© Chicago Sun Times

Byline: Fran Spielman          

Chicago home sellers getting lower prices if they can unload their properties at all in the stone cold housing market have a new headache: the 40 percent increase in the real estate transfer tax tied to the CTA bail-out. 

The City Council’s Finance Committee voted today to shift the increase from buyer to seller, taking $900 out of the pocket of the seller of a $300,000 home even as home prices continue to plunge. 

The current tax — $7.50 per $1,000 of sale price — will continue to be paid by the buyer. The $3 increase per $1,000, which takes effect April 1, will shift to the seller. 

Ald. Pat O’Connor (40th), sponsor of the ordinance, said he wanted to evenly divide the entire $10.50 city tax between buyer and seller, “But state law will not allow that to happen.” So, he opted for “the next fairest thing.” 

“It’s really just a matter of trying not to have the full burden of this increase in taxes continue to be on a purchaser who is buying property in the city. It just seemed to be a more fair way to try and divide this tax. By making the CTA [portion] all on the seller and the city's all on the purchaser, at least there's a clear delineation," O'Connor said. 

Speaking for the Attainable Housing Alliance and Home Builders of Greater Chicago, Paul Colgan argued that the entire tax -- including the increase -- should be paid by the buyer because, "The buyer has a choice. The seller does not É especially in this down market." 

By shifting that tax over on the seller's side, you are stripping them of equity. You are taking money out of the pockets of people who have hard-earned home equity that has been built up over time,” Colgan said. 

When the housing market was still riding high, there were “in excess of 30,000 starts of new homes” during a given year. This year, it may be “as little as 4,000 or 5,000,” he said. 

“So, we may be at 10-to-15 percent of what the market was just two years ago. The market has disappeared that quickly, that fast. We’re hoping it recovers soon. But, it’s in significant decline,” Colgan said. 

Ald. Bernard Stone (50th) was not impressed with Colgan’s argument — not after the dramatic increase in housing prices that preceded the current slump. 

“Over the last at least ten years, prices have appreciated as much as 100 to 200 percent. So, I’m not gonna cry for the sellers,” Stone said. 

The 40 percent increase in the real estate transfer tax is the City Council’s end of a complex deal approved by the Illinois General Assembly that staved off CTA fare hikes and service cuts. 

The $100 million in annual transfer tax revenue will be used to fund a new CTA health care trust and retire $1.45 billion in pension obligation bonds needed to take advantage of union concessions. Over the next 30 years, the CTA is in line to receive a $2.3 billion windfall.