Light Reading for Thanksgiving Morning

From ROI-NJ:

Smart Growth coalition offers Murphy blueprint for economy

For all the talk of attracting companies, the fact remains that the state has a land supply problem, especially in Northern New Jersey.

Consider this: If a manufacturer wanted to bring a few thousand jobs to the port district in northern New Jersey, state officials would not be able — today or anytime soon — to point the business to a single shovel-ready site or even a vacant existing structure. Worse yet, if the company required only a 1 million-square-foot building, it would still be hard pressed to find a shovel-ready site or existing vacant building within 25 miles of the Statue of Liberty.

“Progress has been made in a variety of areas, but much more needs to be done if our state’s economic engine is going to be fed by additional housing and commercial space,” the report states. “There is a scant amount of developable acreage remaining in places where people actually want to work and reside.

“What’s left to feed the engine are the challenging (read: cost-prohibitive) redevelopment sites in our suburban downtowns and urban central business districts, along waterfronts, on brownfields and around and above transit hubs.

“Redevelopment is New Jersey’s best viable long-term growth vehicle. The state must embrace redevelopment and help bridge its unique added costs, while also permitting (not obstructing) responsible greenfield development throughout the planning areas of New Jersey.”

The state’s economy is in a perilous position, the group states.

LOCAL LAND-USE LAW: Get with the times (and all other states)

Inside the recommendation

A serious effort must be made to make the local land-use process more predictable and to identify and implement amendments to the municipal land use law, or MLUL, that lead to greater consistency in the entitlements process and a substantial reduction in the cost and time expended in pursuit of development approvals.

Local land-use bodies must adapt to the realities of modern life. Parking ratios of yesteryear have less relevance in a society trending towards ride-sharing (Lyft/Uber), car-sharing (ZipCar) and autonomous vehicles. Many of today’s mixed-use concepts were simply not contemplated in the traditional lists of permitted uses. There is no better example than “retail” uses; if brick-and-mortar stores in our state are going to be able to successfully compete with e-commerce, local land-use ordinances must allow “omnichannel” uses (curbside deliveries, showrooming, extra-large storage areas for customer pickups and returns, etc.) and hybrid uses (arcades and amusement areas within restaurants, grooming services and overnight facilities in pet stores, etc.).

The challenges become even more complicated for those undertaking transit-oriented development, or TOD. A persistent problem inhibiting TODs is the lack of coordination between NJ Transit and the municipalities in which train stations are located. Despite all the “transit friendly” talk in our state, there is simply no joint vision or strategy between NJ Transit and the train towns to promote, facilitate and implement TODs. This failure is impeding if not precluding what is arguably the most attractive potential source of smart growth development in our state, and must be addressed early in the next administration/legislative session.

Simply put, the state that limits the sale of merchandise on Sundays, restricts the sale of Teslas in malls, bans the issuance of customer coupons on gasoline and milk, concentrates the sale of alcoholic beverages in a select number of restaurants and the sale of package goods in an even more select number of grocery stores must get with the other 49 states.

The background

The “home rule” tax: Development in most of New Jersey begins before a local planning or zoning board; we are, after all, a “home rule” state. But it is time to consider the “tax” effect of home rule because underneath its express policy rationale — uniformity in the approval process — lies the reality: pursuing approvals and developing land in New Jersey is often a very different experience from one municipality to another. Every municipality has its own zoning ordinance and its own planning and zoning boards, establishes its own standards and fees and, to some extent, its own procedures.

The unpredictability problem: Far from facilitating uniformity, home rule has given us a lack of predictability and consistency in the approval process. The reputation of home rule is well-known to corporate site selectors and developers across the country. Unlike other taxes, which are quantifiable, the home rule tax is the leading variable expense, in terms of outright dollars and wasted time, in far too many projects. Even those who have developed land in New Jersey for decades cannot realistically predict how long it will take to get through the entitlements process and how much will it cost.

SHORTAGE OF LAND: It takes a state to create space

Inside the recommendation

New Jersey needs a concerted effort at every level of government to assist the private sector in “making land.” In other words, the state needs to eliminate or reduce the hurdles inherent in remediating, assembling and entitling large-tract sites. For starters, land held by public and quasi-public agencies in strategically located areas should be freed up for redevelopment. Examples include salt domes and DPW maintenance yards along valuable roadways when comparable alternatives are available elsewhere.

