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Demolition Tax

Lake Forest, Lake County

Lake Forest enacted a demolition tax to offset costs the City incurs from the demolition of residential property, including the loss of affordable housing in the community.

Goal

To offset costs incurred by the City, including the loss of entry-level housing.

Target

Residential demolitions.

Financing

$12,000 per single-family home and $6,000 per unit for multifamily properties, or no less than $12,000.

Success

The demolition tax has raised about $30,000 to $40,000 per year for the City, with revenue of approximately $36,000 this past fiscal year.

Background

In the City of Lake Forest, many demolished residential properties were being replaced by larger, more expensive homes, increasing housing costs and changing the city’s character. As a result, in February 2006, Lake Forest enacted a demolition tax, as recommended in the City’s comprehensive affordable housing plan, to offset costs the City incurs from the demolition of residential property—including the loss of affordable housing in the community, interruptions of traffic flows in residential areas, increased debris, impacts on the city’s character and unanticipated stress on public infrastructure. This tax applies only to residential demolitions and is defined as the removal of 50 percent or more of the structure.

How it works

The tax is $12,000 per single-family and two-unit building and $6,000 per unit, but not less than $12,000, in all other demolished buildings. The tax is paid before the City issues the demolition permit. The City of Lake Forest issues an average of eight permits per year, with 12 permits being issued this past fiscal year. Half of the revenue from the tax is allocated to the City’s capital fund to support infrastructure projects, and half is allocated to the Affordable Housing Trust Fund to finance affordable housing initiatives.

Full or partial waiver of the fee is considered when:

  • The applicant and City enter into an agreement relating to the creation of additional affordable homes through the demolition and rebuilding process.
  • The applicant is the record title-holder on the property for at least three years prior to and following the demolition. In this instance, the applicant must pay the tax and notify the City of his/her intent to seek a rebate. After the three-year post-permit period, the applicant may apply for the rebate.
  • Demolition becomes necessary due to factors beyond the owner’s control and reasonable ability to remedy provided the damage is not caused by the owner, any employee of the owner, or a third party in privity with the owner.

Contact

Department of Community Development, City of Lake Forest
847-810-3503, www.cityoflakeforest.com

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