TAX ALLOCATION AGREEMENT


         THIS TAX ALLOCATION  AGREEMENT (this "Agreement") is entered into as of
this  31st  day  of  December,  1999,  by and  between  Security  Capital  Group
Incorporated,   a  Maryland  corporation   ("Parent"),   and  Homestead  Village
Incorporated, a Maryland corporation ("Subsidiary").

         WHEREAS,  Parent,  Subsidiary  and others are members of an  affiliated
group of  corporations  as defined in section 1504 (a) of the  Internal  Revenue
Code of 1986, as amended (the "Code"), of which Parent is the common parent; and

         WHEREAS,   the  parties  desire  to  agree  upon  an  equitable  method
consistent with representations made in Subsidiary's Prospectus Supplement dated
April 5,  1999,  for  determining  the  financial  consequences  to  Parent  and
Subsidiary  of  filing  consolidated  Federal  income  tax  returns  by  Parent,
Subsidiary and others;

         NOW,  THEREFORE,  in consideration of the foregoing promises and mutual
covenants contained herein, the parties agree as follows:



         1.  DEFINITIONS

         (a)  Terms used in this Agreement  shall have the meanings  ascribed to
              them  in  the  Code,  and  the   regulations  and  rulings  issued
              thereunder,  as from time to time in effect.  Concepts referred to
              in this  Agreement  shall be interpreted in view of the provisions
              of the Code and the  regulations  and rulings  thereunder  then in
              effect.

         (b) For purposes of this Agreement,  the terms set forth below shall be
defined as follows:

              (i)     "Capital  Transactions"  means a sale,  merger,  or  other
                      transaction  pursuant to which Parent disposes of a number
                      of shares as a result of which  Parent  owns less than 50%
                      of the shares of Subsidiary.

              (ii)    "Group"  means  Parent and all  corporations  (whether now
                      existing or hereafter formed or acquired) that at the time
                      would be  entitled  or  required  to join  with  Parent in
                      filing a consolidated Federal income tax return.

             (iii)  "Parent"  means  Parent,  or  any  successor  common  parent
                    corporation of the Group

              (iv) "Member" means any corporate  entity entitled to be included
                    in the Group.

               (v)  "Subsidiary Tax Liability"  means the  hypothetical  Federal
                    income  tax  liability  of  Subsidiary  for a  taxable  year
                    determined by multiplying  the  consolidated  Federal income
                    tax liability of the Group  (calculated  before  credits and
                    net operating losses attributable to Non-Subsidiary Members)
                    for  such  taxable  year as  reflected  on the  consolidated
                    Federal  income tax return  filed by Parent on behalf of the
                    Group for such year,  by a fraction,  the numerator of which
                    is the hypothetical Federal taxable income of Subsidiary for
                    such taxable  year,  computed as though  Subsidiary  filed a
                    separate  Federal  income tax return for such taxable  year,
                    and the  denominator of which is the aggregate  hypothetical
                    Federal  taxable income for all the Members for such taxable
                    year,  computed  as if each  such  Member  filed a  separate
                    Federal  income tax return for such  taxable  year (but with
                    the  hypothetical  Federal  taxable income of no such Member
                    being less than zero). Such hypothetical  Federal income tax
                    liability shall be determined at the end of the taxable year
                    and shall reflect any tax elections, conventions, treatments
                    or  methods  which  are  actually  utilized  by the Group in
                    filing  its  consolidated  Federal  income  tax  return.  In
                    determining  its  hypothetical  Federal taxable income for a
                    taxable  year,  a Member  shall  take into  account  any net
                    operating  loss  carryover,  credit  carryover  or other tax
                    attribute  incurred  by such  Member in any  previous  year;
                    provided  that  Subsidiary  shall not take into  account any
                    Subsidiary Pre-Consolidation Net Operating Loss carryover to
                    the extent actually previously utilized in any prior taxable
                    year to offset any tax  liability  of the Group and provided
                    further  that  Subsidiary  shall not take into  account  any
                    Subsidiary Post-Consolidation Net Operating Loss.
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          (vi) "Subsidiary  Estimated  Tax  Liability"  means  the  hypothetical
               estimated   consolidated   Federal   income  tax   liability  for
               Subsidiary  determined  in  accordance  with  the  principles  of
               paragraph (b)(v).

          (vii)"Subsidiary   Tax   Refund"   means  an  amount   determined   by
               multiplying  the Federal income tax refund  received by the Group
               for a taxable  year by the  fraction  determined  for  Subsidiary
               under  paragraph  (b) (v) for the  taxable  year with  respect to
               which such refund is received,  but only in the event  Subsidiary
               has actually made Subsidiary Tax Liability payments.

