Here are excerpts from an open letter resident Robert Dekker wrote to the village board on the teardown tax. He also spoke at the last meeting. Think about his comments and send your own to the village board. He makes a consistent argument, heavy on facts, which is more than we have heard from some on the village board:
President Canning and Members of the Village Board:Here is also an excerpt from a piece sent to me of remarks by NAHB economist Elliot Eisenberg:
I have attended both the Administration Committee and Village Board hearings during which the Teardown Tax has been discussed and wish to offer my comments to you in an open letter to the community.
By way of background, I am:
Licensed real estate broker in the State of Illinois;
Licensed general contractor in the City of Chicago as well as a licensed real estate
developer;
Currently serve as an Executive Officer and a member of the Board of Directors of the Chicago Chapter of the Home Builder’s Association;
For the past three years, I’ve served on the Chicago Chapter’s Government Affairs
Committee, which has primary responsibility for representing the interests of the city’s homebuilders on legislation and regulations impacting the residential building community.
I am not writing in any official capacity or as a representative of the Home Builder’s Association.
I do not currently build on the North Shore and my development activities are exclusively in the city. I address the Board as a concerned Wilmette resident who has first-hand experience dealing with the issues being discussed in connection with the proposed Teardown Tax and Affordable Housing mandates.
This proposed ordinance is a bad idea for a whole host of reasons, some of which I’d like to enumerate:
First and foremost, this ordinance is anti-development, and I believe it will further amplify a growing perception that Wilmette, as a community, is hostile to new development. Anytime a municipality gets an anti-development stigma, it has a negative impact on real estate prices. As a builder/developer in Chicago, I am familiar with a number of wards in the city where the Aldermen are perceived as anti-development. In some cases, this may include a development agenda focused on creating more affordable housing options within their wards. I can tell you from personal experience that builders and developers avoid those wards like the plague. And while those areas may be ripe for development, property prices in those wards have remained stagnant during the recent real estate boom, while their housing stock continues to deteriorate. This can lead to an unusual situation where one ward has attractive new housing and mixed-use development on one side of the street, and the other ward, on the opposite side of the same street, has old, run-down housing stock and empty storefronts.....
I believe this tax will negatively impact other important Village revenue sources by further exacerbating an already slow real estate market in Wilmette:
Over time, property tax revenue growth will slow as assessed values moderate due to lower demand.
More immediately, real estate transfer taxes, currently a large general revenue
source for the Village, will be reduced dramatically as the pace of new development slows. This is actually a much more significant issue than anyone may have considered: It’s actually a double whammy on transfer tax revenue because you’re impacting both: 1) the sale of land to the developer and 2) the sale of the new home to the ultimate buyer.
Permit fee revenue will also be expected to decline as construction activity slows.
The Teardown tax, as proposed, is a regressive, punitive tax that will negatively impact those who can least afford it. It won’t significantly impact development of large, expensive homes or prime pieces of land because the cost is spread over larger a much larger potential revenue base; in most cases, it would represent <1% face="trebuchet ms">The oft-stated remark that Wilmette is required to comply with the State of Illinois’ Affordable Housing mandate belies a legal opinion from Holland & Knight, Wilmette’s own attorney on this matter. As a Home Rule community, unless the state law specifically overrides Home Rule authority (which is does not), then the Village is under no obligation to adhere to the state mandates.
Furthermore, I’d like to quote from Wilmette’s own Affordable Housing Plan dated December 14, 2004. Section 4.1 of that Plan, referring to a Teardown tax and similar fees, states: “In Wilmette, such a tax would impact mainly older, functionally obsolete single family detached houses, typically owned by longtime, older residents whose major assets are their homes. While excessively large replacement houses present their own set of problems, the teardown of obsolete houses may be beneficial to the neighborhood and community. A teardown tax might deter such activity. Its cost would likely fall on residents selling houses destined for demolition, because builders would factor the tax into the price they would be willing to pay for the property.”
Other sections of the Village’s Affordable Housing Plan relevant to this discussion include the following citations: Section 1.4 of The Plan, headed “Practical Limitations”, states: “...fairness requires that any economic burden of providing affordable housing should be shared broadly by all Village residents, not imposed narrowly on persons who happen to own property suitable for this use.” Section 4.2 of The Plan, entitled The Preferred Incentives, goes on to say: “This Plan adopts the policy of spreading the cost of affordable housing broadly, rather than placing the cost on targeted land owners. Accordingly, this Plan does not adopt dedicated taxes and fees as methods for creating affordable housing.”
