Witnesses testify about success of laws making it easier for municipalities to force rehabilitation of derelict properties

In an era of hard times for New Jersey and many of its cities, municipal officials and community development leaders this week brought good news to Trenton: One decade-old initiative is starting to work.

At a hearing Monday before the Assembly Housing and Community Development Committee, a parade of witnesses from around the state and beyond testified that the Abandoned Properties Rehabilitation Act is living up to its name, helping to return derelict parcels to productive use.

Although the Legislature passed the law in 2004, “it’s really taken off in the last three to five years,” said Staci Berger, president and CEO of the Housing and Community Development Network of New Jersey.

Looking for ways to rebound from the Great Recession and Hurricane Sandy, municipalities have a number of tools under the law. These include using eminent domain against small areas of “spot blight;” putting vacant and abandoned properties into receivership, and accelerating tax lien foreclosures, according to Berger.

Like any tool, though, the APRA law requires leadership willing to use it.

Annette Muhammad, director of Newark’s property management and redevelopment division, told of a home across the street from her own, which burned in a fire a decade ago and then sat, decaying, until last year.

“My daughter called it the haunted house,” Muhammad said, adding that, for years, some absentee owners felt they could let vacant properties sit derelict because “the city’s not going to do anything” to enforce health and maintenance codes.

Last year, though, Newark passed the sort of enforcement ordinance envisioned under APRA and last year’s law requiring out-of-state owners to maintain the exterior and grounds of vacant properties.

As a result, the elusive owner of the “haunted house” has cleaned up the site and begun to rehabilitate it, Muhammad said.

That was just one step in a city initiative to put APRA to use, including coordination between her inspectors and code enforcement, she said.

East Orange has begun similar efforts under a local ordinance adopted in November, said Dwight Saunders, the city’s director of property maintenance. Since then, the city has identified 582 abandoned properties, and also has begun efforts to collect fees from their owners, he said.

That can be a difficult task in an era when owners, landlords and lenders have walked away from properties where mortgage, back taxes or rehabilitation costs can be greater than what the houses are worth, Saunders said.

“There’s a lot of investigative work that you have to do to find these people” or companies, whose addresses often are post office boxes, he said.

But so far, the city has tracked down the owners of 105 properties. Working with the city’s quality of life task force, Saunders expects East Orange to collect $403,000 in enforcement fees this year.

Across most of the country, home foreclosures have receded since the Great Recession, though some real estate analysts report they may be increasing again.

In New Jersey, the problem has never gone away — the Garden State leads the nation in foreclosure rate — and the problem is particularly acute in some neighborhoods. Saunders pointed to a block of Schuyler Terrace, where eight of 12 four-unit buildings are vacant and possibly abandoned. APRA gives the city the opportunity to use “spot eminent domain” to take those properties for resale if necessary, he said.

The law also has helped public-private partnerships, said John Restrepo of the Garden State Episcopal Community Development Corp., which redevelops and manages formerly distressed sites in Jersey City. The city has at least 1,400 vacant properties, he said. While about 20 percent are located in the Greenville neighborhood in the city’s south end, where current foreclosures are concentrated, others are scattered across town and income levels.

Working with the city and partners through APRA has provided “flexibility to acquire sites at normal costs even in high-cost markets,” and offer units to people of varied income levels, Restrepo said. Many of the units are “two-family homes, which allows us to leverage rental income” to qualify buyers for mortgages, he added.

Such testimony provided a segue into the legislation that actually was on the committee agenda, A-4248, another effort to allow communities to establish “land banks” — acquiring, managing and marketing properties to spur redevelopment.

Witnesses described the concept as spreading through other states with mixed results, but with some success in areas with conditions similar to those facing many New Jersey cities. Making it easier for hard-pressed municipalities to amass vacant or abandoned properties could be a tool to streamline economic development, they said.

Gov. Chris Christie vetoed a similar bill last year. But Assemblywoman Mila Jasey (D-Essex), a principal sponsor of the legislation, said she believes changes will address the governor’s objections. But advocates acknowledged the governor’s office has not cooperated with the rewrite, so they are operating more in hope than confidence.

“One major concern was fraud,” said Assemblywoman Maria Rodriguez-Gregg (R-Burlington), citing problems two years in Indianapolis, where officials of the city’s land bank were charged with fraud in land sales. She pressed witnesses to explain how the new bill would prevent such instances.

The focus on fraud is useful, since any successful program must combine public transparency with mixed oversight, said Alan Mallach, who is currently with the Center for Community Progress in Washington, D.C., but was known to decades of New Jersey policy makers from his previous jobs here. They include a decade as Trenton’s housing and community development director, as well as a faculty position at Rutgers University.

In Indianapolis, city officials established their own land bank, with no one looking over their shoulders to monitor their real-estate transactions, Mallach said.

New Jersey communities should establish “very explicit procedures,” including a requirement that transactions be posted on a public website, that land bank boards include public members, and that there are detailed contacts between the agency and any participating community, he said.

“I think this current bill does a very good job of minimizing the risk of fraud and bad behavior,” he said.

But all concerned agreed with his assessment that no single program or policy is going to lift the state out of its economic doldrums. Even some well-intended efforts are excluding potential partners.

Curt Macsyn, executive director of the Camden Community Development Association, highlighted efforts such as the database Camden Data, which identifies 3,417 abandoned properties in that city. A similar initiative in Trenton spearheaded by ISLES Inc. produced the site Restoring Trenton, which is being used by that city in its new planning efforts.

While praising the land bank initiative, though, Macsyn said the Economic Opportunity Act of 2013, which streamlined New Jersey’s economic development incentive programs, has financial thresholds that are too high for many neighborhood groups to participate. The Legislature should require groups benefitting from development incentives to find partners in specific neighborhoods, Macsyn said.

Assemblyman Jerry Green (D-Union), the committee chairman, sounded a similar theme. While praising the many local programs, Green said they should coordinate with efforts in neighboring towns. The state also has responsibilities, such as inspecting houses with four or more units, and should be brought in as a partner, Green said.