Friday, July 21, 2006

High Housing Cost Slows State Economy

From the Asbury Park Press:

New Jersey needs comprehensive review of housing policies

It seems New Jersey is perpetually debating the appropriate balance between home building and open space preservation — with both sides claiming the moral high ground on just what quality of life means.

Home builders rightly want to provide a sufficient supply of quality housing for residents of all incomes. Environmentalists rightly want to protect the quality of New Jersey's natural resources. Unfortunately, both goals have suffered under a complex regulatory structure.

A recent study by The Brookings Institution found that the state is losing its economic competitive edge and the threat is coming from "multiple forces, including rising housing costs, persistent race, class and place disparities, and unbalanced development patterns." In fact, New Jersey has the fifth-least affordable housing in the United States, according to the Brookings report.

Simply put, the state has a housing gap that makes it more difficult to live here. And, as housing grows ever more expensive, it squeezes those who can least afford quality housing and also has a harmful impact on the middle class. Without quality housing to continue to attract residential buyers and renters, communities suffer tax base loss and with it, the recurring revenues needed to deliver quality education and other important government services.

This is no longer a hypothetical situation. Numerous studies have cited a slowing of New Jersey's economy, a flattening of wages more severe than the national average and the loss of quality jobs.
...
This leaves the housing and environmental advocates fighting while the state's prosperity suffers. Diverse housing options are the lifeblood of a successful economy and the inability to provide these residential opportunities puts New Jersey at a serious competitive disadvantage with other states. Both sides can agree that open space can't all be plowed under and that new housing options should be directed back to the urban cores and inner suburbs. That's the easy part, but developing policies that logically pursue these goals is where the hard work begins.

20 Comments:

Blogger Shailesh Gala said...

In my opinion the biggest culprit is restrictive zoning laws. In town next to mine, Readington, they have 5 acre zoning law. Now isn't that waste of open space? Wouldn't it be better to build SFH on 0.25 acre or Townhouses on 0.1 acre. That would leave more land for Open space program (satisfying environmentalists) as well as allow room for increased demand.

I don't think the engineering or science is 100% accurate in determining zoning. I believe it has more to do with Local residents control over Zoning authority that leads to such a high zoning law. I am all for environmental protetction, but allowing 1 house on 5 acre land is not the right way.

7/21/2006 05:49:00 AM  
Blogger Metroplexual said...

And don't forget the brain drain of college grads when looking for housing opportunities. They will just dial on.

SG,

Zoning changes now have to be in line with the state plan (SDRP)planning areas 4 and 5 are easily able top downzone without the ramifications of a mount laurel lawsuit.

The justification for large lot zoning comes from the "nitrate dilution model" when outside of sewer service areas. The variables in the model are soil type and ambient level of existing nitrate in the water. Groundwater contamination is the concern.

7/21/2006 05:56:00 AM  
Blogger Shailesh Gala said...

metro: Can't sewer services built to allow for more development?

Also, what I don't understand is why the town next to it has 0.25 acre zoning, while Readington has 5 acre zoning. Geographically both are very similar.

7/21/2006 06:27:00 AM  
Blogger Shailesh Gala said...

Property Tax reforms from Gov coming in 1 week.

Sir Jon is set to battle the property tax dragon

Some key points
* Rewrite the school funding law so that middle-class districts get more help.

* Turbo-charge the drive to consolidate schools and towns. Corzine wants to create a mega-fund to offer cash rewards to towns and schools that merge, or find other ways to cut spending permanently.

* Raise some state taxes. The governor calls it "broadening" the tax base. But that's a euphemism. One possibility is to fiddle with the income tax brackets. Corzine opposes raising the top income-tax rate, saying it would encourage senior business executives to settle in lower-tax states like Connecticut. But he is open to tinkering with the brackets in the existing code. Some Assembly Democrats recently called for graduated higher rates in the $200,000 to $500,000 range, which would raise more revenue.

Well the fight is coming soon, to Theatre near you !!!

7/21/2006 06:39:00 AM  
Blogger Metroplexual said...

SG,

Alot of zoning areas are in watersheds where C1 streams exist. DEP would be very against discharges into tributaries of C1 streams. Their sewer service people have been very slow to even look at plans for new service areas for years now.

