Chicago Mayoral Runoff Will Be A Study In Contrasts For CRE As Lightfoot Is Iced Out
Chicago’s real estate community will face a stark choice when voters head back to the polls April 4 in a mayoral runoff between former Chicago Public Schools CEO Paul Vallas and Cook County Commissioner Brandon Johnson, who finished first and second, respectively, in a crowded nine-person race Tuesday, according to first results.
The two men, both Democrats on different sides of the left spectrum, nosed out incumbent Mayor Lori Lightfoot. Lightfoot, who appeared to finish third as of publication time, conceded Tuesday night, the first time in 40 years an incumbent Chicago mayor has been defeated.
In a race dominated by talk of crime and public safety, real estate issues played a surprisingly large role, with Vallas and Johnson laying out differing approaches to property taxes, land use and affordable housing.
Vallas, the top finisher and a Democrat described as a moderate by NBC Chicago, has called for the creation of an Independent Community Development Authority made up of community-based contractors and organizations to separate development decisions from City Hall politics — a criticism often lobbed at Lightfoot, who has tended toward bold projects her opponents said didn't prioritize neighborhood buy-in.
He told Crain’s Chicago Business that “neighborhood revival should not result in neighborhood displacement” and that communities should be filled with “indigenously owned” businesses.
"I will not be a successful mayor until I reverse the generations of disinvestment in Chicago's poorest communities," Vallas said in a victory speech Tuesday night, after giving his family's policing bona fides. "There is a pathway to that, which I have articulated for this generation. No more promises. We need to deliver.
"Because if our city is to grow and prosper, if our city is to grow the middle class and keep the middle class, we have got to invest in these communities that have long been neglected."
His platform also calls for repealing the automatic property tax escalator allowing the mayor to raise property taxes by 5% or the inflation rate, whichever is lower, and setting aside a portion of new revenue from tax increment financing districts and developer fees for investment in the city’s South and West sides. Vallas has said he would create a new municipal investment fund for development projects and issuing commercial and mortgage loans.
Johnson also opposes automatic inflation-linked property tax increases, saying they “are already too high.” But he has made placing an added tax on non-Chicagoans, suburbs and airlines — a tax he said would generate $800M annually — a centerpiece of his campaign.
“The suburban tax base utilizes Chicago’s infrastructure to earn their disproportionately higher income, yet their taxes fund already wealthy towns,” Johnson said on his campaign site.
Johnson said he would levy a Metra city surcharge he said will raise $40M from the suburbs, an airline tax that would make “big airlines pay for polluting the air” and raise $98M, and “new user fees for high-end commercial districts frequented by the wealthy, suburbanites, tourists and business travelers” to generate $100M.
His plan also calls for reinstating a $4-a-month-per-employee tax on large companies that conduct more than half of their business in Chicago, which he said would generate $20M, and raising the Chicago hotel tax — already the nation’s highest, per the Chicago Sun-Times — to bring in another $30M.
Johnson also advocates hiking the real estate transfer tax on luxury home sales, what he calls a Chicago Mansion Tax, to establish funding to cut homelessness and create affordable housing.
Vallas opposes the tax.
“The money for assisting the homeless need in Chicago can be done through diverting and dedicating existing resources such as the TIF surpluses,” Vallas told the Sun-Times.
As part of a City Bureau survey on affordable housing, Johnson said he would encourage the Chicago Housing Authority to cease what he called “land grabs” and private partnerships in favor of developing local community processes for land use and rebuilding public housing in the city.
“My administration would also use community outreach to launch a citywide assessment of public buildings and empty schools to discuss repurpose possibilities,” he told the outlet in a statement. “There are many facilities across the city that can serve as [single room occupancy units] and affordable housing units at cost to address the crisis of the 65,000+ unhoused in Chicago.”
Vallas in response to the same survey called for allowing property owners to convert unutilized space to affordable garden apartment units, using some of the city’s $28B budget to incentivize such conversions. In addition, he reiterated he would hold the line on property taxes to keep rents and homes affordable.
“I will also work to ensure that our city develops resources such as grant programs that will help homeowners pay for some of the upkeep of their homes,” he said.
Polling ahead of the race suggested late-breaking momentum for both Vallas and Johnson, who managed to consolidate the progressive vote to the detriment of U.S. Rep. Jesús “Chuy” García, who represents Illinois’ 4th District.
Tuesday’s results were a blow for Lightfoot, the city’s first Black female and openly gay mayor, who spent the majority of the campaign attacking García, who had widely been perceived as her main competitor in early polling.
"I told you back then that anything is possible with hard work," said Lightfoot, who championed a range of community-building initiatives during her tenure, from her signature INVEST South/West program intended to reverse decades of disinvestment on Chicago's South and West sides to LaSalle Street Reimagined, an attempt to foster a more mixed-use, neighborhood-oriented environment in the Loop’s aging office-heavy LaSalle Street corridor.
"I want you to know that no matter what happens along the way, you should always believe you can bring about change," she said. "Believe that you matter."
Real estate groups — and real estate money — were largely nonfactors in the race. Groups like Illinois Realtors and the Building Industry Association of Greater Chicago held off on endorsements, though they may reconsider for the runoff, The Real Deal reported. Donations were also scattered, per TRD, with Lightfoot taking in $25K from Marcus & Millichap founder George Marcus as well as donations from trade and carpenters unions. Vallas nabbed a $100K donation from billionaire real estate investor Sam Zell.
Johnson had strong backing from union organizations.