There’s about a nine-month supply of housing available in New Jersey for all ages of buyers, based on current demand. But the amount of age-restricted housing, including resale, that is built, under construction, or approved could be as high as 15 years’ worth. And demographic shifts in the state indicate that demand for this kind of housing is likely to diminish further.
Last summer, New Jersey’s former Gov. Jon Corzine signed into law a bill that gives developers and builders a fast-track application process to convert to market housing projects they had originally intended for residents 55 or older. A panel of experts examined the nuances of that bill during an informative discussion this morning at the Atlantic Builders Convention in Atlantic City, N.J.
“This bill is really an economic stimulus package,” said Steve Patron, the New Jersey Builders Association’s immediate past president, who is also president and CEO of Paradyne Realty Alliance in East Windsor, N.J. He explained that the law allows developers to make a project more economically viable, and to move it forward, at a time when the number of buyers interested in moving into active-adult housing might not be nearly as strong as it was when the developers conceived the project.
The law confines conversion to those age-restricted projects that have been approved prior to the adoption of the Conversion Act last July 2. The developer can’t be holding any buyer deposits, and can’t have sold any of the units. (To meet that requirement, it appears that the bill allows developers to give back deposits or buy back homes they’ve already sold.) And one-fifth of the units must be affordably priced under the state’s Council of Affordable Housing regulations.
“Active adult” entitlement has become the instrument of choice for municipalities around the country to limit what gets built and restrict the number of children coming into their communities, thereby reducing the cost burdens on their school systems. So, not surprisingly, the typical reaction of municipalities to developers’ seeking to convert active adult projects to market housing “has been ‘over my dead body,’” said Jeffrey Otteau, president of the East Brunswick, N.J.-based market research firm Otteau Valuation Group. Only about 20 projects had been converted before the bill was passed.
But market trends have made arguments against conversion less valid, and the bill “gives developers the opportunity to sit down with towns and work out issues” about projects that might have expiration dates on them, said Patron.
In his presentation, Otteau called attention to 2000 Census data estimating that 56% of New Jersey’s households have only one or two residents. He also pointed to more recent findings by the Pew Research Center that one in six households in the state are multigenerational. New Jersey households with children, which fell to 35% in 2009 from 50% in 1985, will fall further to 25% in 2025, Otteau estimated. The Brookings Institution thinks net childless households could represent 85% of the total in 15 years, he said.
As significant to the relative demand for active-adult housing has been baby boomers’ “unprecedented loss of wealth,” which Otteau said is limiting the number of boomers who are motivated to sell their existing homes and move into age-restricted neighborhoods. Where nearly three-fifths of boomers polled in 2003 said they’d be willing to move into active-adult housing, that number dropped to 21% in 2008, and “may be single-digit today,” said Otteau.
Only 18% of New Jersey’s population is 55 or older. And, a growing number of them have been among the 49,000 people who have been leaving New Jersey annually since 2002, often because it’s too expensive to live in the state on a fixed income. “This raises an issue of sustainability” about age-restrictive projects, said Otteau, for municipalities where there aren’t enough Generation X buyers filling the gap, where households are being formed with fewer people, and where more immigrants with larger families are moving in. “Active adult housing is just less attractive.”
Developers that want to convert age-restricted projects to market housing have 25 months from the passage of the statute to submit applications. The application process is fairly simple, and has been streamlined to require planning boards to schedule a hearing on the application within 60 days. If the application is rejected, developers have 30 days to appeal the ruling.
“The genius of the bill is how efficiently it forces towns” to address an application expeditiously, said Don Daines, an attorney with the law firm Hill Wallack, who explained the limitations of the statutes and why certain issues—such as how to deal with phased projects—were tabled so that it could get passed.
Gary Forshner, an attorney with the Lawrenceville, N.J.-based law firm Stark & Stark, provided some detail about what developers need to do to achieve a “voluntary” conversion outside of the statute. “There is no template for this,” he explained, other than the need to assuage several different constituencies, including town officials but more importantly residents already living in the project, who have the power to approve or deny changes to a projects deed or declaration.
Forshner and other panelists agreed that residents need to be assured that the quality of life they bought into when they purchased their age-restricted home wouldn’t be disrupted when the community is opened up to all buyers. That might mean separating amenities, or offering existing residents financial compensation, Forshner suggested.
Developers’ best offense, said Forshner and Patron, might be convincing residents that conversion will raise the project’s marketability, and therefore protect the value of existing residents’ property that might otherwise be diminished if the projects remained age-restricted. “You almost have to put the fear of God into them,” said Forshner.
John Caulfield is senior editor for BUILDER magazine.
Learn more about markets featured in this article: Atlantic City, NJ.