David Brogan is the executive director of the New Jersey Apartment Association
By David Brogan
In the weeks since the start of this crisis, the primary focus was on the health impacts of COVID-19, and rightfully so. And while the economic impact never left our minds, recent data has now put the financial health of our country and our state on the front burner. The aggregate economic toll of this crisis is currently unknown, but we now know that the first quarter gross domestic product of the United States contracted by 4.8 percent. Furthermore, in looking more closely at that number, we must understand that the impact of the crisis really didn’t hit our economy until mid-March. If that is the case, we are looking at a double-digit contraction in GDP, coupled with unemployment rates we haven’t seen since the Great Depression. With that in mind, it is more important now than ever before, that policy makers truly understand how the various industry sectors impact New Jersey’s economy
When examining the data, it is clear that we are currently facing difficult times, and the near future does not look bright. The retail industry in this state will be devastated. Restaurants, which nationally have a 60 percent failure rate in their first year, will see that rate skyrocket over the next 12 to 18 months. At the same time, hotels, casinos and our tourism industry will take years to fully recover. These are all significant components of New Jersey’s economy, but one industry that routinely gets overlooked from this perspective is the multifamily industry. Policymakers have viewed this industry narrowly, focusing on individual landlords and most times, viewing landlords in a negative light. However, by looking more closely at the multifamily industry, policymakers would understand its true economic value and in doing so, they would realize that this is an industry sector that must succeed if they want New Jersey to succeed.
The multifamily industry collectively supports over 50,000 jobs. it pays over a billion dollars in property taxes. it contributes billions of dollars to the state’s gross domestic product and it supports a multitude of ancillary businesses that feed the multifamily industry. These ancillary businesses, in turn, support even more jobs, as well as more income, sales and property tax revenue. Furthermore, consider the economies of scale. When one thinks of improvements to their home like a kitchen remodel, the economic impact of that rehab is dwarfed by a landlord who owns, for example, a 500-unit building, where hundreds of thousands of dollars are being spent on maintenance and improvements each year. Once again, given New Jersey’s current economic condition, policymakers should view the multifamily industry as being critical to the survival of our economy as well as both state and local governments. However, this perspective has yet to take hold.
As the Legislature resumes committees and voting sessions, I would respectfully ask policymakers to think more broadly as they make rental housing policy decisions during, and shortly after this crisis. It is imperative that lawmakers look several steps ahead before passing initiatives that appear to help some people in the short run, when in reality, such policies could be extremely detrimental to the economic health of our state as well as the people they actually are trying to help. Specifically, policymakers should understand the economic domino effect initiatives such as rent suspensions or rent reductions will have on the state’s economy. A rent suspension will directly impact the landlord, their ability to pay staff and vendors, as well as their ability to maintain their buildings, which in turn will impact the quality of life of their tenants. At the same time, it will impact banks, insurance companies, as well as state and local governments via the landlord’s ability or inability to pay myriad of financial obligations including taxes.
Policies such as rent suspensions target a single industry by stripping away its revenue stream. Even at a local level, policymakers must ask themselves, “What would happen to my municipality if the property tax revenue from the multifamily industry never materialized?” Even if the industry isn’t decimated, policies put in place at the state level could decrease the values of multifamily properties in municipalities throughout the state. Elected officials must realize that such actions would lead to a property tax shift onto homeowners. Why? Because the cost of running local government doesn’t go down. Those obligations need to be met and if they are not being met because the taxes paid by multifamily properties are significantly dropping, there is no other choice but to shift that burden onto homeowners. No one wants that.
The Governor and the Legislature have a daunting task on their hands in choosing which policies to move in an effort to get back to normal, and I give them credit for what they have done so far. But the coming months will be critical in determining if our recovery will be smooth or bumpy, successful or not. NJAA and its members, who have literally been on the front lines of this crisis, stand ready to work with the Governor and the Legislature during these difficult times. We just ask those elected officials to remember the role the multifamily industry plays in supporting New Jersey’s economy, as well as state and local governments. Failure to do so will send the multifamily industry down the path of so many other industries affected by COVID-19. The only difference is that such an outcome could have been avoided with a better understanding of the role we play in New Jersey.
David Brogan is the executive director of the New Jersey Apartment Association (NJAA). The NJAA represents all facets of the multifamily housing industry, including market-rate and affordable housing owners, managers and developers and suppliers. NJAA’s membership owns and manages over 210,000 apartments, providing quality housing to over 1 million New Jerseyans.