According to research conducted by Dr. James Hughes, Dean of the Edward J. Bloustein School of Planning and Public Policy, home ownership in the state has dropped from its 2005 high of 70% to 68.3%, and he expects it to drop further to just under 65%. Home ownership in the state is expensive—housing in New Jersey costs 52% more than the national average, and real estate taxes are notoriously high. In the wake of the bursting of the housing bubble and the ensuing credit crisis, lenders across the country are tightening their purse strings, making it harder for homebuyers to secure mortgages.
At the same time, the idea of living in an urban environment is beginning to appeal to two large demographic groups: the baby boomers and their children, the millennials. According to Laurie Volk of Zimmerman/Volk Associates, who spoke at a recent Newark Regional Business Partnership insiders' forum, young singles and couples make up about 40 to 50% of the urban downtown rental market, and empty nesters and retirees account for 30 to 40%. The appeal of settling in multifamily space in a city is not a New Jersey phenomenon: people all over the world are moving back to cities in record numbers. But New Jersey has been somewhat slower than most other areas to adapt to the trend.
The rise in demand for apartments is undeniably good news for multifamily developers. According to David Barry, president of Applied Development, who spoke at the New Jersey Apartment Association's recent Mid-Atlantic Multifamily Conference, "New Jersey will be profitable and a good investment for multifamily developers. Rental housing is doing well. We've seen good rental rate increases and low vacancy rates."
Some areas in New Jersey are ripe for multifamily development. The panel at the NRBP insider's forum stressed downtown Newark's potential. The downtown area of the city has had few multifamily projects in recent years, but the success of Eleven80, which has been leasing briskly since it opened, indicates that Newark may see a multifamily boom in the near future. That's certainly what the New Jersey Performing Arts Center and Dranoff Properties are hoping. The two are joining forces on an ambitious mixed use multifamily and retail development adjacent to the NJ PAC building that will eventually encompass 1.5 million sf. NJ PAC and the developer hope the project will help transform the area.
"The potential in Newark is unbelievable," said Carl Dranoff of Dranoff Properties. "We think big; we're here to do a transformational project."
One thing downtown Newark has going for it is its mass transit system. The current popular movement in multifamily development is for high-density mixed-use properties, close to transit hubs, but New Jersey is making some of that development difficult. Peter Kasabach, executive director of New Jersey Future, who also spoke at the NJAA conference, cited insufficient amounts of land zoned for such developments, restrictive regulations and a lack of predictability in the development process as barriers to smart growth. New Jersey Future, he said, is working with the state to form an incentive program that will encourage municipalities to embrace concentrated, mixed-income smart growth. NJ Future is also hoping to improve the new Urban Hub Transit Tax Credit to benefit multifamily developers who build near transit hubs.
Any sort of multifamily development in New Jersey's urban areas will be beneficial to the state. Not only will it help contain sprawl, it has the potential to increase employment and accelerate the revitalization of long-depressed city centers such as Newark and Camden.
"The only way to grow jobs is to revitalize the downtowns," said Arthur Stern, CEO of Cogswell Realty Group at the insider's forum. "New Jersey has to develop vibrant urban centers and bring in people. If we bring in people, the businesses will follow. But the state must work with developers or we'll have a lot of trouble going forward."
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