A5424 R1

An Act concerning institutional investor ownership related to residential property and supplementing chapter 3 of Title 46 of the Revised Statutes.

Be It Enacted by the Senate and General Assembly of the State of New Jersey:

1. The Legislature finds and declares that:

a. The demand for housing in New Jersey has steadily increased, with New Jersey experiencing the 10th fastest growth rate of all states and the fastest population growth of those states in the Northeast Region;

b. Conversely, the inventory of single-family homes continues to decline, with nearly 10 percent fewer homes available in January 2025 compared to January 2024, leading to an increase in median home prices of nearly 12 percent;

c. Complicating concerns related to supply and demand, institutional investors wield a tremendous amount of market power at significantly lower market shares;

d. The unique structure of the housing market enables institutional investors, through their purchasing behavior, to manipulate supply and demand in the markets for single-family home sales and single-family home rentals;

e. The reduced availability of real property and single-family homes is well-documented in an October 2022 study entitled "Buying New Jersey: The Rise of Institutional Ownership of Residential Properties," produced by the Office of Policy and External Affairs in the Department of Community Affairs, which examines recent trends in institutional ownership and the impact of the rise of institutional ownership on changes in residential sale prices and sales volume in this State;

f. While the study observes that approximately six percent, or one in seventeen residential properties, were institutionally owned as of 2020, over 71 percent of these properties are owned by corporate or business entities, and 22 percent were owned by trusts, such as real estate investment trusts;

g. As a result, State and local governments have attempted to address the reduced availability of real property and single-family homes, caused by institutional ownership and speculation by institutional investors, through various means;

h. While some methods appear to be effective where implemented, it is critical to allocate revenues generated in a manner most responsive to the needs of the State and the housing region; and

i. Therefore, it is necessary and proper for the Legislature to promote housing availability and prevent land speculation by imposing a fee for institutional ownership of unproductive real property zoned for residential use to incentivize the productive use of real property, reduce land speculation, increase the availability of land and single-family homes, address the State’s housing shortage at a time when New Jersey’s population continues to grow, and to use the revenues generated to best respond to the needs of the State, the State’s housing regions, New Jersey’s municipalities, individual home purchasers, and renters.

2. As used in P.L. , c. (C. ) (pending before the Legislature as this bill):

"Abandoned" or "vacant" means, with respect to real property:

(1) that at least two of the following conditions exist with respect to the property:

(a) overgrown or neglected vegetation;

(b) the accumulation of newspapers, circulars, flyers, or mail on the property;

(d) the accumulation of hazardous, noxious, or unhealthy substances or materials on the property;

(e) the accumulation of junk, litter, trash, or debris on the property;

(f) the absence of window treatments such as blinds, curtains, or shutters;

(g) the absence of furnishings and personal items;

(h) statements of neighbors, delivery persons, representatives of an association of a planned real estate development, or government employees indicating that the residence is abandoned or vacant;

(i) windows or entrances to the property that are boarded up or closed off or multiple window panes that are damaged, broken, and unrepaired;

(j) doors to the property that are smashed through, broken off, unhinged, or continuously unlocked;

(k) a risk to the health, safety, or welfare of the public, or any adjoining or adjacent property owners, exists due to acts of vandalism, loitering, criminal conduct, or the physical destruction or deterioration of the property;

(l) an uncorrected violation of a municipal building, housing, or similar code during the preceding year, or an order by municipal authorities declaring the property to be unfit for occupancy and to remain vacant and unoccupied;

(m) a written statement issued by the most recent owner expressing a clear intent to abandon the property; or

(n) any other reasonable indicia of abandonment.

(2) Real property shall not be considered "abandoned" or "vacant," if at least one of the following conditions exists on the property:

(a) a building is unoccupied, which is undergoing construction, renovation, or rehabilitation that is proceeding diligently to completion, and the building is in compliance with all applicable ordinances, codes, regulations, and statutes;

(b) a building is occupied on a seasonal basis, but otherwise secure; or

"Affordable housing" means an inclusionary development, as the term is defined pursuant to subsection f. of section 4 of P.L.1985, c.222 (C.52:27D-304).

