New Jersey fights institutional home buying with more affordable units

New Jersey fights institutional home buying with more affordable units

2022-08-05T10:11:04-04:00August 5th, 2022|Economy, North & Central Jersey, Real Estate & Construction|

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2 min read August 2022 — A statewide effort to tackle the affordable housing crisis is underway in New Jersey. As institutional home buying hits new highs, thousands of affordable housing units are in the works.

For locations with denser populations and fast growth like North Jersey, housing is a persistent issue. Almost opens in a new window80%opens PDF file of Newark locals rent, with many of those people reporting they are rent burdened. This means they are paying more than 30% of their income in rental costs. 

This crisis in home ownership is caused primarily by a sharp rise in property values due to investors piling in, according to a study released by Rutgers University. It says that from 2017 to 2020, institutional, largely anonymous buyers were responsible for almost opens in a new window50% of all arm’s-length residential sales in Newark, which marks a threefold increase since 2010.

As a result of this increase in demand, home values have skyrocketed in New Jersey. Across the state, home values have risen opens in a new window15.1% in the year to June 2022 to $467,384, according to Zillow. According to  New Jersey REALTORS®, housing supply is at opens in a new window2.7 months for both single family homes and townhouses as of June 2022. Although positive for the economy, this dynamic is pushing housing supply out of the hands of lower-income residents. 

For North Jersey, there is a real opportunity to address not only the wealth gap but also racial inequality through its efforts to provide high-quality affordable housing. In New Jersey, Black residents have a opens in a new windowmedian householdopens PDF file wealth of $17,700 while Latino household wealth is about $26,100. In contrast, wealth among white households is a staggering $322,500. 

Attention is being paid to the issue. Last August, Newark Mayor Ras Baraka opens in a new windowpledged to create or preserve 6,600 affordable units in the city by 2026. The opens in a new windowAffordable Housing Production Fund (AHPF) was also unveiled in Governor Murphy’s 2023 budget, allocating $335 million to creating 3,300 new affordable units across 43 developments throughout the state. Still, to plug gaps, the city of Newark alone needs over 16,000 affordable units to meet growing needs, according to the Rutgers study. 

Now, one of the most ambitious affordable housing initiatives in recent years has been rolled out in Newark in the form of the Newark Land Bank. This bank is designed to dispose of vacated and blighted properties and lots, getting them back on the tax rolls and giving them to people who will live and grow in Newark, according to Roy Southerland, Chief Investment Officer of Invest Newark. “Our homeownership rate is 24% and we want to raise that to 40% in three years,” said Southerland with Invest:.

Under the Newark Land Bank there is a Section 8 Homeownership Conversion program, which provides residents with vouchers and gives low-income residents the opportunity to own a home. Invest Newark is embarking on this initiative in partnership with the Neighborhood Assistance Corporation of America, the Urban League of Essex County and the City of Newark. While the city provides down payment assistance, the Newark Housing Authority oversees the voucher program. 

The ultimate goal, according to Southerland, is to create over 2,000 units of affordable housing within the next five years. Another significant development in the journey to equitable growth for the region is the recently approved razing of the old Newark Bears stadium to opens in a new windowconstruct 11 high-rise towers containing 4,200 market rate and affordable units. The opens in a new windowfirst phase has already been approved and will see the construction of two 18-story towers containing almost 600 residential units alongside commercial space and, importantly, access to the NJ Transit light rail link. 

Supporting infrastructure is a critical consideration when constructing affordable housing, or there is a very real risk of creating housing deserts. According to Mike Cerra, Executive Director of the New Jersey League of Municipalities, North Jersey needs the infrastructure in place to be the gateway into Manhattan, as well as Elizabeth, Paterson, Jersey City or Newark, given the importance of these locations to jobs and economic growth.

And authorities are going beyond just traditional infrastructure, especially since many are still working from home. “While urban centers get the focus in terms of traditional infrastructure, we have to think big picture because a lot of offices have downsized,” said Cerra with Invest:. He highlighted efforts to expand technology and broadband in rural areas of Warren County and Salem County as part of a statewide effort to bridge the digital divide.