Attachment C
b. The Legislature deems it to be necessary for the public welfare to increase the supply of newly
constructed rental housing to meet the need for such housing in New Jersey. In an effort to
promote this new construction, the Legislature enacted P.L.1987, c.153 (C.2A:42-84.1 et seq.),
the purpose of which was to exempt new construction of rental multiple dwelling units from
municipal rent control so that the municipal rent control or rent leveling ordinances would not
deter the new construction. Although this legislation was initially made effective only for a
temporary five-year period, it was expanded for a second five-year period by P.L.1992, c.206
until 1997, and then in that year made permanent by P.L.1997, c.56. At the time P.L.1987, c.153
(C.2A:42-84.1 et seq.) was introduced, the uniform method of financing construction of new
apartments was through project-based mortgage loans. There was little, if any, new construction
financed in any other way. Recently, however, there has been increased utilization of Real Estate
Investment Trusts (REITs) and other public companies which could potentially be an important
new source of construction of rental housing in New Jersey. These entities generally do not
utilize project-based mortgages but instead obtain comprehensive financing not secured by
individual mortgages as a more efficient and lower cost means of financing new construction.
There has been confusion as to whether new construction undertaken by REITs and other such
entities would be exempted from municipal rent control under the terms of section 2 of P.L.1987,
c.153 (C.2A:42-84.2) when there is no initial mortgage financing. To eliminate any confusion
and to facilitate the construction of new rental units for which there is no initial mortgage