Jersey City's Mayor on How the City Built So Much Housing

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1:13Hello and welcome to another episode of the Odd Lots podcast. I'm Jill Weisenthal. And I'm Tracy Alloway. I've been covering a little local politics these days, Tracy. It's not our normal beat, but sometimes there's a little intersection. We're going local, not macro, micro. We're going micro. So it's interesting because we did a recent episode, listeners may remember, with one of the candidates for the mayorship here in New York City, Zoran Mamdani, and he sort of talked about his vision for affordability. Actually, backing up for a second, it feels like housing affordability is suddenly swamping everything is the issue, almost regardless of your perspective, that is like on top of many people's minds these days.

1:54Well, also, we've talked about this before, but also seems like a bipartisan issue. And like you don't get a lot of bipartisan things nowadays. I'll just put it that way. No, but it's interesting. Like, you know, at one point there's like health care and sometimes climate. Other times right now, it just feels like there is such a so much anxiety about housing affordability and all this stuff. And it feels like it's a nationwide thing. Within the Democratic Party, there are different wings of how people talk about it. So we obviously talked to the socialist candidate for mayor. There's also what people would call like the sort of like more liberal abundance view that, you know, the answer is just we just need more and use whatever levers to pull to like get more in some way.

2:34So, you know, even within one party, though, although everyone sort of agrees on rent and affordability, not a lot of consensus on the path there. Yeah. So the overall goal is very clear, but I guess like the levers that you're going to pull to get there are very complicated. And I have to say, that's one thing that I kind of struggle with in this topic. It just seems like there are so many different things that you could do. And all of them seem very like bureaucratic, very technical tax abatements, all these incentives, rent control. And it's interesting to me how you choose between them about what's going to be most effective.

3:11Can I just say, by the way, you know, I think a lot of these debates are very part of the reason they exist is because the media is very heavily represented in New York and San Francisco. I mean, I don't think there's an affordability crisis in like Davenport, Iowa, to the same degree. And I think that's important to acknowledge. I also think like New York and, you know, San Francisco are some of the best places in the world. So I get why people pay a lot of money for them. Anyway, it turns out one of the best cities over the last several years in the entire country for housing production is our neighbor, Jersey City, right across the water.

3:42I really like Jersey City. I've spent a little bit of time there. And their mayor, Stephen Phillip, is running for governor in the Democratic primary right now. So we have the perfect guest to talk about Jersey City housing production. Stephen Phillip, thank you so much for coming on Outplots. Thanks for having me. I appreciate being here. For those people who don't know, you've been the mayor of Jersey City for how long? I think I saw it was like in the last 10 years, housing stock has increased by 25%, something like that? Yeah. I mean, we used to be maybe 2 % of the state's building permits.

4:10We're upwards of 10 % now. I mean, we've been the backbone economically of the state of New Jersey. I've been the mayor there for 12 years. I've been unapologetically very, very pro-growth. You could see the skyline change across the river. So it's been a good story and we're growing and I'm very proud of the changes that have happened. What's the biggest choke point or hurdle when it comes to building more affordable housing? Because everyone seems to have a different answer to this and different things that they would put emphasis on. But in your view, what's number one? What do other people say out of curiosity?

4:41Well, people say like zoning and things like that, incentivizing the developers to build something other than luxury, high rises, that sort of thing. I'd point to a couple of things. I mean, in New Jersey, we have definitely have an incentive program that is complicated. We have obviously zoning with home rules. So you have a lot of municipalities, 564 municipalities, which is problematic and home rules. So how do you overcome that, which I think we have some solutions for. And I think that generally speaking, across the country, you have kind of the NIMBY sentiment monopolizing the conversation.

5:14And how do you wrestle that away from them is different in each city or state. But in New Jersey, I think we've done a pretty good job of kind of creating a dynamic where the people that are pro-growth can also have a voice there. You've been pretty unapologetic in your view that market rate housing benefits everyone, that there's supply and demand. You expand supply, it filters down, et cetera. You talk about, quote, affordable housing, unquote. But give us your general philosophy of housing and making it more affordable and why you believe that a lot of the solution is essentially liberalizing and supply and demand.

5:55Yeah, I think. Letting people build what they want where they want. Yes, I think that when you put more restrictions around housing growth, so rent control sounds like a good buzzword, but when you're too restrictive around that stuff, you're going to create a situation where you're not seeing supply being increased. We've seen in Jersey City pressure when New York City isn't growing on our housing prices. And when we've grown a lot, you've seen the demand still high, but the rent increases subside. So it leads you to the conclusion that the market rate component of housing is as important to the conversation as the affordable conversation.