          (viii) "Subsidiary  Pre-Consolidation  Net Operating Losses" means all
               operating losses generated by Subsidiary prior to May 28, 1999.

          (ix) "Subsidiary  Post-Consolidation  Net Operating  Losses" means all
               operating  losses  generated  by  Subsidiary  during  the  period
               beginning May 28, 1999 and ending on the date on which Subsidiary
               ceases to be a Member.


         2.   ALLOCATIONS OF CONSOLIDATED
              FEDERAL INCOME TAX LIABILITY

          (a)  Filing by Parent

                 Parent shall file  consolidated  Federal income tax returns for
               each taxable year ending after the date hereof.

          (b)  Payment of Tax Liability

              For each taxable  year ending  after the date hereof  during which
              Subsidiary is included in a consolidated Federal income tax return
              with Parent,  Subsidiary will pay to Parent an amount equal to its
              Subsidiary Tax Liability. To the extent that the obligation to pay
              such amount has not been fully  satisfied  pursuant  to  paragraph
              2(c) of this  Agreement,  Subsidiary  shall pay any such remaining
              amount to Parent on the last date on which  Parent is  required to
              make its final  payment of Federal  income  taxes for the  taxable
              year without incurring any penalties or additions to tax.

          (c)  Estimated Payments

               On any date on which  Parent  is  required  to make an  estimated
               payment of the consolidated Federal income tax of the Group under
               Section 6655 of the Code, Subsidiary will make estimated payments
               to Parent  in an amount  equal to its  Subsidiary  Estimated  Tax
               Liability.  If the  total  of  such  estimated  payments  made by
               Subsidiary  to Parent with  respect to a taxable year shall be in
               excess of the  liability  of  Subsidiary  to Parent  pursuant  to
               paragraph 2(b)(i) of this Agreement for such taxable year, Parent
               shall pay the amount of such excess to Subsidiary on the later of
               (1) the date on  which  Parent  is  required  to make  its  final
               payment of Federal  income  taxes for the  taxable  year  without
               incurring  any penalties or additions to taxes or (2) the date of
               final determination of Parent's consolidated tax liability. In no
               instance shall Parent  knowingly  withhold  excess  estimated tax
               payments attributable to Subsidiary.



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          (d)  Tax Refunds

              (i)      Parent  shall  pay  to  Subsidiary   the  amount  of  the
                       Subsidiary  Tax Refund for each taxable year ending after
                       the date hereof.

              (ii)     The payments  described in this  paragraph  2(d) shall be
                       made not  later  than  five  days  after  such  refund is
                       received by Parent.

          (e)  Pre-Consolidation Net Operating Losses

               All Subsidiary  Pre-Consolidation Net Operating Losses will inure
               100% to the benefit of Parent in the event a Capital  Transaction
               occurs.

         3.  CHANGES IN TAX LIABILITY

          (a)  If the  Subsidiary  Tax Liability of Subsidiary is changed as the
               result  of any final  administrative  or  judicial  determination
               (including a final  "determination" as defined in Section 1313(a)
               of the Code) with  respect  to  consolidated  Federal  income tax
               returns  actually  filed by the  Group,  then the  amount  of the
               payments  required  from  Subsidiary  to Parent  under  paragraph
               2(b)(i)  or the amount of the  payment  required  from  Parent to
               Subsidiary under paragraph 2(d)(i),  as the case may be, shall be
               recomputed by substituting the amount of Subsidiary's  Subsidiary
               Tax Liability (or  Subsidiary  Tax Refund) after the  adjustments
               described above in place of Subsidiary's Subsidiary Tax Liability
               (or  Subsidiary  Tax Refund),  provided  that the  principles  of
               paragraph  1(b)(v)  shall be  applied  in  connection  with  such
               recomputation notwithstanding any contrary determination. If such
               final determination  results in an increase in the Subsidiary Tax
               Liability,  Subsidiary  shall pay to Parent  not later  than five
               days after such final determination an amount equal to the excess
               of the new Subsidiary  Tax Liability  over the amount  previously
               paid to Parent by Subsidiary. If such final determination results
               in  a  Subsidiary  Tax  Refund  or  increases  the  amount  of  a
               Subsidiary  Tax Refund,  Parent shall pay to Subsidiary not later
               than five days after receiving such refund an amount equal to the
               excess  of  the  new   Subsidiary  Tax  Refund  over  the  amount
               previously  paid to Subsidiary by Parent.  The parties  recognize
               that such new  liability  (or refund) for any taxable year is not
               necessarily  Subsidiary's  final  liability  (or refund) for that
               year, and may be recomputed more than once.

