A proposal to expand rent control to rentals in redevelopment areas would do little for the tenants who need help most, and would push the cost onto everyone else.
At the October 19 council caucus, councilmembers Jake Ephros and Eleana Little introduced Ordinance 26-089, which would end what Ephros called “an indefinite, essentially forever, exemption” from rent control for new buildings in redevelopment areas [Hudson County View]. At the caucus, Business Administrator Ruby Choi said one week was not enough time for a substantive review and the Law Department was still drafting its memo. The ordinance was listed for first reading at the October 21 council meeting but was tabled due to requests from the Solomon administration and other city council members for more time to review.
The sponsors describe the ordinance as “closing a loophole” and bringing Jersey City in line with state law. Tenants at Portside Towers, who saw rent increases of 25 to 50 percent in 2022, are a constant reminder that renters in large, waterfront buildings can face rent shocks [Shelterforce]. Since then, activists residing at Portside have pushed for rent control for their buildings. The immediate impetus for this latest proposed ordinance is the plight of the 160 low-income tenants at 30 and 40 Newport Parkway in Newport, whose affordability controls expired this year. Surprisingly, last year the Portside Tower activists advocated against a PILOT agreement that would have preserved and expanded the affordable housing at 30 and 40 Newport Parkway.
This latest rent control ordinance would be an expensive and poorly targeted one. Rent control on the city’s newest, highest-end buildings mostly helps households that are already doing fine, does little to help the moderate- and low-income households in need, and passes the bill on to homeowners and current and future tenants who are not in a rent-controlled apartment.
What the ordinance would change
New Jersey’s Newly Constructed Multiple Dwelling Law, enacted in 1987, exempts new apartment buildings from local rent control “for a period of thirty years or the amortization of the initial mortgage loan, whichever is less,” as long as the owner files a notice with the construction official before the certificate of occupancy [N.J.S.A. 2A:42-84.2]. Jersey City’s rent control law goes further. Section 260-1 of the city code exempts “newly constructed dwellings with 25 or more dwelling units located within a redevelopment area” with a council-approved redevelopment plan, with no end date. A second permanent exemption covers hotels, motels, and other buildings “converted from any previous use as a nonpermanent dwelling to use as a dwelling on or after October 1, 1983” [Ord. 26-089]. The rationale for both exemptions is the recognition, borne out by dozens of academic studies, that rent control discourages new construction [Journal of Housing Economics]. Other jurisdictions have similar “perpetual exemptions” as Jersey City’s, including New York City, the entire state of California, and Washington, DC [State of New York, California Civil Code, City of Washington, DC]. In fact, of the 50 largest cities in the US, the nine cities with rent control all have permanent exemptions for new construction.
Ordinance 26-089 would repeal both permanent exemptions. Redevelopment-area towers and conversions would instead get “the standard thirty-year exemption outlined by state law, provided that all applicable procedures are followed.” The ordinance states that “a permanent exemption from rent control is an active detriment to the long-term needs of the city for more affordable rental housing” [Ord. 26-089]. The council has tried this before under the Fulop administration with Ord. 19-128, which was introduced in 2019 but never adopted [Hudson County View].
Portside Towers, the building Little pointed to at caucus, is a different case. Both Tower 1 and 2 of Portside were built under traditional zoning outside of a redevelopment plan area. Tower 1 was built as a condo building in 1992 and converted to rental usage in 1995. Tower 2 was built as rentals under traditional zoning. Neither tower would have qualified for the city’s permanent redevelopment exemption, only the state’s 30-year one, as the Tidewater Basin Redevelopment Plan was not adopted until November 1999, after both towers were already built.
Moreover, the recent litigation involving Portside was over whether Portside qualified for the state exemption at all. On September 28, U.S. District Judge Madeline Cox Arleo ruled that it did, holding that the state filing requirement “does not create a condition precedent” to the exemption [Towers at Portside v. Jersey City]. Under that ruling, Portside’s first tower came under rent control in January 2025 and the second will in December 2027. There is no dispute that a building past its 30-year state exemption and outside of a redevelopment plan area can be put into rent control once the 30-year state exemption expires.
