As rents and home prices have surged in recent years, the availability of affordable housing continues to be a major concern in communities across the US. Property tax abatements and incentives are tools utilized to increase the supply of affordable housing. They impact property management expenses by reducing the annual property tax liability and promote the development of new or preservation of existing affordable housing. This has resulted in numerous states developing strategies to address the affordable housing crisis.
Illinois House Bill 2621, known as the Affordable Housing Omnibus Bill, was signed into Illinois law in 2021. The legislation created property tax incentives for the rehabilitation and/or new construction of affordable residential housing with seven or more units based on tiers of affordability: 15%, 20% 35% - at 60% of Area Median Income (AMI). Additional qualifying requirements and duration of the incentive are tier based. Tiers 1 (15%) and 2 (35%) of the special assessment program are available anywhere in Cook County and any other Illinois county that doesn’t opt out by vote of the county board. Counties outside of Cook County can delay implementation for a period or opt back in after initially opting out. Several counties have initially opted out; however, with the ability to opt back in, checking with a Kroll property tax professional on the most recent status is recommended. Tier 3 (20%) is only available in downtown Chicago and defined “low affordability” communities in Cook County where less than 40% of the housing is affordable, which are identified by the Illinois Housing Development Authority.
| Incentive Tier | 1 | 2 | 3 |
| % Affordable Units | 15% | 35% | 20% |
| Weighted AMI Requirement | 60% | 60% | 60% |
| Minimum Building Size | 7 units | 7 units | 7 units |
| Duration | 10 years with two renewable 10-year periods | 10 years with two renewable 10-year periods | 30 years |
| Assessed Value Reduction | 25% post-construction assessed value |
35% post-construction assessed value |
Years 1-3: 100% incremental assessment Years 4-6: 80% incremental assessment Years 7-9: 60% incremental assessment Years 10-12: 40% incremental assessment Years 13-30: 20% incremental assessment |
| Qualifying Activity |
New construction and rehabilitation costing $8/sq. ft., adjusted annually for inflation, and two primary building systems |
New construction and rehab costing $12.50/sq. ft., adjusted annually for inflation, and two primary building systems | New construction and rehab costing $60/sq. ft., adjusted annually for inflation, and five primary building systems |
| Availability in Illinois |
Anywhere in Cook County and any other county that doesn't not opt out by vote of county board | Anywhere in Cook County and any other county that doesn't not opt out by vote of county board | Downtown Chicago and some suburban Cook County municipalities |
| Program | Subparagraph (1) of subsection ”©" in state law | “Subparagraph (1) of subsecti”©(c)" in state law |
“Subparagraph (2) of subse©on (c)” in state law |
In 2022, the Illinois General Assembly approved an amendment to the Affordable Housing Omnibus Bill. Senate Bill 3895 redefined the “base year” as the tax year immediately prior to the year that the building permit was issued. The “base year” is utilized in Tier 3 to calculate the incentive amount based on a percentage of the difference between the “base year” value and the post-construction assessment. The amendment also changed the maximum rent at or below 60% of AMI to allow for a weighted average.
Tiers 1 (15%) and 2 (35%) of the special assessment program have an initial 10-year term with up to two renewal options. Tier 3 (20%) in Cook County has a 30-year term. Annual certifications may be required.
The special assessment program is not ownership-based and runs with the physical property. A purchaser must comply with all requirements for the property to continue in the program.
Additional information from counties that have opted in and implemented a program can be found at the links below. We recommend checking with a Kroll property tax professional for additional county specific information.
Cook County’s program is called the Affordable Housing Special Assessment Program. Current properties designated as Class 9 and in good standing may qualify to switch to the more expansive Affordable Housing Special Assessment Program. Note: The number of years in the Class 9 program would count against the initial term of the Affordable Housing Special Assessment Program. In-service properties that were constructed or have made substantial improvements since January 1, 2015, may qualify for the program. Note: The number of years since construction was completed would count against the initial term of the Affordable Housing Special Assessment Program.
Lake County’s program is the Affordable Housing Tax Credit. Properties may apply for the program within two years of new construction or rehabilitation of existing residential real property. The term would be reduced for the number of years between the property being placed in service and receiving the reduced valuation from this program.