         (b)  Payments made pursuant to paragraph (a) shall bear interest in the
              same manner as any late payment or refund of Federal income tax.



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         4.  PAYMENT

         (a)  Any payment  required by Subsidiary to Parent under this agreement
              shall be made (i) first,  by  reducing  the amount of any  account
              payable  created under  paragraph  4(b) (but not below zero),  and
              (ii) then by entering or increasing  an account  payable to Parent
              on the books of account of Subsidiary.

         (b)  Any  payment  required  by Parent to  Subsidiary  pursuant to this
              agreement  shall be made (i) first by  reducing  the amount of any
              account  payable created under paragraph 4(a) (but not below zero)
              and (ii) then by  entering  or  increasing  an account  payable to
              Subsidiary on the books of account of Parent.

         (c)  Any account  payable  created under paragraph 4(a) or (b) shall be
              due in whole or in part on five days' written notice by Subsidiary
              or  Parent,  as the  case may be,  whose  liability  such  account
              payable  is, and any due but unpaid  amounts  shall bear  interest
              from and after  such due date at the prime rate of  interest  then
              most  recently  utilized  by  Parent in its  principal  short-term
              credit agreement, plus two percent (2%) per annum.


         5.  INDEMNITY

              Parent agrees to indemnify,  defend and hold  Subsidiary  harmless
              from and against any and all  liabilities  for Federal  income tax
              and  Federal  estimated  income  tax  (including,  in both  cases,
              interest and  penalties  thereon) with respect to any taxable year
              to which this agreement applies;  provided that the amount of such
              indemnity  shall  be  reduced  by and  shall  offset  any  payment
              required to be made by Subsidiary pursuant to this Agreement.


         6.  EFFECT OF AGREEMENT

         (a)   As  between  Parent  and  Subsidiary,   the  provisions  of  this
               Agreement  shall fix the liability of each to the other as to the
               matters  covered  hereunder,  even  if  such  provisions  are not
               controlling for tax or other purposes (including, but not limited
               to, the  computation  of earnings and profits for Federal  income
               tax purposes).

         (b)   This   Agreement   shall  be  effective  as  between  Parent  and
               Subsidiary in respect of all taxable years  beginning  1999 until
               Subsidiary ceases to be a Member of the Group.



<PAGE>

         7.  STATE AND LOCAL TAXES

              In the event  Parent  actually  files  consolidated,  combined  or
              unitary income or franchise tax returns or reports in any state or
              local jurisdiction on behalf of and pays such taxes owed by all or
              part  of the  Group,  the  principles  and  procedures  (including
              indemnity in paragraph 5) stated in this Agreement shall apply for
              purposes of allocating such state tax liability.

         8.  MISCELLANEOUS PROVISIONS

         (a)   This Agreement  contains the entire  understanding of the parties
               hereto with respect to the subject matter  contained  herein.  No
               alteration, amendment or modification of any of the terms of this
               Agreement  shall be valid unless made by an instrument  signed in
               writing by an authorized officer of each party.

         (b)   This  Agreement  has  been  made in and  shall be  construed  and
               enforced in accordance with the law of the State of Maryland from
               time to time  obtaining,  without  regard to the conflicts of law
               provisions thereof.

         (c)   This Agreement  shall be binding upon and inure to the benefit of
               each party hereto and its respective successors and assigns.

         (d)   All notices and other communications hereunder shall be deemed to
               have been duly given if delivered by hand or mailed, certified or
               registered  mail, with postage prepaid  addressed to the party to
               which the notice or other communication is given.

         (e)   This  Agreement  may be  executed  simultaneously  in two or more
               counterparts,  each of which shall be deemed an original, but all
               of which together shall constitute one and the same instrument.

         (f)   The headings of the paragraphs of this Agreement are inserted for
               convenience only and shall not constitute a part hereof.











<PAGE>


            IN WITNESS WHEREOF, the parties hereto have caused this agreement to
be signed by their duly  authorized  representatives  as of the date first above
written.



                                         Security Capital Group Incorporated

                                         By:    /s/ Jeffrey A. Klopf
                                                   Jeffrey A. Klopf
                                                 Senior Vice President


                                         Homestead Village Incorporated

                                         By:   /s/  David C. Dressler, Jr.
                                                David C. Dressler, Jr.
                                                       President