Next, for such sites to be even more transformative, they must be combined with adjacent privately held properties, and intervening streets must be vacated to add contiguity and open up even more aggregation options.

Thus, unlocking the value of vacant or underutilized private property is essential to the making-land effort. One major impediment has been environmental contamination. Cleaning up sites is expensive; as a result, many landowners run a skeleton business just to avoid ISRA compliance that would be triggered by the cessation of operations. This has to change.

Government at all levels must proactively encourage these property owners to sell, through efforts that include the carrot of bonus values, remediation incentives and equal or better relocation options for active businesses, and the stick of forced cleanups where contaminants threaten the environment.

The background

Increase in demand: The need for warehouse, distribution, data center, logistics, research and development, and manufacturing space has increased significantly in the last 10 years. In the port district of northern New Jersey, we are experiencing the lowest vacancy rates in over 30 years; vacancy rates in other industrial submarkets around the state are also down significantly.

Few sites shovel-ready: There are only a handful of large-scale clean (remediated), assembled, entitled and otherwise shovel-ready sites remaining in the port district of northern New Jersey. The primary reason for the lack of sites is clear: Few redevelopers have the time, patience and risk tolerance to take on a land assemblage involving holdout property owners, eminent domain, environmental cleanup, multi-year permitting, etc.

Other options (states) available: Most redevelopers of large, complicated sites operate in multiple states where development on greenfields is still possible and where redevelopment is easier; in other words, they have choices on where to build. Not even incentives or the crazy rental numbers and selling prices in today’s market are enough to entice them into taking on these challenging, potentially career-killing projects.

Posted in Demographics, Economics, Employment, New Development, New Jersey Real Estate, Politics | 26 Comments

Why fight it? Go with the flow.

From the Record:

Minimum wage for Bergen County workers is now $15 an hour

Bergen County Executive Jim Tedesco gave thanks for county workers on Tuesday when he signed an executive order that raises the minimum wage for full-time employees to $15 an hour.

Tedesco, riding the progressive wave that swept Phil Murphy into office earlier this month, did his part to help the governor-elect deliver on one of his key campaign promises: to nearly double the minimum wage all around the state, which now stands at $8.44. The freeholder board planned to adopt the wage hike by resolution on Tuesday night, making Bergen County the first of New Jersey’s 21 counties to raise the minimum wage.

“Good people are essential to good government, and good managers understand that their employees need to be valued,” Tedesco said at a news conference, where he was flanked by freeholders, a county union leader, and an advocate for working families. “County employees who put in 40 hours or more every week, in service to their friends and neighbors throughout Bergen County, deserve and have earned a $15 minimum wage.”

The wage hike, which is retroactive to Sept. 1, immediately affects 129 blue-collar and white-collar workers scattered about county government. Some are office clerks, others are drivers, and still others work for the county road department and public works.

The county estimates that the wage hikes will cost $360,647 in the first year, which is less than 1 percent of the county’s $52.8 million budget. Tedesco said the minimum wage increases were part of two contracts that the county signed recently with locals 655 and 755 of the United Services Workers Union. Tedesco said there no plans to give the $15 wage to part-time county workers.

Posted in Economics, New Jersey Real Estate, Politics, Property Taxes | 86 Comments

$15 in 3 years?

From the Star Ledger:

What Murphy just said about N.J. minimum wage hike, millionaire’s tax

In their first public appearance together, Gov.-elect Phil Murphy and his fellow Democrats who lead the New Jersey Legislature promised Monday to gradually hike the state’s minimum wage to $15 over the next few years.

At the same time, Murphy told reporters he is still committed to raising taxes on wealthy residents to pay for his initiatives — even though state Senate President Stephen Sweeney recently said the federal tax overhaul currently being considered in Congress might complicate the issue.

Appearing at his first Statehouse news conference since his Nov. 7 election, Murphy said he’ll make good on his campaign vow to increase the state’s minimum wage from just under $9 to $15.

