Everyone in New Jersey deserves a fair property tax system, where lower-income and lower-wealth families get money back for the high cost of housing, while wealthier families pay what they owe to support schools and high-quality public services that strengthen our communities. So when property tax relief proposals come along, we must ask: Who does this program make New Jersey affordable for, and by how much? Does it advance equity and close the gap between wealthy and the rest, or does it widen that gap?
As the centerpiece of his latest budget proposal, Governor Murphy announced a new property tax credit named “ANCHOR” (Affordable New Jersey Communities for Homeowners and Renters). This explainer outlines the size and scope of the proposal, how it stacks up against existing property tax relief benefits, and highlights who benefits most from it — and by how much.
What is ANCHOR?
Despite the new name, ANCHOR is really an expansion of the Homestead Benefit program, which provides property tax relief to homeowners who earn up to $75,000 per year, as well as seniors and those who meet the state’s definition of “disabled” earning up to $150,000 per year.
The proposed ANCHOR program would expand the Homestead Benefit in three main ways:
- Increasing the credit amount for current recipients
- Extending the benefit to homeowners with higher incomes ($75,000-$250,000 annual income)
- Reopening the benefit to renters on a limited basis.
The credit would cost an additional $550 million in Fiscal Year 2023 — for a total of $893 million in property tax credits — and would increase in subsequent years.[i] The average yearly credit amount for homeowners would be $682 and the renter credit would be fixed at either $150 or $250, depending on other factors.
Who benefits from ANCHOR?
It’s important to contrast the proposed ANCHOR program with the Homestead Benefit that it would replace.
Homeowners: As noted above, the ANCHOR proposal would extend property tax relief to households earning between $75,000 and $250,000, well into the top 15 percent of earners in the state.[ii] For reference, the median household income in New Jersey was roughly $83,000 in 2019.[iii]
The following graphs show how much homeowners would receive in the new ANCHOR program, as a percentage of their total property tax bill, compared to the current Homestead Benefit program.[iv]
Although households in all eligible income ranges receive increases, the increases are largest for the higher-income homeowners not previously eligible for the credit. More than $150 million of the credit would go to households earning $150,000 annually or more, including households well within the top 20 percent of New Jersey earners.[v] Of the $550 million in additional funding for the program, more than a quarter would go to well-off households.
A property tax credit that advances equity should not include benefits to the wealthiest households simply because they happen to own their homes.
Renters: The ANCHOR proposal notably includes renters in property tax relief. Renters, on average, have lower incomes than homeowners in New Jersey – where median homeowner income ($112,000) is more than double median renter income ($52,000).[vi] Although renters do not pay property taxes directly, a substantial portion of their rent goes toward their landlords’ property tax payments.[vii]
The credit amounts proposed in ANCHOR are substantially smaller than for homeowners. Benefits are fixed at $150 for most renters earning under $100,000, and $250 for seniors or disabled renters who earn less than $70,000.[viii] In total, payments to renters make up only about $100 million of the nearly $900 million cost of the ANCHOR program in the coming fiscal year – less than the amount going to households earning $150,000 or more. To advance a more equitable tax code, the dollar amount going to renters should be increased to parity with homeowner benefits.
To better enable the program to alleviate wealth inequality and help those who need it most, the ANCHOR program should direct fewer dollars to high-income homeowners, and more to renters.
How does a property tax credit affect wealth inequality?
As lawmakers on both sides of the aisle talk about the need to make the state more affordable — in this case, through property tax rebates — they gloss over the fact that property ownership is heavily tied with wealth. The median homeowner nationally has $255,000 in net worth, compared with a mere $6,300 for the median renter.[ix] And this wealth includes non-home wealth as well, as homeowners possess on average more financial assets like bonds, stocks, and retirement accounts.[x]
Why does wealth matter? Wealth provides families and communities with greater economic security and opportunity, enabling them to sustain financial shocks, afford educational opportunities for their children, invest in business opportunities, and engage in greater political advocacy.
And because Black and Hispanic/Latinx New Jersey residents make up a much smaller proportion of homeowners than they do of the population as a whole, the gap between wealth in homeowners and renters also drives racial wealth inequality. As one recent report from the New Jersey Institute for Social Justice points out, the median white household in New Jersey has $132,000 in home equity, while the median Black and median Hispanic/Latinx household have $0.[xi]
White householders make up 74 percent of all owner-occupied units in the state, but only 39 percent of renter-occupied units. Benefits that go primarily to homeowners run the risk of disproportionately benefiting wealthier, white households.
