"The chief cause of problems is solutions."

—Eric Sevareid

A consensus has emerged among Springfield lawmakers and Mayor Lori Lightfoot to authorize Chicago's switch to progressive rates on real estate transfers. Though the framework would provide welcome relief for smaller homeowners, it would hammer the multifamily residential market and undermine the initial goal of stimulating more affordable housing.

First, the good news.

The framework is incorporated in companion bills now moving through the Illinois House and Senate. It would cut Chicago's portion of real estate transfers, currently 1.05 percent, to 0.95 percent for sales between a half-million and 1 million dollars and to 0.55 percent for sales of less than a half-million.

That's meaningful relief for homeowners and small commercial landlords. Aside from the obvious cash benefit, cutting the cost of mobility for middle-income homeowners is good for everybody.

But owners of big apartment buildings would get slammed, and they provide the primary housing option for lower-income groups. The tax on sales over $10 million in value would almost quadruple to 4 percent. Sales from $3 million to $10 million would be taxed at 2.8 percent, a 270 percent jump. Sales from $1 million to $3 million would be taxed at 1.5 percent, a 43 percent increase.

The round-trip tax—both purchase and sale—of, say, a $50 million apartment building would be $4 million. That's just for Chicago's tax. The state, Cook County and Chicago Transit Authority have their own transfer taxes.

The progressive transfer tax hike was initially envisioned as a revenue source to fund affordable housing. Under the new framework, one-quarter of all transfer tax revenue would be earmarked for that, and the rest would go toward Chicago's general budget. Roughly $50 million of new revenue is projected beyond the $160 million the city already collects, though it's an unreliable revenue source because transaction volumes are cyclical.

But the true impact will come from those increases in transfer costs for big multifamily properties, and it will hurt.

Higher cost means less supply. The tax hike will be just another cost of ownership impairing the viability of new construction, which is very expensive in Chicago. As Crain's recently reported, Chicago construction costs are 20 percent higher than the national average. Only New York and San Francisco are higher. Among Midwestern metro areas, costs rose the most in Chicago over the past decade, at 31.6 percent.

Lower-income groups need those big apartment buildings, which are a more realistic option for affordable housing than homeownership. That's where real money is. Roughly $3 billion of multifamily properties changed hands in Chicago last year.

It will be a similar story for nonresidential commercial properties like offices and factories. They represented another $5 billion in sales last year. Those volumes have already dropped to half of postrecession highs. Progressives may be delighted to see the corporations that own them taxed; they equate corporations with the rich. In fact, however, corporate taxes are ultimately borne by customers, shareholders, employers, suppliers and other stakeholders. Corporate taxes are scattershot, and not very progressive.

People who usually are well-off—owners of homes valued at more than $1 million—will indeed pay more, as intended. Those existing owners probably will see the new transfer tax as an "exit tax" on the wealthy, which is no doubt an unspoken, additional rationale for it. Potential new buyers will see it as a deterrent to buying.

But it's on that initial goal of supporting affordable housing that the progressive transfer tax hike is most unsound. It will backfire, validating that quote above from Eric Sevareid.

Mark Glennon is founder of Wirepoints, an independent research and commentary nonprofit.