NJ Local Redevelopment and Housing Law

The statutory framework

• N.J.S.A. 40A:12A-1 et seq. — Local Redevelopment and Housing Law.
• N.J.S.A. 40A:20-1 et seq. — Long Term Tax Exemption Law.
• N.J.S.A. 40A:21-1 et seq. — Five-Year Exemption and Abatement Law.
• N.J.S.A. 40A:12A-66 — tax abatement and PILOT provisions within redevelopment areas.

Primary source: nj.gov/dca (Division of Local Government Services).

Area in Need of Redevelopment designation

The foundational step. Under N.J.S.A. 40A:12A-5 and 40A:12A-6:

1. Governing body resolution authorizes the planning board to conduct a preliminary investigation of the proposed area.
2. Criteria evaluation — qualifying conditions include substandard/unsafe/unsanitary/dilapidated/obsolescent buildings, discontinued or abandoned commercial or industrial uses, publicly-owned vacant land unlikely to be developed by private capital, deleterious conditions. Recent amendments added vacant or partially vacant shopping malls, plazas, and office parks.
3. Public notice and hearing at planning board level.
4. Planning board recommendation to governing body.
5. Governing body resolution adopting the designation.

A designated area is deemed "blighted" for constitutional purposes — which may allow eminent domain (Condemnation Redevelopment Area designation) or restrict eminent domain (Non-Condemnation Redevelopment Area). The distinction matters for the redevelopment agreement and for property-owner leverage.

Redevelopment Plan adoption

After area designation, the governing body adopts a Redevelopment Plan specifying:

• Permitted uses, densities, building forms.
• Design standards.
• Infrastructure improvements.
• Affordable housing requirements if applicable.
• Relationship to the municipal Master Plan.

The Plan supersedes the underlying zoning within the redevelopment area, enabling new uses or higher densities than the base zoning allows. This is the core developer benefit.

Redeveloper designation

Under N.J.S.A. 40A:12A-4 and 40A:12A-8, the municipality (or a designated Redevelopment Entity like a Redevelopment Agency or Housing Authority) may contract with public agencies or private redevelopers to carry out the Plan:

• Selection typically via RFP/RFQ or direct negotiation with a specific redeveloper.
• Conditional designation while due diligence is completed.
• Redeveloper designation by resolution.
• Redeveloper Agreement covering land disposition, site work, construction milestones, affordable housing obligations, public benefits.

Redevelopment Agreement — covenants running with the land

Under N.J.S.A. 40A:12A-9, agreements, leases, deeds, and other instruments between the municipality/entity and redeveloper must contain specific covenants running with the land:

• Construct only uses established in the Redevelopment Plan.
• Begin improvements within a reasonable timeframe.
• Prohibit transfer of the redevelopment area or project without municipal consent.

Upon project completion, conditions warranting redevelopment are deemed resolved — removing the area from eminent domain eligibility based on those conditions.

PILOT agreements and tax abatement

Tax abatement via PILOT is often the economic centerpiece of LRHL projects:

Five-Year Exemption and Abatement (N.J.S.A. 40A:21)

Short-term abatement up to five years, typically for smaller-scale projects. Often gradient-structured (declining abatement over the five years).

Long-Term Tax Exemption (N.J.S.A. 40A:20)

For substantial redevelopment and housing projects:

• Term: up to 30 years from project completion or up to 35 years from the execution of the financial agreement (50 years for sequential projects).
• Urban Renewal Entity required — typically a single-purpose entity formed under the Long-Term Tax Exemption Law.
• Financial agreement between municipality and urban renewal entity, approved by ordinance.
• Annual service charge paid in lieu of taxes, computed per N.J.S.A. 40A:20-12. Typically either a percentage of annual gross revenue or a percentage of total project costs.

Long-Term Tax Exemption is the mechanism that makes otherwise-infeasible projects viable. Trade-off: reduced revenue to municipality in early years (partially or fully offset by service charge); stabilization of carrying cost for developer; public project-level benefits in exchange.

The typical LRHL project sequence

1. Area designation — preliminary investigation → planning board hearing → governing body resolution.
2. Redevelopment Plan adoption — overrides underlying zoning within area.
3. RFP/RFQ for redeveloper or direct negotiation.
4. Redeveloper conditional designation with due diligence period.
5. Redevelopment Agreement with covenants, obligations, milestones.
6. PILOT / Financial Agreement via ordinance.
7. Urban Renewal Entity formation for LTTE.
8. Site plan and other local approvals under MLUL (see our NJ MLUL essay) — typically abbreviated in redevelopment areas.
9. UCC construction permits (see our Camden UCC essay).
10. Construction and completion.
11. Annual service charge payments during LTTE term.

Redevelopment Plan and MLUL interaction

Redevelopment Plans override underlying zoning within the designated area. This means:

• Standard MLUL variance/rezoning processes may not apply — the Plan itself enables the uses.
• Planning Board still reviews site plans for conformance to the Redevelopment Plan's specific standards.
• Certain MLUL procedural requirements apply but in modified form for redevelopment approvals.
• The Redevelopment Plan can be amended over time, typically via the same adoption process.

Common redeveloper considerations

• Affordable housing obligations. Municipalities often include affordable housing requirements in Redevelopment Plans or negotiate them into Redevelopment Agreements, especially in light of Mount Laurel doctrine.
• Public improvements. Infrastructure contributions, park spaces, public amenities often negotiated.
• Construction timelines. Redevelopment Agreements carry milestones with default provisions.
• Assignability. Transfer restrictions — consent provisions matter for future refinancing or sale.
• PILOT calibration. Percentage of revenue vs percentage of project cost — each approach has different risk allocation.
• Revenue sharing with school districts and county often addressed separately.

Environmental and other regulatory overlay

LRHL designation doesn't substitute for:

• Site remediation under SRRA/LSRP + ISRA for contaminated industrial properties. See our NJ LSRP/ISRA essay.
• Wetlands and coastal permits where applicable. See our NJ CAFRA/WDA/FWPA essay.
• Stormwater compliance under N.J.A.C. 7:8 with Green Infrastructure mandate. See our NJ Stormwater essay.
• Regional overlays in Highlands or Pinelands. See our NJ Highlands and Pinelands essay.
• Contractor licensing under DORES + trade boards + HIC. See our NJ Three Tracks essay.
• NJDOT access permits for work fronting state highways. See our NJDOT essay.

How LRHL compares regionally

• Pennsylvania. Urban Redevelopment Law (URL), KIZ/KOZ tax incentive programs, Tax Increment Financing Act. More fragmented toolset than LRHL.
• Maryland. Urban Renewal Law, Transit-Oriented Development Act, Sustainable Communities program.
• Virginia. Virginia Tax Increment Financing Act, Enterprise Zone Grants, HUD Section 108 loans often used.
• Delaware. Limited statewide redevelopment-specific framework; municipal-level tools.
• New Jersey. LRHL as comprehensive framework with PILOT + LTTE combined — among the most powerful redevelopment tools in the region.

What developers should know

If you're considering a major NJ commercial or mixed-use redevelopment: LRHL is the likely vehicle. Engage local counsel and redevelopment specialists.

If an area isn't yet designated: work with the municipality on area-in-need-of-redevelopment study. The designation is step zero.

If pursuing PILOT: Long-Term Tax Exemption is typically more valuable than Five-Year for substantial projects. Urban Renewal Entity structure is the vehicle.

If refinancing or selling: transfer restrictions in the Redevelopment Agreement affect terms.

For broader NJ context, see our essays on NJ MLUL, NJ LSRP/ISRA, NJ Stormwater GI, and Camden UCC.

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