New Jersey's Housing Shortage: Causes, Costs, and Potential Solutions

New Jersey faces a severe housing shortage driven by high construction costs, complex regulations, and a significant gap between median income and home prices. With a median list price of $563,048 and a household income of $96,278, homeownership is a stretch for many. The state received a "C-" on a national housing report card, indicating systemic challenges. However, recent legislative changes and proposed policies from gubernatorial candidates aim to increase supply and improve affordability by streamlining construction and enforcing affordable housing mandates.

What is Causing New Jersey's Housing Shortage?

The core issue is a chronic imbalance between supply and demand. New construction has not kept pace with population growth. While New Jersey accounts for 2.8% of the U.S. population, it only represented 2.5% of new housing permits nationally. This imbalance is exacerbated by several factors:

• High Land Costs and Regulatory Complexity: In the Northeast, limited available land and strict zoning rules make development expensive and slow.
• The New-Construction Premium: The price gap between new and existing homes is a steep 74.1% in New Jersey, one of the highest in the country. This indicates that most new builds are targeting the high-end market, leaving middle-income buyers with few affordable options.
• Permitting Delays: The state's permitting process is often cited as a "perennial issue" that adds time and cost to new projects.

How Does New Jersey's Affordability Crisis Impact Buyers?

The affordability crisis is quantified by the significant gap between income and housing costs. With a median home price over $560,000, the financial burden on buyers is substantial. The high new-construction premium—a term for the percentage difference in price between a newly built home and an existing one—means that newly built inventory is often out of reach. This shortage of options limits mobility and makes it difficult for families to build generational wealth through home equity.

What Legislative Steps Have Been Taken to Address the Shortage?

Governor Phil Murphy recently signed Bill S50/A4 into law, which addresses a key root of the problem: the uneven enforcement of affordable housing requirements. This legislation codifies the Mount Laurel Doctrine, a constitutional rule requiring every municipality to provide its "fair share" of affordable housing.

The law streamlines the process for determining these obligations, reducing legal delays and providing clear formulas for municipalities. Since courts reinstated Mount Laurel enforcement in 2015, New Jersey's annual affordable housing production has nearly doubled, providing homes for over 50,000 people. This law aims to create a more proactive, long-term housing policy.

What Solutions are Proposed by Political Candidates?

With a new governor on the horizon, candidates have presented plans to stimulate housing construction.

• Jack Ciattarelli (Republican) has criticized the state's "C-" grade as a government failure. His plan focuses on modernizing and streamlining the state permitting system to avoid regulatory delays. He also proposes cutting property taxes and capping them to a percentage of a home's assessed value.
• Mikie Sherrill (Democrat) has vowed to work with industry groups to make housing "affordable and accessible." Her proposals include expanding first-time homebuyer assistance programs and ending diversions from the Affordable Housing Trust Fund. She also emphasizes redeveloping underutilized properties like office parks.

Based on our experience assessment, solving New Jersey's housing crisis requires a multi-pronged approach: supporting streamlined permitting, encouraging the development of mid-density housing, and ensuring affordable housing funds are used as intended. These steps could help close the gap of 4.7 million homes the nation faces and create a healthier market.