It’s been my long-held belief that could be the reason for higher property taxes - to keep out the riff-raff!!
In some towns it is, but it really only works well with the “no overnight parking” policy; otherwise you have a situation like my town: Older homeowners with empty nests sell their homes, and those one-family homes are illegally converted to two- and three-family homes by the new (often foreign) buyers. Parking becomes a nightmare, the legitimate homeowners are charged for a mass of new students in the schools (from houses still paying taxes as one-family homes), and spoken English becomes a rarity.
A recent house explosion in Elizabeth NJ was caused by an illegal apartment’s gas hook-up, and a few years ago a fire along the Hudson River in northern NJ killed a few people from different countries that lived in what was basically an illegal boardinghouse in a basement. Hoboken NJ learned a lesson when many illegal basement apartments were flooded; they weren’t insured because they basically didn’t officially exist.
In the past towns used to pursue these aggressively to remove them; now many will let it remain and simply increase the taxes (to stem the flight of people from northern NJ). Woe to the homeowner who has one of these pop up next to them; areas that had been 100% American 25 years ago now resemble Andes villages (and many of the illegal tenants cling to their Third World habits).