Whose property taxes are going up in gentrifying Chicago and why?: What I learned from Cook County’s data

Lisa Jean Walker

March 17, 2023

Essay is below, after these updates:

UPDATE 4/24/2023: See this Chicago Sun-Times letter to the editor for in a succinct summary of how the Assessor’s model inflates assessments in gentrifying communities.

UPDATE 7/26/2023: See this Chicago Tribune letter to the editor where I briefly share what I learned about property assessments for “luxury” homes in my neighborhood.

UPDATE 7/28/2023:

1) I used what I learned about property assessments in my appeal to the Cook County Board of Review for the 2022 tax year. Our assessment was reduced by over 18% to a value that we think is fair based on what we have learned about assessments in our immediate neighborhood. I include the notes I used in my Board of Review hearing at the end of my essay below.

Bothered that the property tax system encourages an "every man for himself" mentality, I reached out to over a dozen neighbors of old-housing-stock homes to encourage them to appeal. One neighbor responded to me directly. Using my data, she received an additional reduction from the 2021 tax year, for an overall reduction of almost 23% from the original assessment.

2) Seeking to provide closure to my work, I emailed the Assessor’s Office this feedback along with the updates above.

I also wrote to the Assessor that I believe his office has a bias for the use of statistically-driven quantitative data uninformed by actual lived experiences that can bring perspective to assessments. He is not attending to contexts such as gentrification. Homeowners like myself want him to understand more deeply how gentrification creates inequities in property assessments.

UPDATE 10/30/2023: I received a reply to my email (mentioned above) from Scott Smith of the CCAO at the end of July. I sent him a response on 10/30/2023, which is available here, including Scott Smith’s message to me. I raise questions about CCAO’s use of sales ratio data, which Cook County uses to understand inequalities in assessments.

UPDATE 4/22/2024: I received yet another reply from the CCAO back in late November, this time from Dr. Nicole Jardin, the Chief Data Officer for the Assessor’s Office. I am now working on making it available with my comments. Stay tuned.

Whose property taxes are going up in gentrifying Chicago and why?: What I learned from Cook County’s data

I am a middle-class taxpayer who lives in a gentrifying Chicago community. My property taxes have gone up 107% since 2017. Is this the beginning or end of extreme tax increases? The affordability of my home is on the line.

I am a researcher, so I need data and evidence to answer my question. I studied the Assessor’s Office information about how it assesses properties and I analyzed Cook County’s data. I wrote two reports, one for Assessor Kaegi and one for homeowners who own modest old Chicago homes. I summarize highlights below.

When Assessor Kaegi explains that property assessments have gone up because of gentrification, we likely assume wealthier people are paying more in taxes. When I analyze data for my community, I find owners of modest old homes shoulder an increasing portion of the tax burden compared to owners of luxury homes. “Luxury” is a common descriptor in real estate listings. In my community, luxury homes sell for twice as much or more than modest old homes.

It is convenient for the Assessor’s Office to explain that our high assessments are due to “rising market values,” but I detail in this report for homeowners that this does not hold up to evidence. The “hot” part of the real estate market is sales of rehabs and new construction, as developers know. Yet, my analysis shows that Cook County property assessments have gone up four times more for modest old homes compared to luxury homes (rehabs and new construction), and these large increases are not supported by sales prices. When I total the 2021 Cook County assessments for 46 luxury homes, I find the amount is the SAME as—NOT HIGHER than—what owners paid for the homes in the previous seven years. The “hot” part of the market is not seeing the same increases in assessment values as the “fixer-upper” part of the market.

What is happening if the market is NOT driving up Cook County property assessments? My theory is that the Assessor’s Office new “artificial intelligence” assessment model is poorly designed for gentrifying communities. The model is developed around (“trained” on) sales of rehabbed and new construction homes and pulls up (inflates) the assessments of modest old homes. At the same time, owners of luxury homes receive assessments that often are lower than recent and not-so-recent sales prices. (See Chicago Sun-Times letter to editor for how this works.)

The Assessor’s Office says it is creating greater consistency and fairness in assessments. It points to statistics to support its even-handedness. While the statistics may be useful, they are not based on scientific studies, and the Assessor’s Office should do a better job of understanding where and why inequities exist in assessments.

Homeowners’ experiences of consistency and fairness should matter too. Sharp increases in property assessments and taxes have hit our old homes for TWO consecutive assessment cycles. The taxes on our homes are going up MORE than luxury homes. The Assessor’s Office assures us that our taxes may not go up at all, and we are then walloped with paying large tax increases for 2021 and for 2022 within just five months. We are longtime stable homeowners who consistently pay our taxes. Cook County should treat us better.

I believe the Assessor’s new assessment model will accelerate high-end gentrification in Chicago—north, west, and south--by sharply increasing taxes for moderate-income and middle-income homeowners while moderating taxes on high-end properties. Unless corrected, this promises to end affordable home ownership in Chicago’s mixed-income neighborhoods. It will pave the way for 20% down payments of $140,000 or more and monthly mortgage payments that are equally unimaginable for most people.

My perspective is based on studying the data—connecting assessments, to housing type, to market value, to taxes. (Cook County does not do this.) I first examined data for 37 single-family homes in my neighborhood and then, in a follow-up study, for 106 homes in one square mile in Jefferson Township, including parts of Avondale and Irving Park. Are the patterns in my community true for other communities? We can find out if other people study the data as I have.

The Assessor’s and Treasurer’s Office tell us that assessments and taxes have gone up for some homeowners and down for others, that they have gone up in gentrifying communities and down on the South and West sides. FOR WHOM SPECIFICALLY are assessments and taxes going up or down? When I analyze the data, I see clear patterns of regressive taxation. While not surprising, this should signal to Cook County’s Democratic leaders that the property tax system remains inequitable.