6:30And, you know, look, a lot of people push back for a variety of reasons. Sometimes it's rooted in racism. I mean, people have a different reaction if you use the word affordable housing versus housing that's affordable. They have a different kind of thought process around that. But the reality of the situation is that market rate housing helps you build more affordable housing or housing that's affordable. And they have to work together to be successful. And that's how we've approached it in Jersey City. And it's generally been successful. So one of the criticisms of market rate is that you end up with those developers just building the luxury apartments because they can wring more money out of those.

7:05How do you address, I guess, the balance between luxury housing versus, I don't know, housing for the middle class or housing that's further down the spectrum? Yeah. So in Jersey City, we do have kind of set asides or inclusionary zoning ordinances, and those are important. We've gone back and forth with the advocacy groups on what's actually achievable, and we've actually come to a place that's pretty successful. And we generally target about 20 % of a housing development to be a blended, affordable component. So that could be workforce housing, that could be low-income housing, which is obviously more stressful on the overall project.

7:41So you got to factor some of that stuff in. But we do have, you know, a specific minimum requirement when they do get a specific incentive, like a tax abatement from the city. What specific levers? So, OK, you've been the mayor of Jersey City for 12 years. It is objectively true that the skyline has changed a lot. It is objectively true that the housing stock has grown. I'm sure it's benefited just from the fact that, you know, Manhattan and New York City has been fairly dismal about expanding housing supply. And so people look elsewhere. But versus before you came into office now, what are the specific levers that you've pulled to expand production?

8:16And how can you like attribute, you know, when you do an attribution of the housing stock, what can you say to what you've done? So when I came into office, the tax abatement or incentive program was very political in nature. And it seemed to be by right for the developers that were pursuing it. And there were two problems with that. The politics of it created kind of uncertainty and apprehension about people investing in a market if they weren't familiar with the politics about it. And the uncertainty of how the process worked was problematic as well. So we came in and we changed the policy entirely.

8:52And people said that we wouldn't see the amount of growth. But I viewed it at the time that it was such a given that you would get these tax abatements that it didn't necessarily incentivize more growth. It was already factored into the seller's price and the buyer's price and the private transaction. So we had to recalibrate that market a little bit. And so what I did was we changed the tax abatement process where we mapped it to census tracts based on poor census were automatically entitled to a steeper incentive. And what you gradually saw was people moving away from the waterfront and investing money because it seemed more certain the process and it seemed to have a clearer advantage if you were moving to certain areas.

9:30And we mapped it to the census tract, which seemed like a reasonable way to map it towards income where you're trying to instigate development. And so that worked. And I think that that clarity really helped people invest and attracted new developers to the area. So we were no longer relying on the same small pool of developers. And I think the certainty was very good because, you know, New Jersey has a history of political corruption and feeling that, you know, there was some process around this that it wasn't necessarily predicated on what lawyer or architect you hire created a better climate for business.

10:04So you mentioned widening the pool of developers. And this is something that Joe and I are really interested in. We went down to North Carolina and learned that towns and cities really have to make pitches to developers to get them to come in. What's the process of, I guess, working with a developer, talking to them actually like? What are the things that they are looking for specifically? Well, look, I think that they are interested in an administration that seems less political in nature and more focused or aligned in a pro-growth mentality that recognizes that they are in the business of providing housing and there's mutually beneficial outcomes if we work together.

10:44When I became the mayor of Jersey City, one of the things that I did with the existing developer pool was I recognized the fact that we needed to market the city better to the surrounding areas. I knew that, you know, not necessarily Soho or Tribeca wasn't a comparison to Jersey City. Somebody wasn't making the choice, should I live in Tribeca or Jersey City, but certainly with Brooklyn and Queens and the outer boroughs. So we got most of the larger developers at that point together. And what I said to them was that we would do a marketing campaign where the city's economic development corporation would match the private dollars one for one.

11:17And it would be targeted in these areas that we think that we can attract new residents and new developers. and I was very deliberate that it would not be political in nature. Like I would not appear in this. My voice would not be a part of it. It was going to be focused on branding the city in a different way. That ultimately led to more interest, more demand, more developers. And I think that that was a very, very helpful step that we did out of the gate. The politics is always problematic and people are apprehensive about that. Wait, what do you mean by political exactly? Well, the political is in most places, at least in New Jersey, It's been a history of who you know and a very small cadre of relationships that have allowed you entree into the process.

