The Cape May Housing Crunch

It’s easy to conjure the specialness of Cape Island, even from far away. There’s the arc of light over the peninsula that slides into deep purples and pinks at sunset, the summer sound of a laughing gull overhead, and the chatter of children on the shore’s edge. 

But there are also the trying moments of snaking through weekend traffic, the unending cold-edged winds of March and the fact that every place is really crowded for 10 weeks of summer before the visitors drift away. 

For those who love the Cape May area, it is the privilege of living in this very special place—or owning a home here—that matters most. 

However, like every resort town in America, the fact that so many love the place has resulted in high real estate prices and a lack of year-round affordable properties to rent or buy. 

 That has made it difficult for the people who work here to also live here unless they have a relatively high income, have been invested in the real estate market, can live with a family member, or who have lived here for a long time. The national housing shortage is starkly apparent in desirable locations with limited inventories of lower cost homes or rentals. 

The problem has been compounded by the fact that property owners have found that short-term rentals can be more lucrative than long-term ones. That also limits the availability of year-round rentals as buyers turned homes into either seasonal rentals or short-term rentals through agencies such as Airbnb or VRBO. In recent years, the problem has gotten worse, and Covid sped up trends that were already in place. 

“Higher-end households were looking for more of that vacation arbitrage, especially during the pandemic when you could work from home anywhere,” said Yelena Maleyev, senior economist with international services firm KPMG. “Folks with higher incomes that were living in more expensive areas—New York City, San Francisco, Chicago, moved to those lower cost places that still potentially have amenities but at a much lower cost.” 

This demand for housing added to the surge in prices. According to Realtor.com, the median home sold in Cape May County went for $785,000 in February, up from $439,000 just three years earlier.

While retiring baby boomers get a lot of the blame, they are not necessarily making the biggest impact on housing. “I’m sure there’s some of that higher income and post-retirement households that don’t necessarily stay all year round and also are not helping with the supply challenges,” said Maleyev. “In general, on a national basis, it’s not the case that Baby Boomers are buying up everything.” 

She said it’s the growing disparity in wealth, which is affecting housing nationally. “Those that have housing wealth have record levels of housing wealth. They can afford a second home or to move even in a higher mortgage rate environment because they can probably afford to pay all cash,” she said. “That’s what we’ve been seeing in the last few years. That doesn’t exclude Gen X or Millennials or even Gen Z.” 

That makes the prospects for renters even more difficult, particularly in areas where rents are high and there’s a scarcity of housing supply. “Those that are renters can just not keep up with how much they need to save to afford that down payment in this high mortgage environment, pushing that inequality gap to be even bigger,” said Maleyev. 

Meelyn Pandit considers himself one of the luckier newcomers to the Cape Island area. A software developer and data engineer, Pandit moved to Cape May County from Indiana and works at Cellular Tracking Technologies in Rio Grande. 

“It was definitely more expensive compared to where I lived in the past but mainly, it’s the availability—not being able to find anything on Zillow, then having to look on Facebook,” he said. 

Pandit hoped to initially buy a small house in Villas in Lower Township, but houses there were out of his reach. The median house Villas sold for $360,000 this winter, up more than $100,000 in three years, according to Realtor.com. 

After a panicked couple of weeks in the summer of 2023, Pandit found his first rental in Cape May in a $1600 a month studio above a garage. Utilities were included, but it was too small, and he needed to find something bigger. 

He started to search for a new place to live six months before his lease ran out. His options were limited. Small homes in Villas were renting for $2,000 a month or more. 

“I’m a middle-aged man and I don’t want roommates,” said the 35-year-old Pandit. “I’m mature enough that I want to live alone and be in control of my living space.” 

Pandit ultimately found a small cottage behind his landlord’s home in Wildwood Crest. “It’s honestly the most affordable thing in the county,” he said of his $1500 a month two-bedroom unit. He pays for utilities and internet himself. 

“Half my take-home income is going to rent, so I’m not able to save that much and I’m not really able to go out and enjoy the town,” he said. 

Pandit’s situation is not uncommon. Young adults in their 20s and 30s are caught in the housing crunch, and so are young families. The solution sometimes is to live much further away than is desirable just to be able to afford a home. 

Kiersten Wilcox was caught in just that situation, but she was trying to afford to live in another resort town—Jackson, Wyoming, where she worked in a gallery. Her husband worked as a ski instructor. Initially, they were crammed into a tiny apartment in town, but needed to find a bigger home they could afford. 

