Soaring rental demand helping power residential real estate market

While demand for residential and commercial real estate in New Jersey lags alongside slow income and employment growth throughout the economic recovery, mounting activity in the state’s multifamily apartment sector has picked up the slack, according to an industry analysis by the Edward J. Bloustein School of Planning and Public Policy…

While demand for residential and commercial real estate in New Jersey lags alongside slow income and employment growth throughout the economic recovery, mounting activity in the state’s multifamily apartment sector has picked up the slack, according to an industry analysis by the Edward J. Bloustein School of Planning and Public Policy at Rutgers University.

“Most of the permits for new residential construction — though much reduced, in terms of previous levels — have been for rental housing,” said Joseph Seneca, a Bloustein economist and co-author of the report. “The single-family housing recovery will be a long and slow process, despite favorable mortgage conditions and falling home prices. For that reason, the rental market will remain a source of growth … with continuing solid demand for rental use, and the real estate industry will respond to that.”

According to the survey, which collected data from real estate firms representing more than 80,000 apartment units in the state, in 2010, the apartment industry spent $4.2 billion on everyday operations and $410.6 million on renovations and additions to existing structures; contributed $140 million in state tax revenue and $1 billion in local tax revenue; and added 44,000 jobs, which exceeded the 36,400 jobs gained in 2011. Breaking down the data, Bloustein researchers calculated each apartment unit in New Jersey contributed $12,827 in tax revenue and $6,928 in property-related operating expenditures. The survey also found the industry spent $374.3 million — or $741 per unit — on third-party services like landscaping, plumbing and paving.

“The apartment sector is made up of many businesses. It’s not a pharmaceutical industry where there’s just a handful of big firms,” Seneca said. “In the aggregate, it represents a significant economic engine for the state, with its direct employment multiplier effects creating and sustaining other jobs.”

Jean Maddalon, executive director of the New Jersey Apartment Association, said she sent the data to the Gov. Chris Christie administration to show how much the industry contributes to New Jersey’s economy and “make sure that impact is known whenever new policy comes about.”

“We know we pay a lot of taxes, but it was an eye opener for us to see that $1 billion in local tax revenue,” Maddalon said. “For registration of apartment buildings, the state charges $10 a property, but municipalities charge $100 a unit — and that’s very costly when the municipality can get that information from the state for free. The consumer is impacted by those regulations, as well, so the most we can hope for is the government to consider the apartment industry a part of the dialogue and think about how policy will affect it.”