As the cost of housing in New Jersey continues to soar, making it increasingly unaffordable for many residents, the market for “super luxury” homes – properties with exceptionally high price tags – continues to rise at a faster rate than all other homes. Applying a higher fee to the sale of these expensive homes could generate hundreds of millions in revenue, helping to make the state more affordable for low-income and middle-class residents. Crucially, this tax would be targeted exclusively to the wealthiest households.
New research from national experts suggests that adding a 4 percent tax on the sale of homes above $1 million could raise substantial revenue for the state. With New Jersey already facing a structural deficit, this new revenue source could fund vital programs that make living and raising a family in the state more affordable. These programs could include affordable housing initiatives, rental and mortgage assistance, and working family tax credits like the Child Tax Credit and Earned Income Tax Credit.
The impact of this fee would be limited to a small fraction of the housing market. Statewide, less than 10 percent of home sales exceed $1 million.[i] Levying a 4 percent tax on home sales over $2 million would affect only the top 2 percent of sales, while raising over $200 million in annual revenue for the state. Extending this same tax to homes sold over $1 million could generate hundreds of millions of dollars more for the state.
New Jersey’s existing 1 percent assessment on properties sold for over $1 million has not dampened the luxury home market. In fact, luxury home sales increased in 2023, even as overall sales declined.
Expanding the fee on very expensive homes would provide essential funding for affordable housing and critical infrastructure in New Jersey. It would also ensure that the state’s wealthiest residents, rather than low- and middle-income households, contribute their fair share to these vital resources.
End Notes
[i] Institute on Taxation and Economic Policy (ITEP) and Center on Budget and Policy Priorities (CBPP) analysis of data from Zillow, the National Association of Realtors, the U.S. Census Bureau, and various state and local agencies. Data on file with author.
