Redevelopment vs. Rehabilitation: What's the Difference?
In New Jersey, the Local Redevelopment and Housing Law (LRHL) provides municipalities with powerful tools to revitalize distressed areas. For developers, the two most important designations are "Area in Need of Redevelopment" and "Area in Need of Rehabilitation." While they sound similar, they unlock different powers and incentives.
Area in Need of Redevelopment
This is the more powerful designation. It requires a rigorous investigation by the Planning Board to prove that the area meets specific statutory criteria (e.g., dilapidation, obsolescence, faulty arrangement).
Key Powers
- Long-Term Tax Abatements (PILOTs): Up to 30 years. This is the holy grail for project financing.
- Super-Zoning: The town can adopt a Redevelopment Plan that supersedes existing zoning, allowing for custom density, height, and use standards.
- Eminent Domain: In a "Condemnation Redevelopment Area," the town can use eminent domain to acquire holdout properties. (Note: "Non-Condemnation" areas do not have this power).
Area in Need of Rehabilitation
This is a "lite" version of redevelopment. It is easier to qualify for—often based on the age of the housing stock or water/sewer infrastructure—but the powers are more limited.
Key Limitations
- Short-Term Abatements Only: Generally limited to 5-year tax exemptions/abatements. You cannot get a 30-year PILOT in a Rehabilitation Area unless it is also designated as a Redevelopment Area.
- No Eminent Domain: The town cannot take property.
- Zoning: The town can still adopt a Redevelopment Plan, but the process is slightly different.
Which One Do You Need?
If you are building a large-scale multifamily project, you almost certainly need a Redevelopment designation to secure a Long-Term PILOT. The 5-year exemption offered by Rehabilitation areas is often insufficient to offset the high taxes on new construction in NJ.
The "Spot Redevelopment" Strategy
If your site is not currently in a Redevelopment Area, you can ask the municipality to investigate your specific block and lot. This is common practice. You fund the study, the Planning Board reviews it, and if the site qualifies, the Council designates it.
Navigating the Designation Process
Getting a site designated is a political and legal process. I help developers manage the investigation and negotiation with municipal officials.
About the Author
Ryan Goldfarb is a real estate development advisor. He specializes in New Jersey land use law and redevelopment designations.