In July, I went to the Administration Committee’s hearing where this ordinance was discussed publicly. Despite nearly universal opposition from members of the public in attendance and the fact that this proposed ordinance contradicts the recommendations from Wilmette’s own Affordable Housing Plan, the Committee, curiously, recommended in favor of it......
Without digressing further into the issue of trying to create more affordable housing in the Village, I am very concerned about the creation of a new tax that will likely have unforeseen and unintended consequences well into the future. If the Village wants to promote affordable housing initiatives within this community, then by all means let’s put all the issues on the table; however, there needs to be a great deal more community input before deciding how to go about it. If the community ultimately decides that affordable housing is a worthwhile goal to pursue, I believe that the Village should consider market-based incentives for creating more affordable housing.
As many of you know, the Affordable Housing issue has been a hot button in the City of Chicago for the past 2-3 years. There have been several affordable housing ordinances introduced, all of which have failed. The Home Builder’s Association, realizing that this issue wasn’t going away, has begun discussions with two very well-respected, non-partisan organizations, the Metropolitan Planning Council and Urban Land Institute, to devise a marketbased plan to promote more affordable housing in the city without any new mandates. The gist of the program entails providing “as of right” FAR and/or density bonuses to developers who voluntarily agree to add “Affordable” units to their multi-family developments. Alternatively, they can make a voluntary contribution to the city’s affordable housing fund. This program, if adopted by the city, is expected to dramatically increase the number of new affordable housing units constructed in the city almost immediately, without any new mandates or taxes. Another initiative that has gained headway in the city is to allow significant FAR bonuses or increases in zoning to homeowners who choose to rehab existing homes rather than demolishing an existing home and constructing a new building. This idea would have the added benefit of preserving our existing housing stock. Either or both of these market-based initiatives would be preferable to a demo tax. In truth, the only way to meaningfully increase affordable housing options in the Village is to change the Zoning code in order to significantly increase allowable density for new multi-family developments. I, personally, do not advocate such a position; however, it is an issue that needs to be discussed within the context of the whole affordable housing debate.
It is a fact that the market for real estate ebbs and flows over time, and we appear to be at the early stages of a downward slope in the market that may last for quite some time. Currently, builders and homeowner’s alike are facing a market where:
Interest rates have doubled in just the past 18 months.
The cost of building materials have increased between 15-20% each of the last two years.
There is a significant oversupply of homes on the market today, especially here on the North Shore.
The last thing we need right now is another tax on real estate that will put further downward pressure on prices during an already difficult housing market. Furthermore, it’s counter-intuitive to believe that adding another tax on real estate development will serve to create more affordable housing opportunities in this community.
In closing, I’m sure many of us discussing this issue would love to own lakefront property here in Wilmette. The cost of that property today is, of course, well beyond most our means. That is a simple fact of supply and demand and market economics. I don’t think the Village Board is prepared to subsidize the cost of me or anyone else to live on the lakefront. Assuming that is the case, then how can the Village justify its efforts to give money and/or subsidized housing to a select few who may desire to live in the Village, but can’t otherwise afford it. I implore you in the strongest possible terms to vote against this ordinance.
“Builders don’t just want to build expensive houses,” he said. They realize that housing demand is heavily concentrated between $175,000 and $400,000, the range in which some 40 million households can afford to buy a home, “but there’s not a lot of homes being built at these prices,” particularly in areas where the government is artificially constraining the supply.Another letter writer had this to say, about the stereotype of the north shore as all "rich folks":
“People don’t think about the unintended economic consequences of regulation,” he said. “Do we make GM give cars to the poor? Do we force teachers to teach extra students? Do local governments require Wal-Mart to sell stuff to the needy at reduced prices? Do we require grocery stores to provide food to the needy at a discount? Why is workforce housing different? Inclusionary zoning typically raises the cost of housing production, and there is no debate on that among economists.”
Many, maybe even most, residents, while well-off vs average, have, like most people stretched mightily to get to the NS. Thus, they are somewhat just holding on. Any increase in their expenses, particularly involuntary ones like taxes, makes their hold on their homes more tenuous. Thus, anything that raises taxes, even on "all those rich folks", really distresses a lot of people.Some have made sacrifices to move here for a good education for their children, paying quite a bit for a modest house that they may feel they don't really own if their taxes keep going up.
Also, the Wilmette blog comments.
Agenda for Tuesday's meeting.
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