But Murphy provided few other details as he stood alongside Sweeney, D-Gloucester; incoming state Assembly Speaker Craig Coughlin, D-Middlesex; and U.S. Rep. Donald Norcross, D-1st Dist.

“We have to do it responsibly, but we must get there,” said Murphy, who will replace Republican Gov. Chris Christie on Jan. 16.

“This is as high on the priority list as anything we’ve got,” Murphy added.

Once Murphy is sworn in, though, Democrats will lead both branches of government, making it more likely such a measure will become law.

Democrats have not yet drafted a new bill nor settled on how long the phase-in period will be. Murphy said he favors three to four years.

“At least we know we’re moving forward instead of meeting the veto pen,” Sweeney said.

Said Murphy: “Give us a chance to get our sleeves rolled up and get the specifics ironed out.”

Posted in Demographics, Economics, New Jersey Real Estate | 88 Comments

Upper middle class not paying their fair share?

From Bloomberg:

Should the Upper Middle Class Take the Biggest Tax Hit?

Humans learn the concept of fairness at a very young age. After all, it doesn’t take long for a child to start whining about a sibling who gets an extra serving of ice cream. As the Republican-controlled Congress tries to push through tax reform this year, one group of Americans may similarly question why it’s coming up a scoop short.

The upper middle class gets relatively few benefits and a disproportionate number of tax hikes under the $1.4-trillion Tax Cuts and Jobs Act approved by the U.S. House of Representatives last week. Families earning between $150,000 and $308,000—the 80th to 95th percentile—would still get a tax cut on average. But by 2027, more than a third of those affluent Americans can expect a tax increase, according to the Tax Policy Center.

If the House bill becomes law, overall benefits for the upper middle class will start out small, and later vanish almost entirely.

Is this fair? Some argue it’s only right for the upper middle class to carry a heavier burden. This is because the top fifth of the U.S. by income has done pretty well over the past three decades while the wages and wealth of typical workers have stagnated. People in the 81st to 99th percentiles by income have boosted their inflation-adjusted pre-tax cash flow by 65 percent between 1979 and 2013, according to the Congressional Budget Office. That’s more than twice as much as the income rise seen by the middle 60 percent. (The top 1 percent, meanwhile, saw their income rise by 186 percent over the same period, but that’s another story.)

“Many upper-middle-class families will tell you they do not feel wealthy,” said Brian Riedl, a senior fellow at the Manhattan Institute, a right-leaning think tank. “Their standard of living [is] closer to the middle class than to the top 1 percent.” The income numbers don’t tell the whole story, he explained. The upper middle class is weighed down by high costs: Affluent workers live in expensive areas, pay a lot for real estate and daycare, and are taxed far more than Americans further down the ladder.

Richard Reeves, a senior fellow at the left-leaning Brookings Institution, isn’t buying that argument. He’s the author of “Dream Hoarders: How the American Upper Middle Class Is Leaving Everyone Else in the Dust, Why That Is a Problem, and What to Do About It.”

“There’s a culture of entitlement at the top of U.S. society,” Reeves said. While others focus on rising wealth of the top 1 percent, Reeves argues that the gap is widening between the top 20 percent and everyone else. The upper middle class is guilty of “hoarding” its privileges, using its power to skew the job market, educational institutions, real estate markets, and tax policy for its own benefit, he contends.

“The American upper middle class know how to take care of themselves,” Reeves said during a presentation at the City University of New York last week. “They know how to organize. They’re numerous enough to be a serious voting bloc, and they run everything.”

Posted in Demographics, Economics, National Real Estate, Politics | 116 Comments

New life into old suburbs?

From LoHud:

Study: NYC suburbs could use 250K more transit-oriented homes

The solution to rising housing prices in the New York metro area could be the addition of 250,000 homes to the city’s suburbs over the next 20 years, according to a new study released this week.

The study, conducted by the New York City-based Regional Plan Association and released Tuesday, says the key to affordable living is building transit-oriented developments, which reduces the cost of living.

“Our region is struggling under the weight of it’s own success — with housing prices at an all-time high and space at a premium,” said Tom Wright, President of the Regional Plan Association. “More transit-oriented development is a real answer to our concurrent housing and commuting crises.”

