Low- and Middle-Income New Jerseyans Priced Out of Rental Market

Hank Kalet | March 13, 2013 | Housing, More Issues
Advocates argue that administration's $1 billion post-Sandy rebuilding plan won't make much difference long-term

The majority of renters in New Jersey cannot afford the apartment they live in, a situation made worse by Hurricane Sandy. And while the state is planning to spend nearly $1 billion in hurricane relief on low- and moderate-income residents, housing advocates say that will do little to address the long-term problem.

Of the 1.06 million renters in the state, 59 percent are paying more than 30 percent of their income toward housing, a figure the federal government considers affordable, according to a report issued today by the National Low-Income Housing Coalition. These figures are based on 2011 data from the federal American Community Survey conducted through the U.S. Census Bureau, the NLIHC says, and do not reflect the impact of October’s hurricane on the state’s rental market.

A report issued last week by the Enterprise Community Partners and NYU Furman Center for Real Estate and Urban Policy found that renters made up 42.5 percent of those affected by the storm. Two-thirds of those renters earned less than $30,000 a year. The report is based on data from the Federal Emergency Management Agency.

Gov. Chris Christie’s plan, unveiled Tuesday, would use federal disaster aid to rebuild and expand the rental housing stock destroyed by Hurricane Sandy. It would provide loan guarantees and direct aid to nonprofits and other developers to build both sale and rental units for low- and moderate-income residents. The governor says that about half of the $1.83 billion in federal aid will be earmarked for New Jerseyans who fall into those categories.

Housing advocates, however, were critical of the plan, saying that it would disproportionately benefit homeowners at the expense of renters.

Groups like the Housing and Community Development Network of New Jersey and the Fair Share Housing Center want the governor to target more of the rebuilding money to renters to address the shortfall in affordable rental units. They also want the governor to use state trust fund money — the Balanced Housing Program funded by a realty transfer tax — to create new affordable housing, something he failed to do in his first three state budgets.

What the NLIHC report shows, said Arnold Cohen, policy director for the Housing and Community Development Network of New Jersey, is that the state faces a long-term rental housing shortage and that, “even before Sandy, there was a tremendous need for rental housing, particularly in the Shore communities.”

“That is exacerbated by Sandy,” he said, “because we have increased demand from people who were homeowners who now need to rent, and by reduced supply because of the housing destroyed by Sandy.”

Favoring Homeowners

Kevin. D. Walsh, associate director of the Fair Share Housing Center in Cherry Hill, said the Christie administration is “over-responding to the needs of homeowners, while not doing enough to meet needs of low-income renters.”

“These are people who are disproportionately not likely to have insurance,” he said. “And these are the groups that, when they lose their housing they likely don’t have the savings and whatnot needed to bounce back from a natural disaster.”

According to the NLIHC report, renters account for about one-third of all New Jersey households, and they earn considerably less than those who own their own homes. Median household income in the state, according to the report, is $87,088, more than twice the $40,527 estimated median income of the state’s renters.

Using the definition of “cost-burdened” developed by the federal Department of Housing and Urban Development, the report sets the affordability threshold at 30 percent of income. According to the HUD website, “families who pay more than 30 percent of their income for housing are considered cost-burdened and may have difficulty affording necessities such as food, clothing, transportation, and medical care.”

In New Jersey, nearly six out of 10 renters fit this profile, compared with 53 percent of renters nationally, the report said. This is not surprising, given the high cost of rent in the state, said Megan Bolton, research director for the National Low-Income Housing Coalition. New Jersey fair market rent of $1,292 for a two-bedroom apartment ranks fourth behind Hawaii, California, and New York.

New Jersey’s fair-market rent, the report said, is nearly 30 percent above the rental affordability threshold of $1,013 estimated by the NLIHC. Fair-market rent, as defined by HUD, is a rental unit at the 40th percentile of the market, meaning that 60 percent of rental housing would cost more and 39 percent would cost less.

In a dozen New Jersey counties, the report found, the percentage of renters paying more than 30 percent of their income in housing costs exceeds the statewide figure. Topping the list is Passaic County, with 76 percent of its renters exceeding the threshold. Fair-market rents in Passaic are the highest in the state at $1,450, while the estimated median income of renters in the county is $30,964 – the fifth-lowest in the state.

“We see it as an issue of both rent and income,” Bolton said. “What we’ve seen over the last couple of years is declining income and increasing rents — and those two things do not work well together.”

Leveling Off

Rents had leveled off toward the end of the housing boom in 2008, because national vacancy rates were at about 8 percent, she said. Over the last few years, the vacancy rate has fallen to 4.5 percent nationally because the uncertain housing market has made renting a more attractive option, she said.

Construction of new rental units — at least those at the lower end of the scale — has not kept pace, she said, which has helped create a shortage of housing for low-income workers. Addressing this will take government action, she added, which has to start with funding the National Housing Trust Fund. The fund was created in 2008 to pay for construction, preservation, and rehabilitation of low-income housing, but has not been funded since its initial $1.5 billion stipend.

At the state level, advocates say, the governor needs to do more than what has been proposed under the Sandy relief plan. He needs to end his practice of using money from the Balanced Housing program, what advocates call the state’s affordable housing trust fund, to balance his budget and instead spend it to build new low-income units.

“Part of what the governor has done … is to take the money that was supposed to be used for starter homes and apartments throughout the state and use it to balance the state budget,” Walsh said. “He is using one-shot gimmicks to balance the budget, while putting us further in a hole from a housing standpoint.”

Cohen said the trust fund money must be used for housing, which is something being done in Connecticut, where Gov. Daniel Malloy recently unveiled a $217 million affordable housing plan.

“We are urging [Christie] this year to use those dollars to increase the supply of housing — either through rehabilitation, building new housing, or reclaiming foreclosed homes. The construction work helps the economy, but families moving in also buy furniture, carpeting, etc., and they increase local property taxes.”

“This didn’t just start with Sandy,” he said. “It needs to be addressed.”