12:00And in a place like New Jersey, where a lot of the rules are codified in a very, very loose way, you feel obligated that you've got to have a certain type of relationship. And the more you can remove that towards the business climate, the more likely people are to invest in that. And I feel like that's been a kind of a big change in Jersey City overall. This is super interesting. I don't think this dimension of housing unaffordability or the challenges to production has come up. But when you look at still today, Jersey overall, you're running for governor. Do you still see like outside of Jersey City, a general tendency towards it's going to be difficult to get approvals and so forth if you aren't with the right architect, if you aren't with the right paver and so forth?

12:42Is that still an endemic problem in New Jersey at constraining the supply of housing? I think it's a cultural issue in New Jersey. I mean, we had a senator that is about to go to jail for gold bars. I mean, that's a example of the political culture of how people perceive New Jersey. I think that any reasonable person would estimate that you're in the 200 ,000 unit shortage range for the state of New Jersey now, maybe a given a little. And the production of affordable units is roughly only like 3 ,000 a year. So you're looking at close to 70 years to cure the backlog that you have today. It's quite significant.

13:20And there is a sentiment that, you know, municipality by municipality has a disproportionate amount of control over the outcomes of housing production. And part of the job as governor will be to kind of change that narrative so the NIMBYs, not my backyard, are not monopolizing the conversation. And there's a lot of ways that I think a governor can do that. Well, let's talk about that. How do you deal with the NIMBYs? And the localities who fight it because there must be tension between state versus local. Yeah, I think there's a couple of things you could do. So New Jersey has a fair share housing requirement, which has been litigated for 30, 40 years, where every municipality is going to have some sort of obligation on housing.

14:01And a lot of the municipalities push back. If it's a suburban municipality, they say, well, you're obligating us to this 200 affordable units and they come under an 80-20 rule. So the 200 units equates to roughly 1 ,000 units overall, which is kind of the mayors would say it's taxing on their infrastructure, which is true. So the NIMBYs then co-opt the conversation and drag these out in court for some period of time. So Trenton A, I think, can do a better job of creating transparency around your municipality where it is in the process. Today, that doesn't exist. So, for example, if Westfield, use that as an example of a municipality, is cooperating and doing a good job, there's no transparency to that.

14:41So the NIMBYs generally control the conversation at the planning boards because of the fact that there's a lack of information. So I think Trenton being helpful in that is part of it. But number two is that if you have an objective to build new housing, which New Jersey does, and when a mayor or council people say that you're going to make us build these thousand units, but added children in the schools, added needed infrastructure, I do think Trent needs to tie dollars and resources to those municipalities that are cooperating. You do need a carrot and stick approach. Otherwise, you're never going to get mayors to actually move in a place that has home rule like New Jersey.

15:21Thank you.

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16:32Easy Cater, your business tool for food. To learn more, visit easycater.com slash podcast. Okay, so speaking of municipalities and infrastructure, one of your proposals is consolidating some of those municipalities so that you don't have a doubling or, I guess, triplicating. quadruplicating, is that a thing, of services in order to cut costs. And I get that cutting government services and costs is obviously very hot right now. But what particular benchmarks or targets are you looking at here? And how do you ensure, I guess, quality of service as you consolidate? Yeah. So I think the way that we start this is more focused on shared services than absolute consolidation.

17:16And from a mayoral standpoint, knowing that, again, New Jersey has 564 municipalities, a lot of municipalities for a very, very small area, all with home rule and all have departments that are not necessarily important by municipality for municipality. Just to put in perspective, 75 % of those 564 municipalities have less than 20 ,000 people. 50 % of them have less than 10 ,000 people. So a lot of very small municipalities that all have offices like health departments, which should probably be at the county, animal control should be at the county, things like that. And so I think that we've outlined the process to create leverage over the municipalities via referendum and to force kind of shared service once Trenton has leverage.

18:01And I think that's the way you got to get there because nobody's going to voluntarily give up parts of their government unless you have Trenton creating leverage on that. Why hasn't this been done before? Because when I think about animal control, for instance, It does seem kind of crazy that you have hundreds, dozens of municipalities that are all running their own animal control services. But like I imagine there must be a challenge in doing some of this. I think that for the most part, mayors and council people are reluctant to give up departments or relationships. Often the people that work in these small municipalities or large municipalities are personal relationships.

18:35You may know the person's family. They've been there for a long time. And so just the bureaucracy and stagnation is what ends up getting you into this place of not wanting to make any change. People have talked about it for 20 years, about some sort of consolidation. The difference in how we're approaching it is that we are using kind of the referendum process around bonding for municipalities to create leverage over the municipalities to force it. Absent forcing it, you're never going to get it to happen. That's the truth. And so it's a little bit of a different approach. I could tell you that the League of Municipalities, which is the advocacy group for all 564 municipalities in New Jersey, hates what I say, which probably tells you that I'm right about it, to be honest with you.

