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‘Property Taxes Matter’: Black Homeownership Rates Could Drop Even Lower if Older Adults Are Left Behind

In a city marked by stark racial disparities, where only 35% of Black residents own homes compared to 54% of white households, inequitable property tax assessments threaten homeownership for Chicago's older Black residents.

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In the United States, where only 44% of Black Americans own homes, a significant risk emerges: many may struggle to maintain their homes as they seek to age in place.

In Chicago, which remains the most segregated city in the United States between white and Black residents, a mere 35% of Black residents are homeowners — the lowest rate among all racial groups, according to the 2022 Census American Community Survey. Compounding this issue, the looming threat of foreclosures could push Black homeownership rates even lower, signaling a brewing crisis in the heart of the city.

Tiffany Smith and John Groene, Associate Directors for Neighborhood Strategy on the South and West Sides at the Neighborhood Housing Services (NHS) Chicago, have increasingly devoted their time to working with current homeowners, ensuring that people can stay in their homes, age in place, and addressing the factors that lead to foreclosures and force people out of their residences.

“Many people identify us with programs to help people buy their first home and do it right,” says Groene. “We certainly do that. But if we help 10 people buy here in Chicago on the west side or the south side, but we lose 10 current homeowners, many of them older adults, we really haven’t made an impact.”

“If we help 10 people buy here in Chicago on the west side or the south side, but we lose 10 current homeowners, many of them older adults, we really haven’t made an impact.”

John Groene, Associate Director for Neighborhood Strategy on the West Side, NHS Chicago

In 2023, Chicago had a total of 2,849 new foreclosure filings, according to housing data from the Institute for Housing Studies (IHS) at DePaul University. Over 10% of the foreclosure filings took place in Auburn Gresham and Roseland on the South Side of Chicago, two communities that are predominantly Black. In Auburn Gresham, around one-third of the households earn less than $25,000, representing the majority in that neighborhood, while in Roseland, about one in four households have an income below $25,000.

In Cook County, the number of older adult homeowners is rising, with these households in Chicago often being Black or Latino, lower-income, and living alone. Despite older adults having the highest homeownership rates, the 65-74 age group is rapidly shifting towards renting, facing significant affordability challenges in both renting and owning, according to IHS research.

To address this, NHS Chicago has identified a significant opportunity for intervention.

“We have really found the most area of opportunity in the property tax process, and particularly the Cook County property tax sale, which really manifests itself in the form of a property tax foreclosure,” says Smith.

How Cook County property taxes work

In Cook County, which encompasses Chicago, property taxes are an important aspect of homeownership. The Cook County Treasurer issues property tax bills twice a year, with homeowners facing a median annual property tax bill of $5,605.

The first installment, due at the start of March, is legally set at 55% of the total tax bill from the previous year. The second installment, due in late summer, accounts for any adjustments in tax rates, property assessments, and exemptions that the homeowner qualifies for, completing the annual tax requirement.

If you have a mortgage, it’s common to use an escrow account to handle your property tax payments. For those with an FHA loan, setting up an escrow account is mandatory, whereas for conventional loans, it’s optional, though it remains a frequent practice. The lender determines the annual property tax amount and divides this cost into the monthly mortgage payments.

Smith explains, “Our property taxes, insurance premiums, and interest payments are included in that monthly payment.” However, she notes that once your mortgage is fully paid off, the responsibility for paying property taxes shifts to you.

Smith recalls her personal experience with the transition from mortgage payments to handling property taxes directly.

“I was so excited when I made my last mortgage payment,” recalls Smith. But in March, she received a surprise $5,000 bill from the Cook County Treasurer’s office. Initially confused and upset, Smith called her father, distressed, thinking she had made a financial mistake.

“No, kid, that’s the taxes,” her dad said. “You got to write the check. You’ve been paying it all along. It was just in your mortgage.”

The thought of paying $5,000 in property taxes within 30 days was a daunting reality for Smith, who, despite having successfully managed her mortgage, found herself unprepared for the substantial lump-sum payment.

This scenario is particularly alarming for lower-income homeowners in Chicago, who could find such a bill severely impacting their budget. A 2022 survey revealed that 37 percent of adults would need to borrow money, sell something, or would be unable to cover a sudden $400 expense. Compounding this concern, a Pew Research study discovered that 73% of Black adults reported they lacked emergency funds to cover three months of expenses.

For older adults on fixed incomes, this situation can be even more precarious. Unlike Smith, who has some financial flexibility, older adults often have to manage their expenses strictly within the constraints of retirement funds or social security benefits. An unexpected or poorly planned-for tax bill of $5,000 can significantly disrupt their budget, potentially leading to tax delinquency and even foreclosure.

What happens if you don’t pay your property taxes

The due date for the first installment of the 2023 property taxes was Friday, March 1, 2024.

Cook County Treasurer Maria Pappas warned taxpayers, “If you don’t pay your taxes by the due date you end up paying more because of the interest penalty.”

The Treasurer’s Office allows for partial payments for those unable to pay the full amount by the deadline. Starting after March 1, interest charges on any remaining balance will drop from 1.5% to 0.75% per month, which comes to 9% a year.

Property tax bills not fully paid within 13 months of the second installment’s due date are presented for the Annual Tax Sale by the county Treasurer.

“When you are delinquent in your property taxes for more than two years, your pin, your property ID number, is eligible to be put in the property tax sale,” Smith explains.

At the Cook County Tax Sale, bidders step in to cover the due taxes and penalties, competing on the lowest interest rate they’ll charge the property owner moving forward, capped at a certain percentage.

“Those properties that go to sell are then purchased by property tax buyers,” says Smith. “Often, they are hedge funds. We’re finding that lot of them are actually in New York or in Florida and other places.”

