Affordable Rental Housing Property Tax Programs

The State of Illinois has several provisions in its Property Tax Code to encourage the development and rehabilitation of affordable housing.

Disclaimer: The Illinois Housing Development Authority does not administer property tax. Property tax is managed by the local governments including cities, counties, and taxing districts. If you would like more information, please contact your local county officials. For questions on how IHDA may assist in providing information to support assessment reductions, exemptions, and low-income housing valuations, please contact PTAXQuestions@ihda.org

Assessment Reductions

Signed into law in July of 2021, Section 15-178 of the Property Tax Code (35 ILCS 200/15-178) creates a statewide special assessment program to incentivize the new construction and preservation of affordable housing. Key provisions of the program include:

Tier Tier 1 Tier 2 Tier 3

(Limited Availability)
Affordability Requirement 15% of units

Requirement can be met through restricted rents, renting to tenants with vouchers, or participating in another affordable housing program.

 35% of units

Requirement can be met through restricted rents, renting to tenants with vouchers, or participating in another affordable housing program.

 20% of units

Requirement can be met through restricted rents, renting to tenants with vouchers, or participating in another affordable housing program.
Affordability Level At or below 60% of Area Median Income (AMI) At or below 60% of Area Median Income (AMI) At or below 60% of Area Median Income (AMI)
Incentive 25% reduction in assessed value 35% reduction in assessed value Years 1-3: reduction equal to 100% of the difference between the value one year before the affordable units are occupied and post-construction assessed value Years 4-6: 80% of the difference

Years 7-9: 60% of the difference

Years 10-12: 40% of the difference

Years 13-30: 20% of the difference
Qualifying Activity New construction and rehab costing $8/sq ft1 and improvements of two primary building systems New construction and rehab costing $12.50/sq ft1 and improvements of two primary building systems New construction and rehab costing $60/sq ft1 and improvements of five primary building systems
Minimum Building Size 7 units 7 units 7 units
Duration of Incentive 10 years, with two renewable 10-year periods for a total of 30 years 10 years, with two renewable 10-year periods for a total of 30 years 30 years
Geographic

Availability

 No restrictions No restrictions (1) a municipality or jurisdiction with less than 1,000,000 inhabitants in which 40% or less of its total year-round housing units are affordable, as determined by IHDA during the exemption determination process under the Affordable Housing Planning and Appeal Act;

(2)”D” zoning districts in the Chicago Zoning Ordinance; or

(3) a jurisdiction located in a municipality with 1,000,000 or more inhabitants that has been designated as a low affordability community by passage of a local ordinance by that municipality, specifying the census tract or property by permanent index number or numbers.

1: The qualifying investment per square foot is adjusted annually by the Consumer Price Index for All Urban Consumers.

Owners seeking to enroll their properties in this special assessment must apply directly to the county assessor’s office. Please contact your local county assessor for more information.

Exemptions

Certain properties may qualify for a property tax exemption under the Charitable Purposes section of the Property Tax Code (35 ILCS 20/15-65). Refer to the Property Tax Code and administrative rules (86 Ill. Adm. Code 110.116) for additional details.

Valuation Methodology

Division 11 of Article 10 of the Illinois Property Tax Code details the valuation procedures for low-income housing in the State.

Section 10-235 of the Property Tax Code (35 ILCS 200/10-235) expresses that it is the policy of the State that low-income housing projects developed under Section 515 of the federal Housing Act or that qualify for the low-income housing tax credit under Section 42 of the Internal Revenue Code (26 U.S.C. 42) shall be valued at 33 and one-third percent of the fair market value of their economic productivity to the owners of the projects. This helps insure that their property taxation valuation does not result in taxes so high that rent levels must be raised to cover this project expense.

Section 10-260 of the Property Tax Code (30 ILCS 200/10-260) clarifies that in determining the fair cash value of property receiving benefits from the Low-Income Housing Tax Credit authorized by Section 42 of the Internal Revenue Code,  emphasis shall be given to the income approach.

35 ILCS 200/ Property Tax Code

35 ILCS 200/10 Article 10. Valuation Procedures for Special Properties. Division 11. Low-income Housing.

35 ILCS 200/10-235 – Low-income housing project valuation policy; intent.

35 ILCS 200/10-240 – Definition of Section 515 low-income housing projects.

35 ILCS 200/10-245 – Method of valuation of low-income housing projects.

35 ILCS 200/10-250 – Certification procedure and effective date of implementation.

35 ILCS 200/10-255 – Rules.

35 ILCS 200/10-260 – Low-income housing.

30 ILCS 200/15 Article 15. Exemptions.

35 ILCS 200/15-65 – Charitable purposes.

35 ILCS 200/15-178 – Reduction in assessed value for affordable rental housing construction or rehabilitation.