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A constant topic of conversation I have with my wife Bubelah is where we want - or should - live. We live in a suburb of New York City (the only major city growing in the northeast). Our cost of living is horrific. We have a three-bedroom townhouse that cost just shy of half a million dollars in 2004, pre-boom. Our house would go for almost $600,000 today. I think this topic goes well with an ongoing debate at The Simple Dollar.

When we bought the house, we received an abatement. For those of you not familiar with New Jersey’s blood, er, property tax, municipal governments often give a break to new construction for a set number of years. The way it works is that our house is taxed at the same rate as any other house in our municipality, but the assessed value is reduced by a set percentage. So a house, having been assessed as being worth $400,000, will be taxed as if it had been assessed as $300,000. This tax treatment will continue for another 4 years.

However, once it ends, our property tax will leap upwards. How much depends on the rate at the time and the new assessment. This situation wouldn’t be so bad if not for the fact that we already pay almost $700 per month in property taxes, plus over $200 in association fees (road upkeep, lawn upkeep, snow shoveling, etc. - not a bad deal, actually).

In five years, therefore, we might be paying approximately $1200 per month in taxes and fees. This is before our mortgage of almost $2000 per month. This means that simply to keep the house my after-tax income must be $3200 just to pay for the house. Before paying the utilities, for food, for diapers, for anything else - $3200 after tax or the first $50,000 of my gross income per year goes to housing costs. If we ever paid off the mortgage, we’d still have $1200+ per month to pay for all eternity.

All of this might not be so bad if it wasn’t for the fact that the property tax goes to service municipal debt, a failing school system, broken roads and awful municipal services. We have only two municipal parks in a city of a half million, potholes litter the roads, and large areas of the city aren’t safe after dark. We have concluded that the public schools are not an option for Little Buddy.

My point is that we must really, really, really love living near New York to put up with all of that, right? There are other considerations - Bubelah’s extended family all live in New York, my parents are nearby, and we desperately hope for a continued gentrification of our city (and it is happening in fits and starts). But are we crazy?

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