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Sunday,
August 27, 2006
By SCOTT FALLON
STAFF WRITER
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North
Jersey is on the cusp of a condominium and town-house
building boom that some feel will slowly change the suburban character of
the area into an even denser collection of bedroom communities.
It also has spurred concern among
some planning experts who say the projects may stall as the real estate market
continues to slow from its record pace.
Developments totaling at least 14,000 units of high-density housing
have either been proposed, are before local boards, or have recently been
approved in Bergen, Passaic,
Morris and Hudson
counties, according to a review of building data by The Record.
Construction is slated across the region, from massive developments
such as the 2,580-unit EnCap Meadowlands Golf
Village in Rutherford and Lyndhurst to smaller projects like a 68-unit
apartment complex in Butler.
The reason for the focus on high-density housing is simple: Land is
difficult to find in North Jersey and
density drives real estate profits.
This decade's boom has been fueled by low mortgage rates, steady
population growth, increased investment in real estate and government
incentives for builders to use former industrial tracts, say real estate
agents, developers and economists.
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By the numbers
New multifamily units authorized from 2000 to June 2006, compared
with 1990-1999.
Bergen:
7,316 +71 percent
Passaic:
1,592 +12.5 percent
Morris: 4,956 +124 percent
Hudson:
15,231 +185 percent
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"There is a lot of competition to live
here," said John Knifton, a senior vice president of Somerset
Development, which is building the 737-unit Wesmont Station in
Wood-Ridge. "There are high barriers. ... It's not made for just
anyone," he said of homeownership in the region.
But will there be enough demand by the time these developments are
built?
"It's a legitimate fear," said James Hughes, dean of the
Bloustein School of Planning and Public Policy at Rutgers University.
"These were conceived during boom years, but by the time they get
around to building, it's a whole new economic situation."
Residential development is on course to outpace Bergen County's
population growth in the next 10 years, according to a recent study by
the county's Office of Planning and Economic Development.
At its current pace, housing in Bergen
will climb toward 400,000 units from today's 350,000 by 2015 while the
population slowly increases to the low 900,000s from 891,000. It would
create the largest housing surplus the county has seen and its first
since the late 1980s and early 1990s when the real estate market
collapsed, said Farouk Ahmad, director of the county planning office.
The real estate market is slowing considerably. In the second quarter
of this year, New Jersey
had the nation's 10th biggest drop in the sale of existing homes.
Helping fuel the slowdown is the rise in interest rates. The average 30-year
mortgage rate hit a four-year high of 6.8 percent in late July, compared
with 5.7 percent a year ago, according to Freddie Mac, the Federal Home
Loan Mortgage Corp.
In addition, New Jersey
has not been adding the same number of high-paying jobs as it did in the
1990s, Hughes said. "We're not getting the same amount of people who
can afford new, high-end housing," he said.
Ahmad has been warning developers that they should build their
projects in phases or they might end up with a lot of empty condos and
town houses.
"If all of them go into development and we have them in a year or
year and a half, we'll have a big problem," Ahmad said. "All of
these developments are built at high cost. Land is high. Interest rates
are going up. Construction cost has gone up for the last few years
because of Katrina and [hurricanes] in Florida."
Ahmad said that if developers build a couple of hundred units every
six months and test the market, population increases would be more in
sync with new housing.
That's not the case everywhere. More than 170 condos in the 206-unit
The Watermark on Hudson in North Bergen have been sold even though the
12-story tower on River Road
is at least a year from completion.
"Clearly the market changes, but we've had a great first quarter
of this year," said Craig Klingensmith, an executive with WCI
Communities, builders of Watermark. "We're attracting a lot of empty
nesters, the type of people who have a 5,000-square-foot house in Upper Saddle River
and are looking for a luxury condominium."
Building up, not out
Indeed, economists say the baby boom generation will provide a wave of
empty nesters who condo developers hope will sustain their industry.
A lot also depends on the New
York City housing market. If home prices stay at
their astronomical level, the theory is that more renters will flee to New Jersey to own
a home.
Home construction in Bergen
County this decade
has already surpassed all residential building in the 1990s, 12,805 units
through 2005 to 11,304 for all of the '90s. Passaic County
may soon eclipse last decade's total: 4,016 so far to 4,820 in the 1990s.
Hudson County
has already surpassed its 1990s total and Morris County
is keeping pace with its 1990s building boom.
The trend of building up instead of out has sharply curtailed the
number of new single-family homes -- the staple of suburban New Jersey. Only
47 percent of homes built this decade in Bergen County
were single-family compared with 62 percent in the 1990s.
New housing can revive downtrodden communities, spur the local economy
and gentrify neighborhoods. But upscale housing also can bring in more
national retailers, which can harm locally owned businesses.
Another result is an increased demand for police, fire and other
municipal services and, in most cases, an influx of children into the
local school system.