Titled “Untapped,” in reference to the region’s potential for development, the 40-page study found that more than 60 percent of municipalities in the Lower Hudson Valley, Long Island, northern New Jersey and western Connecticut have restrictive zoning codes near their regional rail stations that hinder multi-family development. It found more than one in four municipalities only allow for low-density, single-family development in those areas.

RPA suggests that denser downtowns, with housing, retail, parks and schools near railroad stations, reduces the need for parking lots and garages because neighborhoods become more walkable. It also suggests that existing parking areas could be used for development.

“As technology emerges that will free space within some of New York’s most accessible suburbs, now is the time to consider our suburban planning holistically — and fully commit to a transit-oriented development strategy throughout the region,” Wright said.

Posted in Demographics, Economics, New Development, North Jersey Real Estate, NYC | 49 Comments

House Bill Passes, 1 NJ Republican Signs

From the Star Ledger:

‘Open season on N.J.’: With Trump backing, House GOP votes to cut your property tax break

With the help of one New Jersey Republican, the U.S. House on Thursday passed sweeping tax legislation that would end tax breaks used by many Garden State residents and could harm the health of business and real estate in the state.

Rep. Tom MacArthur, R-3rd Dist., was the only New Jersey lawmaker to support the legislation, which would eliminate the ability of taxpayers to deduct their state and local income or sales taxes, and cap the property tax deduction at $10,000.

House Republican leaders, who drafted the bill in secret without any public hearings, also prevented lawmakers from seeking to amend the bill on the floor in order to restore the full state and local tax deduction.

The vote was 227-205, with four of the five New Jersey House Republicans, including Rep. Rodney Frelinghuysen, R-11th Dist., joining all seven House Democrats in voting no. Frelinghuysen was the only lawmaker who didn’t announce his position in advance of the vote.

Only 13 Republicans, nine of them from New Jersey and New York, opposed the bill. No Democrats supported it.

“Every New Jersey taxpayer should be furious that this bill passed,” said Rep. Josh Gottheimer, D-5th Dist. “When you look at the deductions lost for state and local taxpayers, for seniors with medical expenses, for homeowners with mortgages, and small businesses, it’s undeniable that this tax hike bill is another nail in the coffin for New Jersey.”

Posted in Economics, National Real Estate, Politics, Property Taxes | 87 Comments

Look on the bright side, maybe we can afford to go to the beach again

From the Star Ledger:

Ivanka in Bayville: Tax reform will be the law of unintended consequences

During his brief speech, Treasury Secretary Mnuchin said that there will be winners and losers in New Jersey under the tax-reform plans.

“For people who make a million dollars in high-tax states, there will be a tax increase,” he said. “But as the president says, he’s willing to have his taxes go up to do the right thing.”

Good for him, but the more I study these competing packages, the worse it looks for Jersey.

If governor-elect Phil Murphy gets his wish and brings back a top tax rate of 10.75 percent, taxpayers in that bracket will no longer be able to deduct it from their federal taxes. That means they could pay a marginal tax rate of more than 50 cents on the dollar.

That’s a big luxury tax for living in New Jersey. Who’s going to be left to pay the taxes and mortgages of all those first homes in places like Summit and Essex Fells and second homes in places like Lavallette and Long Beach Island?

But the plan looks great for lower-costs states like Pennsylvania and North Carolina, where that $24,400 standard deduction likely exceeds the deductions of all but a few taxpayers.

Perhaps you can’t always get what you want.

But if this package goes through, I predict a lot of Jerseyans will find they need a house on the Outer Banks.

Posted in National Real Estate, New Jersey Real Estate, Politics | 236 Comments

Senate’s handling of MID a head scratcher

From HousingWire:

Housing industry gives mixed response to Senate tax reform bill

One of the biggest changes from the House tax reform bill is that the Senate’s version would leave the mortgage interest deduction intact at its current cap of $1 million. The House tax reform bill would cut the MID in half to a cap of $500,000.

But despite leaving the MID intact, the Senate’s bill has still received mixed reactions from the housing industry. One expert said this is hardly a relief as the Senate’s bill would still double the current standard tax deduction.