7/21/2006 07:27:00 AM  
Anonymous Anonymous said...

My problem with this article is that it presents the housing/environmental sensitivity as an either/or which is a false choice.

There are plenty of places where affordable housing could be built while complying with environmental regulations.

Many builders play the affordable housing card when they want to enlarge their projects into environmentally sensitive areas.

Strangely, a housing slowdown theoretically makes it easier to address both issues, though to reach affordability the price drop would have to be so severe that the economy would be in the tank.

Lindsey

7/21/2006 07:43:00 AM  
Blogger grim said...

Please keep in mind this piece was written by a developer..

grim

7/21/2006 07:50:00 AM  
Blogger patient homebuyer said...

it is about time the msm gets involved in this bubble talk, a link on ben jones blog about the housing crisis in ca from cbs evening news, my mom just told me she saw a report on nbc in ny this morning about a 13% drop in prices in some areas, it is only a matter of time for this house of cards to collapse

7/21/2006 08:05:00 AM  
Blogger grim said...

Number of people around the office commented on the housing bubble piece this morning.

grim

7/21/2006 08:06:00 AM  
Blogger RichInNorthNJ said...

I don't feel a lack of housing in New Jersey is the cause of its current woes. This area has the same run-up as other coastal areas due to all of the attributes of the housing bubble (lax lending, speculation, etc.).
I believe any migration out of New Jersey is due more to loss of technical, pharmaceutical and other high-skill jobs and careers along with being overburdened by high taxes and the cost of housing.

I’m thinking you can build as many houses as you like but if the high paying jobs aren’t here and the taxes are still high, housing would still be unaffordable.

Rich

7/21/2006 08:07:00 AM  
Blogger RentinginNJ said...

Home builders rightly want to provide a sufficient supply of quality housing for residents of all incomes.

Yea right. Developers only want to build condos and McMansions. I can’t remember the last time I saw a developer putting up regular single family homes in NNJ.

7/21/2006 08:17:00 AM  
Blogger Metroplexual said...

grim,

which housing bubble piece?

7/21/2006 08:27:00 AM  
Blogger grim said...

I believe it was on NBC or ABC sometime this morning.

grim

7/21/2006 08:43:00 AM  
Anonymous LeeS said...

Most of the people I know that are living in NNJ now are NY based workers. But consider that there are so many new and imposing burdens on a NJ home owner. I'm thinking about giving up myself, and reconsidering parts of Nassau County in LI, because at least the property taxes are reasonable.

When I stop to think about it - the mortgage, property taxes, commute costs, energy price increases (fuel and elecrticity), home insurance, property tax reassessments, state tax increases, possible income tax increases - makes me want to stick to New York. I mean, yeah, we're taxed terribly, but is it really that much better in NJ? Starting to look less like it is.

7/21/2006 08:53:00 AM  
Blogger RentinginNJ said...

I don't feel a lack of housing in New Jersey is the cause of its current woes. This area has the same run-up as other coastal areas due to all of the attributes of the housing bubble

I agree. The data simply don’t support the “prices are high because we can’t build” hypothesis.

2005 had the second most building permits issued in the last 26 years (1986 was first). Since 2002, building permits have been issued at an above average rate.

Between 2000 and 2005, population has only grown by 1.8% in NNJ*, adding 81k people, while permits were issued to build 78k housing units.

Assuming 2.6 people per household, construction easily outpaced population growth, suggesting pressure on the housing supply should have dropped and prices should have moderated. We all know that’s not the case. Prices are high because of a bubble, pure and simple. There simply is no shortage of housing.

*Using Grim’s GSMLS definition of NNJ. (Bergen, Essex, Hudson, Morris, Passaic, Somerset, Sussex, Union, Warren Counties)

7/21/2006 09:00:00 AM  
Blogger lisoosh said...

Rentinginnj - I agree. They have been building like crazy for years around me - southern Somerset County and the Brunswicks and lots are townhouses, they have added tens of thousands of units.
If you take away homes bought as "rental investments" and "second homes" many of which were made possible by lax lending, you would find that there is absolutely no shortage. There are whole towns at the shoret which have been left with 100 full time residents. There are condos and townhouses standing empty for sale and for rent.

