David Brogan is the executive director and CEO of the New Jersey Apartment Association.
By David Brogan
As New Jersey’s gubernatorial race heats up, housing remains a critical issue. Everyone agrees that we need more market-rate and affordable housing to meet demand, and there is also a consensus that housing prices in New Jersey are too high. But what can the government do differently to address these issues? Policymakers and our next governor need to acknowledge that current government policies are exacerbating these problems, not solving them.
New Jersey needs to shift from a process-based strategy to a solutions-based approach. More directly, we need to stop creating layer upon layer of regulation that results in housing scarcity and drives up costs and, instead, move toward an approach that increases supply and reduces upward pressure on prices. Furthermore, if we stop demonizing housing providers and those who invest in the rehabilitation or construction of housing, and view them as partners with a common goal, we will start to address both the supply-demand imbalance and improve the quality of life for tenants. Regardless of who wins next November, a gubernatorial candidate who recognizes the flaws in our current housing policies will be better equipped to move in a different and more effective direction.
Local, state and federal policies that drive up housing costs
New Jersey stands out as a distinctive and diverse state. Geographically, it benefits from its location between two major metropolitan areas. Beyond that, it boasts intangible attributes such as a highly educated workforce and a unique character that makes us proud to call New Jersey home. However, our state has had a somewhat contradictory approach to housing policy. While government encourages development with subsidies, it simultaneously constrains developable land through restrictive zoning and environmental regulations. Landlords are often scapegoated and blamed for evictions, while government continues to advocate for lower screening standards that allow people to get into housing they cannot afford. There is a need for more affordable housing and increased rental assistance, but resources to fund these initiatives are always lacking. By taking a closer look at local, state and federal policies that affect housing, we begin to see what’s working and what isn’t, and we can chart a course toward housing policies that will result in meaningful progress.
To better understand some of the problems we face today, let’s look at the policies put in place over the past four years. During the pandemic, both state and federal governments imposed eviction moratoria that drove many small landlords out of the rental housing business and financially burdened larger, more established housing providers. While some argue in favor of the initial implementation of the moratoria given that we were in the beginning stages of a global pandemic and trying to curb the spread of the virus, others believe it was kept in place far too long. Just as government wouldn’t expect employers to have their employees work for 21 months without pay, it shouldn’t have expected property owners to house tenants rent-free for that same duration. Adding insult to injury, while the government forcibly restricted rental income, tax obligations remained in place. Policymakers must recognize that the eviction moratoria reduced the supply of housing, financially impaired housing providers who were grappling with the same burdens as every other business during the pandemic and set the stage for higher prices.
Then came inflation. Just as every American felt the pinch of higher prices in their wallet or purse, so too did owners and developers of multifamily housing. Every input that goes into developing and operating multifamily properties rose dramatically, including labor, materials, appliances and utilities. Additionally, to say that insurance rates rose dramatically would be an understatement. Some NJAA members saw their insurance rates double over the past four years. All these factors contributed to higher prices.
At the same time, New Jersey’s land use policies continue to restrict developable land throughout our state. Municipal governments keep restrictive zoning policies in place, and the state government continues to impose a growing number of onerous environmental regulations that limit the amount of developable land. In the end, restrictive land use policies create scarcity, undermining the goal of addressing the supply-demand imbalance, and driving prices higher.
Policymakers must also consider that every government mandate has a cost. Whether it is a development mandate such as electric vehicle charging stations or an operational mandate such as higher fees or layer upon layer of state and local inspections, there is always a price to pay. This is why our rental housing costs are higher in New Jersey compared to other states. Yet we see bill after bill impose new mandates on housing providers while policymakers deride higher rents. At the same time, housing advocates are imploring the Legislature to impose additional fees as a funding source for housing initiatives. So, their solution to higher rents is to increase the fees on those providing rental housing. This flawed logic is a contributor to our housing crisis today.
Then there is New Jersey’s municipal response to housing policy — rent control — which is the worst “housing policy” of all. Rent control distorts the housing market, reduces supply and disincentivizes reinvestment, which leads to property deterioration, while it also stagnates property values and ultimately leads to a property tax shift onto homeowners. That seems to be the perfect example of a lose-lose-lose “solution.”
When it comes to state and federal budget priorities, housing always gets short shrift. The federal government allocates less than 1 percent of its budget toward affordable housing construction and rental assistance, and New Jersey isn’t much better. Furthermore, this isn’t a partisan issue. A lack of funding at both the state and federal levels of government has been perpetuated for decades by both parties. The fact is there is no escaping that housing is expensive to produce and maintain, and there will always be low- and moderate-income households that need assistance to afford a place to live. The answer is to reprioritize housing and rental assistance funding in a meaningful way.
Lastly, policymakers should recognize that when it comes to providing housing, government cannot do it alone. Unless there is a massive shift, housing is financed, built and maintained by the private sector. Demonizing the industry is not productive. Rather, decision makers should look toward the private sector as a partner with a shared goal. By working together, government and the private sector will increase supply and improve the existing housing stock. This will not only start to address the supply-demand imbalance in a meaningful way, but it will also improve the quality of life for tenants and reduce some of the upward pressure on rents.
Looking ahead
Next year, New Jersey will have new leadership at the state level of government, and when it comes to housing policy, political party is irrelevant. Whether Democrat or Republican, the next governor must focus on realistic solutions toward meeting our housing needs. We cannot continue down the same road that has led us to housing shortages and high prices.
Costly mandates, restrictive zoning, burdensome regulations and a poor working relationship with the private sector will only make our housing problems persist or get worse. Instead, we need a housing policy that encourages development, promotes reinvestment and balances the needs of tenants, developers and landlords alike. We must also prioritize funding for affordable housing and rental assistance. By taking a more collaborative approach, we will see increased supply, higher-quality housing, a leveling off of rents, assistance for those in need and a continued incentive toward a robust housing market. That is a solution where everyone wins.
David Brogan is the executive director and CEO of the New Jersey Apartment Association. Recognized for his expertise in housing policy, Brogan is a go-to source for policymakers on legislation and regulations that impact housing providers
