black households, and then white population loss associated with an aging white population. On balance, Chicago might be a metro that’s seen as struggling at 9.5 million people but would be thriving at 6 million people.”
EXACTLY! The last line there is exactly correct. As a volunteer with Little Brothers, Friends of the Elderly here in Chicago , I have seen first hand how Chicago’s taxes have affected the elderly population. It’s this elderly population that was Chicago’s backbone 50/60 years ago when the city was an industrial hub. They built everything from cars, to high-rise buildings, to the steel that went into each. They owned bungalow houses in neighborhoods like Bridgeport, Portage Park, Lincoln Park, and other parts of the city. Many of them were either immigrants, or the sons and daughters of immigrants. Many of them commuted from the city to places like Aurora and Joliet, which were also industrial and railroad hubs. Imagine that, a time existed when Chicago was home to blue collar labor, and the suburbs were where they went to work. Suburbanization and racism put an end to that sadly, exposing the faults of this generation. Today in Chicago, what’s left of this generation is either getting pushed into government subsidized nursing facilities, or being forced to sell their properties to developers who eagerly wait to tear them down, rebuild, and sell to young, white collar professionals.
I was recently at a community meeting in my neighborhood of Lakeview where Cook County Assessor officials were present. The county assessor’s office assesses property values to determine property tax bills. Lakeview is a magnet for recent college grads looking for that neighborhoody feel very few cities offer like Chicago does. Lakeview also offers relatively affordable rents, in comparison to downtown and Near North.
With that said, many owners of these rental properties, older 2 and 3 flat buildings, are retired, elderly Chicagoans; the same generation we just described. Many of them also depend on rental income from their properties to live on. I was shocked to hear that assessed values on their properties were increasing by upwards of 100%, driving many of them to sell to avoid the new tax bill.
The question is, why did assessed values suddenly skyrocket in Lakeview?? The Assessor’s office claims new construction in the neighborhood is driving up land values. They claim even though the structures on the land hadn’t gone up in value, the land value had, tremendously.
Nobody knew how much land value had increased in Lakeview until developer’s started paying exorbitant amounts of money to tear down old buildings.
Why were developers so eagerly tearing down old homes, paying big bucks just for land in Lakeview? Because there was a demand for luxury homes. That demand had already filled up available land parcels in Lincoln Park, one neighborhood south, and so the overflow demand went to Lakeview.
The luxury single family homes and condos represent high margins for developers, and so there was a race to buy up land and build expensive property, which led to the price spikes in land value. This in turn led to the realization by the Assessor that they could collect far higher tax revenues by re-assessing, even if it meant elderly owners would have to sell their property. A developer would surely be more than willing to tear down and rebuild for a buyer who could afford the increased tax rates.
The saddest story I heard at the above mentioned community meeting was of an elderly woman who owned a 3-flat (3-unit) building. She lived on the bottom floor with her disabled son, and rented out the other two units. She cried in the auditorium as she said that the 3-flat was supposed to support her son when she passed away, but now that her tax bill had skyrocketed, she would not be able to afford to keep it. I was most stunned to hear that she felt the rental market could not support the higher rents that would come as a result of higher property taxes.
The city sees a parcel of land as an income stream. They intend to maximize each income stream, even if it comes at the expense of elderly Chicagoans. Sad but true.
The other demographic in Chicago that has seen a population decrease are African-Americans. Chicago has quite a stained history when it comes to its African American population. To say that its present is any better is debatable.
Sure, there are a subset of African Americans that have benefited from “gentrification”. For example, in what used to be one of Chicago’s roughest, most gang infested neighborhoods, Cabrini Green, residents were given “right of return”, meaning they could buy or rent at discounted (subsidized) prices in the buildings replacing Cabrini. But this “right of return” is nothing more than the same old public housing strategy that has failed over and over.
For example, consider one of the new apartment buildings built on CHA Cabrini Green land at Clybourn and Division. The map of the location is below.
This building was discussed in an article by DNAInfo regarding “right of return”. The idea behind this building was to split up the resident demographic. According to DNA Info,
“The seven-story, 84-unit, $35 million building at 454 W. Division St. is mixed-income, with 30 percent of units going to CHA residents; 30 percent for affordable housing; and 40 percent rented at market rate, the 27th Ward alderman said. That translates to 25 CHA and affordable apartments, with 34 set at the market rate.”
