New Jersey's Multifamily Sector is an Anomaly

The suburban New Jersey multifamily marketplace is an anomaly in today’s challenging real estate environment. Located between our nation’s sixth largest city, Philadelphia, and our largest, New York City, New Jersey’s multifamily sector is insulated from the more dramatic economic swings of its neighboring cities to the east and south. As a result, the demand for housing in the region remains robust. But beyond pure geographic location, there are several key reasons for this.

First and perhaps foremost, New Jersey has among the most severe barriers to entry of almost any state in the US. Zoning for multifamily development is very limited statewide, especially in Northern New Jersey. In recent years, multifamily-zoned land, to the extent it was developed at all, was developed as for-sale, condominium housing. Consequently, very little new rental housing has been added in recent years.

In addition, the nature of multifamily ownership is somewhat unique to New Jersey. In the early 1970s, with the advent of rent control, New Jersey quickly established itself as the state with more rent controlled municipalities than existed within the other 49 states combined. As a result, the national players tended to shy away from ownership here. What we wound up with was a cottage industry comprised of local investors–individuals and small groups alike–who set out to own apartments for the long-term and who could chart their own destiny by also playing a role in managing the assets. Today, only a very small percentage of New Jersey’s apartment housing is owned by national firms or REITs.