New Jersey towns have figured out a way to sidestep the highest property taxes in the U.S.
Keep children out.
Educating a child in New Jersey costs an average of $12,567 a year, the most in the nation and more than double the property tax parents typically pay. So local governments have hit upon a way to expand the tax base without the expense of higher enrollment: age-restricted housing.
New Jersey developers have responded by building an estimated one-fifth of the country’s adults-only housing, making the state the leader in a national trend spurred by baby boomers seeking new homes after their children move out.
In New Jersey, where schools can command two-thirds of a municipal budget and state officials have failed to provide tax relief, building communities that don’t allow children has as much to do with reducing taxes as it does with serving older home buyers.
“It’s frustration on the part of some communities,” said New Jersey Gov. Jon Corzine, a Democrat. “The real problem is we have too much reliance on property taxes in how we finance public education.”
Nationwide, 2.8 million households were part of age-restricted communities in 2005, up 29 percent from 2001. The number in New Jersey grew 37 percent in the same period. More than half the housing units started in the state in the past two years have excluded children, according to data compiled by the New Jersey Builders Association.
In one New Jersey town, Monroe Township, population 28,000, half the housing units are limited to senior citizens.
As many as 95,000 such units will be built in the U.S. in 2007, according to an estimate by the National Association of Home Builders. New Jersey developers will build about 20,000 of them.
Exclusionary zoning is legal in the U.S. A 1998 exemption to the federal Fair Housing Act allows age restrictions if homes in a development are intended solely for residents age 62 and older, or if 80 percent of the units are occupied by one person who is at least 55.
New Jersey towns support their school systems mostly with property tax revenue, pushing the average tab to $5,153 in 2004, the highest in the U.S. New Jersey residents are older than in most states — 12.5 percent are 65 and older, compared with the 12.1 percent average in the U.S.
Some home builders see age-restriction housing as protection against the wider housing slump. The National Association of Homebuilders estimates that profit from age-restricted housing was $1.2 billion in 2006.
For Pulte Homes Inc., the largest U.S. home builder by market value, 39 percent of its homes sold in 2005 had age restrictions, up from 33 percent in 2004, said spokeswoman Caryn Klebba. In 2001, the Bloomfield Hills, Mich., company was selling homes in 15 age-restricted communities in seven states, Miss Klebba said.
Today, Pulte has 56 such developments in 20 states, with eight more scheduled to open in 2007.
“Age-restricted housing is growing more than the general housing market,” said Ara Hovnanian, chief executive officer of Hovnanian Enterprises Inc., New Jersey’s largest home builder.
The Red Bank, N.J., company will have 16 adults-only developments on the market this year.
The New Jersey Supreme Court ruled last month that towns could condemn land for open space under eminent domain laws to stop development that might result in “overcrowded schools.” That put children on a par with pollution and traffic congestion as valid reasons for seizing property.
“Exclusionary zoning is most prevalent in New Jersey, but it’s pervasive in a lot of parts of the country, especially in the Northeast, where there isn’t a lot of land to build on,” said Robert Puentes, a fellow with the Brookings Institution’s Metropolitan Policy Program in the District. “With property tax being such a big issue now, it’s much more front and center.”
Still, elected officials are reluctant to link age-restricted development to taxes, mindful that voters may view them as being anti-child.
“It’s a backroom taboo thing that everybody talks about but nobody talks about,” said Douglas Steinhardt, mayor of Lopatcong Township, which limits new housing to two bedrooms.
Lopatcong’s zoning restriction is intended as a density-control measure and “not to keep kids out,” Mr. Steinhardt said.
Age-restricted housing does help reduce property taxes, according to the state Department of Community Affairs. In Monroe Township, which has 8,878 age-restricted units, the most in the state, the property tax averaged $4,327 in 2004, the latest year statistics are available. That was 16 percent lower than the rest of Middlesex County and 22 percent less than the state average.
In comparison, South Brunswick, Monroe Township’s neighbor, has just 731 units of age-restricted housing and an average property tax of $5,782.
“The unbalance that age-restricted housing brings is going to be a disaster for the state in the long run,” said Lakewood Township Mayor Ray Coles. “New Jersey seems to be looking for ways to turn families away.”
Other mayors, including Scott Rumana of Wayne, reject the idea that exclusionary zoning saves money, because having more senior citizens pushes up emergency response costs.
Developers, which can make more money building unrestricted housing, sometimes find it’s more difficult to get those plans approved, said Patrick O’Keefe, chief executive officer of the New Jersey Builders Association.
“It’s almost a prerequisite that a project pass the child-exclusion test before a planning board will consider it,” Mr. O’Keefe said.
In Peapack-Gladstone, population 2,465, the land-use board twice denied Dennis Townsend permission to build 18 multimillion-dollar homes on 13 acres across a dirt road from his Hamilton Farm Golf Club.
On a tour of the land, Mr. Townsend, chairman of Townsend Capital LLC of Towson, Md., pointed to the woods behind his proposed lots, where Peapack-Gladstone recently approved 55 duplexes a stone’s throw from where he wants to build. The duplexes will be age-restricted.
