When Illinoisans aren't buying or selling homes, public sector agencies feel the pinch.
Sales of single-family homes and condominiums plummeted by nearly 30 percent across Illinois last month compared to sales figures for July 2009, new data released by the Illinois Association of Realtors (IAR) shows. In the greater Chicago area, sales were down by more than 25 percent this July versus last. In Springfield, monthly sales were at their lowest level in a decade, dropping by 39 percent over the same time period. Rockford saw a decline of 35 percent. Downstate Madison and St. Clair counties each saw sales dip by about 30 percent between June and July of 2010. The slowdown is what IAR's president called "an anticipated break in the action." The trade group blames weak job growth in Illinois and the expiration of the federal first-time homebuyer tax credit for the numbers.
There are small pieces of good news buried within the frightening stats; between January and July 2010, for example, sales were up 15 percent versus the same period last year. But uncertainty in the housing market is sparking worries about a possible double-dip recession, Chicago Federal Reserve president Charles Evans told an audience earlier this week. And when home sales drop, it puts pressure on governments and public agencies in Illinois that rely on real estate transfer taxes to fund crucial public services.
Real estate transfer taxes are levied when properties are bought and sold. The recorder of deeds in each county collects the tax through stamps it purchases from the state Department of Revenue; the buyer and seller involved in a transaction then reimburse the recorder of deeds during the sale. Counties and home rule muncipalities also are allowed to impose a separate transfer tax.
In its 2009 fiscal year, the most recent for which data is available, the Department of Revenue sold a little more than $41 million in the tax stamps to counties across the state. That's down from the nearly $99 million the department took in two years prior -- meaning less money for the Illinois Affordable Housing Trust Fund (which gets 50 percent of these funds, according to a department spokesperson), the state's Open Space Lands Acquisition and Development Fund (35 percent), and its Natural Areas Acquisition Fund (the remaining 15 percent).
Or take the City of Aurora, a home rule municipality with a transfer tax of $3 per $1,000 worth of sales value. Its current budget assumes less than $1 million in real estate transfer taxes, down from $1.8 million the city collected in fiscal year 2008. In and of itself, that's a substantial drop. But consider that in FY2007, the city took in more than $3.4 million from this revenue stream. The number was $5 million the year prior.
The Chicago Transit Authority is also particularly dependent on the transfer tax. Starting in April 2008, sellers of property in the city were required to pay $1.50 for every $500 of the properties' selling price to fund the mass transit agency (Buyers of any city property already owe $3.75 per $500 in price, money that goes into city coffers.) But the hike hasn't been enough to cover the agency's operations costs. CTA's tax-funded revenues, including transfer taxes, were down by 34 percent in 2009, according to the agency's 2010 budget book.
Clearly, the answer isn't a return to an overheated housing market, which inflated how much governments and agencies took in from the real estate transfer tax. But a renewed focus on job creation and helping the unemployed and assisting homeowners whose mortgages are underwater (29 percent in the Chicago area in the second quarter) could stabilize the housing market and create sustainable revenues. Geoff Smith, the vice president of the Woodstock Institute, made that latter point last night on Chicago Tonight:
Both actions would, in turn, give government budgets and public sector agencies that use real estate transfer taxes a sorely needed boost.