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The Multifamily Housing Mania

Multiple factors have converged to create fever-pitched demand.

When the coronavirus pandemic enveloped New York City between 2020 and 2022, it resulted in as many as 300,000 city residents moving to New Jersey to work remotely, access more outdoor spaces, and escape crime and related quality-of-life concerns. NYC residents are now fleeing extremely high rents, all as New Jersey’s population has swelled from 8.9 million in 2018, to more than 9.3 million in 2024, for these and other reasons.

Demand for New Jersey multifamily housing is red-hot not only due to the above factors, but because many long-time Garden State homeowners possess low-interest mortgages from yesteryear, and they are reluctant to sell their properties and purchase new homes elsewhere within the current high-interest-rate environment. This means prospective New Jersey homebuyers often cannot locate a dwelling to buy and are thus remanded to the rental market, raising demand there. That said, some New Jersey homeowners are eager to sell their homes well above asking price to all-cash buyers and then move into the rental market here, which, in turn, additionally increases multifamily demand. 

None of the above dynamics account for more routine New Jersey apartment demand: Recent college graduates who need apartments, or, say, divorcees who want to be near their ex-spouses/children, and therefore choose apartment living. 

Meeting the Market’s Needs

Developers in New Jersey simply cannot keep pace with demand. They are themselves stymied by high interest rates and high construction costs as well as municipalities leery of allowing multifamily construction. 

“[Most] suburban municipalities in New Jersey don’t want to increase density in their areas,” explains Eugene R. Diaz, founder/principal at Prism Capital Partners LLC. “Most of them don’t want additional housing. They are afraid of it for a variety of reasons: Change scares people, and so [people] vote the [officials] out of office who approved the projects; they are afraid of [vehicular] traffic; and they’re afraid of the impact to their schools.”

Steve Simonelli, senior managing director at JLL Capital Markets, offers similar sentiments, but adds, “Studies show that typically, apartments [actually] add very few school-aged children, and the traffic impacts are very minimal. I think a real education process is necessary [for municipalities], in terms of what the positives are [to having new apartment buildings.] [They increase tax] ratables, and also: Do [residents] really want to look at a blighted old building that needs to be torn down, or [do they want] a new apartment building that maybe has some nice retail in it?” 

Some municipalities also falsely believe that renters don’t have the same socioeconomic status as homeowners. Diaz says, “The reality is [that] in the towns we have built in, the people moving into our buildings typically have double to two-and-a-half times the household income than the people who own homes in the existing townships. There’s a misnomer there, but that’s the fear-driven aspect to municipal zoning.”

Thomas E. Didio, Jr., managing director at JLL Capital Markets, speaks more broadly about the challenges of increasing multifamily housing supply in New Jersey, saying, “It takes years and years to entitle land and then go vertical to build it. [Again,] supply has an upward pressure on rents too, and it’s been contributing to rental [price] increases.”

Slower Progress

Overall, New Jersey added about 23,000 multifamily units in 2023, about 10,000 units less than needed to meet organic growth. Given the above-mentioned constraints on developers, it is projected that only 15,000 to 18,000 multifamily units will be delivered annually across the state in the coming years. 

With 4.4 million total households in New Jersey (of which half are comprised of renters), the state would require 25,000 to 27,000 units per year of multifamily development to keep pace with even a 1% organic growth rate.

“That doesn’t [even] account for people moving into the market [from out of state],” Diaz says. “That’s just household formation [within] New Jersey.”

Apartment Amenities 

Multifamily demand is particularly strong in areas with access to mass transportation, walkable downtowns, proximity to employment hubs and appealing suburban communities. Many of today’s multifamily developments are luxuriously designed, replete with swimming pools, fitness centers, high-end lounges, rooftop access and outdoor spaces. 

“The levels of finish … are just getting higher and higher, and developers are looking to increasingly emphasize sustainable design, smart technology, work-from-home spaces, and comprehensive amenities that appeal to today’s renters who prioritize quality of life in their housing choices,” explains Jacqueline Urgo, president of The Marketing Directors, a marketing, sales and leasing company that represents prominent developers and projects in the New York/New Jersey region.

Martin Brady, executive vice president of sales and broker for the state of New Jersey at The Marketing Directors, stresses the renter in-flow from New York City: “Fifteen or 20 years ago, every developer [in New Jersey] thought they were going to empty out New York, but we used to see [only] about 10% of the residents [actually] come from New York. That has increased year after year, and our last set of lease-ups that we’ve done for 2023 and 2024 show that 35% to 40% of our residents have their last address in one of the five boroughs. [New Jersey] … has become a first option for many people choosing Jersey City, mainly, but [also] all of Hudson County: Hoboken, Harrison, and those areas.” Jersey City approaches $80 per square foot, while Manhattan is more than $90 per square foot.

Activity remains strong further from Manhattan, with transportation access often key to a multifamily project’s success: Morristown, Red Bank, downtown Rahway and even Raritan have hosted successful buildings. For a project in the latter destinations, Brady says perhaps only 30% of residents commute to New York for work. Many of them are employed in New Jersey’s pharmaceutical industry, but they nonetheless want rail access into the city.

Individuals seeking lower rents can avail themselves of Monmouth and Ocean counties. And Brady says that even with high demand and limited supply closer to Manhattan, “There is something for everyone. They might not be able to afford their first choice, but there are ‘levels.’ We are working jobs that are anywhere from the mid-to-high $30 a square foot, up to $90 a square foot in New Jersey, all within probably 35 miles of New York.” 

Conclusion

Demand for New Jersey rentals will likely remain strong for the myriad reasons outlined on these pages. The Marketing Directors’ Urgo concludes, “I don’t see that there’s going to be any ebb in the demand for multifamily housing in New Jersey over the next few years, but I do think the for-sale market will continue to get more robust than it has been [through upcoming] lowered interest rates.” 

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