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Rate of new home construction in Illinois ranks near bottom nationally

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Wednesday, September 4, 2019  |  Article  |  By Scot Bertram | The Center Square

Economy (34) , Housing (51) , Taxes, property (87)

Data from a national building permit survey indicated the state was 48th in new homes per 10,000 residents. Bill Ward, executive vice president of the Home Builders’ Association of Illinois, said the state has been at or near the bottom of the list for the past seven years. Other states deal with the same national environment, but he said Illinois has one big strike against it.

“I think the great outlier for Illinois is property taxation,” Ward said. “Most of my local associations border another state. In every situation, they have a hard time competing with builders in the next state over, simply because the property taxes are so much lower.”

Illinois had 17 new homes per 10,000 residents, ahead of only Connecticut and Rhode Island in that category. Ward said high taxes have ancillary costs as well.

“It’s not only keeping people out of the market, but it’s pushing people out of their own homes,” Ward said. “There are points where people’s property taxes are going up so much they can’t afford it anymore and they choose to rent.”

He also said the migration of jobs to the Windy City from other parts of Illinois has had an impact on downstate markets.

“In Peoria, you have 1,000 white-collar workers from Caterpillar move to the city of Chicago or the Chicago region,” Ward said. “That not only took out those consumers, but it also dumped 1,000 homes onto the market.”

The housing industry in the state has barely bounced back from the lows it hit after the housing crash a decade ago.

“Overall, Illinois lost 85-percent of its market when the housing crash hit in 2008,” Ward said. “And we’ve only crawled up like 10-percent in the past ten year. A good number of states have gotten back up to 50-to-100-percent of their normal market production.”

Illinois ranked in the top five in the proportion of new high-density housing construction. Ward attributed that mainly to the condo boom in Chicago. He said the rest of the state was struggling and losing residents to nearby communities across the border.

“When people pull up and leave the state, they’re taking with them a part of our economy,” Ward said. “[New housing] really does affect the economy. I don’t think people realize how much economic loss we’ve had in the past ten years.”

Ward said he was optimistic the newly created Property Tax Relief Task Force will find solutions to address the property tax problem in Illinois. He said that, combined with a good sales pitch, could turn things around.

“When people start looking into what it is they’re going to need to do to bring that existing home up to where they want it to be, they start to see again the benefit of going with new construction,” Ward said. “But right now it is very difficult to compete with existing construction as far as [cost per] square foot.”

The states with the highest new home construction rates were Idaho, Utah and Colorado, according to the report.