When Gentrification Winds up Meaning Confiscation
Congratulations! The house you bought in Jersey City in the mid-’80s has increased sevenfold in value. Condolences: The city is hiking your taxes so much you’ll have to take out a new mortgage.
Jersey City’s current property revaluation (or “reval”) is a harbinger of what’s to come in states like New Jersey and Connecticut, with tax hikes that make a mockery of planning to retire in a nice city on a fixed income.
The reval, as with many things in New Jersey, is weird. In normal cities and towns, assessors revalue property on a regular basis. If property values are rising, residents see steady hikes — to a point: Albany, for example, caps the “assessed value” of houses in Gotham from rising more than 6 percent a year, or 20 percent over five years.
Jersey City hasn’t reassessed property values in 30 years. It would’ve been a political headache.
Thanks to reforms under several mayors, including current Mayor Steve Fulop, as well as its proximity to Manhattan, downtown Jersey City has become nicer. Jersey City’s population has grown 18 percent since 1980, reversing four decades of urban decline.
Though property values throughout the city are up, property downtown is way up. So owners in outlying neighborhoods have long paid more than they should, and owners downtown, less than they should.
But few elected officials were brave enough to hit downtown owners with higher bills in order to lower them for everyone else. (The city isn’t raising property taxes overall, just re-adjusting them to fix this inequality.)
Every year, the disparity got worse, and the eventual “fix” would be more radical. Jersey City could’ve gone several more decades without a reval, but then-Gov. Chris Christie ordered Fulop, who’d canceled his predecessor’s reval plan, to do it two years ago.
The results are coming in. And many are pleased: Public-school teacher John Flora told nj.com his taxes are dropping from $5,546 to $3,969. “Three-fourths will see a major or minor tax decrease,” a city spokesperson says.
But the rest will see a tax hike. Rosalie Narciso, 72, lives in the house her grandparents bought in 1944 for $7,000. Right now, her taxes are $11,000. But they’ll more than double, to $26,000.
The city won’t phase these hikes in, so Narciso, a retired building manager, has to come up with an extra $13,000 in cash, much of it by summer. And, as she notes, the Trump tax law caps such deductions from federal taxes at $10,000.
This is more expropriation of property than a tax hike. Yet it’s the case all over downtown Jersey City.
It may be hard to muster sympathy for someone whose relatives’ four-figure investment is worth $1.5 million. But middle class owners in cities’ expensive downtowns can’t afford to be rich on paper. Many city homeowners aren’t high earners.
Narciso already raised the rent on her upstairs tenant to $1,600, in anticipation of the hike. She could raise it higher, but abrupt rent hikes make it hard for middle-class people who don’t own property.
And if she sells? The house isn’t in good shape. A buyer who spends $1.5 million must spend hundreds of thousands on a gut rehab — and then pay well above $30,000 in property taxes, in addition to a mortgage. The reval, then, accelerates what’s already happening: downtowns are only for very well-paid workers.
Narciso isn’t even the worst off. Consider a family who bought property in 2010 at a high market value, but with the buyer expecting to pay low property taxes. Any future buyer will take the higher taxes into account, cutting the resale price.
The reval bears similarity to what other residents of New Jersey and fellow cash-strapped states face. It proves that politicians will raise taxes on the owners of valuable property when forced to.
When you consider the tens of billions in retirement liabilities New Jersey and Connecticut face for public-sector workers, and remember Jersey’s state and local pols delayed so long in doing a simple thing like revaluing property, you have to wonder how big eventual property-tax hikes will be — and whether today’s housing-market investments are as sound as they seem.
This piece originally appeared in the New York Post
This piece originally appeared in New York Post