This is one issue to which – for different reasons – I have given a great deal of thought. The initial problem for me was when I formulated the plan to phase out property taxes for principal residences of New Jersey taxpayers, farms, and businesses. Obviously the elimination of property tax would mean that there would be an increase in income tax. The latter would affect renters but the renters would not benefit at all from phasing out property taxes because they do not pay them directly; they are a part of the rent but it is an undefined part, and it is more than doubtful that rents would go down if rental properties were declared tax free.
Accordingly, I decided that it would be fairer to renters to leave property taxes for residential rental properties in effect and use that revenue to give a tax credit to renters, approximately compensating for the income tax increase, which of course would be universal.
I have debated to have an option for rental property owners where they could join a property tax-free plan, they would reduce their rents proportionally, and they would agree to a system of rent control thereafter. But I did not get to the point of studying details and numbers; it was just an idea and still is.
But this article presents a new problem: There is more demand for affordable housing than there is housing. Too many people are paying a disproportionate portion of their total income toward rents, and in some cases, mortgages. Yes, there are also homeowners who are house-rich, cash-poor.
I see 3 factors in this equation detailed in the article: The first and probably the most widespread one is that wages have been stagnant for more than a decade. I believe it is appropriate to say that wages have not kept up with prices in any relevant area: Food, healthcare, or housing. So while landlords have been able to increase rents due to greater demand, wages have stayed flat. As the recession has taken hold and thousands have lost their homes, the pressures on the rental market have increased significantly, pushing rents up.
The second factor is that builders do prefer big houses because they generate more profit when sold. There was also greater demand for large houses before the recession. Government regulations forced builders to include a percentage of moderately priced housing in all developments but that clearly has not been sufficient. A large percentage of the developments in New Jersey have consisted of one-family homes; precisely the type of housing destined to homeownership and not rental. But homeownership becomes impossible when one is unemployed or underemployed.
The third factor is the cases of homeowners who either overextended when buying a home or bought a home within their ability to pay and then became unemployed in the recession.
Governor Christie has not been responsive to this crisis. One in 7 residents of New Jersey, according to the article, put 50% or more of their income toward housing. That is a shocking figure and it is certainly a contributor to the decline in consumer spending.
There are three solutions to the problem presented in the article: Either wages go up, or rents go down, or both. I am inclined to look at the third one as the most plausible one. But I would be misleading you if I wrote that I have a concrete solution today. This crisis is ingrained into the economic decline of New Jersey. Our economic decline, in turn, is connected to the current political structure, its size, and the way taxes are collected. Everything has an effect on everything. Everything interrelates. We need a general reform and not a piece-meal approach to our difficulties.
One possible scenario I can contemplate is what I wrote in paragraph 3 of this piece. But I did debate that option before becoming aware of the affordability issue. Another possible step would be the re-introduction of the legislation Christie vetoed, allowing towns to set up a minimum of affordable housing in any new development.
I may get back to this topic at a future date. I need more time to think. And I do know I will need knowledgeable help with this issue.