The city made quite the effort and investment to get this project up and running. According to DNAInfo again,
“The project was a collaboration between the CHA, nonprofit Cabrini-Green LAC Community Development Corp. and developer Brinshore-Michael…the city supplied the land, $15 million in tax credits and $8 million in tax increment financing funds. The CHA also chipped in an $8 million loan.”
It doesn’t get more subsidized than that! Free land, cheap loans, and TAX CREDITS! Tax credits???? That’s right, while elderly Chicagoans are having their property taxes raised by 100%, the city is giving tax breaks to developers to build affordable housing.
So what ended up being the result of all this??? Well, take a look at what a couple residents have said about living at Clybourn 1200. One review on Google is not exactly glowing:
“Do not move here! I moved out only before my year lease ended because of incessant noise, unsupervised children and teens playing in the elevator, hot and stuffy hallways and loitering in the lobby. And right before I left, there were reports of roaches and bed bugs – the building is brand new so this is very tragic. The staff were pleasant but that was about the only nice feature of this place. I would not recommend for anyone who wants to live in a clean, safe and relatively quiet building. Xavier is right up the street and much nicer and worth the money. Not Clybourn 1200.”
Another review complains of theft and drug use in the building:
“When I first moved in I thought with this being a new building in a great location, I would surely be here for at least 3-5 years. But after experiencing thefts from delivered packages, (happens at least 1-2 times a month) random people sneaking in to find shelter overnight, constant smell of marijuana (the building is supposed to be non-smoking), loitering in and around the building (the building is/accepts mixed income)…”
The take-away from this is that substituting the Cabrini Green projects with new buildings, like Clybourn 1200, that mask the same conditions, will yield the same results.
I remember several years ago looking into possibly purchasing a townhome in a complex built on the northern edge of Cabrini Green during the run-up to the 2008 Great Recession.
At that time, I was told that because the land was CHA owned, there would be subsidized units in the complex. But then in 2014, after the Chicago real estate market had hit bottom in 2012, this article by Crain’s came out.
As of 2018, several of the pictured developments have been completed and sold/rented. For example, the development at 858 Franklin Street? Completed. Average rental price for a 1 bedroom unit: $2,375/month. That will get you about 850 sq. ft. Sure, comparing this to prices in places like New York City and San Francisco, they’re not bad at all. But something to point out is that the land this building sits on was owned by the CTA. The CTA is the Chicago Transit Authority, which owns and operates the El Brown/Purple line that sits right beside the building. This makes these apartments slightly cheaper than what they would normally be if they weren’t on CTA land.
If we compare 858 Franklin to another building, for example, Niche 905 at 905 North Orleans, one bedrooms there start at $2,600 and go up to $5,000 per month. 2 Bedrooms start at $3,796 and go up to $5,000 a month. Studios, the cheapest of the bunch, measuring barely 500 square feet, start at $2,100 a month and go to $4,317 per month. These are insane prices, on par with rents in San Fran and NYC, where resident income is higher than Chicago! At another development Next Apartments that just completed at 347 West Chestnut, prices are even higher than Niche 905. T
here is something here being made very clear. Cabrini Green has entered a new era, one that will see it permanently changed. I see projects like the Clybourn 1200 building as a weak attempt by the city to experiment with affordable housing. I don’t see these projects as ever intending to work. For mixed use housing to work, a commitment is required that goes beyond handing over free land to developers to put up new buildings, like Clybourn 1200. It requires sustainable housing projects that attract residents who are committed to the neighborhood.
What we have going on in Cabrini Green today is high priced, transitory housing, most of it studio, or 1 bedroom in size. Developers do this to fit as many units as possible into the building, and advertise them as a lifestyle, rather than an actual place to live.
We have a culture in America of trying to cover up our dark history with pretty buildings, monuments, and condos. Take a look at these pictures at ChicagoGangHistory.com to see what Cabrini Green used to look like in the 1970’s, 1980’s, and 1990’s. Below is a striking photo of the housing project that sat at 1159 North Larrabee.
I ride my bike down Larrabee everyday. Where this building was, there is now a Target.
One of the most famous incidents that occurred at Cabrini Green was back in 1981 when Mayor Jane Byrne actually moved into one of the highrises. She vowed to live there for the entirety of her term. She was a white female. She left after 25 days. She was voted out of office, some say, because of this stunt, but also because her CHA staff running public housing was extremely corrupt. Some ended up in jail. To get the whole story, this article from February of 2018 is a great read, and has some great pics.
