Tag: taxes

IMPACT FEES


Come January 31st, each of New Jersey’s 564 municipalities is required to file their own resolution with the State, adopting affordable housing obligations for their municipality.

Come June 30th, each of New Jersey’s 564 municipalities is required to submit their affordable housing plan to the State, for their municipality.

Last October, the New Jersey Department of Community Affairs released New Jersey affordable housing requirements. These will need to be completed by 2035. And here they are…

A) Create 84,698 new affordable housing units.

B) Preserve an additional 65,410 existing housing units.

140,00 homes built or renovated over the next ten years. That’s a lot of homes. That’s a lot of infrastructure needed.

Impact fees…and Trenton.

The Municipal Development Impact Fee Authorization Act – presently in committee in Trenton – would, if passed, broaden New Jersey municipalities’ ability to pass through development-related costs to real estate developers. By broadening the scope for how impact fees can be collected by municipalities.


New Jersey is one of 22 states which presently authorizes the collection of impact fees by a municipality. Different states may refer to “impact fees” though their own state vernacular. For example, in Kansas – Kansas does authorize impact fees – impact fees are also referred to as adequate facility taxes. Or excise taxes.

At the present time, in New Jersey, the impact fees which can be passed along by municipalities to developers are pretty much limited to off-site improvements which arise as a direct consequence of the development. Direct consequence?

My humble opinion…

The way impact fees are levied upon developers in New Jersey today seems a bit…unjust. Tilted too far in favor of developers. At the expense of municipalities. See, direct consequence.

For example, an increased allocation of funds – and personnel – will likely be required in order to accommodate the higher number of classroom students which will be arrived at through the construction of new homes within any municipality. New homes are built. New families move in. Families have kids. Kids go to school.

Yet, in New Jersey, this increase in education funding which will be required by a municipality – as a result of new development – is not able to be passed through to real estate developers by way of impact fees. Though they should be able to be so.

Because any increase in education funding needed in order to accommodate larger classroom sizes – or additional teachers – which comes about as a direct result of development is as much of a direct development-related cost as one can think of. It’s attributed to…the building of new homes. Isn’t it?

Education funds for a New Jersey municipality – collected through impact fees charged to real estate developers – should be permissible.

Larger classrooms. Additional teachers. Potentially, the construction of a brand new school. These are a few of the costs – real costs – that a municipality will incur as a result of an increase in the student population. Because new homes were built in the municipality.

One proposed solution? A boardening of the scope for the collection of impact fees by New Jersey municipalities.

Whereas critics of increasing impact fees may view additional impact fees charged to developers as impediments to growth, that argument is easily overcome.

Impact fees can be collected in lieu of local property tax hikes. Furthermore, impact fees are specific to the development at hand. To the area being developed. As such, the implantation of impact fees enables the broader property tax-paying populace to not be unduly burdened through an increased annual property tax bill. To fund development in town…which really does not directly affect them.

Tax Incremental Financing


When you are considering whether to pursue a real estate development project, reaching out to local government officials regarding the availability of tax incremental financing is one step you can take.

Tax incremental financing – TIF –is a development subsidy whereby the municipality diverts future property tax revenue towards economic development. The origin of tax incremental financing traces back to the State of California. And to 1952.

In order to establish a TIF subsidy, an urban renewal district – a TIF district – is first drawn up by the municipality.

With tax incremental financing, the municipality will be diverting increases in property taxes within the urban renewal district from the municipality, to development. It’s a subsidy. With a lifespan of twenty or twenty-five years.

The foundation for TIF? Development leads to increases in property values within the TIF district. As well as in surrounding neighborhoods. The theory? Increasing property values, which lead to an increase in property tax receipts collected by the municipality, offset TIF subsidies.

Land banks in New York…it’s working


There are just about 4 million total residential homes in state of New York. So, with all of the upheaval in our real estate business today – the NAR settlement, changes to buyers agency compensation, high mortgage rates, increased competition, limited inventory…among all of the other “normal” business challenges in real estate – if one is looking for a unique real estate specialty to consider focusing their efforts upon, as we head into 2025, here is something to consider…

Thirteen years after New York’s Land Bank Law went into effect, there are still in excess of, somewhere in the neighborhood of, 40,000 vacant residential homes situated within municipalities throughout The Empire State.

Two general truths…

Truth “A”:  a land bank has procedures available to the land bank which enable the land bank to acquire vacant and abandoned properties. 

Truth “B”:  Developers look for opportunities to acquire, then, to redevelop, properties.

Once redeveloped, and thus, in turn, once transitioned from its former status as a “non-performing” property to a new status – “performing” property – that property can be sold. Thus, returning what once had been a neighborhood liability to the community…coupled to a handsome, new classification: performing property. A community asset. A property which has now been added onto the municipality’s property tax roll.

As such, performing properties create newly-found property tax revenue for municipalities. Additional property tax revenue – now coming into the coffers of municipalities – ease budgetary constraints municipalities face.

Through New York’s Land Bank Law, in The Empire State, a New York municipality possesses the ability to create their own land bank. By establishing a land bank, resources, direction, vision, personnel – coupled to leveraged capital – enable New York redevelopment to take place. In essence, New York land banks create passageways whereby, as this passageway is followed, adverse conditions attributed to non-performing properties which are nestled, often times, for far too, too long, within New York State tax districts…are lessened.


The New York Land Bank Law was signed by Governor Cuomo on July 29,2011. New York’s first land bank was established the following year.. in 2012. Today, there are over 30 land banks in operation in New York State.

Here are some regional New York land bank statistics to think about. These are local land bank statistics…taken from the area of New York State where Josh Allen plays quarterback. And, albeit, as a KC Chiefs fan, I must say, he plays QB pretty darn excellently up there too:

A. 230 properties acquired

B. 44 renovations completed

C. $2.4 million in assessed Values returned to communities

D. $14 million in leveraged investment