Smith explains that the selection of properties for purchase is based on scientific criteria, targeting individuals who are either first-time delinquents or have had no more than two delinquencies in five years. The underlying motive is financial gain, as buyers aim to profit from the interest, banking on the owners’ determination to retain their homes.

The bidder quoting the lowest interest rate secures the auction. Upon winning, they pay the outstanding taxes and penalties, leading to a lien placed on the property for the paid amount.

“What we’re finding,” Smith explains, “is that our seniors are frequently impacted. They’ve typically been in their homes long enough to have paid off their mortgage and are no longer making mortgage payments.”

Smith also points out that Black and Brown homeowners experience disproportionately adverse effects relative to other city residents.

Economic disparities and historical housing discrimination in Chicago

Black and Brown homeowners in Cook County, who often have significant portions of their net worth tied to their homes, disproportionately lose their property and equity due to unpaid taxes, exacerbating the racial wealth gap.

In 2022, the Cook County Treasurer Maria Pappas’s office released the study “Maps of Inequality: From Redlining to Urban Decay and the Black Exodus,” illustrating how government-sanctioned redlining, established more than 80 years ago, continues to inflict damage on impoverished Black communities.

“This government-sanctioned “redlining” — denying home loans in minority areas because they were deemed a financial risk — thwarted generations of Black people from obtaining housing wealth that their white fellow citizens had achieved,” the study explains. In Chicago, homeownership rates for Black families are 35% compared with 54% for white households.

The impact of redlining is visible in Chicago’s south side neighborhoods, characterized by widespread vacant lots, abandoned homes, and boarded-up businesses—a legacy of the historical discouragement of mortgages by the U.S. government. Notably, Chicago’s South and West sides also have the highest percentage of properties offered at the Scavenger sale.

“The 15 Chicago wards with the highest percentage of properties offered at the Scavenger Sale have predominantly Black, Latino, or majority-minority populations,” according to the study.

The Scavenger Sale, conducted every two years by the Treasurer’s Office, offers properties with three or more years of delinquent taxes for sale. Taxes are sold for cash bids, which may not cover the total amount of taxes and interest due. In contrast, the Annual Tax Sale, mandated by law to be conducted yearly, involves an auction of the prior year’s delinquent taxes rather than the properties themselves. Investors bid for the right to pay the overdue taxes and obtain a lien on the property.

“Once your house goes to property tax sale, it is an uphill battle once those taxes are bought because our county has historically made it very difficult to redeem that property,” says Smith. “To redeem that property means you’re paying those taxes off with certified funds.”

This situation exacerbates the difficulties for homeowners who were already financially strained, forcing them to produce the entire payment at once without the possibility of installment plans.

An analysis of property taxes billed in 2021 reveals that lower-income, non-white areas faced significant property tax increases, further emphasizing the challenges faced by these communities. This ongoing disparity is underscored in a report from the Brookings Institute, which highlights that Black homeowners bear a property tax burden that is 10% to 13% higher than that of white homeowners, despite their properties being undervalued by an average of 21% to 23%.

Investigations have unveiled troubling inequities in tax assessments, exposing a system that favors wealthier, predominantly white communities while disadvantaging poorer, non-white ones. Specifically, the investigation conducted by the Chicago Tribune reveals systemic flaws in Cook County property tax assessments, disproportionately harming lower-income residents while benefiting wealthier individuals. This report uncovers a pattern of undervaluation of high-value properties and overvaluation of lower-value ones, exacerbating the unfair burden on economically disadvantaged communities.

NHS Chicago champions equitable homeownership

Since its founding in 1975, NHS Chicago has facilitated homeownership for over 7,000 individuals, helped more than 10,000 homeowners avoid foreclosure, and provided over $700 million in loans, as reported on their website. The organization has also tackled issues like redlining and promoted equitable homeownership to address disparities in race, income, and social status.

“Our mission is to help people buy, fix, and keep their homes,” says Smith. “From an education perspective, we offer housing counseling and education from pre-purchase to post-purchase. We like to support our clients throughout the homeownership lifecycle.”

Many clients on the South and West sides, whom NHS Chicago serves, are predominantly African American. The Chicago Urban League’s 2023 “State of Black Chicago” report highlights that the median income for Black households is less than $36,000 annually, compared to over $82,000 for white households.

With this significant disparity in resources, NHS Chicago focuses on financial education and credit management prior to home purchase. As homeowners face challenges with property taxes and insurance contributing to higher monthly costs, NHS Chicago is dedicated to providing ongoing education and counseling to help reduce these financial burdens, ensuring sustainable homeownership.

“Property tax matters,” says Groene as he explains how financial education and resources can be the difference between homeownership and foreclosure.

Groene spearheads a Financial Self Defense Class online every second Thursday of the month, imparting valuable insights on homeowner savings, including mortgage loan principal and interest, homeowners insurance, property taxes, energy costs, and water bills.

“Word of mouth is how most people find out about it. It’s absolutely scalable, but it’s hard to promote,” says Groene.

Groene explains that many are unaware that they are missing out on benefits like senior tax exemptions until they contact NHS Chicago for home repair solutions.

“Nobody comes to my office knowing that they have an issue with their taxes and nobody knows that they need financial self-defense,” says Groene. “They’re usually coming into my office because they’ve got a roof that’s leaking and they want to explore their options for fixing it.”

However, after attending Groene’s Financial Self Defense workshop, perspectives shift. Many participants leave with a newfound understanding, echoing the sentiment: “The only one that looks out for your money is you.”

This story was produced as part of Columbia University’s Age Boom Academy.

To reach the reporter behind this story, contact hello@chicagosouthsider.com.



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