Legislative Analysis
Each What To Do installment is a two-part overview of an important legal issue affecting inequality. The first part is a one-page reference that offers readers an overall idea of issues such as foreclosure, eviction, domestic violence and other challenging life events. The second part is a detailed back-up memorandum for those who seek further information and background.
CLiME’s Guidance for Lawmakers on Investors and New Jersey Homes responds to the flood of proposed legislation in New Jersey to respond to the growth of institutional investors in single-family homes. This report describes the pending bills in New Jersey and offers expert recommendations on how legislators should understand the combined policy effects of a range of efforts, including bans, opportunity to purchase restrictions, tax strategies, and responses to various harms to renters through tenant-protection laws.
We offer four top level recommendations for New Jersey lawmakers:
Create an executive agency tasked with developing the infrastructure necessary to regulate institutional investors in single-family homes in New Jersey.
Prioritize a first-look law that mandates a wait period before investors may bid on a home once it goes on the market.
Impose limits on property-related tax deductions such as mortgage interest and depreciation to disincentivize investor ownership of single-family homes.
Prioritize various tenant protection bills aimed at responding to specific harms renters face from growing dominance of corporate landlords, including rapid rent increases, increased eviction actions, and habitability concerns.
Community Benefits Agreements (CBAs) are contracts between developers and communities that exchange community support for development projects for material benefits. New Jersey became the first state to statutorily require CBAs in tax incentive programs in 2021 through its EMERGE and ASPIRE programs, though significant workarounds undermine the mandate’s force. This memorandum examines a number of CBAs executed under both programs and argues that, in their current form, these agreements fail to achieve the purpose of ensuring that economic development benefits existing residents and communities. Analysis through dual frameworks of distributive justice and regulatory capture reveals fundamental contract law deficiencies, including vague performance standards, inadequate benefit-to-subsidy ratios below 1%, and missing enforcement mechanisms, rendering agreements aspirational rather than binding. Workforce provisions are entirely absent from an employment-focused program, and enforcement is limited. These failures prevent CBAs from being equity-centered or protective of local residents. Recommendations outline how the state legislature, NJEDA, municipalities, and community coalitions can modify CBA content and enforcement through contract formation requirements, including establishing appropriate parties, incorporating mandatory substantive terms with quantifiable metrics, implementing actual enforcement mechanisms, and enacting statutory reforms to eliminate municipal workarounds. These reforms can transform CBAs from symbolic documents into enforceable instruments that deliver equitable outcomes while ensuring communities receive actual, feasible benefits from publicly subsidized development.
On January 12, 2024, Governor Phil Murphy signed the Wealth Preservation Program law, an ambitious reorganization of the foreclosure process in favor of second chances, non-profit rights of second refusal and affordable home ownership. Then-Assemblywoman, now-Senator Britnee Timberlake, introduced this law because New Jersey has the highest foreclosure rate in the country, with one foreclosure for every 2,271 homes.[1] The potential impact of this law goes beyond just reducing the number of foreclosures. It potentially limits institutional investors’ opportunities to purchase foreclosed homes at sheriff’s sales by providing ordinary homebuyers initial opportunities to bid on properties on more favorable terms. Under the Act, defaulting homeowners, their next of kin or tenants have the first chance to re-purchase their homes from sheriff sales at a publicly disclosed discount price by paying only a 3.5% down payment with 90 days to close. If they do not elect to purchase, non-profit community development corporations (CDCs) have the next right of refusal in exchange for deed restrictions that keep the property affordable to subsequent owners or renters.
