Three months after New York passed sweeping legislation restricting landlords’ ability to raise rents, those landlords are still looking for answers — but New Jersey has not provided any so far.

“I think there’s been a lot of, I’ll say outreach, from the New York private investment community into New Jersey and other surrounding markets in the Tri-State Area,” JLL Senior Managing Director Jose Cruz said. “But have we seen transactions consummated? No, not yet.”

Transaction volume in the Northern New Jersey multifamily market has fallen 30% in the past year, according to a report from Institutional Property Advisors, but not for lack of interest. There simply aren’t enough investment-worthy properties to satisfy the substantial demand, driving the average transaction price higher.

The investors seeking better deals than they can find in New York after rent reform have added to the interest in New Jersey investments so far, perhaps without rising to what one might call demand. Part of that reticence from investors looking across the Hudson River for the first time may be because they expected a value proposition; instead they have found an already supply-constrained market with plentiful liquidity.

Cruz and other leaders in the region will discuss that market at Bisnow’s New Jersey Multifamily event at The Westminster Hotel in Livingston Oct. 10.

“In markets both on and off the [Hudson River], there’s sometimes a little bit of a surprise that the pricing is as aggressive as it is,” Cruz said.

Cap rates have dipped 30 basis points to 4.7% in the past year, IPA reports.

Though interest may have picked up from New York investors, commitments are likely still a ways off, if only because some landlords have mounted a legal challenge in federal court that could nullify the new regulations. Others like Kushner Cos., which has operated on both sides of the river for years, are still weighing their options.

“We’re still evaluating, and we don’t really have a direction on that now,” Kushner Chief Operating Officer Peter Febo told Bisnow.

To New York investors looking to move their capital away from the new restrictions, only proximity makes New Jersey a likely destination. Plenty of municipalities in New Jersey have their own rent control laws, and in some instances are more onerous than even New York's new policy.

Newark, New Jersey's largest city, has restricted rent increases to the consumer price index since 2014, meaning they are rarely allowed to go up more than 1% per year. Though opponents of rent control have warned that such restrictions would prevent new development, more than one Class-A product that will be "among the best in the state" is coming online in the city, Cruz said.

Investors well-versed in New Jersey real estate are experienced in rent control, to the point where New York's laws may not feel all that strange. To illustrate how complex the township-level differences are, Febo cited Kushner's apartment project that straddles the line between Hasbrouck Heights and Lodi.

While Lodi has no rent control law, Hasbrouck Heights caps yearly rent increases at 5%, and just 2.5% for senior housing. Kushner has to keep track of local laws on a unit-by-unit scale, Febo said. Potential newcomers might find more familiar market dynamics in farther-off urban markets.

"Between New Jersey and New York, [the multifamily market] is apples and oranges," Febo said.

Much of the impetus behind rent control has come from tenants fighting against rising prices that would push them to move farther out — a common theme among those moving from New York to New Jersey. Because New York's laws only apply to apartments that are already rent-stabilized, there may not be enough of an impact to have a noticeable impact on that pipeline of renters.

“New York is just too big of a market to say that rent-stabilization laws will have such an impact that population movement changes," Febo said. “I can’t support this with any facts, but in my personal opinion, I do not think that will have any effect.”

The demand for apartments in New Jersey submarkets close to New York City has been enough to drive healthy rent growth for years now, according to IPA's report, and that rent growth has been central to the value of New Jersey multifamily. Yet neither Cruz nor Febo expressed concern that suppressed rent growth in New York could slow down New Jersey's own rents.

“The Jersey City market has always been an alternative to [Manhattan] as a cheaper option, but then again, so is Long Island City," Febo said. "So to try and measure the future impacts on the New Jersey market from rent control laws: one, it’s too early to tell, and two, New Jersey remains a supply-constrained market, so I think occupancy and rent growth will continue to be strong.”