Further, like the current Homestead credit, the ANCHOR credit is based on a percentage of a homeowner’s tax bill, which will likely benefit those with more expensive homes. For example, 10 percent of a $1 million home’s tax bill is much higher than 10 percent of a $300,000 home’s tax bill in the same town.[xii]
Any property tax benefit runs the risk of primarily benefiting homeowners who already have substantial wealth, rather than low- and moderate-income residents who need the most help with housing costs.
How will this work in practice?
These concepts can be difficult to convey, especially the interplay between higher incomes and higher property values and tax bills. Here are some hypothetical examples of the ANCHOR credit as proposed for FY 2023 to better illustrate who will benefit — and by how much. The dollar amounts are in the ballpark of the median property tax bills and household incomes for the towns indicated.
Although all income groups in the eligibility range benefit, the largest gains would go to those with high property tax bills earning between $75,000 and $250,000. But this range is quite wide, and individual results may vary on factors including a property’s assessed value, local property tax rates, and special levies, to name a few.
There’s also a large difference in financial footing between a household of four with an income of $200,000 and a household of one with an income of $100,000, including the home they might own or rent and the town where they live.
Even with the wide range of possible credit amounts, a credit that advances affordability and economic equity should not provide households with income above $150,000 with average benefit amounts three times greater than the maximum renter benefit amount.
So, as lawmakers propose ways to make New Jersey more affordable through new property tax relief, the question remains: Affordable for who?
[i] State of New Jersey, Budget in Brief FY 2023, pg. 11-12. https://www.nj.gov/treasury/omb/publications/23bib/BIB.pdf
[ii] U.S. Census Bureau, American Community Survey 2019 5-Year Estimates, Table S1901: Income in the Past 12 Months (in 2019 Inflation-Adjusted Dollars). https://data.census.gov/cedsci/table?q=s1901&g=0400000US34&tid=ACSST5Y2019.S1901
[iii] U.S. Census Bureau, American Community Survey 2019 5-Year Estimates, Table S1901: Income in the Past 12 Months (in 2019 Inflation-Adjusted Dollars). https://data.census.gov/cedsci/table?q=s1901&g=0400000US34&tid=ACSST5Y2019.S1901
[iv] Derek Hall, Here’s how much you would get in N.J. property tax rebates under new Murphy plan, NJ.com (March 8, 2022). https://www.nj.com/politics/2022/03/heres-how-much-you-would-get-in-nj-property-tax-rebates-under-new-murphy-plan.html
[v] The top quintile in New Jersey income starts around $166,000. See U.S. Census Bureau, American Community Survey 2019 5-year estimates, Table B19080: Household Income Quintile Upper Limits. https://data.census.gov/cedsci/table?q=income%20quintile&g=0400000US34&tid=ACSDT5Y2019.B19080
[vi] U.S. Census Bureau, American Community Survey 2019 5-year estimates, Table S2503: Financial Characteristics. https://data.census.gov/cedsci/table?q=income%20tenure&g=0400000US34&tid=ACSST1Y2019.S2503
[vii] Under New Jersey’s current property tax deduction system, 18% of rent paid during the year is considered property taxes paid. https://www.state.nj.us/treasury/taxation/njit35.shtml
[viii] Budget in Brief FY2023 at pg. 12.
[ix] Federal Reserve, Survey of Consumer Finances, year 2019 data. https://www.federalreserve.gov/econres/scf/dataviz/scf/table/#series:Net_Worth;demographic:housecl;population:all;units:median
[x] Federal Reserve, Survey of Consumer Finances, year 2019 data. https://www.federalreserve.gov/econres/scf/dataviz/scf/table/#series:Net_Worth;demographic:housecl;population:all;units:median
[xi] New Jersey Institute for Social Justice, Making the Two New Jerseys One, February 15, 2022, https://assets.nationbuilder.com/njisj/pages/689/attachments/original/1645217098/Making_the_Two_New_Jerseys_One_2.15.22-compressed.pdf?1645217098
[xii] The Homestead Benefit does have a cap of $10,000 on claimable property taxes paid. N.J. Division of Taxation, How Homestead Benefits Are Calculated, last updated July 16, 2021, https://www.state.nj.us/treasury/taxation/homestead/hrhomeowneramounts.shtml.
[xiii] The Homestead Benefit currently caps eligible property tax bills at $10,000. This table assumes the cap will remain in the ANCHOR program.