Interestingly enough, in the late 1800’s, and thru the early 1900’s, Cabrini Green was an Irish ghetto known as “Little Hell”. Judging from the newspaper headline below, one would think Cabrini Green has forever had a curse on it.
The story of Cabrini Green has been one hell hole after another, but it seems today, the cycle has been broken. It’s just sad to see the history erased.
Just like the name Little Hell was erased, this article from Curbed Chicago tells us that pretty soon the name Cabrini Green may also be gone and dead. According to Curbed,
“…as builders propose and begin to construct new towers, some are pitching a new name for the area: NoCA. The name is supposed to be an abbreviation for North of Chicago Avenue…”
The name NoCA, or north of Chicago [avenue], is in itself, an advertisement ploy by the developers to build comparisons between Chicago and New York City, where neighborhood names like SoHo (South of Houston Street) and Tribeca (Triangle below Canal Street).
There’s a lot in a name, and in my opinion, Cabrini Green should live on forever. It is symbolic; it is named after the great Frances Xavier Cabrini, an Italian Catholic missionary, also known as Mother Cabrini. Her life was dedicated to serving the poor of Little Hell, and other little hells around the country.
To change Cabrini to NoCa would be symbolic in all the wrong ways.
In the earlier noted Bloomberg Opinion piece, there’s is one last point the author makes worth pointing out:
“We’ve seen nationally that the combination of declining economic fortunes and growing racial diversity can create a toxic political environment. Take Cobb County, Georgia, the suburban county that Newt Gingrich represented in Congress for years. Over the past 20 years, the white population in its public school system has fallen by a third. Over the same period, the black and Hispanic population in the system has almost tripled. In 2016, this district voted for Hillary Clinton for president, reversing a long period of Republican dominance. What happens when Cobb and other counties like it transition over from largely homogenous white Republican-dominated counties to diverse, Democratic-leaning counties with growing costs from suburban poverty and aging infrastructure? Will they still be destinations of choice, or will they be avoided for more affluent urban cores or newer places in other metro areas?”
A good way to understand the above is by using a car analogy.
When a car is brand new, it is very attractive. A certain buyer will be interested in that car. It will be a more affluent buyer, who is willing to pay more for the fact that it’s a new car.
He also knows that maintenance costs will be very small for some time, since the car will come with a new car warranty. As the car ages, it will require maintenance, cleaning, and all sorts of expenses. At that point , he sells that car, offloading it to someone who initially gets a good deal, but will be responsible for the costs to maintain the car going forward.
The white male is the new car buyer. The white male statistically has the highest income in the US, a country historically plagued by income, economic, housing, and countless other types of inequality.
As the US turns less white, and more ethnically diverse, that diversity filters down to old, traditionally white neighborhoods. At some point, the white population may even disappear in some places. Suddenly, a potentially marginalized community is entirely responsible for the costs that go with maintaining an aging municipality.
This isn’t a new phenomenon. Inequality works against everyone, including whites, in this sense, because the cost of running a city, state, or country, is color blind. The transition away from pre-Civil Rights oppression, and inequality must happen faster, so that increasing minority populations can carry the burden of maintaining their communities. Right now, with income inequality at record levels, this is not happening fast enough. Institutionalized inequality is still prevalent, especially in our legal system. Many black neighborhoods are not self-sustaining because too many black men are in jail instead of paying property taxes.
Tax revenue is not keeping up with costs in ethnic, urban areas across the country. The social impacts of racism and oppression still plague us all, regardless of race. The economic status ladder is taking longer to climb because of the disadvantages hispanic and black communities faced decades ago. Our prisons are 80% Black or Hispanic. These issues are daunting for America’s aging municipalities.
Chicago is a prime example of the effects of institutional racism and its multi-generational effects. It can be said that Chicago is burying its past in order that it can pay its bills in the future. I’ll finish off by ending with the following fitting quote from the above reference Bloomberg Opinion piece:
“Chicago today is a mature metro area with an island of affluence in its center, a moderate number of thriving suburbs, large swathes of neglect and decline, and high levels of racial and socioeconomic inequality. Many Sun Belt metros currently seen as success stories could end up with a similar fate — unless they emulate how Chicago maintained its successes, and avoid how Chicago went wrong.”