Chicago’s Tax Increment Financing: Who Paid, Who Gained?
Executive Summary
This report from the UIC Great Cities Institute examines more than four decades of Chicago’s use of Tax Increment Financing (TIF), asking whether the program has delivered the kind of public benefit its scale would suggest.
Tax Increment Financing is a way cities fund development projects using future growth in property tax revenue. When a TIF district is created, the amount of property tax revenue generated in that area is essentially set at a starting level. As property values rise, the additional tax revenue above that starting point is placed into a TIF fund. That money can then support projects such as infrastructure improvements, housing, schools, parks, or private development. The idea is that these investments will help stimulate development and increase property values.
The report finds, however, that Chicago’s TIF system has grown far beyond its original purpose of encouraging development in areas experiencing disinvestment. Since 1984, TIF districts have generated approximately $16.6 billion in revenue. Yet the report concludes that much of the property value growth captured by TIF would likely have occurred even without the program. Between 2014 and 2023, TIF increased property tax rates citywide by an estimated average of 13.7 percent, while only 1.8 percent of growth in property values within TIF districts was attributable to TIF-supported development.
The report also finds that TIF benefits have been distributed unevenly. About 51 percent of tracked TIF project spending since 1986 went to downtown or nearby neighborhoods, including investments in private development, housing, schools, infrastructure, and parks. At the same time, substantial property tax growth was directed into TIF funds rather than immediately supporting schools, libraries, parks, and other public services.
While the report recognizes recent reforms under Mayor Brandon Johnson, it argues that deeper structural changes are still needed. Its recommendations include stronger transparency and oversight, allowing more property tax revenue to remain available for schools and essential public services, phasing out downtown TIF districts that have already achieved their original goals, and directing more resources toward small businesses and historically underserved neighborhoods.
Media Coverage
A note on the research design
The New York Times’ coverage of our report included a methodological caution from William Fulton of UC San Diego. Below, report co-author Matthew D. Wilson responds.
Professor Fulton’s characterization of the analysis is not accurate given that our research design was built to address exactly the caution that he raised. We did not assume that parcels near TIF projects were “exactly the same” as parcels farther away. Instead, we follow each property over time, comparing it with its own earlier values, so stable differences between properties do not drive the results. We then ask whether values near a TIF project changed differently from values at nearby comparison properties a half-mile to a mile away. The key question is whether those two groups were following similar trends before the TIF investment, not whether the properties themselves were identical. We tested those pre-treatment trends for every property type and published the results.
We also did not rely on a single estimate. We published four scenarios that vary how much property-value growth is credited to TIF. Under our preferred estimate, TIF accounts for 1.8 percent of the increment. Even under a deliberately pro-TIF scenario that assumes positive effects for every property type, the share rises only to about 6 percent. So even when we give TIF substantially more credit, about 94 percent of the increment still is not attributable to TIF investment. The exact percentage can vary; the central finding that TIF captures far more value than it creates holds across every scenario.
It is also worth noting that the direction of the potential bias Professor Fulton describes is not obvious. If TIF projects tend to go where property values were already poised to rise, our estimates could overstate TIF’s effect; if they tend to go into declining areas, the bias could run the other way. That is why we test pre-treatment trends rather than assume the groups are equivalent. And importantly, the separate tax-shift result changes very little across the four scenarios: we estimate that Chicago property-tax rates in 2023 were 17 to 19 percent higher because of TIF, with more than $1 billion in additional taxes under every scenario.
- WTTW News: TIF Districts Boosted Property Taxes but Failed to Spur Development in Blighted Neighborhoods: Report
- Chicago Sun Times: Chicago program that set aside billions for development has left poor areas behind, UIC study finds
- Block Club Chicago: Chicago’s TIF Program Helped Downtown — But Not Poorer Neighborhoods, New Study Shows
- The Real Deal: Poorer Chicago areas left behind by TIF-funded development, study finds