Economic Impacts of Newark, N.J’s Amended Rent Control Ordinance

Econsult Solutions, Inc. (ESI) was commissioned by the Newark, N.J. Apartment Owners Association, Inc. (NAOA) to measure the economic and fiscal impacts of recent changes in the city of Newark’s rent control ordinance. The city of Newark recently amended its rent control ordinance in an attempt to tie rental increases into the changes in the U.S. Consumer Price Index (CPI) and to require greater rehabilitation investments when a unit becomes vacant to qualify for larger rent increases.

This study provides a conceptual and empirical framework for assessing the impacts of changes in the newly passed rent control ordinance on Newark’s apartment community, the city’s economy and the city’s municipal finances. This is accomplished first by understanding conceptually and then using actual data for the city to decipher how rent control affects rents in Newark and how those rental impacts affect the investment decision making among apartment owners and potential investors.

Limiting rent increases to the CPI in conjunction with a dramatic increase in the required threshold investment for larger rent increases upon vacancy will result in disinvestment, declining quality of apartment communities and adverse impacts on Newark’s neighborhoods.  Moreover, these changes will have significant negative impacts on employment and economic activity in Newark and will diminish the city’s tax base and tax revenues, which will put greater pressure on Newark to reduce essential public services such as education, safety and recreation.

ESI estimates that the recent changes in the ordinance will:

• Reduce capital improvement investment in apartment communities by $3.3 million annually
• Reduce decontrol-related investments by $17.9 million annually
• Reduce annual maintenance expenditures in apartment communities by at least $4.0 million
• Lower the quality of living in apartment communities