Newark, New Jersey officials will limit yearly rent increases on newer construction and owner-occupied units to 5% – testing the limits of a state law that bans “unconscionable” rent spikes but doesn’t define how much is too much.
The new ordinance comes amid a boom in new city development and an affordability crisis fueled by inflation and rising rents.
“The affordability crisis in Newark is getting worse and likely to get much worse over time,” David Troutt, founding director of the Rutgers Center on Law in Metropolitan Equity, said during a City Council hearing on the ordinance this month.
He said the market needs regulatory constraints.
“The fact that the city has in many respects become a playground for outside investors who recognize that this is a captive population in one of the most expensive housing regions of the country so that there’s no place left to go. The city of Newark, therefore, is ripe for rent extraction,” he said.
A 2021 report by Rutgers Law School Center for Law, Inequality and Metropolitan Equity found that Newark renters pay an average of $340 more than they can afford to pay with a third of their income. And one-third of renters pay more than half of their incomes in rent. The median income in the city is roughly $35,000.
An existing Newark rent control measure already restricted some annual rent bumps to changes in the Consumer Price Index and capped increases to no more than 4%. But that law only applies to 70% of the city’s rental properties.
State law normally prevents rent control measures from applying to properties for 30 years after construction is completed. Newark also hadn’t previously regulated rents for owner-occupied homes with four units or fewer.
But New Jersey also bars “unconscionable” rent increases in its anti-eviction law. The Newark ordinance would define that term as an increase of 5% or more, and fine landlords $1,250 for increases that violate the new standard.
“Landlords are charging rents of over $2,000 for one-bedroom apartments in areas where they were just $750 five years ago,” Newark Mayor Ras Baraka said in a statement. He said the ordinance was a “big step toward continuing to be the kind of culturally and economically diverse city that makes Newark so special.”
But Nicholas Kikis, from the New Jersey Apartments Association, which represents landlords, said the ordinance had “very serious issues of legality” and violated the state law that exempts certain properties from rent control restrictions.
The Department of Community Affairs didn’t respond to questions as of Friday afternoon about whether any municipality had set the terms for “unconscionable” rent increases as Newark is now doing.
Drew Curtis, an organizer with Homes For All Newark, said the ordinance was a tool to help residents afford to stay in the city, including college grads who can’t afford to come back.
“A lot of times people talk about brain drain in communities like Newark. People want to stay but they need to be able to afford it,” he said.
The ordinance would apply to newer housing developments like NBA giant Shaquille O’Neal’s 33-story mixed income residential tower, or Teachers Village that includes 20% affordable units.
“People are still making the same amount of money but they are just simply being expected to pay more and more in rent. They’re not getting more, they are paying more with less for the same kind of housing that they had before,” Troutt said.
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