3 April 20222 minute read

Illinois General Assembly approves critical changes to 2021 affordable housing tax relief legislation

The Illinois General Assembly has approved critical updates to the 2021 Affordable Housing Omnibus Bill.

The 2021 legislation had approved property tax relief to incentivize the creation and rehabilitation of affordable housing units. However, certain provisions in that legislation related to the definition of the “base year” for purposes of calculating the incentive created ambiguity, and the legislation did not align with local requirements, including the Chicago Affordable Requirements Ordinance, with respect to maximum income limits. The amendment, approved on April 1, 2022, corrects these two issues.

The legislation allows for a reduction in assessed value equal to a percentage of the difference between the value of the property in the base year and the post-construction assessed value for residential projects in “low affordability communities” that establish at least 20 percent of units as affordable. The reduction in difference is 100 percent in Years 1-3 and tapers down over a 30-year affordability period.

Previously, the base year was defined as the taxable year prior to the latter of (1) the date of the initial application or (2) the date on which 20 percent of the total number of units in the property are occupied by eligible tenants. This created ambiguity and was challenging to underwrite. The amendment clarifies that the “base year” is the tax year immediately prior to the year in which the building permit is issued.

Additionally, the original legislation established the maximum rent as affordable to households at or below 60 percent of area median income (AMI). However, many municipalities, including Chicago, allow for or even require weighted averaging (ie, providing some units below and above 60 percent AMI). The amendment modifies the requirement to allow for a weighted average if otherwise required.

The legislation will now head to Governor JB Pritzker’s desk, and we expect it to be signed into law later this spring.

For more information about this legislation, contact any member of the Chicago Land Use Team at DLA Piper:

Katie Jahnke Dale

Richard F. Klawiter

Paul W. Shadle

Mariah F. DiGrino

Ben Quarless