Inside a redevelopment plan area, buildings enjoy permanent exemption status from Section 260 rent control and developers rely on that permanent exemption. Redevelopment areas hold most of the high-rise rental housing built in Jersey City since the state exemption took effect. Our analysis of the 2026 county tax list found about 210 rental buildings of 25 or more homes in redevelopment areas, built since 1987 or now under construction, with roughly 53,700 homes between them. Journal Square 2060 (about 12,600 homes) and Newport (about 6,900) are the largest. About 3,300 homes in 11 buildings are already past 30 years and would come under rent control as soon as the ordinance takes effect. That figure rises to about 7,500 homes by 2036 and 14,600 by 2046.
Leaving newly constructed buildings in redevelopment areas permanently exempted from rent control is not a loophole in Section 260. The intent of a permanent exemption is to mitigate the damaging effect rent control has on new development, the budget, and residents’ overall welfare.
Who actually benefits?
Rent control has no income test. The benefit goes to whoever holds the lease when the rent increase cap kicks in. The benefit grows the longer the leaseholder stays. In waterfront towers, that is disproportionately higher-earning households that earn double the city’s median income.
When economists Kenneth Ahern and Marco Giacoletti studied St. Paul’s 2021 rent control law, they found the tenants who gained the most had higher incomes, while the property owners who lost the most had lower incomes. For buildings with high-income owners and low-income tenants, the transfer was close to zero. The wealth moved in roughly the opposite direction from what the law intended [National Bureau of Economic Research].
Compare that with the affordable units the city funds through PILOT agreements. At Canal Crossing, 102 of 508 units are reserved for households at or below 50% of area median income and filled through the city’s income-qualified lottery [Better Blocks]. Those deals have costs, and we have been vocal in trying to explain how they work. They are not as efficient as voucher programs, for example, but, unlike with rent control, the public can easily assess the cost of the PILOT agreement, the council votes on each one, and the benefit of the below-market-rate housing goes to households that qualify based on their income and are selected through the housing lottery. Rent control on towers hides its cost and gives the benefit to whoever happens to live there.
Locking the door behind current tenants
Rent control works well for people who already have an apartment and badly for everyone who doesn’t. The strongest evidence comes from San Francisco, where a 1994 ballot measure extended rent control to small apartment buildings. Stanford economists Rebecca Diamond, Tim McQuade, and Franklin Qian found that covered tenants became about 20% more likely to stay at their address. Landlords responded by cutting the rental supply in those buildings by 15%, mostly through condo conversions and redevelopment, and the lost supply pushed rents up about 5.1% citywide [American Economic Review; National Bureau of Economic Research].
We are not advocating for abolishing rent control in Jersey City, which predominantly helps longtime renters in old, downmarket tenement buildings inland from the waterfront. But waterfront towers are where newcomers land and where higher-earning households move as their lives change. When fewer of those apartments turn over, demand spills into the rest of the city. Apartments in the Heights, Bergen-Lafayette, Greenville, and smaller or owner-occupied rental buildings would all become more expensive to rent. As a result, renters who never set foot in a tower would pay for this ordinance through higher rents in the buildings they can afford today.
The teachings of St. Paul
Voters in St. Paul, MN, passed the country’s strictest rent control law in November 2021: a 3% annual cap with no exemption for new construction. New multifamily permits fell about 80% year over year in the following months while permits in Minneapolis rose [Reason]. Ahern and Giacoletti estimated property values fell 6–7%, an aggregate loss of $1.6 billion [NBER]. In 2022 the city council exempted new construction for 20 years and exempted affordable housing entirely. Developers still describe rent control as a drag on every project, and permits have stayed below their pre-2021 level [Forum News Service].
