Population Loss in Illinois Could Affect Property Tax Sales in 2020

Although it remains too soon to say for sure, it appears that every metropolitan area in the state of Illinois may experience population loss in 2019. With the 2020 census coming up, officials in many states report concerns that their counties will register losses of hundreds of residents. The culprit, many say, is Illinois’ extremely high property tax rates, which many believe are driving people over the state lines into neighboring states like Missouri, Iowa, Indiana, and Wisconsin.

High Property Taxes Cost State Residents as Well as Income

When residents flee a state in order to avoid paying property taxes, over time the loss starts to hurt the state even if the residents are still working and spending money in their original location. Property taxes in Illinois are the second-highest in the country at 2.32 percent. Only New Jersey rates are higher. And while people may initially move to other states but keep their jobs in Illinois, the commute may wear on them over time.

“I think it is a struggle,” observed Mayor Kyle Moore of Quincy, Illinois. He added, “When we talk with local employers, they can’t find enough people to fill their jobs.” In fact, the lure of lower property taxes is so strong that many real estate brokerages in Missouri, where property taxes hover around 1 percent, market to Indiana homeowners with a barrage of materials showing just how much more home they could afford simply by moving “across the river.”

Why Don’t They Just Lower Property Taxes?

Critics often view Illinois’ ongoing issues with property taxes and population losses as issues with simple solutions: lower property taxes. However, according to a report from the Illinois Policy Center, the overwhelming fact of the matter is that the state cannot afford to do so, even as the high tax rates drive off the people paying the bills. Illinois schools and local governments both have enormous pension liabilities created by years of borrowing to pay those liabilities and agreeing to further obligations despite having no means for meeting them. In fact, the Illinois Policy Center estimates pension costs take up fully 50 cents of every property tax dollar paid and have done so for the past 20 years.

What Does This Mean for Tax Lien and Tax Deed Investors?

Illinois has long been an extremely productive location for tax lien and tax deed investors in part because although property taxes are high, acquiring a property via a tax lien or tax deed is still one of the easiest and least expensive ways to get started in real estate. Illinois’ high taxes mean that there are relatively more properties available for investors to choose from. However, with more homeowners opting to leave the state completely and with population counts falling, it becomes more important than ever for investors to purchase the right types of property in the right locations in order to optimize chances of filling a vacant property with a long-term tenant or selling it to a retail buyer.

The pension issue also should play a role in your selection of an Illinois investment property. In this state, many renters are public servants like teachers, for example. These individuals are ideal tenants, often remaining in place for years at a time and adding value to their communities. However, teachers and other public servants are likely to become more selective regarding the areas of the state in which they wish to teach and live if local school systems suffer as property taxes go unpaid or population volumes fall.

The PIP Group dedicates a great deal of time and energy to researching potential tax lien and tax deed investments in every area of the state in order to make sure that the properties available to PIP Group investors meet those investors’ specific goals and needs.

You can learn more about investing in a prime state for strategic investing in multiple fronts, Illinois, by signing up to view our Illinois Opportunity Spreadsheet here.

About the Author

Leave a Reply 0 comments

Leave a Reply: