By Kevin Haas
Rock River Current
Get our mobile app
ROCKFORD — A new round of tax breaks may be offered in an attempt to spur more homebuilding in the city and alleviate a real estate crunch caused by record-low numbers of homes for sale.
City Council members will be asked in the coming weeks to consider a three-year property tax rebate for newly built homes and multifamily structures. The city could also waive fees for building permits, inspections, plan review and water connection fees.
The Rockford School Board, the largest portion of your tax bill in the city, will also be asked to consider the breaks, Superintendent Ehren Jarrett said.
“We’re not yet building new homes at the pace that we should be,” Mayor Tom McNamara said. “I think we can be a better partner with the Realtors and a better partner with our citizens by creating incentives.”
More news: Rockford-area home sale prices hit record high, topping $198K for the first time
McNamara made his comments last week during a news conference with the NorthWest Illinois Alliance of Realtors announcing that the Rockford region hit its highest ever average monthly home sale price at $198,254.
“We at the city are eager to partner with other taxing bodies,” McNamara said. “I’m optimistic that this will be the year that we can start creating new programs to help launch more new construction throughout the city of Rockford.”
The city had a similar program in 2016 that offered a three-year property tax rebate for buyers of foreclosed, short-sale or newly built homes. That incentive has since expired.
“It helped quite a bit to get things generated,” Gary Oehlberg of Oehlberg Construction said of the past program. “It spurred growth. It got some new construction going where city of Rockford’s been dead for a long time.”
More news: A crown today. A white coat one day. Boone County Fair Queen envisions a future in medicine
Building permit data shows that the Rockford region has never returned to the booming construction days that existed before the housing bubble burst and the Great Recession took hold in 2007. It did, however, tick upward after the last tax rebate program was put in place in 2016.
There were 157 single-family home construction permits in 2007, the year the housing bubble burst. The highest number since then was 41 in 2019 before the pandemic took hold. There have been 19 such permits so far this year.
“We just finished one maybe six to seven months ago in Rockford,” Oehlberg said during a phone interview in between a home remodeling project his company was handling. “It was the first one I’ve built there in probably 10 years.”
Winnebago and Boone counties would regularly build 1,600 to 1,700 units a year in the construction heyday, according to data from the Home Builders Association of the Greater Rockford Area. Last year, there were 51 single-family home construction permits in Winnebago County and 17 in the city of Rockford, according to building permit data. There were 136 total permits in the county when including duplexes, triplexes and four-family units.
Oehberg said more taxing bodies than just Rockford and Rockford Public Schools will need to take part of the program for it to pay off. Most taxpayers in the city of Rockford have 11 different taxing bodies on their bill, including Rock Valley College, the Forest Preserves of Winnebago County, Rockford Township, Four Rivers Sanitation Authority, the Rockford Park District, the Rockford Public Library and the Greater Rockford Airport Authority.
“If Rockford’s going to grow, people have to make things happen,” Oehlberg said.
‘A tragedy in the making’
Data from the Northwest Illinois Alliance of Realtors shows that the inventory of homes for sale has dropped for 30 straight months when compared to the same month a year ago. That has spurred a fast-moving real estate market and record home-sale prices.
“We get calls literally weekly from people who are moving to this area — doctors, medical professionals — who just simply cannot find a product that they’re looking for,” said Sunil Puri, founder and CEO of First Midwest Group. “They’re looking for newer homes or new duplexes, something they can quickly move into.”
Puri, whose company has developed thousands of acres of land into homes and businesses over the past four decades, said Rockford can’t afford to miss out on opportunities to bring people into the city.
“When we lose these people because of the lack of housing we lose their families in the schools, we lose their charity, we lose their buying power, we lose everything, and it’s a tragedy in the making long term,” Puri said.
First Midwest Group obtained ownership of a neighborhood called Siena Crossings after it was left partially developed in the wake of the Great Recession. It has 10 ranch-style duplexes tucked just off Guilford and North Alpine roads, but there are 42 more lots that could be developed.
It’s challenging for homebuilders to make the economics work because of high material and labor costs, as well as rising interest rates. There’s another problem, too, Puri said: There aren’t nearly as many homebuilders now as there were before 2007.
“There just aren’t that many left in the area like we used to have that build,” Puri said. “We’re simply challenged not by capital but by builders right now.”
The high cost of construction and high interest rates will make new homebuilding difficult even with the tax rebate and fee waivers, Puri said.
“It’s a step in the right direction. Let’s hope things settle down,” he said. “I hope this is not just a one-time thing, so that when rates do come down we don’t have this incentive fold.”
‘Plenty of available lots’
A decade of subdued building led to a shortfall of 6.5 million single-family homes across the country, according to a report released by Realtor.com in March.
In July, a typical day saw 45,000 fewer homes on the market across the country compared to a year ago, a separate report from the agency said.
Dennis Sweeney, executive vice president of the Home Builders Association of the Greater Rockford Area, said construction costs are putting the price of a newly built home too high for first-time buyers to afford.
A homebuilder is fortunate, he said, if they can build at $230 per square foot, plus the cost of buying the lot.
“That means even your basic Rockford ranch homes now are in that $400,000 to $450,000 price range,” Sweeney said.
First-time homebuyers used to make up about 40% of the market, Sweeney said, but now that’s dropped to about 25%.
“When you don’t have people entering the first-time homebuyer market, which are the lower priced homes, allowing people that own those homes to move up to another home to move up to another home, perhaps build a new home, it slows everything down,” Sweeney said.
More news: The GOAT Pub and Grill aims to create new neighborhood gathering place on Rockford’s North End
Sweeney said prices have inflated exponentionally, and that’s not the best way for the city to grow its tax base.
“You’d much rather have your tax base expand through new construction and growth than inflate,” Sweeney said. “We are in a situation now where it is dramatically inflating.”
McNamara said the benefits of the incentives could go beyond helping grow the tax base.
“It puts hardworking men and women to work, it gives Realtors more inventory to sell, and it allows new people to come into our community,” McNamara said.
Sweeney said there has been more homebuilding activity this year, but much of it has been in Loves Park, Belvidere and in unincorporated areas of Winnebago County. He hopes this could provide an avenue for more construction in the city.
“Trust me, there’s plenty of available lots in school district 205 and in Rockford for development,” Sweeney said. “This would be one way, perhaps, to move some of that land inventory.”
This article is by Kevin Haas. Email him at khaas@rockrivercurrent.com or follow him on Twitter at @KevinMHaas or Instagram @thekevinhaas and Threads @thekevinhaas