The Ephros and Little proposal is milder than St. Paul’s original law as a 30-year runway is longer than the 20 years St. Paul settled on. But state law prevents them from enacting anything more draconian.
The ordinance’s introduction comes at a time of great uncertainty and could jeopardize multiple beneficial projects. The council already voted down the five-year tax abatement program for new construction 3–6, with Ephros and Little among the no votes. Plans are on file for new 51-story mixed-income towers in Journal Square, developers are trying to extend the light rail across 440 and build a new station by Holland Garden as part of new housing projects, and redevelop brownfield sites at Canal Crossing and Bayfront into affordable housing. At the same time, Jersey City is competing with New York City for the same construction capital, but New York has a new mayor who is intent on drastically reducing construction costs following the City of Yes legislation that rezoned much of the city. A rent control ordinance would put Jersey City’s needed growth and development in jeopardy. Even New York City permanently exempts all non-tax-exempt buildings built after 1974 from rent control and rent stabilization policies [NYC Rent Guidelines Board].
The tax bill moves to homeowners (and through them, renters)
Jersey City just passed a 15% municipal tax increase. An analysis by Ian Kolchin, one of our volunteer contributors, estimated that buildings added in the last five years now cover nearly one dollar in five of the city’s property tax levy [Better Blocks]. In general, buildings built after 1983 make up nearly half the city’s tax base.
This ordinance also lands right as a wave of older tax deals ends. Jersey City has 32 long-term PILOTs expiring by 2029. They pay about $41 million a year now and are projected to owe roughly $75 million in conventional property taxes once they convert [Better Blocks]. Few of the buildings that would hit the new 30-year rent control trigger are paying the city under a PILOT agreement, though. When the agreements end, the buildings return to the regular tax rolls, and their assessments would reflect values the ordinance has already lowered.
Apartment buildings are typically assessed on the income they produce. A building facing rent control loses value long before the cap kicks in, because buyers and lenders price in the decades of capped income that follow. To estimate the cost, we modeled each of those 210 buildings’ income at market rents and under Chapter 260’s cap: the lesser of inflation or 4% a year, with no reset when a tenant moves out. We then applied each building’s drop in value to its 2026 tax bill, counting a loss only once it is large enough for the owner to win a tax appeal. The devaluation would be about 30% for buildings over 30 years old. But even newly constructed buildings would lose about 10% in value, even though rent control doesn’t kick in for 30 years.
Properties impacted by rent control would file for an appeal on their valuation. Successful appeals would result in a reduced assessment. Due to the delay in implementation, some property owners would receive a refund on taxes paid, which would come straight out of the municipal budget. The impact of reduced assessments would continue to impair the municipal and school budgets for decades to come as less property tax is collected.
The decline in value comes from how developers, real estate investors, and lenders forecast rent growth. They price in a range of outcomes: years when rents fall and years when they jump. Rent control leaves the bad years alone, creating downside risk, and clips the good one, eliminating any upside. When rents fall, the owner takes the full loss; when they rise faster than inflation, or faster than 4% in a high-inflation year, the owner can’t capture the gain. That lopsided bet makes a building worth less today, whether or not rents actually rise that fast. Our estimate captures only part of this effect, through the occasional inflation spikes in the middle and high cases, so it may understate the loss. In contrast to rent control, new supply also lowers the value of older buildings, but it does so by lowering rents for every renter in the market, and the new buildings add to the tax base instead of shrinking it [Pew]. And the potential upside encourages more developers to enter the market, increasing overall housing supply.
Differences between models are due to assumptions around rent growth relative to inflation. For the purpose of illustration, we have modeled three scenarios: low inflation and rent growth, higher inflation and moderate rent growth, and high inflation and high rent growth to show the potential impacts on valuations.
Our models are built on core assumptions around inflation and rent growth. We have forecast the impact of low, moderate, and high rental growth against inflation to show how different scenarios would impact building valuations and attending property taxes as a result. Other credible models may contain other assumptions and result in divergent estimates.
