HP’s demo tax is fundamentally unfair

Peter Diambri is 87 years old and owns a tiny vacant house on a small lot in Highland Park.  The home, formerly a rental property, has been subject to freezing and subsequent severe water damage.  Several years ago, at the City’s request, Diambri boarded up and secured the property.

Mr. Diambri and his family have determined the home, with an estimate property value of $100,000, cannot be feasibly repaired and want to take corrective action.  Diambri contacted the City to obtain a demolition permit to raze the objectionable structure, but he was shocked to discover that while the City is not opposing the demolition they want him to pay a $10,000 demolition tax to do so.

One-third of the $10,000 is to go to the City’s infrastructure fund, and two-thirds of the money will be deposited in the City’s Affordable Housing Trust Fund that helps provide below market housing to those that may otherwise be unable to afford to live in Highland Park.  On top of the $10,000, Diambri would also have to pay an additional $5,000 if he wishes to defer paying the tax now and a $750 demolition permit fee (100 percent of the permit fee is also diverted to the affordable housing fund).  Of course, he will also have to pay a contractor an estimated $20,000 for the demolition. 

This isn’t a special tax just for Mr. Diambri; it’s a tax targeted toward all owners of older residential properties.  In other words, as a consulting firm hired by the Village of Wilmette best put it: “[A demolition] tax would impact mainly older, functionally obsolescent single family detached houses, typically owned by longtime, older residents whose major assets are their homes.”  Even when a homeowner sells to a builder, the consulting firm says:  “Its cost would [still] likely fall on residents selling houses destined for demolition, because builders (who may be the persons actually paying the tax) would factor the tax into the price they would be willing to pay for the property.”  

Very few communities nationwide have instituted such a tax, and even fewer as high as $10,000.  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 these activities.  As is, most Highland Park residents are not required to contribute anything toward affordable housing efforts, while those that own smaller, older homes destined by the market to be demolished get hit with this massive tax.

At 87, Mr. Diambri has put in a lifetime of hard work to provide for his family and retirement.  He is trying to do the right thing by demolishing a functionally obsolete property; he should not have to forgo 10 to 15 percent of his property’s value to fund ancillary city services, especially when most other Highland Park residents do not have to contribute even $100.

Howard Handler is Government Affairs Director for the not-for-profit North Shore – Barrington Association of REALTORS – the area’s leading private property advocate.  Handler, a licensed real estate broker, received his undergraduate degree from the University of Wisconsin – Madison, and his master’s degree in Public Policy and Administration from Northwestern University.  He can be reached at: hhandler@iar.org