Tear-Downs Indicate Healthy Home Sales Market
To many Princeton residents it seems that no matter where you turn, an old house is being torn down to make way for a new – and usually much larger – residential structure.
According to market trends, new listings in Princeton are up by over 10 percent this year as compared to 2014.
Neal A. Snyder, CTA, tax assessor for the municipality, has seen an increase in the number of tear downs in recent years. The Bordentown resident has been Princeton’s Tax Assessor for 12 years and he sees the increase in new homes being bought and sold in Princeton as a positive thing for the town.
Tear downs are a result of a dearth of vacant lots, he said. “There was a downward trend in the late 2000s but there has been a turnaround and there is currently a boom with builders coming in and new homes being bought and sold. Homes are appreciating in Princeton and as they do, the ratio I use to assess property taxes goes down. Princeton is a desirable place to live and is a safe investment for home builders who are, after all, out to make money.”
“For 2015, the property tax assessment ratio (assessment to sale price) is 91.23 percent of market value,” said Mr. Snyder, adding that in 2014, the ratio was 93.23 percent.
Kevin Wilkes of Princeton Design Guild (PDG) has also noted the increase in tear downs in recent years, which he attributes to the increasing value of Princeton homes and the widening gulf between expectations of higher income buyers and the average or poor condition of many post World War II homes built cheaply and lived in for 30 to 50 years by professional couples, now aging, for whom necessary updating and maintenance over the past 15 years of their lives (their senior years) has proved impossible.
“The real estate market in Princeton sustains a pricing premium for all new construction,” said Mr. Wilkes. “Families today want an open first floor plan with kitchen and dining and family living all woven into a fabric of collective family enjoyment. Princeton’s collection of post World War II ranch houses, center hall colonials, and split levels are often cramped in size with tiny kitchens off in a rear corner and stairs and fireplaces dividing up the space in discrete little boxes that people want to open up for a modern lifestyle.”
New and larger homes mean more taxes collected by the municipality. “When a small house is torn down and replaced by a bigger one, there is an increase in assessment of the home,” explained Mr. Snyder. “The revised assessment is based on the market value of the new home, which is itself influenced by the value of similar like-kind homes.”
As most homeowners know, there are two components to the assessment, the value of the land and the value of the building itself. And because properties in different parts of Princeton are assessed differently based on land values in different neighborhoods, it could be the case that an identical building put up in two different parts of the town could be assessed differently for tax purposes.
Currently, said Mr. Snyder, there are 75 different neighborhoods in Princeton for tax assessment purposes, based on style, age, zoning, and other factors.
As Mr. Snyder explained, “a small house that may have been assessed in the upper $300,000 range with taxes around $8,000, could be replaced with a new home that is assessed at $1,800,000 with taxes nearly $40,000.”
Asked to explain a query to Town Topics by one Moore Street resident suggesting that a newly built home which replaced a tear down was being taxed at a higher rate than the tear down, Mr. Snyder said: “The tax rate is all the same on all property; the assessment (value) of the home is much higher than what was torn down. By law you cannot charge a different rate for certain properties.”
Each year the rate changes — based on the Princeton schools budget and that of the municipality and the County budgets — noted the tax assessor. “Assessments change based on additions, updates etc. and/or from the annual compliance plan, which entire neighborhoods increase or decrease based on the sale-to-assessment ratio in the neighborhood.
Today’s homes, said Mr. Wilkes, consume a great deal more electricity than they did 50 years ago and appliances and heating and cooling equipment are much more efficient and offer many more features for comfort; windows and skylights are automated with better insulated glass. If the building size is too small, the mechanical equipment undersized and the floor plan does not promote family cohesion, there comes a point at which homeowners are inclined to ask themselves: “Wouldn’t it just be better to start all over?”.
When PDG remodels older homes, however, there is “almost always something salvageable,” said Mr. Wilkes. “Out of over 350 projects completed by our firm in the past 30 years, we have only torn down 2 homes completely in order to build a brand new home. In all other cases, we have found a way to fashion a new home using some of the elements of the home that pre-existed. There is great joy in bringing a building back to a vibrant life from a period of neglect; even if it has to be dramatically transformed, its youth spirit still lives inside.”
New homes paying bigger taxes bring more into the municipal coffers. But don’t look for a corresponding decrease in your property taxes since there are other components to the tax bill besides the municipal budget, including a portion for schools, for the Princeton Public Library, and for Mercer County.
The municipal website (princetonnj.gov) has a section for the Tax Assessor’s Office. As stated on the website, the office has “a duty to uniformly value all properties in Princeton, so that all taxpayers pay their fair share of the obligations of the schools, the County, and the municipality.”
The website includes information on how to appeal your tax assessment as well as forms for Property Tax Deduction Claim by Veteran or Surviving Spouse or Service Person; Claim for Real Property Tax Deduction on Dwelling House of Qualified NJ Resident Senior Citizen, Disabled Person, or Surviving Spouse; Application for Real Property Tax Abatement for Residential Property in Urban Enterprise Zone, among others.
The tax assessor’s office is at 400 Witherspoon Street. For more information, call (609) 924-1084.