In 2016, Jersey City’s population is set to exceed Newark’s. With an influx of newcomers, city officials have pioneered a tax incentive plan that encourages new development while actively combating segregation by income. While these goals usually conflict, officials are confident that the program, Payment In Lieu of Taxes (PILOT), will meet the needs of all stakeholders.
Introduced in 2013 by newly elected Mayor Steven M. Fulop, the plan spreads affordable and market rate housing evenly throughout the city by tying development incentives to the relative desirability of given neighborhoods. Though there’s been no development under PILOT yet, as of now, new developments can qualify for the program. New Jersey property taxes are one of the nation’s highest. Like most tax abatements, the objective of PILOT is to encourage economic activity by easing the developer’s tax burden to incentivize denser development.
The city partnered with researchers at New York University and Columbia to study the city’s housing market intensively at the neighborhood level. According to Ryan Jacobs, Jersey City’s Director of Communications, Jersey City operates under the philosophy that “any improvement to [the] land is a good idea.” Jacobs critiqued the “tale of two cities” dichotomy that prevails in many discussions around balancing affordability and development. In Jersey City, he states that “that choice is a false choice, it’s more communal than that. It’s not healthy to have one part of the city that is growing and one part that isn’t.”
PILOT divides the city into four tiers, each with a different tax incentive. Tiers 1 and 2, highly developed areas, receive property tax abatements for a shorter amount of time. Tier 1, for example, has a 10 year property tax abatement, and a mandate that 10 percent of newly constructed units be affordable housing. Tier 4, by contrast, has a 15 percent affordable housing mandate and a 30 year property tax abatement. The city wants to attract concentrated investment in Tiers 3 and 4. Consequently, these zones have longer tax abatements.
Regardless of their designation, there is a mandate in each tier to build affordable housing. Jersey City adopted HUD’s standards of affordable housing to encompass individuals making 80 percent of the Area Median Income (AMI) and below.
Tax abatements are tailored to individual neighborhoods. A special target is the revitalization of Journal Square, once the commercial heart of the city, and now a neighborhood in need of reinvestment.
Currently, downtown and waterfront districts, like the 1980s New Urbanist Port Liberté, attract new residents who can afford median monthly rents greater than $2,000, while inland neighborhoods garner comparatively less investment. According to the 2010 Census, approximately 19,000 Jersey City units (29 percent) rent for greater than $1,500 per month. Port Liberté, with its canal, bike paths, and dense residential clusters, has a median household income of $100,000, compared to the citywide median of $46,813.
The city intends to make the affordable housing application process as transparent as possible. Per state law, developers of market rate housing that receive tax abatements must contribute $1,500 per residential unit to the city’s affordable housing fund. The fund has received $15 million dollars since 2003.
These proposed developments pictured here serve as examples of projects that could be executed under PILOT. The two images at top are of a waterfront development that received an abatement (though not through PILOT). The complex is 80 percent market rate and 20 percent affordable, and the first mixed income development in that district in 30 years.
On Montgomery Street, 116 new affordable units are planned (an additional 10 units will be market rate). The complex is designed by Wallace Roberts and Todd (WRT).