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Is a Standardized Valuation Process on the Horizon for Chicago Properties?

By Gary Smith
Is a Standardized Valuation Process on the Horizon for Chicago Properties?

There have been complaints about the property tax system in Cook County for many years, and in 2019, a new county assessor was voted in to reform the system. However, that reformation process has also caused many in the real estate investment community to question the uncertainty still latent within the new tax system.

What the Study Found

In response to the concern by the real estate investment community, the Chicago District Council of the Urban Land Institute undertook a study to gauge whether created a standardized valuation approach would create a more consistent property tax system. It used Chicago’s 2018 reassessment data for this study, and only looked to address the impact of the effort to reassess property at the required rations to fair market value according to state law and county ordinance. It also did not take COVID-19 into account.

What happened after the first portion of Cook County was reassessed under the new system put into place by Cook County Assessor Fritz Kaegi was that there were large assessment increases for some commercial and multi-family properties, sometimes more than 100% increases. In addition, the Board of Review appeals process reversed some of the assessor’s changes to such an extent that it created greater uncertainty in the outcome.

The real estate investment and development community asserts that this additional level of uncertainty around the reassessment process—and whether the commercial and multifamily assessments will rise more than other classes of properties—has caused investors to stop investing in projects in Cook County.

The findings of the task force are that it should be “possible to achieve greater predictability and stability in assessment” and provided two recommendations.

  • Recommendation 1: The Cook County Assessor’s Office and the Board of Review should work to create a standardized valuation approach and that the Board of Review and appeals process should be used only to make changes due to extenuating circumstances, information on business value, or isolated errors by the assessor’s office.
  • Recommendation 2: To paraphrase, once a consistent valuation methodology is implemented, the recommendation is that policymakers should ensure the distribution remains consistent in the distribution of values between residential and commercial properties and that policymakers understand the implications on taxes of each property type for development, housing affordability, economic attractiveness and fair distribution of the property tax burden.