Ocean City's R-2/R-M Zoning: The Arch-Nemesis of Preservation
Ocean City, NJ, is a town renowned for its quaint neighborhoods and historic charm. Yet, each year, numerous historic homes are demolished and replaced with oversized, unmemorable duplexes and triplexes.
Why does this happen? Simple: R-2 and R-M zoning.
Originally created to encourage affordable multifamily housing, R-2/R-M zoning (two-family and multi-family, respectively) has ironically become the greatest threat to historic preservation and affordability—and a goldmine for developers.
The problem boils down to basic economics: Ocean City's home values are largely driven by rental income potential, not the quaintness or beauty of the home. This means the value of a piece of real estate is based on how big and how many units you can jam onto a lot. As one city councilman put it succinctly, “We max it out!”
For developers, R-2/R-M zoning is a dream—allowing for large, multi-unit dwellings that maximize profit. For preservationists, it’s a nightmare. Historic homes on R-2/R-M lots rarely stand a chance of survival unless they are exceptionally large, in pristine condition, or uniquely valuable enough to command a price that makes a teardown uneconomical. Even then, a full-lot six-bedroom VRBO would command higher summertime rent, and would be a more attractive speculation for absentee investors.
Those houses are hard to find. As a result, the wrecking ball is busy in town, knocking down one single family home after another.
Consider 634 Ocean Avenue. Originally a modest single-family home, the site now hosts a nondescript duplex with two 5-bedroom units, each selling for approximately $1.9 million—a total of $3.8 million. Here’s the breakdown:
Total duplex sale price: $3.8 million
Less developer’s profit and commissions: about $500 thousand
Less construction costs: roughly $1.5 million
This leaves developers with approximately $1.8 million available to bid on the original home.
How can preservation-minded buyers compete?
They usually can't. Again, let’s use 634 Ocean as an example. If an old home buyer wanted to purchase that house and fix it up – or even build a new, quaint, single family home on that lot – they would logically want the end product to be worth the money they invested. A single-family home in Ocean City starts at around $1.7 to $2.0 million for either a new house, or an older home in very good condition. However, historic and older homes usually require renovations, which also triggers the need to raise the house to meet flood standards. This means adding anywhere from $400,000 to $500,000 in renovation expenses to the overall bill. A new build would be in the same range, maybe a bit more.
Therefore, to avoid having invested more in a property than what it’s ultimately worth, the older home buyer in this example can bid a maximum of about $1.3 million. This is easily beaten by developer offers, particularly in R-2/R-M areas where developers can bid way beyond that amount, if needed, and still walk away with a huge profit.
For that reason, many historic homes never even reach the open market. Developers frequently approach homeowners directly, present the economic realities, and negotiate private deals to avoid commissions and public listings. The recent sale of 105 East Atlantic exemplifies this: Zoned R-2, this older, (and very unique) property sold privately for $1.4 million—the upper limit for preservationists—and is now likely slated for demolition. On another occasion, after learning that a historic cottage had sold, a local preservationist reached out to the realtor to make a matching or higher offer. The offer wasn’t considered. It’s worth noting that many local realtors maintain close relationships with speculative duplex builders.
Some may argue developers are simply responding to market demand, providing duplexes desired by investors. However, these large duplexes, often dubbed "party houses," offer little aesthetic value or community charm. Built cheaply with repetitive designs, minimal landscaping, limited parking and maximizing occupancy, they add little charm to neighborhoods. Instead, they lead to increased parking issues, noise complaints, and dissatisfaction among residents.
So, yes, investors want them, but residents do not—and neither do potential residents. People want modest homes with a yard. They want variety in housing stock. Long-term residents aren’t looking to own one half of a duplex, especially when, not long ago, a full home with a yard was in the same price range.
It’s not demand that’s sending single-family home prices through the roof. It’s the systematic culling of supply.
What solutions exist?
First, reducing R-2 / R-M zoning areas would significantly help, although developer influence in Ocean City complicates this politically. Developer interest dominates the various Boards in town and the administration and would be unlikely to tie off any of the udders of their cash cow.
Second, increasing parking requirements could naturally limit house sizes, improve affordability, and reduce crowding. Yet, again, strong developer resistance makes this challenging.
The city could also create a building envelope limit. For example, a new build or rebuild could not exceed the original square footage by more than a certain percentage. This would also moderate the size and cost of houses and would also moderate the need for infrastructure expansion. Yet, it too would be fought by developers.
The City could also create certain exemptions for lifting requirements for older homes and also provide more relaxed building envelopes on restorations. For example, FEMA already provides exemptions from elevation requirements for homes listed on the National Register of Historic Places, the State Register, or those officially designated by local ordinance as historic structures, recognizing that lifting such buildings may compromise their historic character (FEMA, Substantial Improvement/Substantial Damage Desk Reference). This would reduce the cost of rehabilitation and make old home buyers more able to compete with developers. Whether the city would care to do so is uncertain as it is not typically inclined to do anything that takes away developers’ competitive edge.
Developers often justify the current wave of duplex construction by pointing to Ocean City’s long history of duplexes. But what’s being built today bears little resemblance to the duplexes of the past. Historically, a “duplex” often meant a single-family home with an accessory apartment—perhaps over the garage, in the attic, or on the ground floor. Crucially, the property was owned by a single household, which retained full agency over decisions about maintenance, repairs, and whether or not to rent.
Today’s duplexes are two-family condominiums in all but name, with two separate owners sharing walls and common infrastructure but not necessarily a shared vision. This can lead to contentious situations when, for example, one owner wants to sell and the other doesn’t. Common area repairs are often neglected or disputed. The charm of the old-style duplex has given way to a fragmented, speculative model that erodes both neighborhood cohesion and architectural integrity.
What’s more, this speculative duplex boom is unlikely to last forever. Eventually, the investor-driven demand will dry up, and Ocean City will be left with a glut of oversized, unattractive duplexes that no one actually wants to live in full-time. Developers may be left holding the bag—but the real loss will already have been Ocean City’s: the destruction of its architectural charm and neighborhood diversity.
That leaves grassroots efforts, such as voluntary deed restrictions limiting future development of a lot to single-family use. This could effectively preserve historic character without dramatically reducing property values. And it can be done without any city involvement.
Those are basically the choices: one is whether the City fathers want to avoid a cookie cutter, party-house town and preserve some aspect of its history. To date, they have not seemed inclined to do so as it impinges on the profit motive of developers, many of whom are also policymakers.
So, citizens may need to lead the way.