Here’s Why Rent Is ‘So Damned High’ In New Jersey, Rutgers Experts Say

NEWARK, NJ — “Why is the rent so damned high?” That’s the frustrating question researchers at Rutgers University-Newark are trying to answer with their new study.

The Rutgers Center on Law, Inequality and Metropolitan Equity (CLiME) has released a study that takes a look at the rising cost of rent in the United States, including New Jersey. View the full report and learn about its methodology here.

Things are getting ugly out there for many renters, researchers said. The average rent went up 30 percent between 2021 and 2023 – a spike in inflation that has been devastating for tenants.

There are four main reasons why your rent seems so expensive, experts said:

• “Stagnant wages”
• “Widening income inequality”
• “Consolidation among developers and landlords”
• “A severe shortage of homes affordable to low-income renters and first-time buyers”

Some experts have argued that building more homes is the only way to bring down the cost for tenants – but that’s only one piece of the puzzle, Rutgers researchers say.

“What we kept bumping up against is what you see in the news and experts focusing on the supply-side,” CLiME associate director Katharine Nelson said.

“Yes, it’s a problem,” Nelson continued. “But there is no single individual solution to the rental affordability crisis. We need to attack this on many fronts at once. That means building more homes, certainly. But the homes we are producing must be homes we need: very low rent units and starter homes.”

“At the same time, we need to address the consolidation of landlords and homebuilders which are driving up prices, and find creative ways to assist very low-income households as federal subsidies disappear,” Nelson said. “And, we need to do all that while also preserving the affordable housing we still have.”

Here are some of the reasons why it is tough to afford an apartment in the Garden State, experts said:

RENT BURDEN – “Renters struggle mightily to find housing they can afford in New Jersey because of a mismatch between what they can afford and asking rents. More than 8o% of New Jersey low-income renters pay more rent than they can afford, as do 50% of moderate-income renters. For every 100 low-income renters in New Jersey, there are just 43 units affordable and available to them. New Jersey is an expensive state. The rent burden here is comparable to the burden of renters in other parts of the country; it's just that rents and incomes are both higher here.”

NOT ENOUGH HOMES – “New Jersey has a large undersupply of homes. New Jersey's rental vacancy rate is just 3.6%, which is much lower than the national rate of 6.6%, and suggests significant building is needed. New Jersey's home vacancy rate is much lower at 0.5%, half the national average.”

AFFORDABLE HOUSING – “New Jersey most needs starter homes and low-rent units in the suburbs, as well as low-rent units in North Jersey's urban municipalities. The greatest pent-up demand is for starter homes and affordable options in the suburbs. The New York Metro area needs more than 300,000 additional housing units, and urban areas in this region are undersupplied. Newark, Paterson and Elizabeth each have a shortage of more than 5% of the rental stock. New Jersey's affordable housing stock is disappearing fast. If we don't proactively preserve it, these trends will continue.”

LANDLORD PROFIT – “Corporate landlords are rapidly buying up housing throughout the state, a practice widely connected to rising rents. From 2017 through 2019, nearly half of all sales of one to four-unit homes in Newark were to an investor, and preliminary statewide data show concentrated patterns of corporate investment in most New Jersey cities. New Jersey is one of numerous states that has filed antitrust lawsuits against RealPage, a company that supports landlords with a rent-setting algorithm to maximize profits.”

THE BIG PICTURE

According to the CLiME report, the housing crisis isn’t something that has come out of left field: things have been getting worse for the past 40 years.

One big problem? Paychecks aren’t keeping pace with what it costs to rent a home.

Over the last four decades, rents grew three times faster than incomes. Rents are now four-times higher than in 1984 after adjusting for inflation. As of 2023, nearly half of all U.S. renter households — about 22 million — are “housing-cost burdened,” paying more than 30 percent of their income on rent.

At the same time, the number of “starter homes” being produced in the U.S. have been drastically shrinking. In the 1970s and 1980s, more than a third of new homes built were starter homes, at rates exceeding 400,000 per year. Since the Great Recession from 2007 to 2009, the U.S. has produced fewer than 100,000 starter homes annually, the report found.

Meanwhile, the days of the “small landlord” who cultivated personal relationships with their tenants – and often set rent about $200 per month below market value – may be in the rearview mirror and fading fast.

In 2000, “non-individual investors” such as corporations owned one-third of five to 24-unit apartment buildings. By 2020, they owned two-thirds of those properties, the Rutgers study found.

• Related: North Jersey Apartment Hunters Face Tough Competition, Report Says
• Related: Corporations Own Most Of This City’s Homes. New Laws Are Pushing Back
• Related: Homelessness Is Outpacing Affordable Housing In New Jersey, Advocates Say
• Related: NJ Sued By Dozens Of Towns Over Affordable Housing Requirements

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