New Jersey’s Homeownership Pipedream
Attempting to become a first-time homeowner in New Jersey is as fruitless as Ponce de León’s quest to find the fountain of youth
JACK CIATTARELLI WON New Jersey’s Republican primary election last week, making him the only chance that Garden State residents have to stop the progressive tax and spend priorities of Democratic Governor Phil Murphy. Good luck.
As it stands now, the cost of living in New Jersey is unbearable, and, from what Ciattarelli promises on his campaign website, it doesn’t appear as though it will be getting any better regardless of the outcome in November.
One important sign of the state’s poor financial times can be illustrated by examining what it costs to buy your own little slice of Jersey.
The average price of a single-family home in New Jersey has increased by about 24% since this time last year to $500,628, up from $403,785, according to NJ.com.
Assuming that the average first-time homebuyer has good-to-excellent credit and enough generationally acquired wealth to plunk down a sizeable down payment, the roundabout mortgage cost per month should be about $1,500, which is comparable to the state’s median monthly rent payments.
Unfortunately, the buck doesn’t stop there as the taxman must get his share. And that is where the actual headache begins.
New Jersey’s highest in the nation property tax turns the goal of homeownership into a pipedream. If you take the state’s average property tax rate of 2.420% and apply it to the average home, you get an annual property tax bill of $12,115 — or $1,009 added to your monthly expenses.
Excluding homeowner’s insurance, the yearly cost of this median home with its average property tax is $30,108 annually. To put it another way: unaffordable on the state’s per capita annual salary of $44,888 before taxes.
The average home may be affordable if you don’t like food or furniture, and somehow you have paid off the student loans necessary to get the job to pay for the house that is starving you. But there is that Jersey taxman again.
According to a survey that was reported earlier this year by The Wall Street Journal, “an average New Jersey resident will pay an estimated $931,698 in taxes for his lifetime of toil.”
This tax burden is the highest in the nation as the average American, according to the Journal, will only pay $525,037.
Now, there are, of course, reasons for the elevated cost of the average home right now: Demand is vastly outstripping supply.
Per a recent study by the National Association of Realtors that was reported on by the Journal, “construction of new homes in the last two decades lagged behind historical levels,” leaving a deficit of approximately 5.5 million homes.
This deficit has caused the NAR to call for “once-in-a-generation policy responses.” But, as it turns out, those responses are nothing more than the same-old lackluster policies that have yet to fix anything.
In their report, the NAR calls for an expansion of tax credits for low-income rental properties, for government to implement policies to encourage the renovation of “distressed properties,” and for the states and cities to reduce regulatory limits on housing density. Only that final piece will actually help increase the supply of housing.
The major problem with the NAR’s recommendations is that they only help realtors sell properties to municipalities to put subsidized rental units on. These proposals do little to nothing to actually help lower-income families move up to the middle class by purchasing a home.
This has long been a policy prescription of the Left, who seek to build subsidized apartment’s which increases the tax burden on homeowners and keeps the poor from ever owning assets they need to establish equity and better lines of credit.
The right isn’t innocent in all of this either, though, which brings us back to Jack Ciattarelli.
His plan is nothing more than a mail-in rebate for homeowners via a tax credit. The problem with the tax credit plan is that it does absolutely nothing to help a family pay that $2,509 in monthly expenses.
Another one of Ciattarelli’s plans — an embargo on taxing gains from the sale of a second home — will do nothing more than make it easier for house flippers to escape taxes on the profit they make from inflating housing values even further.
Ciattarelli’s housing plan may help his buddy’s dodge taxes on the sale of their vacation homes, but it won’t help the first-time buyer.
The only thing that will help New Jersey residents realize the dream of homeownership is to significantly lower taxes by taking on the state’s powerful public unions — which Ciattarelli does not promise to do.
Reducing state spending may be nearly impossible with the Democratic majority in Trenton, but inroads must be made. But most of all, the state’s government needs to sponsor programs that help first-time buyers put money down on their homes to reduce expenses monthly and not another mail-in rebate tax promise.
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