Union City, NJ · Member since 2017 · 2 posts · 0 votes
Hello all,
I am curious what people's opinions are regarding the impact of new condo's coming to the downtown Union City NJ Area. I have identified 10 decent sized projects that are Proposed or Approved w/ most slated to finish 2019ish. (Note: These #'s are based on JerseyDigs.com and other websites -- Best Estimates...). They are mostly mixed-use apartments w/ commercial store-front space and in-building parking. All within 5 blocks from each other and represent a decent uptick in Condo supply. Additionally, it is likely these are mid-upper scale apartments but not fully Luxury and % car ownership is moderate since centrally located.
What are your thoughts on these type of constructions? Is the added commercial space and decent increase in tax base going to be a good thing?
Attorney · Rutherford, NJ · Member since 2015 · 132 posts · 168 votes
9y
Hey @Andrew Loa--that's a pretty great list. I don't know where some of those are in the approval process but I'm a little skeptical that *all* of them are going to actually make it to completion. There are also a fair amount of smaller projects I am aware of, some of which are closer to completion (like coming online this year or early next year), and a few of which are south of 30th St (most of the ones you identified are north).
In general, it's been quite difficult to get new building projects approved in Union City for various reasons, mostly centering around the city's zoning laws/master plan. Union City also has quite restrictive rent control laws which make renovating larger buildings not economically viable, since, in general, it's not possible to raise rents beyond CPI (for 4+ family buildings) with very limited exceptions, even compared to other towns in New Jersey. New construction is exempt from rent control, so, presuming that some of these are rentals rather than apartments, that would be a welcomed increase to the inventory for nice, renovated apartments.
At least for tenants, I think the new construction will be great: there are a TON of poorly maintained buildings in Union City--at least in my opinion (as I alluded to above), because of rent control. There is basically no incentive for landlords to do anything re: renovations or maintenance, except to prevent tenants from complaining to the city. The housing stock basically shakes out as: nice 1-3 family homes that have been recently purchased by investors or owner occupants that are increasingly being fixed up (exempt from rent control). This is probably the plurality of homes in the city. There's some nice, new construction, particularly north of 30th and along Park Avenue. And finally there is a LOT of poorly maintained, un-renovated, rent controlled units scattered around the rest of the city.
From a landlord/owner perspective, I think the glut of new rentals and condos will tend to at least stabilize prices--I've seen this already over the past 8-12 months in some of my rentals in Union City, although, I think with these new units (and with the rising cost of rentals in other NYC environs), there's a different class of tenants increasingly coming into Union City: specifically, Manhattan or NYC-bound young professionals, which will hopefully incentivize landlords owning non-rent controlled buildings to cater to this demographic.
Prior to 2007 there were similarly a ton of proposed construction projects, many of which never came to fruition because of the recession so, hopefully, that won't be the case once again!
Union City, NJ · Member since 2017 · 2 posts · 0 votes
9y
Hello John,
Thanks for the Reply. I'm just an investor and have only just started my passive portfolio in the Hudson area.
Agreed -- Many of that list will likely not pass into approval. Or at a minimum, have a decrease in the number of units. The locations on that list were primarily chosen due to them falling under the criteria of "Center City Core" // "Gateway Commercial" // "Neighborhood Commercial" on the zoning master list . That, in combination that many projected to be less than 4 stories high, should give them a decent shot at getting approved.
The rent control is surely an issue for 4+ unit properties. I am curious what is the percentage of rent controlled properties in UC?
That's a shame if people aren't renovating due to rent control -- Rules are meant to be broken! Ambiguity in the language "shall not exceed 15% unless an efficient landlord cannot meet operation expenses or make a fair return on his/her investment.".
If they think that they won't be able to charge enough then there are surely ways around that. Do you know if they allow fair return to factor in the opportunity cost of renting it out at fair market value? Why not just finance it --> increase rent 15% + interest cost (justifiable operating expenses and is a free $ Loan) --> gain on capital appreciation and 15% rent. More so, if they ever leave. I know larger public company apt buildings doing 21% increase between tenants to combat regulations...
Personally, I think it's more due to risk aversion and laziness on behalf of the landlords. Easy to maintain a cheaper place w/ tenants that aren't demanding much... but that opinion is solely on conjecture & a small sample size.
Most of my interest in the Dev projects is in the ripple effect that you mentioned. New Dev projects bring upscale apts --> New demographic --> Increased tax revenue and local spending + Rents go up and stabilize --> shift in local commercial ops --> increase reno's, tear downs and higher end apts to cater to new clientele --> and cycle repeats... Aka gentrification. But, this is also a chicken before the egg situation. Without new development or reno'd apartments the tax base won't increase and the commercial shops won't change (at least not quickly). So, new demographic won't pile in and cause the aforementioned changes etc.
What kind of properties do you own? and what price stabilization have you seen (YoY change and any discount for multi-family vs condo's)?
Do you think UC wants to be gentrified? #1 of most of the city officials goals is to "preserve the character" of the area. Which I read as, resist gentrification and keep prices low to keep current populace & voter base.