“While the Senate’s proposed tax bill makes the MID whole on paper by raising the cap back to $1 million in deductible interest, champions of the deduction won’t exactly be breathing a sigh of relief,” Zillow senior economist Skylar Olsen said. “Like the House bill we saw last week, the Senate’s tax bill still proposes doubling the standard deduction, and the Senate wants to completely remove the state and local property tax deduction.”

“Under the Senate bill, Zillow’s analysis shows that in most places, even fewer households would itemize deductions, meaning an even smaller sliver of homeowners would benefit from the MID, rendering the MID a much more niche tax benefit,” Olsen said. “That is sure to cause a stir among industries that rely on widespread use of the MID.”

The National Association of Realtors, one of the most vocal defenders of the mortgage interest deduction, said just keeping the mortgage interest deduction intact isn’t good enough.

“While we are still reviewing the outlines of this proposal, we are watching closely for changes to current law that might leave middle-class homeowners, and homeownership broadly, in a worse place than it is today,” NAR President Elizabeth Mendenhall said.

“We’ve already seen that a near-doubling of the standard deduction, combined with the elimination of other deductions like the state-and-local tax deduction, can turn the American Dream into a nightmare for families, as the rug is pulled out from under them,” Mendenhall said. “Simply preserving the mortgage interest deduction in name only isn’t enough to protect homeownership.”

Posted in Economics, Mortgages, National Real Estate, Property Taxes | 67 Comments

That time of year again

From The Street:

Top Predictions for U.S. Home Prices In 2018

Danni Springfield, a real estate agent at The Springfield Group in San Antonio, Tx. – Even relatively steady markets are seeing impressive growth in the housing market, Springfield says. “In San Antonio, it cost 10% more on average to buy a home in 2016 than in 2015, although 2017 numbers have not been released yet,” she says. “All indications are that this trend will continue in 2018 based on one item – inventory.” A market is considered balanced with about six months of inventory, and, in a balanced market, homes will appreciate at 2% to 3% on average, Springfield notes. “In a low inventory market, like much of the country is currently experiencing — San Antonio is at 3.1 months — the average price appreciation will be 6% to 7%, and high-demand pockets will grow in double digits,” she says. “As long as jobs are up, interest rates are low, and homes are appreciating, we are going to see a high volume of real estate transactions.”

Janine Acquafredda, real estate broker with House n Key, Realty, in Brooklyn, N.Y. – More people are looking to buy and fewer are looking to rent, and that’s a big impactor on home prices going forward, Acquafredda says. “Rental prices have moved so high the last several years that it makes sense for people to buy, since mortgage payments and rent are comparable in terms of a monthly expense,” she explains. “I think we will see rental prices continue to move lower as inventory grows and demand shrinks.” Acquafredda says that as long as mortgage interest rates remain low and the overall health of the economy stays strong, 2018 should be a healthy year for real estate. “That said, I don’t predict any surges in pricing, but I do see more of a level, consistent sales activity.” Acquafredda also says there is one potential fly in the ointment for the U.S. real estate market in 2018. “One big impactor could be the GOP tax plan especially in major cities, like New York City, where the change to the mortgage interest deduction could have a huge impact,” she notes. “You’ll see fewer people buying multiple properties and the proposal to scale back the ability of Americans to deduct state and local tax payments from their federal bill is also going to impact what and where people buy.”

Allison Bethell, Real Estate Investor Analyst, at FitSmallBusiness.com, in New York City – Home prices are affected by the stability or lack of stability in the economy, unemployment rates, interest rates and supply and demand of housing inventory, says Bethell. “A lot of new homes are being built and will be delivered in 2018, and housing has recovered from the hurricanes in Texas and Florida and the fires in California are behind us,” she says. “Also, interest rates have risen this year so this, along with low unemployment rates indicates that home prices will rise next year by a few percentages. They won’t rise as high as they have in the past, but they will still see a small incline.” Bethell also says that “lack of available inventory” especially in Los Angeles, New York City, Boston, and San Francisco will keep the prices going up and may price out professionals looking to purchase in those areas.