"Beneficial owner" means, with respect to an entity, an individual who, directly or indirectly, through any contract, arrangement, understanding, relationship, or otherwise, exercises substantial control over the entity, or owns or controls not less than 10 percent of the ownership interests of the entity. "Beneficial owner" shall not include:

(1) a person under the age of 18 years;

(2) an individual acting as a nominee, intermediary, custodian, or agent on behalf of another individual;

(3) an individual acting solely as an employee of a corporation, limited liability company, or other similar entity and whose control over or economic benefits from such entity is derived solely from the employment status of the person;

(4) an individual whose only interest in a corporation, limited liability company, or other similar entity is through a right of inheritance; or

(5) a creditor of a corporation, limited liability company, or other similar entity.

"Commissioner" means the Commissioner of Community Affairs.

"Family limited liability company" means a limited liability company:

(1) that has no more than five members;

(2) whose membership satisfies the following criteria:

(a) each member is an individual or a family trust; and

(b) each member who is an individual is related to each of the other members who are individuals, within and including the third degree of consanguinity or affinity; and

(3) whose revenue is paid directly from one member to another.

"Family trust" means:

(1) a trust in which a majority of the beneficiaries are individuals who are related to each other within and including the third degree of consanguinity or affinity; and where each beneficiary is an individual or an organization described pursuant to section 170(c)(2) of the Internal Revenue Code (26 U.S.C. s.170(c)(2));

(2) a charitable remainder annuity trust or a charitable remainder unitrust, as those terms are defined pursuant to section 664 of the Internal Revenue Code (26 U.S.C. s.664); or

(3) a charitable lead trust.

"Institutional investor":

(1) means:

(a) a partnership, corporation, limited liability company, or trust;

(b) an affiliate, subsidiary, or holding company of a partnership, corporation, limited liability company, or trust;

(d) a beneficial owner of an affiliate, subsidiary, or holding company of a partnership, corporation, limited liability company, or trust; and

(2) shall not mean:

(a) a nonprofit corporation organized for the exclusive purpose of acquiring real property, that is, or is to be, used for the development and provision of affordable housing;

(b) a family trust; or

"Single-family home" means a residential property and any ownership interest of a residential property, consisting of one to four dwelling units. A "single-family home" shall include a townhome or townhouse.

"Small institutional investor" means an institutional investor that, in the aggregate through any combination of the institutional investor’s partnerships, corporations, limited liability companies, beneficial owners, or trusts; or affiliates, subsidiaries, or holding companies of a partnership, corporation, limited liability company, beneficial owner, or trust, owns 20 or fewer parcels of ¹[real property] subject property¹ or single-family homes.

"Subject property" means real property, any part of which is zoned for residential use, which is unproductive real property that is purchased, owned, or acquired by an institutional investor, which has not maintained a continuous or seasonal occupancy for:

(1) a period of 12 months or more subsequent to the effective date of P.L. , c. (C. ) (pending before the Legislature as this bill);

(2) a period of 12 months or more subsequent to the real property’s acquisition or purchase; or

(3) any other period of time prescribed by the commissioner pursuant to section 4 of P.L. , c. (C. ) (pending before the Legislature as this bill).

"Unproductive real property" means real property, including raw land and structures thereon, which qualifies as abandoned or vacant. "Unproductive real property" shall not include real property predominantly dedicated to an agricultural use, or development or construction activities that have not yet begun, but will begin, in the subsequent 18 months to the 12-month period specified herein, demonstrated by:

(1) executed contracts between developers and contractors or other parties who will develop, engage in construction, or engage in other similar activities on the real property;

(2) a completed application for development, as the term is defined pursuant to section 3 of P.L.1975, c.291 (C.40:55D-3); or

(3) other evidence required by the commissioner pursuant to section 4 of P.L. , c. (C. ) (pending before the Legislature as this bill).

"Townhome" or "townhouse" means a single-family dwelling unit, constructed in a group of three or more attached units in which each unit extends from foundation to the roof and with a yard or public way on not less than two sides.