The tax base of a town may expand significantly, but property taxes
also are likely to increase.
For instance, Edgewater has been the site for more new high-density
housing since the early 1990s than any other community in North Jersey. From 1999 to 2005, there have been
1,091 multifamily units developed in the 0.85-square-mile borough,
according to building permit data.
During that same period, the average property tax increased to $5,601
from $3,793. The 48 percent increase was the 13th-largest among Bergen County's 70 municipalities.
"We had been told for years that more housing would increase our
ratables and that has not happened," said Edgewater Councilwoman
Beatrice Robbio, who has worked on the borough's most recent master plan,
which limits residential zoning. "The only way to deal with taxes is
to radically curb development. But we suffer intimidation by high-rise
here."
Infrastructure help
To counter some of the tax burdens developments bring, towns usually
get builders to help with infrastructure costs. Although these generally
include road and utility improvements, they have gone further when large
developers want to build in town.
For instance, the developers of Wesmont Station in Wood-Ridge have
agreed to build a science lab at the high school, an eight-acre community
athletic facility, with a soccer field, track, baseball fields and a
1,000-seat grandstand.
The Lakewood
company will also contribute $15 million toward a new 419-student middle
school for Grades 5-8.
Town officials say it's more than justified considering Wesmont is
expected to increase Wood-Ridge's population by a third with 2,500 new
residents, including an estimated 432 children who could enter district
schools.
Although the infrastructure improvements are worth millions, it will
fall to local taxpayers to provide the additional teachers and staff to
accommodate the expected growth.
In 2005, the average cost to educate a child in a New Jersey public school was $12,567,
the vast majority of which came from local property taxes.
"School-age children are always the big one," said Joseph
Seneca, a planning and economics professor at Rutgers University.
"The [infrastructure] costs get passed on to the consumer. The
long-term costs usually get passed on to the taxpayers."
That's what makes age-restricted communities like the 755-unit Wanaque
Reserve or the 814-unit Four Seasons in West
Paterson, both under construction, desirable to local
governments.
"They don't affect the school system and there's no traffic at
rush hour," Seneca said. "That's the ultimate ratable."
Regardless of when people drive, transportation improvements often
have to be made with such an influx of people.
But state Department of Transportation Commissioner Kris Kolluri said
increasing lanes on highways typically increases traffic and attracts
even more development. He said the focus should be on mass transit such
as a new $7.2 billion train tunnel connecting New
Jersey to Manhattan under the
Hudson River. It also would give Bergen and Passaic
counties a direct Manhattan
connection, eliminating a transfer at Secaucus Junction.
"This is not a highway-driven solution," Kolluri said.
"We have to look at mass transit as a big part of the solution. We
have to look at the existing infrastructure and make sure it's in a good
state of repair before addressing capacity issues."
Recent state law also is determining where developments can be built.
Passaic County
is seeing the majority of housing applications coming in cities such as Paterson and Passaic,
while the Highlands Act has halted some major developments in up-county
towns. In July, the West Milford Planning Board unanimously rejected a
proposal to build a 100-unit condominium complex called Valley Ridge in
the heart of the protected area.
"Historically, a third of development applications have come from
West Milford and the other northern
towns, but it has decreased drastically," said Neil Muller, the
county's planning director. "We mostly see applications for cell
towers and that kind of stuff, not housing."
Reclaimed sites
There is one place where developers can find plenty of land in this
region: contaminated industrial sites known as brownfields.
The state Economic Development Authority has funded 1,111 projects,
including two of the more massive developments in Bergen County.
Wesmont Station has received $1.75 million in loans for engineering
and remediation costs.
The EnCap Meadowlands Golf
Village has received $150
million in loans to cap 785 acres of landfills in Lyndhurst
and Rutherford.
"The real estate market has just driven these types of
projects," said Ken Kloo, a state Department of Environmental
Protection official who oversees brownfield redevelopments. "It's as
much a real estate issue as environmental remediation. We have developers
who seek this out."
But not all of them are welcomed.
In May, a Rutherford advisory
committee made up of 16 residents voted overwhelmingly against a plan to
build 3,400 condos on a vacant industrial site along Route 17.
The vote came after a series of hearings in which hundreds of
residents rallied against the mammoth proposal by Rutherford-based
Lincoln Equities Group LLC. The company has not made any new plans for
the site, but can still submit a formal application before the borough
planning or zoning boards.
The committee said the project would increase Rutherford's
housing stock by 50 percent and flood the school with hundreds of
additional children.
But another major concern was that it would create a
"disconnected urban-styled community" that would have little in
common with the suburban character of the town.
"We're a town of mostly single-family homes and this was so much
denser than the rest of Rutherford,"
said Glenn Elliot, a former mayor who was on the committee. "It was
a pretty unanimous feeling that it didn't fit at all, except for the
developers. They thought it fit."
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