Demolition Tax

The demolition of any residential structure comes with a fee of $20,000. Multifamily properties are charged additional fees depending on the number of units in the building. For the demolition of 2–5-unit multifamily properties, an additional $4,000 per-unit fee applies; and for 6+ unit multifamily properties a $7,500 per-unit fee applies. All revenue raised from the tax is allocated to the Affordable Housing Fund, which is used for City efforts in the creation, preservation, maintenance and improvement of affordable housing within the City.

To not disincentivize developments that would advance the City’s housing goals, the following are exempt from the demolition tax:

• If applicants enter into an agreement with the City to provide affordable housing.
• If the Evanston Community Development Director determines the replacement structure will be affordable.
• If the demolition is ordered by the City.

Owner-occupants who demolish their homes to construct replacement houses for their own use have two options for paying the tax. An owner may apply to defer the tax if they have been the occupant for three consecutive years; in which case a lien for the tax amount is recorded against the property. If the owner sells the replacement house prior to the expiration of three years from issuance of the certificate of occupancy, the deferred demolition tax plus interest is due. If the person remains an occupant of the replacement house for three years, the lien is released and no tax is due. Alternatively, if the owner remains the occupant of the replacement house for three consecutive years after issuance of the certificate of occupancy, they may pay the tax at the time the demolition permit is issued and later apply for a monetary stability incentive equal to the amount of the tax.

The ordinance received some public opposition and generated debate among council members because it initially required owner-occupants who might continue to occupy the property to pay the tax up front. People were also concerned about equal protection if owner-occupants were allowed to defer payment but sold the replacement housing without meeting the three-year requirement.

Impact for Equity provided pro bono assistance to help resolve this and other issues –drafting an initial sample ordinance, participating in public meetings to communicate the intent of the ordinance to the public, giving continuous feedback to City staff on revisions and offering potential alternatives. Ultimately, the City of Evanston adopted an Impact for Equity recommendation known as the “Stability Incentive”, which gives homeowners that are eligible for reimbursement of the tax the option of either paying the tax up front or taking a lien on the property.