3. a. Except as provided by subsection c. of this section, on and after the effective date of P.L. , c. (C. ) (pending before the Legislature as this bill), there shall be imposed a fee on an institutional investor that holds, acquires, or purchases any ownership interest, whether directly or indirectly, or through any combination of an institutional investor’s constituent persons or entities, in a subject property, in an amount equal to the product of:

(1) $30,000, and

(2) the number of subject properties owned by the institutional investor as of the last day of the calendar year.

b. The fee owed pursuant to this section shall be paid to the commissioner in a manner prescribed pursuant to section 4 of P.L. , c. (C. ) (pending before the Legislature as this bill).

c. Except as provided in subsection d. of this section, the provisions of P.L. , c. (C. ) (pending before the Legislature as this bill) shall not apply to:

(1) a tax exempt nonprofit organization that is described in section 501(c) of the Internal Revenue Code (26 U.S.C. s.501(c)) and exempt from federal taxation pursuant to section 501(a) of the Internal Revenue Code (26 U.S.C. s.501(a)), which purchased real property for the exclusive purpose of providing, and which serves to provide, affordable housing in this State;

(2) a small institutional investor;

(3) a financial institution, including a credit union, or an institutional investor, which has acquired or purchased real property as a direct result of any foreclosure, or a secured transaction pursuant to the "Uniform Commercial Code - Secured Transactions," N.J.S.12A:9-101 et seq.;

(4) an institutional investor, which, as a condemnor, as the term is defined pursuant to subsection (b) of section 2 of P.L.1971, c.361 (C.20:3-2), has acquired or purchased real property pursuant to the "Eminent Domain Act of 1971," P.L.1971, c.361 (C.20:3-1 et seq.);

(5) a governmental authority; or

(6) such other institutional investors in possession of any ownership interest in real property that the commissioner, in consultation with the Director of the Division of Consumer Affairs in the Department of Law and Public Safety, determines to be: necessary to effectuate the provisions of P.L. , c. (C. ) (pending before the Legislature as this bill), in the public interest, and necessary to preserve the quantity and availability of real property in this State. An institutional investor, subject to an exemption pursuant to this paragraph, shall provide additional information that the commissioner determines to be necessary for the institutional investor to qualify for an exemption pursuant to this paragraph and that effectuates the purposes of P.L. , c. (C. ) (pending before the Legislature as this bill).

d. Notwithstanding the provisions of subsection c. of this section to the contrary, an institutional investor shall submit to the commissioner, on a form established by the Department of Community Affairs, in consultation with the Division of Consumer Affairs in the Department of Law and Public Safety and published by the Department of Community Affairs on the department’s Internet website, a report containing the information required by this subsection, and such other information as required by the rules and regulations promulgated by the commissioner pursuant to section 4 of P.L. , c. (C. ) (pending before the Legislature as this bill). The information submitted by the institutional investor shall include but not be limited to, the number of subject properties, properties at risk of becoming subject properties within six months, and single-family homes that, in the aggregate or through any combination of the institutional investor’s constituent persons or entities, were purchased or acquired within the previous 12 months, or are currently owned by the institutional investor. An institutional investor shall submit the information required pursuant to this subsection to the Department of Community Affairs for every taxable year by April 15 annually, and within 60 days of the effective date of P.L. , c. (C. ) (pending before the Legislature as this bill) if April 15 is not less than 90 days subsequent to the effective date of P.L. , c. (C. ) (pending before the Legislature as this bill).

e. An institutional investor that fails to provide the information required by subsection d. of this section shall, in addition to the fee established pursuant to subsection a. of this section, be liable to a civil penalty of $500 for a first offense, and $1,000 for a second and any subsequent offense. Each day that the commissioner is not in receipt of the report required by subsection d. of this section shall constitute a separate and distinct offense. A penalty pursuant to this subsection shall be collected in a civil action by a summary proceeding pursuant to the "Penalty Enforcement Law of 1999," P.L.1999, c.274 (C.2A:58-10 et seq.). The Superior Court of New Jersey, Law Division in the county or vicinage in which the majority of the real property owned or acquired by the institutional investor is located shall have jurisdiction over the proceedings. Process shall be in the nature of a summons or a warrant, and shall issue upon the complaint of the Attorney General.

4. The Commissioner of Community Affairs shall, in consultation with the Director of the Division of Consumer Affairs in the Department of Law and Public Safety, and in accordance with the "Administrative Procedure Act," P.L.1968, c.410 (C.52:14B-1 et seq.), adopt rules and regulations to implement the provisions of this act.

5. This act shall take effect on the first day of the sixth month next following the date of enactment, and shall apply to an institutional investor that holds, acquires, or purchases any ownership interest in a subject property on or after the effective date of P.L. , c. (C. ) (pending before the Legislature as this bill), except that the Commissioner of Community Affairs and the Director the Division of Consumer Affairs in the Department of Law and Public Safety shall take anticipatory action necessary to effectuate the provisions of P.L. , c. (C. ) (pending before the Legislature as this bill).