David Fisher, PP, AICPVice President, K. Hovnanian Homes

March 1, 2013

Creative Housing Solutions For Changing Demographics

• Background on State Planning

• Policy Emphasis & Redevelopment Focus

• Changing Demographics

• Trends in Housing Preferences

• Housing Product to Meet Future Demand

• Challenges

Overview

State Planning

First attempt to create some type of state planning authority came in 1934 when Governor A. Harry Moore established a temporary state planning board. In May 1934, the first State Planning Act (P.L. 1934, c. 178) was passed.

Modest efforts ensued for many years until the late 1970’s when the NJ Dept of Community Affairs prepared the first real comprehensive plan, known as the 1977 “Preliminary Draft” State Development Guide Plan.

Courts began to give credence to Draft Guide Plan by tying affordable housing compliance to areas identified in this document for growth.

State Plan Background

State Planning CommissionEstablished by 1985 State Planning Act along with Office of State Planning to prepare state planning documents, and

to manage implementation and municipal ‘cross-acceptance’ of the Plan. Leads to adoption of first “State

Development and Redevelopment Plan” in 1992.

State Planning Commission’s Office of State Planning later becomes Office of Smart Growth (moves from Dept of Treasury to NJDCA)

Plan update and 2nd round of cross-acceptance takes place

2nd State Plan adopted (2001)

Preparation of third draft Plan released in 2004; cross-acceptance process begins again, but stalls …. little progress for many years

• Abbreviated (40 p.) State Plan document simplifying state policy guidance for investments in growth, infrastructure and environment.

• Creates 4-tiers of ‘investment areas’:

~ Priority Growth

~ Alternate Growth

~ Limited Growth

~ Priority Preservation

• New emphasis on ‘Industry Clusters’

• Highest Priority Growth targeted for: former PA-1 areas; urban centers; UEZ’s; Redevelopment Areas; Transit Villages; higher educ campuses; and other areas key to important industries

• State Strategic Plan yet to be adopted

New State Plan Vision

Not Much Difference1977

2001…

What’s left?

Planning Areas 1 and 2 and a dozen or so designated ‘Centers’

… minus areas being removed from local sewer service areas by NJDEP through amendments to Areawide Water Quality Mgt Plans (WQMP’s)

RESULT: Less land for development; greater focus on redevelopment and infill.

Demographic Realities …. Future Growth Sectors

•Eco-boomer’s (children of baby-boomers) in mid-20’s to early 30’s

•Aging baby-boomers / move-downs … smaller homes; near children

•Foreign-born populations (Hispanic, Asian, Indian, etc.)

STATISTICS• Birth rate in U.S. continues to fall … in 2011, we produced the lowest

number (less than 4 million) since 1998. Nationwide, birth rates have been declining since a peak of 4.3 million in 2007.

• According to the Census, over the past four decades while total population in NJ increased (from 7.1 to 8,7 million), the school-age population has declined by more than 270,000 students during that period.• Whereas in 1970, the number of school-age children represented 25% of the total population, by 2010 that percentage had dropped to 17.3%.

Changing Demographics

Fewer households with children … dependent on market and locational variations

Source: Otteau Evaluation Group, 2012

NYC v. NJ … a Reversal in School Kids

MED. HH INCOMES

> $125,000 $100 – 124,999 $80 – 99,999 $65 – 79,999 < $65,000

Bergen County – school enrollment losses

• Young and middle-age NYC couples and singles with children less likely to move to NJ suburbs for schools.

• North Jersey (non-urban) towns experiencing reductions in school enrollments

Bergen Co. Towns 2000 2010 % dropNorwood 320 214 .33Harrington Park 344 193 .44Franklin Lakes 703 435 .38Wayne 3,313 2,458 .26Ringwood 935 689 .26

Source: The Record, 2/17/2013, staff writer David Sheingold.

Percent of Homebuyers Wanting to Walk to:

0%10%20%30%40%50%60%70%80%

Source: National Association of Realtors, 2011

Increased Demand for Convenient Locations

•Walk-ability Creates Value: Homes in walkable urban neighborhoods experienced less than half the decline in home prices (since 2006) as compared to other traditional/suburban locations.

