Rocky Soil, NIMBY Constrict Supply

New York City stops at the Hudson River, but its urbanized land pattern straddles the water and radiates across northern New Jersey, enveloping cities such as Newark and Paterson as well as once-small villages such as Paramus and Montclair.

The result is a vast metropolitan area that gradually recedes into large residential tracts of as much as 8 and 10 acres per lot in places such as Bedminster and Basking Ridge. Farther west and south are quaint Revolutionary War-era towns surrounded by farmland. All of this is kept in place by strong local authority to control land use, vocal anti-growth neighbors and a generally slow pace of government approvals. But these constrictions come at a steep price. Judging by the land-value measure of GMP/lot, an ongoing undersupply of new lots will result in surging land prices in northern New Jersey for the foreseeable future.

Rosen Consulting Group forecasts that land prices should rise sharply to shadow GMP/lot totals of $230,374 in 2002, $236,514 in 2003, $247,929 in 2004 and $261,167 in 2005. Stoking the increase will be a flat-to-slowing number of single-family building permits for the region while business activity rises consistently. Permits are estimated to dip to 6,550 in 2003, down from 7,600 in 2002.

"The ability to get more land in northern New Jersey is dwindling pretty rapidly," says Wayne Patterson, first vice president of the Northeast region for luxury Giant Toll Brothers Inc. "We have had to work a lot harder. All of our project managers keep an eye out for available land. Additionally, we have land acquisition managers who carefully study sewer, water and transportation capacities. Dealing with a move-up buyer as we do, concern with schools is probably the number one priority."

In 1992 the state put forth new local planning guidelines designed to help steer higher-density development to areas surrounding town centers while preserving historic open spaces and room for large-lot development. The measure has largely failed because it lacked teeth and because New Jersey law traditionally has favored local control, so towns can simply drag their feet on projects they don't want.

"People come into our state and can't believe the level of local control," says Ron Lukowiak, a community builder with K. Hovnanian Enterprises who manages five neighborhoods in Union and Essex counties. On average, he says, there are five levels of local and regional authorities, each with their own requirements. Ultimately, says Lukowiak, it amounts to more than 100 approvals per home.

The few successful higher-density projects often require a fight. Patterson cites the case of a Warren County project of 500 market-rate homes and 70 affordable homes that came about only after the builder sued to make the town live up to its required share of affordable housing.

"There is a state requirement for all towns to provide their fair share of affordable housing," says Patterson. "And one of the methods of doing it is a builder can get a builder's remedy, which allows them to do high-density building on this particular site in exchange for supporting the lower price of the affordable home."

Lastly, topography is a constant issue, says Patterson. Rocks, steep hillsides and generally formidable terrain make home building uneconomic in some sections of northern New Jersey. "It has forced us to pass on many potential deals."