This action in lieu of prerogative writs is brought by the owner of several apartment buildings in Jersey City attacking the validity of certain provisions of the Rent Stabilization Ordinance of the City of Jersey City. The matter was heard at a plenary trial with full presentation of evidence by both litigants in the controversy.
At the time of trial the court had before it the basic ordinance, Jersey City, N.J., Ordinance 346, February 20, 1973 (hereinafter cited as J. 346) and the amending ordinance, Jersey City, N.J., Ordinance 366, July 17, 1963 (hereinafter cited as J. 366). Subsequent to the hearing, the city passed a further amendatory ordinance, Jersey City, N.J., Ordinance 390, November 20, 1973 (hereinafter cited as J. 390). In view of the fact that the court is required to decide the case on the basis of the status of the law at the time of determination, Hohl v. Readington Tp., 37 N.J. 271, 279 (1962); Kligman v. Lautman, 91 N.J. Super. 488, 493 (App. Div. 1966); Noble v. Chairman, etc., Mendham Tp., 91 N.J. Super. 111, 116 (App. Div. 1966), cert. den. 48 N.J. 120 (1966), and with the acquiescence of the parties, the conclusions reached herein will be based upon the local law in effect as of this date.
The power of a municipality to adopt ordinances controlling or stabilizing rents has been approved by the Supreme Court of this state in Inganamort v. Fort Lee, 62 N.J. 521 (1973). The contention that a local government is powerless to legislate in the area of rent control is therefore no longer a viable issue. Hence, the challenge to the ordinance is focused upon the absence of an emergency justifying the exercise of that power and upon the means utilized in the ordinance to accomplish the intended purpose.
The ordinance in question seeks to control rents in buildings having more than four dwelling units by stabilizing the rentals in those buildings at the levels which obtained on January 11, 1973, the date of the expiration of Phase III of the Federal Government's Economic Stabilization Program. Utilizing the January 11, 1973 base as the standard for the rent freeze, provision is made for permissible increases based upon changes in circumstances. For example, an automatic percentage increase is granted at the termination of a tenancy equal to the amount that the Consumer Price Index of the Bureau of Labor Statistics of the U.S. Department of Labor has increased over the index figure existing at the commencement of the tenancy (§ 4, as amended by J. 366). Provision is also made for a rent surcharge when warranted by increase in taxes (§ 5, as amended by J. 390), or expenditures for capital improvements (§ 10B, as amended by J. 390). In addition, there is a provision for a "hardship" increase when the "landlord cannot meet his mortgage payments and maintenance" (§ 10A, as amended by J. 390).
The ordinance by its terms is limited to a life of one year and expires at that time unless extended by resolution of the municipal council on a year-to-year basis. It delegates the administration of the ordinance to a Rent Leveling Board with appropriate provisions for hearings and notice to interested parties (§§ 10, 11, as amended by J. 390).
The manifold contentions of plaintiff may be briefly summarized as follows:
1. There is no critical housing shortage in Jersey City which can legitimately support the exercise of the police power to control rents.
2. The retroactive provision of the ordinance rolling back rents to the levels in existence on January 11, 1973 is an unconstitutional impairment of the obligation of contracts.
3. The limited applicability of the ordinance to buildings containing more than four dwelling units constitutes an unreasonable classification and creates unconstitutional discrimination.
4. The use of the Consumer Price Index of the U.S. Department of Labor as a criterion for permissible rent increases is arbitrary and fails to assure the owner a fair return on his investment.
5. The method of computing a rent surcharge for tax increases is arbitrary and unreasonable.
6. The method of computing a rent surcharge for a capital improvement is arbitrary and unreasonable.
7. The provision for a hardship increase is unfair and unreasonable.
The constitutionality of rent control regulation depends upon the existence of a housing emergency, for without such an underlying need the municipality would not be legally justified in exercising its police power in this area of control. Jamouneau v. Harner, 16 N.J. 500, 514-517 (1954). See also, Stuyvesant Town v. Ligham, 17 N.J. 473, 483 (1955). An emergency, in this sense, is an "unusual public exigency calling for the exercise of the police power to alleviate the common peril or need." Jamouneau, supra, 16 N.J. at 514.