Greg Moers, a real estate agent at Triplemint, a real estate start-up brokerage firm in New York City – Home prices will rise faster than incomes in 2018, says Moers. “Even though the rental market is still strong in most markets with little inventory, we should expect to see continued positive home pricing growth,” he says. “Housing will also become less affordable hurting millennials and renters the most. Any big government policy change, like tax reform, will stimulate demand more than supply, which will push the prices upwards.” As for home prices, Moers says that if the industry is currently building more houses than we need, then prices don’t need to firm up. “I expect long-term interest rates to rise a little, which won’t help prices,” he says. “Although there’s not much reason to expect a collapse, the recent 7% nationwide price increase seems a bit much given the demographics. I would think that 3% would be more realistic next year.”

Denise Supplee, Realtor and co-founder and operations director at SparkRental.com in Hatboro, Pa. – “We will see some interesting fluctuations in the U.S. real estate market in 2018,” Supplee states. “One largely will hinge on the up-the-air tax reforms that directly affect housing.” Another emerging factor is that the millennials are moving, Supplee adds. “I’m seeing more younger homeowners fleeing the city life for the quieter suburban life,” she says. “With family planning on the horizon, a need for neighborhoods with sidewalks, better schools and fenced in yards are replacing the nightlife and culture of the city.’ Additionally, Supplee says that complaints of “no inventory” most likely will continue. “Another oddity I’m noticing is that the baby boomers are holding onto their homes. Whether that’s due to an increase in multigenerational living or modern medicine providing a higher quality of life, this is definitely a contributing factor to ongoing low home inventories.”

Posted in Demographics, Economics, National Real Estate | 23 Comments

Senate says “F*ck You New Jersey” and proceeds to piss all over us

From the Star Ledger:

Senate GOP bill delivers bigger blow to N.J. by killing your entire property tax break

The entire federal deduction for state and local taxes — an important tax break for New Jersey residents — would end under legislation proposed Thursday by Senate Republicans.

The Senate Finance Committee measure goes even further than the House, where Republican leaders agreed to keep a property tax deduction of up to $10,000 while eliminating the break for state and local income and sales taxes.

In both cases, however, Republicans have decided to target a tax break used disproportionately by New Jersey and other high-tax states, most of them governed by Democrats, in order to fund tax cuts for the rest of the country.

“New Jerseyans can’t afford to subsidize the rest of America more than we already do, and it is up to every member of Congress from New Jersey to put party aside and defeat this morally bankrupt bill before it bankrupts our future,” said U.S. Sen. Robert Menendez, D-N.J., a member of the finance committee.

More than 41 percent of New Jersey taxpayers take the deduction, according to the Tax Foundation, and 84 percent of those deducting their state and local taxes earn less than $200,000 a year, according to New Jersey Policy Perspective, a progressive research group.

Not only would state taxpayers lose a key deduction, but New Jersey would find it harder to raise taxes to make up for any federal budget cuts, said Jon Whiten, vice president of New Jersey Policy Perspective.

“Eliminating these deductions would harm millions of New Jersey families while squeezing the state at both ends,” Whiten said.

Posted in Economics, New Jersey Real Estate, Politics, Property Taxes | 159 Comments

Vancouver tops NYC and SF for least affordable

From HousingWire:

New study reveals least affordable city in North America

Home prices are out of control in markets such as San Francisco and Manhattan, which have the lowest levels of affordability in the U.S., however other cities in North America are still less affordable.

A new study, The International Housing Affordability Survey conducted by Point2Homes, shows the least affordable market in North America is located in Canada. The least affordable market in North America is Vancouver, Canada, where the median home sales price is more than $1.1 million and the median family income is only $63,944.

Vancouver’s affordability crisis was fueled by foreign investments in the real estate sector, according to an article by Minh Uong for The New York Times. Now, Vancouver has risen to one of the least affordable housing markets in the world.

The second least affordable market in North America is Manhattan, homes are even more expensive than Vancouver at $1.2 million, however the median income is higher at $77,559.

San Francisco came in as the third least affordable market in North America, and the second least affordable in the U.S. It’s median home price is the highest in North America at nearly $1.3 million, but is also holds the highest median income in the U.S. at $92,094.

The chart below shows how many years it would take to pay off a median priced home if borrowers paid 100% of the area’s median income toward the mortgage for major North American cities.

On the opposite end of the spectrum, Detroit came in as the most affordable city as median income borrowers could pay off their median priced home in just 1.8 years if they dedicated all their income toward their home.