19:17But that's kind of where we are. Jersey City, I think in 2022, approved something where developers on a voluntary basis can expand the number of units in a plot in exchange for some level of affordable units commitment. Is that being utilized? Like, what is the math work? It's voluntary to include more affordable units, and then they get to expand the number of—is that being utilized? It's used actually a lot. So it's a little bit different than the inclusionary zoning ordinance, which was you get an approval, and let's say 20 % has to be inclusionary zoning depending on what the zoning changes.

19:51This was an overlay zone that we put in place that basically what it said is that within the existing envelope of the building—so from an outside, you could just add more density in there. it is being used because what you see in Jersey City is you see a lot of these smaller units in these larger buildings and they trade at roughly from the downtown area, let's say$100 ,000 a door on approval. So it's of high value to do that for us from the city standpoint. Wait, what does that mean trade at$100 ,000? Like if you sell, let's say a building is approved for 10 units, it roughly would be a million dollars.

20:28And that math is exponential for if you have a 300, 400 unit building. From our standpoint, it was the best way to approach a need for affordable housing without changing the aesthetics or the scale of the building on the outside, which is problematic often to kind of the community group, so to speak. So it is being used. I would probably say it's being used as much, if not more, than the inclusionary zoning ordinance that we have in place. And it's just been another tool to kind of increase the affordable housing production. Since you mentioned aesthetics, I find this really interesting because aesthetics doesn't always come into the conversation on affordable housing.

21:05And it is an issue for a lot of people. And I think about the look of Jersey City versus, I don't know, a Hoboken or something like that. They're very different. How important are aesthetics in your conversations? And I guess, how do you address some of those issues? We have a good planning department and we've gotten better at it. as we've gotten more sophisticated developers into Jersey City, it's allowed us to be more aggressive with the aesthetics and push developers a little bit more. So you can dictate what things will look like. We can, to some degree. And I think that as the marketplace has become more competitive, the natural outcome of the private sector is that they're pushing each other to better products that look better, feel better, better amenities, you know, whether it's a pool or a kind of a little golf range or whatever they got going on in there.

21:53It's changed over time a little bit better. And because we've grown so much, everybody's thinking about how to make their building more competitive. The buildings are being absorbed into the market as quickly as we're building them. They would tell you that. That's largely because of New York's lack of construction, which is a bigger problem. But it also has benefited us from the aesthetic standpoint, for sure. So here's a big picture thought that I have. Go for it. And I kind of hinted at the beginning, but New York City and our neighbors on the other side of the water, greatest place to live in the entire world, in my opinion.

22:26The economic opportunities for an individual here are extraordinary. The culture opportunities are extraordinary. I understand intuitively why rents here or mortgages are so expensive, because it's the best place in the entire world. Jersey City has expanded the housing stock quite a bit, but also affordability has worsened over the last decade or so. Is that inevitable because it's just so good? People want to live in the best place in the world, and so it's going to get more expensive? Because this is where there's sort of like, when I talk to a lot of the YIMBYs, I understand like expanding production that's good for the economy, et cetera.

23:01I'm less convinced that market housing or any housing can actually make these places cheaper because they're so good. They're so desirable. Can you actually solve affordability or do you just have a lot more people here and that's good enough? You could definitely slow the growth of rental increases. Okay. So whether you're going to have a massive rental decrease, I don't know, but you could definitely slow the growth. And we've seen that in the last year, two years, whereas Jersey City was consistently ranked as very, very steep rent increases and it was problematic. That has slowed because of the supply conversation.

23:36Specifically though for Jersey City, I think that yes, we have been a victim of our success in many ways and a victim of New York's lack of construction. So if you are going to have a regional solution, New York and particularly Manhattan needs to carry its weight, which is not happening today. Just on this beggar thy neighbor issue, I guess, do you talk to other cities and other towns about like what they should be doing? And I guess how replicable is the Jersey City model for a place like New York or Hoboken or wherever? Well, I think there's a lot of good things that have happened in Jersey City, and some of the mayoral candidates do reference the amount of housing production because it's been pretty astronomical in Jersey City.

24:19It kind of speaks to the lack of production, again, in New York. I think as governor, there's a lot of things that you can do to change the climate in New Jersey around housing production. And one of the challenges that we've had in New Jersey is you haven't had a governor with municipal experience in 20 years. You know, Phil Murphy came from being an ambassador and Chris Christie was a U.S. attorney and John Corzine was a U.S. senator and et cetera, et cetera. So I do think understanding the touch points, the leverage points, how to motivate somebody at the municipal level is very, very important to being a governor in a place like New Jersey.