On July 17th, I attended the Board of Education meeting of Princeton Public Schools. I felt compelled to offer a new perspective on the proposed referendum to increase the town’s bond indebtedness by $130,000,000. Instead, for the first two hours I had to listen to a social psychologist’s report about inequality and iniquity in the schools. This one almost put me asleep. Why? It was nothing new. We had heard about the same issues long ago from then Superintendent Philip MacPherson.
The advice that I had come to offer was that from the real estate point of view, perhaps this project for renovating the schools is being proposed at the wrong time. My background is as a Princeton real estate broker for 40 years. The current time is now a time of great fiscal uncertainty in the local real estate market in New Jersey, and especially in Princeton.
In short, most of us know that there will be a sizeable readjustment that will occur to the value of homes based on the recent changes in the federal tax laws regarding the deductibility of property taxes. What we don’t know is how much that will impact the real estate market in Princeton. The downturn is only beginning.
Signs are already there that property values will be declining in the immediate area. During the last Great Recession, property values stayed flat, then decreased by about 10% in Princeton while they decreased almost a third in both Montgomery Township and West Windsor Township. Like Princeton, both had excellent school systems. Please be aware that this time around, several other knowledgeable brokers are seeing signs that this imminent real estate storm seems worse than the last one. It’s not just the market any longer, but a deliberate tampering with it, and with the value of real estate.
What does this have to do with the equity in your home? When the value goes down, so does your equity. Many of us have counted upon that equity to borrow against for the educational needs of our children. If that equity is seriously depleted, then education may become prohibitively expensive. It sounds a little bleak, but it’s not as bleak for those who are renting here, only for those counting on the value of their homes, which are usually most people’s largest investment.
Increasing the educational tax load of the average home in Princeton by $750.00 per year may not sound like a lot of money to either executives or couples with two incomes, but it is for people with more modest homes and lower taxes, as in the Witherspoon Jackson Area, for example. It can be especially hard also on the elderly on fixed incomes, many of whom will be forced to leave their community and move elsewhere. There are many of these older people who have continued to live in the community for three decades after their children have graduated from Princeton High School. This is unlike those who flock here from other areas temporarily, and agree to pay excessive rents while their children are in the Princeton Public Schools, as if they were the equivalent of free public prep schools, and then move away, or back abroad “to take care of their ailing parents.” Permanent residents care about the future, instead of just using the system. As for parents of Cranbury’s students, which of them will continue to pay on the bonds?
I suggest that now is the wrong time to put one more straw (or bale of hay) on the camel’s back. While I, too, believe in a good education for all of our children, and that we may have to consider some of these expenses soon, I think that it would be foolhardy to do it now, in the face of a brewing storm.