Highland Park considers only minor revisions to teardown tax
Attorney Paul Diambri stands in the front of a dilapidated structure at 1659 McGovern Street in Highland Park that has served a a lightening rod for a reexamination of the city's teardown tax to finance affordable housing. | Ryan Pagelow~Sun-Times Media
Updated: March 15, 2013 8:03AM
HIGHLAND PARK — When the housing market was booming, larger dwellings began to replace modest homes at what Highland Park officials thought to be an alarming rate.
In response, the City Council instituted a tax on teardowns specifically to fund its affordable housing program. Proponents of the $10,000 tax on each demolition argued that buyers and builders who replaced homes with larger dwellings were contributing to the loss of affordable housing stock in the city.
As current housing commission chair Jami Sharfman put it, “If someone was going to purchase a home, knock it down and build a new home, they were in a position to pay the tax.”
Now, a hardship appeal from the owner of a boarded-up structure near downtown has sparked a controversy over the fairness of asking a select number of property owners to bear the cost of the city’s affordable housing program.
The property owner, 87-year-old Peter Diambri, is willing to demolish the dilapidated, 600-square-foot structure on the property at 1659 McGovern St., but has objected to paying the $10,000 tax on top of the estimated $18,000 cost of demolition.
“This is not the situation of a greedy developer seeking to demolish a modest home, with the goal of erecting a ‘McMansion’,” said Diambri’s son, Highwood attorney Paul Diambri, who appealed on his father’s behalf at a committee meeting in late 2012.
Council members responded by asking its housing commission to reexamine aspects of the tax, including whether the tax should be lower for properties below a certain threshold.
“Very few communities nationwide have instituted such a tax, and even fewer as high as $10,000,” said Howard Handler, government affairs director for the North Shore-Barrington Association of Realtors. “That’s not to say the city’s goal of funding affordable housing is devoid of merit, but those that simply own older homes, which are most likely to be demolished, should not shoulder a disproportionate burden of funding theses activities.”
On Monday, City Council members heard the housing commission’s findings. The commission has recommended that the tax on residential teardowns stay at the current level, but that the premium for deferring payment be changed from 50 percent to 5 percent a year up to 10 years.
The housing panel rejected the idea of reducing the demolition tax for lower-priced properties. The group reasoned a low demolition fee, say $2,000, could serve as a disincentive for owners to maintain properties that are the main source of affordable housing in the city.
Council member James Kirsch suggested that an escalator cost should be linked to the Consumer Price Index.
City attorney Steven Elrod was instructed to draft ordinance changes to reflect the commission’s recommendations.
In the early years, the tax on demolitions generated so much revenue — $850,000 one year alone — that the ordinance was amended to redirect one-third of the receipts to an infrastructure fund.
Then everything changed in late 2008 with the collapse of the housing and credit markets. The few demolitions that took place the following year yielded $33,000 for the Affordable Housing Trust Fund, far less than what the city’s housing commission and staff felt was needed for a viable program.
According to a staff memo, the demolition tax was set at $10,000 because the 40 to 50 demolitions that were occurring annually at the time would yield the desired $400,000 to $500,000 in revenue.
Noting the demolition tax is key to affordable housing, but only a tiny portion of the Multi-Modal Transportation Fund, the commission recommended that all teardown tax receipts go to the Affordable Housing Trust Fund, a change the council supported on Monday.