7/21/2006 09:11:00 AM  
Anonymous Anonymous said...

"Most of the people I know that are living in NNJ now are NY based workers. But consider that there are so many new and imposing burdens on a NJ home owner. I'm thinking about giving up myself, and reconsidering parts of Nassau County in LI, because at least the property taxes are reasonable.

When I stop to think about it - the mortgage, property taxes, commute costs, energy price increases (fuel and elecrticity), home insurance, property tax reassessments, state tax increases, possible income tax increases - makes me want to stick to New York. I mean, yeah, we're taxed terribly, but is it really that much better in NJ? Starting to look less like it is."

Lees, Which of the costs/issues above are better on LI? I am suggestiong that LI is more expensive than NNJ. I've done both, I find quality of life to be much better in NNJ. And I believe, your money goes father in NNJ. Yes I agree with most here that its expensive and overtaxed, but you don't change the equation at all in Nassau county, in fact I think it is worse.

Grass isn't always greener. As much as folks complain about traffic in NNJ, does not come close to LI traffic nightmares.

There are dozens of town centers in NNJ where there has been a town for 100-150 years...LI was not much until post WWII boom created cookie cutter developments out of the potato farms. With the exception of a few harbor towns, LI is quite lame.

JMM

7/21/2006 11:44:00 AM  
Anonymous Anonymous said...

Long Island, thats been over
for 20 years.

7/21/2006 02:06:00 PM  
Blogger Roadtripboy said...

"Home builders rightly want to provide a sufficient supply of quality housing for residents of all incomes.

Yea right. Developers only want to build condos and McMansions. I can’t remember the last time I saw a developer putting up regular single family homes in NNJ."

RentingInNJ, you took the words right out of my mouth. Not only is there more money to be made in making luxury condos and homes but arent' communities a little skittish about creating lower cost developments?

I wonder if there is a fear of creating more housing projects ghettos, which is what resulted the last time this country focused on developing housing for lower income individuals/families.

7/21/2006 08:32:00 PM  
Anonymous Anonymous said...

Well I think there are plenty of homes in this state already. And many of these "Quality Homes" are crap. They use crappy products. Companies like K. Hov build the junkiest houses. Friend of mine bought a place that was built by K Hov. On a few of the Windows they only sealed 3 sides as opposed to all four. Plus for most of the interior it was all junk. They cut costs left and right. Living in Somerset NJ, I see quite a bit of construction going on around this area. And Roadtripboy was right with MC Mansions. Over in Hillsborough there is a lot of commercial building going on. I mean where does it end. If I had Billions of dollars I would go around buy peoples houses/ buy land galore. So that way if these idiotic builders tried to buy my land I'd sat it will cost you 1 Billion dollars per sq foot of land. People may think thats nuts but something must be done about these builders. Its not even like they build any normal priced homes anymore. Its funny I make too much money for moderate income housing but I can't afford to buy anything. This crap is out of controll just like the housing bubble was. I think zoning laws are good and bad. Its nice that they are putting up restrictions so all the land does not get crapped on by the mc mansions. Shailesh Gala said 1 house on 5 acre land is not the right way. Well in some cases yes. Look at how the develepors ruined the land. 3500sq ft home on .2 of an acre??? There are so many homes like that that have been built that 1 house of 5 acres is a great law so with a 3500 sq ft home or bigger you are not wasting land. But if you were to build a smaller home than 1 acre should be fair. It cost builders peanuts to make there MC mansions. About 40-50/sq foot. All these poorly built homes that have been being built left and right, in 10-15 years they are all gonna fall apart and look like Hell. My last thing to add is there was an article a while back on NJ.com about how many of the developer go up and knock on people doors and ask to buy there house so they can tear it down and build a mc mansion on it. Well thats what you morons get for building like crazy. Not much land left to be developed and thats why they argue against the land trust issues. Maybe these builders should go find a new state to work in, not much left in NJ to develop...I know PA has a lot of No where land with plenty of vacant land. I bet there just waitin for the Mc Mansion builders to come build some over priced MC mansion made from low end materials.

7/25/2006 09:22:00 PM  

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