In the middle case, the ordinance would take about $25 million a year off the tax rolls in year one, rising to $59 million by 2036 as more buildings cross the 30-year line. Most of that shifts to other Jersey City taxpayers: about $214 a year on the median home bill in 2028 and about $523 by 2036. If you also count the new buildings that would no longer get built, or that get built but assessed lower, the 2036 figure is closer to $520. The total net present value of the rent control ordinance is around $1.4 to $2.3 billion, depending on the discount rate used. One thing we do not model that could make the numbers worse is the change in expectations that the ordinance would produce. Ahern and Giacoletti attribute roughly a third of St. Paul’s lost property value to indirect effects beyond the regulated units themselves [NBER].
The losses would arrive through tax appeals and revaluations that take time to wend through bureaucratic channels so the impacts would not be felt all at once but they would be increasingly severe. Our estimate assumes they arrive through appeals. Under New Jersey law, an owner can win a reduction only once the assessment sits more than 15% above the city’s average ratio of assessed to market value [N.J.S.A. 54:51A-6], and 2028 is the first tax year an appeal can reflect the ordinance, since tax year 2027 is valued as of October 1, 2026, before the ordinance was introduced. The Jersey City Apartment Owners Association has already stated that appeals are coming [Hudson County View], and Little herself acknowledged at council caucus that the change carries a cost in future tax revenue. Appeals also carry a direct cost. When an owner wins, the city refunds the overpaid tax, with interest, from its own budget, including the school and county shares.
Supply effects
As financial incentives to build decline because of added costs or lower rents, construction of new housing also declines in the short run. As stated above, our calculations suggest that newly constructed buildings valuations would fall by about 10%, even with a 30-year grace period before rent control kicks in. Estimates in the academic literature suggest that supply falls about 0.4% to 2.5% for every 1% decline in financial incentive to build [Centre for Economic Policy Research]. That would indicate a roughly 4% to 25% decline in supply due to the rent control ordinance. In the long run, market-rate rents in non-rent-controlled apartments would rise as a result of the supply shortage, and housing production would partially rebound, but not enough to reduce rents to what they were.
Better ways to protect renters
The sponsors are right that the moderate-income renters in Newport will lose their income-restricted housing if nothing is done. Other low and moderate-income households across the city will face similar problems in coming years. But there are better tools to help them:
- Plan for expiring affordability. Mayor Solomon’s senior policy advisor Isaac Smith noted at caucus that affordability restrictions in many PILOT buildings run for 30 years, but most 30-year PILOT agreements with an affordable housing component were signed after 2005 so very few similar cases will present themselves to the council in the coming years. Negotiating extensions as those deals end protects income-qualified households directly.
- Help renters directly. Research by Diamond, McQuade, and Qian suggests protection against rent spikes would work better as public insurance than as a mandate on landlords [NBER]. Direct rental assistance, through vouchers or cash, goes to households by need and works in market-rate buildings [US Dept of Housing & Urban Development Cityscape]. It costs money, but everyone can see what it costs and who it helps.
- Increase supply. Single-stair reform, by-right approval for projects that meet affordable housing targets, passing the 139 rezoning plan, relaxing the 15% mandatory IZO downtown, and selling surplus city land for housing all add supply that eases rents citywide [Better Blocks].
The question housing advocates, homeowners, and renters alike need to pose to the council is whether a rent control ordinance helps the renters who need it, at a price the city can carry. The record from San Francisco and St. Paul says it would not. At minimum, the council should continue to table this ordinance until it has reviewed the Law Department memo, independent fiscal impact estimates, and had the conversation with housing advocates that the ordinance sponsors said they are open to have all happened. The council should also spend time exploring more effective alternatives like a voucher program. And, failing that, the council can always revive the previous PILOT agreement proposal that the city negotiated last year to preserve housing for Newport renters if no better alternatives are found.