They ended up buying a house for $267,000 in Idaho, with a 40-minute drive through a mountain pass on a good day. That became much more complicated after they had a baby who they needed to pick up from day care, and with winter weather that was sometimes treacherous with avalanches occasionally blocking the most direct route home. They ultimately moved to Kennebunk, Maine with their now six-year-old daughter. Wilcox was also able to find space to open her own art gallery. 

“Affordability drove us to Maine, lifestyle, everything we wanted to be able to give our daughter. I know there was a world where we could have figured it out in some way in Jackson, but between the hours we were working and the amount of commuting we were doing we weren’t going to see her. To me, it felt really stupid,” she said. They bought a home near her parents in Kennebunk for $340,000 in 2020. 

Like other resort areas, the cost of living tied to housing in Cape May has become a much greater portion of income in the last several years. 

Cape May’s problems are by no means unique, according to economist Ethan Harris. Harris was Bank of America’s global chief economist before retiring last year. His family has long time Cape May ties, and he owns a home in North Jersey.

Harris said the South Jersey area from Cape May north to Atlantic City has been unaffordable for households making median income since before Covid and is even more unaffordable now. 

He pointed to the Atlanta Federal Reserve Banks’s Home Ownership Affordability Monitor. The Atlanta Fed considers it “unaffordable” when a household needs to spend more than 30% of its earnings on housing. 

The Atlanta Fed’s monitor shows that a Cape May County household making the median income before Covid in January 2020 needed to spend 44.3% of its income to pay for the median-priced home. The median home price was then $403,700. The median income was about $70,000. That same median income household now earns $87,394 a year in Cape May County. But housing costs have gone up even faster, and the median household earner as of this past January needed to spend 79.4% of their income to cover the cost of a median priced home, which now costs more than $700,000. 

‘Unaffordability has gone up so dramatically, from 44% to 79%. That’s massive,” said Harris. 

“The thing about this median price is heavily skewed by the huge amount of tourist activity, so the median home in Cape May is probably occupied by someone who doesn’t have the median income,” he said. He said that means many homes in surrounding areas like Lower Township or Middle Township are also probably out of reach for local workers. 

“It’s worrisome of course when the average working person can’t afford to live in the area they are working in,” said Harris. “It probably does contribute to labor shortages there.” 

Emmy Casper is a 29-year-old wildlife biologist working for Conserve Wildlife Foundation of New Jersey. For several months of the year, she works on the Delaware Bay shore focusing on nesting shore birds and marsh restoration. 

She has been looking for a permanent place to live but has found just temporary housing, including a winter rental that she was able to stay in until it became a summer rental in May. The small house was renting for nearly $2,000 a month off season, so her parents helped pay the rent in return for spending a few weekends with her in Cape May. 

Casper has lived in a rooming house in Cape May Point across from the Cape May Point Science Center with other naturalists, but she wants to find her own home. 

“They’re hard to come by because nobody wants to rent year-round. I looked on Furnished Finder, which is a site for traveling nurses and other professionals that might need a place temporarily and people offer their houses for short term rentals. That’s where I found this one,” she said of the Lower Township home she rented until mid-May. 

Casper has been searching for a place in Cape Island, Lower Township, Middle Township and Cape May Court House. She is limited to a maximum of $1,600 a month, and says the further south she looks, the more expensive it gets. 

“I’ve looked on Zillow. I looked at newspaper ads. I’ve looked at every website I could think of. It’s been very challenging at least in the area I’m interested in,” she said. “There are more options in towns and cities like Millville. It’s more in my price range, but it’s also too far from some of the coastal sites I work in.” 

Realtor Brian Groetsch, a broker and owner of RE/MAX Surfside, said the geography of Cape May is a negative for those looking for a place to live since it is the narrow end of New Jersey and buyers or renters can only go north. “We are 20 miles at sea, water on both sides within five miles,” he said. 

“We have real problems here because when a retail or front-line worker or hospitality restaurant worker can’t find a place to live and they have to drive up to Galloway or Egg Harbor Township, they’re going to drive by a thousand opportunities to work between there and here, and they’re just not going to stay here,” he said. 

The Villas and Del Haven used to be reasonably priced alternatives to Cape Island, but those places have attracted new types of buyers and have become hot rental areas. 

Short-term rentals like Airbnbs have popped up all over the county but Groetsch said there are signs they may have saturated the market and rents have become high. The demand may have softened as some people have returned to their offices full-time, and vacationers are traveling to other destinations that may actually be cheaper even with airfare. But they still put stress on the housing supply. 