The preamble of the ordinance recites the existence of a housing emergency due to exorbitant and speculative rent increases which are causing "severe hardships upon tenants and are adversely effecting [sic] the health, safety and general welfare of the citizens" of the community (Preamble,
J. 346). With or without this recital, the ordinance is presumed to be valid and to have been adopted on the factual foundation essential for its validity. Garden State Racing Ass'n v. Cherry Hill Tp., 42 N.J. 454, 464 (1964); State v. Mundet Cork Corp., 8 N.J. 359, 369-371 (1952); Johnson v. Montville Tp., 109 N.J. Super. 511, 519 (App. Div. 1970). The burden therefore rests upon plaintiff to establish the absence of the emergency asserted expressly and impliedly by the municipality.
Although some opinions in the field of landlord-tenant law make reference to the court taking judicial notice of the existence of an acute shortage of low-income housing in urban centers in this State, Samuelson v. Quinones, 119 N.J. Super. 338, 343 (App. Div. 1972); Troy Hills v. Fischler, 122 N.J. Super. 572, 582 (Law Div. 1971), aff'd 122 N.J. Super. 525 (App. Div. 1972); Tanella v. Rettagliata, 120 N.J. Super. 400, 411 (Cty. Ct. 1972); Academy Spires, Inc. v. Brown, 111 N.J. Super. 477, 480 (Cty. Ct. 1970), the imprimatur placed upon the right of municipalities to adopt local rent control ordinances in Inganamort, supra, requires a factual inquiry into the existence or nonexistence of the emergency in the affected locale.
Plaintiff sought to establish the absence of an emergency by reference to factors allegedly demonstrating an open rental market in Jersey City. One factor projected by the proofs is the increase of the number of advertisements for vacant apartments in local newspapers between 1971 and 1973, although there was no correlation between these advertisements and the rental range involved. In addition, real estate brokers, with a personal financial interest as property owners, testified in very general terms that there were more vacant apartments available in 1973 than there were in 1970 or 1971, and that the payment of broker's fees on rentals has shifted from tenants to landlords. One of the brokers estimated a vacancy factor of 5% in Hudson County based upon discussions with owners. Another owner-broker testified that he had a current vacancy factor of 16% in two buildings,
with a drastic increase in vacancies commencing in the beginning of 1973. Several building superintendents also testified that more vacancies existed in 1973 than in past years.
The Director of Planning of Jersey City testified as an expert and as one intimately familiar with the housing conditions in Jersey City. His department has monitored the housing situation in the city since 1961, preparing various reports on all phases of data relevant to housing, including statistical analyses of housing unit vacancies. The most recent and comprehensive report prepared under his supervision for submission to the governing body and to the appropriate federal agency was published in September 1973. It is entitled "Jersey City Housing Crisis" and is a compendium of housing information garnered from other reports, investigative field work and discussions with realtors.
The planning expert, using the 1970 census data as a starting point, concluded that as of September 1973 there was a vacancy factor of less than 3%, based on the number of units added to the rental market through construction and removed from the market through demolition or deterioration since 1970. In addition, he pointed out that many available housing units are beyond the reach of economic feasibility for the families in greatest need of housing. He testified that the factors involved in assessing the presence or absence of a housing crisis are more than the statistics of population, housing units and vacancy rate. There must also be considered the income of those in need of housing, the rents demanded by the owners, the age and obsolescence of existing buildings, the amount and cost of new construction, the effect of increased taxes on private construction, the relocation of families because of government subsidized housing developments, and many other variables relating to the social composition of the residents of the city.
It is unnecessary to detail in full the testimony of the expert or the contents of the report. The unequivocal conclusion from this evidence is ...