On Monday, March 17, the Senate Community and Urban Affairs Committee advanced an amended, version of S-1408, which authorizes the conversion of certain office parks and retail centers to mixed-use developments. The amended SCS for S-1408 does not address the concerns raised by local officials and removing the two-year sunset, makes the bill even more objectionable.  

As amended, the SCS for S-1408 would: 

• Require a municipal planning board to permit the conversion of eligible properties, so-called “stranded assets” into mixed-use developments, effectively bypassing the existing variance procedure and preempting local zoning. 
• An eligible property is defined as: 
  1. An office park that is at least 50,000 square feet or a retail center of at least 15,000 square feet; and 
     1. Has a vacancy rate of at least 25% rate for at least 18 months immediately preceding the application; or  
     2. Has suffered an economic downturn over the immediately preceding 3 years, demonstrated by evidence of a quantifiable loss in revenue such that the developer’s expenses for the premises have exceeded revenues by at least 30% or more each year. 
• The substitution eliminates the 2-year sunset in the original bill, meaning that this would be a permanent preemption of local planning. 

A mixed-use development, which may include the demolition of existing structures, that is subject to a preemptive conversion shall be considered a permitted use and not require a variance, provided that: 

1. The development otherwise complies with zoning requirements in the municipality’s mixed-use zone (see below).
2. The application proposes at least two types of uses, one of which shall be residential, and no use shall be industrial. 
3. At least 20% of the residential units to be constructed shall be reserved as very-low-income housing, low-income housing, or moderate-income housing 
   1. At least 50% within each bedroom distribution are low income units 
   2. At least 13% of the low income units are very low income units; and 
   3. Must comply with the Uniform Housing Affordability Controls in N.J.S.A. 52:27D-301 et seq.

The bill goes on to establish the criteria to follow if there are multiple mixed-use zones and legislates mixed-use zones if the municipality does not have a mixed-use zone. This is likely to result in costly litigation.  

In addition, the bill’s legislative findings declares that “one significant impediment to converting stranded retail centers and office parks into dynamic mixed-use communities is the application of outdated, rigid municipal zoning regulations that often separate residential and commercial uses from each other.” Then states that in order “to encourage the development of vibrant and desirable mixed-use communities, further to the public good, it is appropriate for the Legislature to set standards to modernize local land use regulations that stand in the way of the repurposing and redevelopment of stranded retail centers and office parks.” 

The League testified in strong opposition to the legislation based on the unnecessary and unwarranted preemption of local master planning. In our statement, we noted that any such application can be made through the variance process or a redevelopment process. Further, we noted that the criteria in the bill is ripe for litigation and expressed concern that this could turn into a backdoor means to challenge a town’s approved affordable housing plan and expose the municipality to litigation. 

The bill now stands at 2nd reading in the Senate. SCS-S-1408 could be scheduled for a Senate floor vote as soon as next Monday, March 24. For this reason, it is critical to reach out to your State Senator as soon as possible and ask for a NO vote on S-1408, also known as the “stranded assets” bill.  

The Assembly companion, A-2757, has not advanced to date and is referenced to the Assembly Commerce and Economic Development Committee.  

Contact: Mike Cerra, Executive Director, mcerra@njlm.org, 609-695-3481, x120.