The Senior Housing Conversion Quagmire Needs to be Resolved

November 8, 2012

The ongoing dispute between municipalities and real estate developers over applications to convert senior housing to market-rate housing has left the real estate market in an untenable state of confusion and uncertainty. Up until 2011, New Jersey law required local zoning boards to approve any developer's request to convert designated senior housing into market rate housing. Now, after that law has expired, the issue is being fought in the courts through a seemingly never-ending and nightmarish process of appeals.

The current standoff - brought about by the combination of an unfortunate economic climate and a lack of political will, involves two very powerful interest groups. Municipal elected officials and the State League of Municipalities are steadfast in their belief that allowing vacant, dedicated senior housing units to be converted to market-rate units would have a detrimental affect on school systems, municipal budgets and local infrastructure. Conversely, the New Jersey Builders Association and the developers they represent argue that it only makes sense that unoccupied units that were once dedicated for residents fifty-five and older should be converted to market-rate housing to address demand.

The arguments put forth by both sides have some degree of merit. As a former Mayor, I realize that turning senior communities into market rate housing could, in certain cases, put a strain on local resources. But as a practicing attorney and a former Chief Counsel to a New Jersey Governor, I understand that its not in our best economic interest as a state to let these newly constructed properties lie vacant while there is a demand for market-rate housing.

Prior to the economic downturn, municipalities rightfully exercised their rights to shape the dynamics of their locality, but today, these concerns should be secondary to boosting the economic well being of our state and to revitalizing a languishing market.

The key to finally resolving this issue lies with the definition of the term "substantial detriment," a vague legal criteria being used by municipalities to oppose conversion applications. In 2011, a bipartisan bill was introduced in the New Jersey State Legislature that would have made the definition of "substantial detriment" clear and discernible. Unfortunately, this bill was never voted out of committee, and due to the high volume of lawsuits and appeals, the courts have since been unable to produce a clear, universally accepted definition.

Defining what qualifies as "substantial detriment," would allow for appropriate vacant units to finally be sold at fair market value while simultaneously preventing the approval of the conversion applications that would produce a real, tangible hardship on a municipality. It is time for this issue to once again be taken up in the state legislature and its imperative that the Christie Administration and the legislative leadership of both parties use their collective political will to ensure that "substantial detriment" is defined once and for all.

Paul T. Fader is a named partner in the law firm of Florio Perrucci Steinhardt & Fader, is the former two-term Mayor of the City of Englewood and was the Chief Counsel to Governor Richard Codey.

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