New Jersey could soon launch a program that cuts the red tape to allow vacant office parks to be converted into housing.
The Senate Community and Urban Affairs Committee pushed forward a bill, S-1766, that would let developers skip some local zoning rules to repurpose vacant office parks and retail centers. The goal is for these tired older spaces to be converted into housing.
Democratic state Sens. Troy Singleton of Burlington and Benjie Wimberly of Bergen sponsored the bill. Singleton said the bill could increase hosuing supply.
"We have large commercial properties across the state sitting partially vacant or economically distressed while families struggle to find attainable housing," Singleton said.
"This legislation helps modernize outdated zoning practices and creates a pathway to transform underutilized sites into vibrant mixed-use communities that can support housing, local businesses, and long-term economic growth."
New life for stagnant office space
New Jersey has approximately 189 million square feet of office space, of which about 36 million square feet are vacant. Its vacancy rate, about 22%, has remained stubbornly high for the past two years, according to an analysis from commercial real estate firm Cushman & Wakefield. That's equivalent to 25 empty 99 Hudson St. towers.
Cushman notes there is a "flight to quality" trend for office space, where much of the leasing activity happens in the newest and highest-quality space. Older and worse-located office buildings are stagnating, empty and deteriorating.
New Jersey developers could convert 24 million square feet of office space to other uses, Cushman found.
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So, bill S-1766 targets large commercial properties. Office parks must be at least 50,000 square feet and retail centers must be over 15,000 square feet. The space needs to show a history of "sustained vacancy or economic distress."
The resultant development must include residential development, and that residential development must reserve 20% of its units for affordable housing.
“Rather than allowing these properties to decline further, this bill creates an opportunity to breathe new life into them while addressing one of the biggest challenges facing our state: the lack of available housing," Wimberly said.
In exchange, developers get a limited preemption from local zoning regulations. They would be allowed as permitted uses without requiring the developer to go to the city to obtain a use variance, potentially delaying the project. The development would still need to comply with some other development standards, like land-use law and municipal planning board oversight.
The Garden State's housing dilemma explained
The bill is the latest in a series of state housing bills that could take some power away from local jurisdictions to control zoning decisions. Many other states have bills aimed at preempting restrictions on lot sizes and setbacks to allow builders to construct homes in areas that don't otherwise allow them.
In this instance, New Jersey says the office parks and retail strips have to prove they're economically stagnant. That means either a 25% vacancy rate for the past 18 months, or a demonstrated revenue decline over three years.
Not everyone is on board with the idea. The New Jersey State League of Municipalities urged its members to oppose the bill.
"In addition to bypassing the local zoning process, it is likely to result in costly litigation," it said.
The Realtor.com® state-by-state housing affordability report card gives New Jersey a C-. The National Low Income Housing Coalition estimates the state needs almost 200,000 new rental and for-sale homes to meet the needs of low-income residents.
New Jersey has put about $1 billion into housing programs over the past few years. Lawmakers pitched new housing bills and ideas, including a new savings account for first-time homebuyers.
It has a series of other housing bills this session. The state Legislature is also advancing bills to ease the development of accessory dwelling units and to allow religious and nonprofit buildings to convert property to inclusionary housing.
New Jersey also has a proposal to create Urban Enterprise Zones to target investments in certain areas.
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Tristan Navera is a senior reporter on housing policy, covering trends and solutions in the housing market from Washington, DC. He was previously a senior reporter at Bloomberg Law, and before that covered real estate for the Washington Business Journal. Earlier in his career, he spent a decade reporting on business and real estate in Dayton and Columbus, OH. A Cincinnati native, he holds a journalism degree from Ohio University.
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