Posted in Demographics, Economics, National Real Estate | 100 Comments

An outsider gets his chance

From Politico:

Murphy defeats Guadagno to become New Jersey’s next governor

Democrat Phil Murphy, a millionaire former Goldman Sachs executive and U.S. ambassador to Germany who’s never held elective office, will succeed Republican Chris Christie as New Jersey’s governor after defeating Lt. Gov. Kim Guadagno on Tuesday.

Murphy, a progressive who grew up outside of Boston and smiled so much on the campaign trail that he was mocked for it, will bring to Trenton a sharp change in style from the combative and Jersey-born Christie, who became famous for his public fights with constituents and politicians.

Tuesday’s double-digit victory by Murphy, an unabashed liberal who supports raising the minimum wage to $15 an hour and providing free community college, means New Jersey’s government will be under full Democratic control for the first time in eight years. At the same time, it will inevitably be read as a repudiation of the deeply unpopular Christie and equally unpopular President Donald Trump.

With 99 percent of the vote counted, Murphy was leading Guadagno 56 percent to 42 percent.

He will have line-item veto power over the state’s roughly $35 billion budget and the power to name top state officials, like the attorney general, who, in many other states, are elected. But he will also confront a retirement system underfunded by billions of dollars after two decades of neglect, a deteriorating public transit system and an economy that has lagged the nation’s.

The governor-elect began his campaign with a number of pledges meant to appeal to liberal activists and public workers unions. In addition to promising free tuition at community colleges, he promised to increase protections for undocumented “dreamer” immigrants who came to the state as children and improve NJ Transit, which has been plagued by delays and outdated infrastructure.

But he’s struggled to explain how he’ll pay for his programs, promising to raise taxes by about $1.3 million — largely based on increasing the tax rates on the state’s wealthiest individuals and an anticipated $300 million in taxes sales of legalized marijuana.

The amount, however, won’t come close to covering his campaign promises.

Murphy has also floated the idea of creating a state bank modeled on the only other existing one, in North Dakota.

Posted in New Jersey Real Estate, Politics, Property Taxes | 151 Comments

Who would want to win?

From Fox Business:

N.J. voters worry about taxes as they elect a new governor

New Jersey’s voters will decide Tuesday who will take over running the state from outgoing Republican Gov. Chris Christie, who, after two terms in office, is leaving Trenton with one of the lowest job-approval ratings of any U.S. governor.

The winner of the election will inherit a state facing large and expensive problems, from underfunded public pensions to crumbling transportation infrastructure, at a time when the electorate is loath to accept more tax increases. The average residential property-tax bill in New Jersey has increased 32% during the past decade, reaching $8,200 in 2016, and public polls consistently have found that the state’s voters list taxes as their top concern.

New Jersey’s financial problems are significant: Its $88.8 billion public-pension liability is 41% unfunded, and that $36.5 billion deficit will weigh on future state budgets. State funding for K-12 public schools hasn’t kept pace with a funding formula outlined in state law, infuriating education activists and putting pressure on local property taxes.

And a host of transportation challenges — financial uncertainty about construction of a new train tunnel under the Hudson River, funding and management struggles at NJ Transit, and questions regarding the replacement of the ailing Port Authority Bus Terminal in Manhattan — will require significant investment by New Jersey’s next governor.

At the same time, New Jersey’s real gross domestic product, a measure of economic strength, saw a compound annual growth rate of only 0.2% between 2006 and 2016 compared with 1.1% nationwide, according to the U.S. Department of Commerce. And weighed down by pension woes, New Jersey general-obligation bonds have been downgraded 11 times across three credit-rating firms since Mr. Christie took office in 2010.

Posted in Politics | 180 Comments

Selling the tax plan through small business

From the Star Ledger:

Why a Trump Cabinet official made a weekend trip to N.J.

U.S. Small Business Administrator Linda McMahon discussed the Republican tax cut plan on a trip to New Jersey on Saturday as supporters touted the proposal as an elixir for economic growth.

On her first trip since House Republicans released their proposal, McMahon, a member of President Donald Trump’s Cabinet, was expected to meet with small-business owners in Cranford and Cinnaminson on Saturday.