Cape May Mayor Zack Mullock said the decline in families able to live in Cape May was already a problem even before the increase in short-term rentals. But workers had more pre-Covid options. 

“From a city perspective, here was the thought five years ago and obviously before then—we knew real estate values were going up and the City of Cape May was going to be a difficult place for young families to purchase, but you could go across the bridge and within 10 minutes, you were in an affordable area,” Mullock said. “Now that Lower Township and obviously the other inland communities have gotten so expensive, it puts the onus on every municipality to say what are we doing about affordable housing. I think it should really be a collaborative effort.” 

Mullock said the city is trying to address the worker housing issue, which has gotten worse as more single-family homes have been sold and turned into rental properties. “I even just know personal situations. For instance, some of the lifeguards—they’re still in Grandma’s house, but I know it’s not going to stay in the family in the next five to 10 years. It’s just getting worse and worse and worse,” he said. 

When Mullock first became mayor, the city was not charging short-term Airbnb rentals the type of occupancy tax it was charging hotels. Now it is making $2 million a year from the occupancy tax, he said. 

Mullock said affordability in the city is a top priority, after maintaining the sea wall and providing drinking water. The city council is in preliminary discussions about working with a developer to find a way to create some workforce housing for city employees and others. 

That is separate from the affordable housing plan that New Jersey towns are required to submit for the next 10 years by end of June. Cape May does have public housing, but Mullock points out that workers making minimum wage in New Jersey make too much to qualify for government housing. 

That leaves workers in a bind. Some local businesses have helped by providing their workers with places to live. 

Groetsch said the worker shortage was extreme following Covid. His father, for instance, was hoping to retain the one worker remaining at the family’s hotel. He needed to find a housing solution, and he ended up helping to finance a home that was then rented to the employee and her family. 

Cape Resorts, which owns Congress Hall and the Virginia Hotel among other properties, has long provided housing for its workers. It has owned the Paris Inn and bought the Hotel Alcott several years ago for its employes to stay in. The Chalfonte Hotel, owned by Mullock’s family business, also provides housing for its workers. 

KPMG’s Maleyev said across the nation there are some efforts to find housing solutions that may not fit all zoning situations but have become more popular as the housing shortage got worse. 

The economist said because zoning laws vary from town to town, there are challenges in adding affordable housing in some locations. “We’re starting to see this anti-NIMBY movement in some states to create some of that gentle density, not giant apartment buildings but duplexes, fourplexes, the kind of entry level housing this country isn’t building the way it used to back in the 60s and 70s,” she said. 

Groetsch said nobody wants to talk about increasing density, but it may need to happen in the county. “It’s a lot of not-in-my-back-yard; we all want somebody to serve our pancakes in a restaurant or a cocktail in a bar, but we just don’t want to do anything to help him live here and that’s where I think the private sector may have to step in,” he said. 

Groetsch said there’s a new law in New Jersey that gives nonprofits priority at sheriff’s sales of distressed and abandoned housing. That may help create opportunities for more housing to become available at affordable levels. 

He notes there is a potential model in a nonprofit-run program in Sanibel Island, Florida that has been operating since 1979 to provide affordable housing to the workers on Sanibel who have been priced out of the market. 

Community Housing & Resources provides rental properties and some properties for sale in Sanibel. 

Renters pay 30% of their income for rent, with a maximum threshold on income of $100,000. The city of Sanibel provides funds to the organization, which also is the recipient of grants and contributions from private donors. 

The nonprofit owns multi-family buildings and duplexes. Ten residences are in a program where they can actually be bought but must be sold back to the nonprofit when the owners move on. 

The residents of the buildings include servers, teachers, and bartenders; 14% are employed by nonprofits, including the Sanibel Captiva Conservation Foundation. The foundation is helping restore natural areas that were destroyed by hurricanes.

Hurricane Ian wiped out 11 of its 76 units in September 2022 and they’ve been rebuilt with the exception of one multi-family still under repair. The nonprofit hopes to have 100 units by 2029. 

Cape May Point Mayor Anitia VanHeeswyck said the issue of affordable housing for workers is “apples and oranges” when compared to the affordable housing required by the state. 

“I don’t really know what the answer is. I think as I’m hearing about places like Sanibel or Aspen they’re creating their own places. They’re doing it in a different way,” she said. “A creative way to solve this has to be found. State affordable housing isn’t going to fill that niche. It’s something else, and it will be positive but it’s not going to fill the need for what we’re talking about.”