The rate rental properties are assessed at dropped over two tax years to slow the rate at which condo conversions are depleting the rental market.
Low interest rates sent thousands of first-time buyers into the market in recent years, which helped drive up property values everywhere?#34;nowhere in the Midwest, though, as much as in Oak Park, according the one newspaper's rankings.
But another force fed condo conversions?#34;the revamping of a multi-unit apartment building into condominiums?#34;higher taxes.
"We convert them because real estate taxes get so high we can't afford to rent them," said Mike Fox, a hotel owner and real estate investor in Oak Park. "Realistically, we can't afford to keep a building as a rental."
That's because when a property is held by a single owner for decades, the owner is able to win assessment appeals that restrain the rate of growth in the property's assessed value.
But when a property is purchased, the sale price becomes the de facto assessed value, in many cases driving taxes too high for the investment to be profitable.
Taxes account for between one-fourth and one-third of rent on a unit, Fox said. Other leading costs include utilities and insurance, both of which have skyrocketed in recent years, he said.
By converting a newly acquired apartment building to condos, the units are assessed at lower rates, and investors are able to make profits.
Fox said the lower assessment rate will help, but won't end condo conversions. That will come when the economy improves and rents and interest rates rise.