I have not analyzed massive amounts of data, but rather sampled manageable chunks. I am learning directly from data, not relying entirely on government statements and reports. I invite others to do the same. None of us will be better off if we yield to data expertise that is detached from our lives and communities. Assessors who rely entirely on data and statistical models to assess our properties need our on-the-ground, real-world input.

I now have a new understanding of how gentrification increases my taxes. The actual market value of my property is not going up by leaps and bounds compared to luxury homes nearby as Cook County assessments show. Anyone buying my small old house would know to discount the price for the investment needed to improve it to gentrified standards. The Assessor’s artificial intelligence model lacks such savviness. It is out of touch with the market. Owners of old affordable homes are paying a steep price as a result.

To answer my opening question, we are likely at the beginning of large tax increases unless Cook County learns how to better assess our properties. Luxury continues to sell in this community, and homes that are ever more expensive are being built nearby every day.

One word of advice: APPEAL.

Board of Review Hearing, June 2023

Notes

Introduction

1.      I requested a hearing because I believe that our home is overassessed for reasons that affect many other homeowners. I am not just concerned about our home. Overassessment of homes like ours are the norm in this area. I have analyzed the data for homes nearby and have developed some insights into why this is happening. I want to share them with you while also providing comps to request a lower assessment for our home.

2.      We live in an area of Chicago where assessments for homes like ours have gone up a lot. The Assessor’s Office says the increases are due to gentrification. The assessment increase for our home is about 37%. Our taxes are up by about 45%. But going back five years, our taxes have increased over 100%. The assessment for our home went up in 2018 as well, by 45%.

3.      When I say “homes like ours” I mean homes that are not new construction or total rehabs. We maintain and improve our home, but it is still a very old home. It has many characteristics that would negatively affect its market value. This is an important point because the Assessor’s Office does not have data to distinguish between homes based on their condition.

4.      Homes like ours sell infrequently so it can be challenging to find market value comparables. Also, there are fewer and fewer class 2-02 homes because they get torn down for new construction or they are rehabbed into class 2-03 or larger homes. This also makes it difficult to find market value comps.

Comps

5.      In the documentation for my appeal, I have provided pictures of one market value comp and four lack of uniformity comps. They are at the end of the document in the appendix. All are frame houses similar in age to our home. Most are nearby, and all are within one mile. I also include a picture of our home.

6.      The market value comp is a home that was sold in October of 2020 three years ago. It is only three blocks away on Spaulding Ave. I feel lucky that a good comp is close by. I selected this comp from among five homes that sold within the last three years. The five homes are shown in a table on page four. The Spaulding home listed at the top is the second most expensive home.

7.      Based on the online description for the Spaulding home, it has been improved, as has our home, but it is not a fully rehabbed home. Based on the sale price from almost three years ago, it is $301 per building square foot. The current assessment for our home reflects a value of $402 per square foot.

8.      In my appeal document, I request our assessment be based on $295 per building square foot. The reason I have gone lower than the Spaulding home is that our home has only one full bathroom, not two. Also, our one full bathroom has a shower that is under the eaves with limited headroom. Adding a bathroom or any other kind of space to our house would be extremely expensive.

9.      The price per square foot of $295 is also supported by four lack of uniformity comps. Assessments per building square foot for the four homes range from $208 per square feet to $297 per square feet. Three of the homes are close by. The fourth home is further away but within a mile. I selected these four comps from a list of thirteen homes that show lack of uniformity. The list is on page 8. The four comps I selected appear to be in similar or better condition than our home based on how they appear from the outside.

Overassessment

10.   I said I had insights into why our home and others like it are being overassessed. I would like to speak to these now:

a.      The assessment model that the Assessor’s Office uses is based on recent sales going back seven years. Most of the sales in my neighborhood—about 90%--have been for fully rehabbed or new construction homes. Homes like ours sell infrequently so their data doesn’t contribute to the model to the same extent as data for rehabbed and new construction homes.

b.      Almost all homes near ours are assessed at $380,000 or above. The figure of $380,000 is set by the Assessor’s Office as the low-end for high-priced homes in Jefferson Township. Our home is not a high-priced home, but our home is in a neighborhood with a lot of sales of high-priced rehabs and new construction. Because our home is one of the smallest homes around, it has been assessed at the base value of $380,000.

c.      However, homes like ours usually sell for less than $380,000. I provide evidence of sales for similar homes on pages 4 and 5. I also show how Cook County assessments for lower-priced homes like ours tend to be much higher than actual sale prices unless the assessments have been appealed.

d.      At the same time, more expensive homes in this area tend to be assessed below their sale prices. I show this on page 10. I have analyzed data for different kinds of homes in this area. Higher-priced 2-78 homes tend to get more favorable assessments than smaller modest 2-02 homes that have not been rehabbed. I discuss this on page 9.

e.      By setting a minimum assessment of $380,000 in my neighborhood, the Assessor’s Office is trying to prevent underassessment of higher-priced homes. But this minimum assessment is causing homes that have not been rehabbed to be overassessed. Old housing stock homes are being grouped with high-priced rehabs and new construction for assessment purposes.

Final Comments

The Assessor’s Office does not have good information about the condition of homes. I have identified a market value comp and four lack of uniformity comps that I believe are good matches for the condition of my home, based on what I can observe and learn online. I believe $295 per building square foot would result in a fair assessment for our home.

Immediately next door is a 2-02 home that sold in 2021 at the peak of the market. I mention it in my evidence but didn’t use it as a comp because it was built in 1952 so it is a younger house and it is made of brick. The Cook County assessment for this home is very close to the price it sold for. The assessment reflects a value of $300 per building square foot. This serves as another example for me that $295 per building square foot would be fair.