It was part of her Ignite Tour, an effort to visit all 68 district offices of the Small Business Administration and talk with small business owners about how the agency can help them create jobs and improve the economy.

“I want to make sure SBA is not the best-kept secret in the country,” McMahon said. “The president’s agenda is really to grow this economy.You support small businesses because small businesses are the engine of our economy.”

This time, the discussions also included the Republican tax plan, which was officially released on Thursday and is supported by Trump.

“If they pay less tax and have more money in their pockets, they will grow their businesses,” McMahon said in an interview. “That is what every business tells me without fail: If they had more money in their pockets, they would reinvest it in their company. They want the business to be able to grow. They want to hire more people.”

While McMahon came to New Jersey, Vice President Mike Pence and Labor Secretary Alexander Acosta headed to York, Pennsylvania, on Saturday to discuss the tax bill with business owners there.

The emphasis on small businesses is this: There are 30 million small businesses, accounting for 96 percent of all businesses in the U.S., according to the SBA. They account for two of every three net new private sector jobs in the U.S.

Posted in Economics, Employment, New Jersey Real Estate, Politics | 89 Comments

How will the housing market react?

From Forbes:

What The Republican Tax Bill Means For The Value Of Your Home

House Republicans released their long awaited tax bill Thursday. The proposal is a long way from becoming the law of the land, but the draft contains some red flags for the people who build, sell and own homes—as well as for people who want to buy them.

Three changes are particularly relevant: a reduction in the amount of mortgage interest that can be deducted, a new cap on property tax deductions and limits to the capital gains exemption used by homeowners when they sell.

Real estate professionals have been quick to cry foul, arguing the proposals would eliminate the tax incentive to buy, turning America into a nation of renters and putting pressure on home values. Already the homeownership rate is near an all-time low at 63.7%, they point out. William Brown, president of the National Association of Realtors, calls the bill “nowhere near as good a deal as the one middle-class homeowners get under current law.” Some outside the industry, however, contend that in the long run the only real loser will be the industry itself.

While the median price of a house sold today is $245,000, in some expensive markets a $500,000 loan does not come close to paying for most homes. Some fear the lower cap would be particularly detrimental to first time buyers in such markets. Moreover, creating a distinction between current and future homeownership could create a disincentive to move, intensifying an already severe inventory shortage at the entry level. Increases in home values over the long term will also eat away at the value of the deduction if a plan to raise the cap over time is not put in place.

At the same time as the plan cuts back on deductions for individual homeowners, it exempts real estate investors from a new 30% limit on interest deductibility for businesses. “This tax plan would turn America from a nation of property owners into a nation of tenants renting from private equity-backed landlords,” argues Vishal Garg, CEO of Better Mortgage, an online mortgage lender focused on Millennials. “Why should corporate landlords get the deduction if your consumer homebuyer can’t?”

Another change is to the provision that allows homeowners to exclude from their taxable income up to $250,000 in capital gains ($500,000 for married taxpayers) from a sale of their primary residence. Under the plan, to qualify for this break, homeowners must have owned and lived in the home for at least five of the last eight years. Currently the rule is two of the last five. Taxpayer use of the exclusion would also be limited to one sale every five years, rather than one every two. In addition, under the house bill, you begin to lose the gains exemption if adjusted gross income (in a look-back period) exceeded $500,000 if married or $250,000 if single.

Expensive markets would also be hit by the proposal to cap the deduction for property on a home at $10,000. Currently all state and local taxes are deductible in the ordinary tax (although not in the alternative minimum tax, which would be eliminated by the house bill). In the lead up to the bill’s release, local tax treatment was one of the most contentious issues. Originally on the chopping block, property taxes were spared after a revolt from Republican lawmakers from high-tax states like New York, where the effective property tax rate is 1.38% of a property’s value, and New Jersey, where the effective rate is 2.13%.

The compromise, however, did little to quell real estate industry anger or investor jitters. (It is also unclear how many House Republicans from high tax states will continue to oppose the bill because of the $10,000 cap and because state and local income taxes wouldn’t be deductible at all.)

Posted in Mortgages, National Real Estate, Politics, Property Taxes | 42 Comments