On July 10, 2024, Governor Phil Murphy signed a tax sale revision law (A3772/S-2334), which modifies the process for investors engaged in tax sale foreclosures and provides steps for homeowners to protect their equity. Senator Brian Stack (D-33) introduced this law in January 2024 in part because of the case of a 94-year-old Black woman named Geraldine Tyler, who lost her home and equity in the tax sale foreclosure process. In 1999, Mrs. Tyler purchased a one-bedroom condominium in Minneapolis, Minnesota. She lived in the condominium until 2010 when problems in the neighborhood prompted her to rent an apartment in a safer area. She experienced financial difficulties, leading her to get $2,300 in tax arrears, which increased to $15,000 with penalties and interest. In 2015, Hennepin County, Minnesota, seized her condominium, sold it for $40,000, and pocketed $25,000 in surplus equity. On May 25, 2023, the United States Supreme Court unanimously held in Tyler v. Hennepin County that the municipality violated the Takings Clause of the U.S. Constitution when they stripped and retained Mrs. Tyler’s equity.
To aid municipalities in regulating anonymous investor buying of 1-4 unit homes we drafted this model ordinance. A companion memorandum analyzes its legality and effectiveness under New Jersey law.
Continuing CLiME’s work on regulating institutional investors of 1-4 unit dwellings in cities like Newark, this legal research memo explains and accompanies model legislation, showing cities exactly how to mandate transparency of ownership among anonymous LLCs.
Locally owned businesses are vital constituent members of an economic community because they provide jobs to local workers, sustain the tax base for city services, offer goods and services that grow other businesses and build wealth for equity owners. They are vital. Where they are in short supply communities struggle to grow economically. Where that growth has been stymied by factors arising from ingrained racism, growth is even more challenging. Local businesses owned by Blacks and other people of color face a disproportionate range of constraints to growth including, but not limited to, patterns of market discrimination. Given Newark’s overwhelmingly Black, Latino and working-class population, the city’s challenges with locally owned economic development are as great as anywhere in the nation. There is evidence that recent trends have not been good for minority small businesses across the country.
Land banks are government-created institutions whose mission is to return vacant, abandoned and tax-delinquent properties into productive use. Land banks are empowered to acquire land, eliminate back taxes and tax liens attached to a property in order to create a clean title, maintain the land in compliance with local and state ordinances, and convey the property back into active use. As a mechanism for expediting the disposition of city-owned and/or abandoned properties, land banks can be a significant local government tool either for equitable growth or for more conventional economic development.
What is Universal Basic Income and how can I read more about it? As UBI is featured in more discussions of mobility policies and progressive federalism, CLiME provides an overview.
As the first state to pass a comprehensive anti-discrimination statute after the Reconstruction Era, New Jersey has a demonstrated commitment to civil rights. This commitment, coupled with several characteristics unique to the “Garden State,” has laid the groundwork for, what is arguably, the most contentious affordable housing debate in the country. New Jersey is the only state in which there is a judicially recognized constitutional mandate that all municipalities provide for a “realistic opportunity for the construction of [their] fair share of the present …
Under New Jersey’s Mount Laurel Doctrine on exclusionary zoning and affordable housing, and the state Fair Housing Act enacted in 1985, all New Jersey municipalities and State agencies with land use authority have a constitutional obligation to create a realistic opportunity for development of their fair share of the regional need for housing affordable to low and moderate income households. This housing need, and associated fair share obligations, has three components: Rehabilitation Need, Prior Round obligation (1987-1999) and Prospective Need (post-1999). This document presents the methodology for calculating and allocating regional prospective housing need for 1999-2024 to New Jersey’s 565 municipalities, and then calculating the Net Prospective component of each municipality’s fair share housing obligation. It also provides the results of these calculations for all municipalities, calculating their Net Prospective Need for 1999-2024 using the Prior Round (1987-1999) methodology.
Faced with a growing crisis of homeowner residents whose properties are “underwater” or already in foreclosure, many cities around the United States have explored the possibility of expediting mortgage principal write-downs through the extraordinary exercise of eminent domain. As of this writing, no city has actually followed through, and one, Richmond, California, has already been sued. Several cities in New Jersey are contemplating the use of redevelopment law as the only available local power to stabilize their tax bases and bring relief to homeowners.