New Jersey residents pay the nation's highest effective property tax rate, and two counties in particular are bearing the brunt of it as home values climb, a Homes.com analysis has found.
An effective property tax is the percent a homeowner pays in relation to the assessed value of the home itself, meaning that New Jerseyans, on average, pay property taxes equal to 2.23% of their property's market value. The analysis found that on average, New Jerseyans pay $9,300 a year in property taxes.
To be sure, New Jersey isn't the only place where property taxes are becoming a heavier burden. Nationally, they have risen by an average of 13.8% since 2019, according to Cotality, formerly CoreLogic. Homeowners have raged against the increases, prompting some states — including Florida, Illinois, Kansas, Montana, North Dakota and Pennsylvania — to mull new forms of taxation to replace them. At the city level, some of the largest property tax increases between 2021 and 2023 have been in Tampa, Indianapolis and Dallas, according to a study from LendingTree.
"Property taxes can turn a house that looks like a bargain into something quite different," Matt Schulz, chief consumer finance analyst at LendingTree, said in a statement. "That's why it is so important to consider all of the costs that go into buying and owning a home before you buy."
Bergen and Essex counties bear the brunt
The Homes.com analysis found that there are parts of New Jersey where the property taxes are about half the state average. In Cumberland County, for example, homeowners pay $4,800 on average. The largest property tax burden is in Bergen and Essex counties, where homeowners are paying $13,600 on average.
The percentage that each city or town charges its homeowners in property taxes somewhat explains why there's such a big dollar amount difference between Bergen and Cumberland counties, said Mateusz Wnek, an analyst at Homes.com and CoStar who researches the northern New Jersey market. The biggest reason for the gap, however, is the difference in average home values between the two counties, Wnek said, adding that the higher the value, the more expensive the taxes will be.
Bergen and Essex are in northern New Jersey, a densely populated part of the state with spillover residents from New York City, Wnek said. A larger population has meant stronger demand for housing, pushing up the value of homes in those counties.
Home values in Bergen and Essex counties have risen 17% and 13% in the past year, respectively, which is part of the reason property taxes there have also climbed, the analysis found.
Bergen County's average home value is $820,000, and it is $652,500 in Essex, Wnek said. By comparison, the average home value in Cumberland County is $270,000, he said.
Tax increases don't curb demand
Property taxes in Bergen and Essex counties are becoming such a cost burden that homebuyers would spend more on a 30-year mortgage than they would if they rented a two-bedroom apartment for 30 years, Wnek said in his analysis. You don't build equity when you rent, however.
Higher property taxes in New Jersey have become so commonplace that buyers complain about them yet still buy homes across the Garden State, real estate agents said.
"People are talking about it, but it hasn't stopped anything," Michele Chiles-Hickman, a Berkshire Hathaway agent who works in Essex County, said in an interview. "We still get multiple offers on lots of properties here. People looking to buy here know."
To help buyers avoid the sting of high property taxes, Chiles-Hickman said, she asks her clients how much they're willing to pay per year and then sends only those properties where the taxes are less than that limit.
Some Essex County residents have said they plan to move out of the area because the cost is too much, Chiles-Hickman said, and a good chunk of them are retirees.
"But people aren't leaving in droves," she said. "Even with the retirees, if their property taxes are too high, by that time, they've already paid off the house and they're only paying the property taxes. Even if they're $25,000 a year, that's only $2,000 a month, and that's less than what they'd pay in renting or if they went in assisted living."
Buyers go into their house hunting in Bergen County already knowing how steep the taxes will be, and they get their true first glimpse of what the price will be when they get a preapproval letter from a home lender, said Laura Gill, a Bergen County agent with Keller Williams.
"And it's not like you're going to balk at the property taxes because it's either you want a home or you don't," Gill said in an interview. "There is still so much pent-up demand that it's really just another factor in affordability."