As the effects of the Covid-19 pandemic continue to reverberate throughout our society, The Law Offices of Gary H. Smith, P.C. remains fully committed to working on your property tax matters. We want to make sure that you know we are here for you, particularly in these troubled times.
With all the stories circulating of potential post Covid property values, and considering Assessor Kaegi’s misguided proposals which will have minimal or potentially negative tax effects upon you, we wanted to provide you with some of our perspectives of potential Covid impacts. While the following is a summary of our opinions only, we believe that point is actually the most important point to emphasize; namely, everything you hear defining the impacts on future real estate values at this time is speculation and opinion only. It is simply too soon to know all the future real estate ramifications of this crisis.
1. The Chicago real estate market was hurting even before the crisis. Covid made it worse – As of February, 2020, home value growth in the Chicago area was the weakest of the 20 major metro areas in the United States. By the end of March, new listings and those under contract were down over 35% from the year prior and listings temporarily taken off the market increased by 85%. Prior to the Covid effects, the Loop retail vacancies were at their highest rate since 2007. Homebuilder confidence by mid-April (35%) was at its lowest level since 2012 and was below 50% for the first time since 2014.
2. The underlying reasons for Chicago area real estate weaknesses will not automatically disappear when Covid disappears – High real estate taxes and population losses are considered the primary reasons for the property value weaknesses in the Chicago area. Secondary reasons cited are government corruption, potential added future tax burdens, crime rates, high taxes in general, and the weather. We can’t do anything about the weather, and we seemingly can’t do anything about the population losses either. Illinois had the second-highest percent of population loss of any state for the last 10 years and the Chicago area has had population losses for the last four years. Population loss threatens future federal funding and economic prosperity. In terms of real estate taxes, losses impose higher tax burdens on those that remain behind. Illinois has the 2nd highest property tax burden (taxes charged in relation to value) of any state in the nation.
3. The long-term impacts on the real estate market are unknown and unknowable at this time – Cushman and Wakefield say “It’s premature to draw strong inferences about the virus’s impact on property markets.” Kendall County Assessor said, “We may not know the effects until 2023 or 2024.” What will be the unemployment rate after COVID? The bankruptcy rate; the vacancies rate; the shuttered businesses rate? When will we be back at work, at the ballparks, at concerts or back in the hotels? What will happen to population densities, both in residential and commercial office settings? Will it be a V-shaped recovery, a U-shaped recovery, or something slower still? The one thing all experts agree on…it historically takes longer for real estate market adjustments to play out and be fully impacted and known than equity or employment markets.
4. And yet, during all of this, The Assessor has recklessly re-opened his calendar during the Shelter in Place and has promised a Covid discount that is either meaningless or discriminatory, or both– The Assessor’s office is closed to the public. He is allowing on-line filings only. Cases that require visits by an appraiser or the Assessor threaten the health of both the taxpayer and visitor, or force the taxpayer to sacrifice a basis of appeal. Complicated arguments requiring discussion are effectively eliminated.
We have already established the impacts cannot yet be known, and yet the Assessor is “applying Covid adjustments” to many properties without allowing a review or ability to appeal. Anything he is doing will have no impact what-so-ever until 2021. “Discounts” universally applied to properties in the taxing district have no impact on a tax bill. This is because assessment adjustments applied in the same percentage to all properties in a taxing district simply cause that district’s tax rate to be adjusted upward to make up for the apparent benefit given. His Covid “adjustment” is just more of the same tax shell game Assessor Kaegi has accused everyone else of playing. Furthermore, he is legally required to value all properties as of January 1, 2020. If he adjusts values to account for events as the year goes on, he discriminates in his considerations of properties. Unequal treatment under the law violates the Illinois State Constitution and the 14th Amendment to the United States Constitution.
This office has proposed consideration of certain property tax payment extensions and assessment suspensions to various government representatives and agencies, as well as to the media, to provide benefits to taxpayers now. We are advocating for a proper and adequate adjustment of property assessment values once the actual impact are known or knowable, not while they are wild speculations and rumors. We do not know if any of our proposals will be accepted or enacted, but please know that The Law Offices of Gary H. Smith, P.C. is advocating for tax relief measures on your behalf that might provide taxpayers relief at this time, when they need it most.
The Law Offices of Gary H. Smith, P.C