• Fewer Young People Want Cars: In 1995, people aged 21-30 accounted for 21% of all miles driven. In 2009, that number fell to 14%.

Sources: Otteau Evaluation Group & Brookings Institution, 2011

N.J. Residential Permits & Multi-family Segment

(1980 – 2012*)

Source: Patrick J. O’Keefe, Jan 2013

N.J. – Household Characteristics

Source: Otteau Evaluation Group, 2012

Adjustments in Household Composition Alters Outlook and Demand for New Housing

Buyer Profile

~ Seeking pure, basic housing

~ Price is key

~ Lower income segments

~ Desire home-ownership but often credit challenged

~ Active young professional singles & couples, career focused upper-middle class professional

~ Adaptable will sacrifice bdrms for features; price focused on technology & style

~ Values convenience over price

~ Active, laid back middle class singles or couples & families

~ High rate of home-ownership often in rural areas

~ Affinity for outdoor sports, rec activities

~ Not traditionally career focused

~ Traditional middle to middle-upper class families

~ Prefer mid-sized suburban homes

~ High home ownership w/ strongest affinity toward new homes and communities

~ Home features and community feel are important

~ Affluent families, older couples

~ Privacy, prestige and features important

~ Custom tastes, country club preferences

~ Demand high-end finishes; many options

~ Variety of product, yet location and size both important

~ Semi to fully retired lower-middle class adults

~ Mixture of ethnically and racially diverse; strong ties to communities and traditions

~ Only likely to move to downsize or locate closer to family

~ Middle class adults nearing or in retirement

~ Locations, features and community feel is important and ability to remain active

~ Motivated to downsize and have maintenance-free lifestyle

~ Consider a retirement purchase their final home

~ Wealthiest of active adult segments

~ Middle to upper class adults w/ eye on retirement

~ Community, sense of place is important

~ Very active and social lifestyle

~ Stylish features, new construction, community feel are all important

Buyer Profile

Affordable multi-family townhomes

Delaware Run (Trenton, NJ)

Whispering Pines (PA)

Bayport (West Atlantic City, NJ)

Mid-priced Townhouses (Infill)Hartland Square

(North Brunswick, NJ)

Providence Corner (PA)

The Ivy (Shrewsbury, NJ)

Redevelopment - CondominiumsMorris Place

(Morristown, NJ)

Station Square(Union Twp, NJ)

High-end Waterfront Condo’s

Grandview at Riverwalk

(West New York, NJ)

Mid and High-Rise Flats77 Hudson(Jersey City, NJ)

Port Imperial(W. New York and

Guttenberg, NJ)

Oceanfront (Redevelopment) Multi-family

Active Adult SFD

Four Seasons at Harbor Bay(Little Egg Harbor, NJ)

Four Seasons at Manalapan (Manalapan Twp, NJ)

Still in demand for right price / amenities

Multi-family Age Restricted Housing

Four Seasons at Ridgemont(Montvale, NJ)

Broad Offering of Housing Product

• Matching housing value/price to market demand … Can we make it affordable enough to attract larger demographic groups/buyers?

• Overcoming redevelopment impediments:

• Securing incentives to acquire, remediate and/or improve properties to create opportunities

• Finding properties with manageable environmental liabilities/clean-ups

• Managing costs for infrastructure and site development

• Financing challenges for land acquisition and for home-buyers

• Need for property tax relief in certain cities/towns (PILOT?)

Challenges

Acquisition issues … complications of condemnation

Environmental remediation Cost of labor (prevailing wage) Condition of sewer, water, stormwater

infrastructure Traffic improvements

Thank You!

For information contact:

David B. Fisher, PP, AICP

Vice President – Governmental Affairs

K. Hovnanian Homes

110 Fieldcrest Avenue, 5 t h Floor

Edison, NJ 08837

(732) 225-4001

dfisher@khov.com