Sweeping Changes to NJ’s Rules on Affordable Housing Proposed

Colleen O'Dea | June 18, 2019 | Housing
Housing advocates cheer controversial bill as builders decry proposed new requirements for high-density developments and question constitutionality

Credit: NJTV News
Affordable housing
New Jersey would impose, for the first time, a requirement that a quarter of units in many proposed high-density developments be affordable to residents of low- to middle-income under a bill that cleared its first legislative hurdle on Monday. The measure is aimed at trying to ensure that high-demand municipalities in the northeast, in particular, do not displace residents as they redevelop and gentrify.

The controversial bill (A-4414) drew cheers from housing advocates, who lauded its potential for increasing the state’s affordable housing stock, and jeers from builders, who said it could have the opposite effect as prospective developments could be unprofitable and thus not be built. The Assembly Housing and Community Development Committee approved the bill with members voting along party lines — Democrats in favor and Republicans in opposition.

Assemblywoman Britnee Timberlake (D-Essex), prime sponsor of the bill, said requiring new housing developments to include some units affordable to those of modest means is necessary in a state that is consistently ranked one of the most expensive housing markets in the nation.

Assemblywoman Britnee Timberlake (D-Essex)
“This has been a long time coming,” she said. “We want to be certain that a percentage of new construction is absolutely affordable. Hopefully, this bill does that.”

Under the bill, most new housing developments of at least 30 units would have to make at least 20 percent of units — six in a 30-unit development — affordable to those with incomes below 80 percent of the area’s median income and 5 percent — one or two in a 30-unit development — affordable to middle-income residents, defined as up to 120 percent of the median. The developments would not necessarily have to be inclusionary, however, as developers could build the lower-priced units elsewhere within a municipality. A town could require a builder to pay a fee of between 25 and 30 percent of the project cost into its affordable housing trust fund in lieu of building units. As much as half of that payment would not have to build homes, but could be diverted to fund “community centers,” including ball fields and meeting halls.

What else is in the bill?

Timberlake said the bill would apply only to those developers who seek some public subsidy, including affordable housing trust fund payments, assistance from the NJ Housing and Mortgage Finance Agency or municipal payment-in-lieu-of-taxes (PILOT) agreements, although that was not apparent from the language in the bill as passed out of committee.

Kevin Walsh, director of the Fair Share Housing Center that is part of more than 280 court settlement agreements with municipalities over their affordable housing obligations, said the measure also would not impact any of those settlements.

The measure was revised before its release. In its initial form it would have been even more inclusive, covering all housing developments of 20 units or more.

These requirements would not replace the current state process for determining local affordable housing obligations; under the Mount Laurel Doctrine and Supreme Court decisions, every community is required to provide for its fair share of the need for low-cost housing within its region. (There are six housing regions in the state, each with either three or four counties in them.) But if enacted, this measure would represent a significant shift in state housing policy, which now does not require the construction of any affordable housing. State law, and the current court process, only requires communities to zone for their share of the housing need.

“This is something that really can benefit all sectors throughout our state,” Timberlake said. “In terms of the urban areas, this is a bill to make sure that when there are big buildings being built, that the displacement that comes along with gentrification does not occur and that there is some affordability … This helps get suburban areas closer to their obligations, which already exist. This does not in any way, shape or form change those obligations.”

Opposition is lining up

To ensure that lower-cost homes get built as part of new construction, the measure would require that, as a developer completes a project, a portion of completed units be affordable. That would prevent a builder from finishing three-quarters of a project and saying he was unable to complete the rest without any of the units already finished being affordable.

Additionally, the bill includes requirements for all developments that are not age-restricted to ensure that at least half of the affordable units have two or three bedrooms and, thus, be suitable for families.

Representatives of the state’s municipalities, real estate agents, builders and apartment complexes all oppose the bill.

Frank Marshall of the New Jersey State League of Municipalities said that requiring a set-aside for affordable housing in developments could make them unprofitable to builders and thwart the bill’s intention to get more low-cost homes constructed.

“If the project is not viable … then regardless of obligation, the project is not going to be built,” he said.

Nicholas Kikis, a vice president with the NJ Apartment Association, added that for those projects that still could be built “you’d see the costs drive up significantly and further exacerbate the affordable housing crisis that we have as a state.”

‘A lot of grave concerns’

Jeff Kolakowski, director of governmental affairs with the New Jersey Builders Association, said the organization has “a lot of grave concerns” about the legislation. He said a 30-percent payment in lieu of construction into an affordable housing trust fund would be “a significant increase” over the current 2 to 6 percent of a project’s cost.

“I don’t know why we would take money and put it in the affordable housing trust funds when some municipalities are just sitting on the money,” he said, referring to significant fund balances that some towns had accrued while affordable housing rules were on hold due to legal challenges. “I further have a concern that taking a 30 percent payment in lieu of … then earmarking 50 percent for community centers is unwise. I don’t understand why we would take money out of a houser’s hand and put it into another community need, which is for community service centers.”

Kolakowski also objected to the addition of a requirement to build middle-income or workforce housing because communities are not yet meeting the needs of those with lower incomes, who have a greater need.

“I don’t think we should be doing things to subsidize people at those levels,” he said of the middle-income category.

The U.S. Census Bureau estimated New Jersey’s median household income in 2017 at $76,475. Based on that figure, a “middle income” household could have close to $92,000 in annual income and qualify for lower-cost housing.

Kolakowski added that the bill may be unconstitutional, or at least is inconsistent with the state Fair Housing Act, which spells out affordable housing rules, because it does not give developers compensation for building or funding low-cost homes.

“You cannot just foist this responsibility on the development community without giving them something in exchange,” he said.

But housing advocates praised the legislation, with Walsh calling it a “visionary bill” that would supplement the FHA and court process for establishing affordable housing obligations.

Timberlake said she sees it as an additional, much-needed effort to boost the amount of low-cost housing in the state.

“This is an additional tool that is in the toolbox,” she said. “There is no one silver bullet or special fix for affordable housing. It really does take a lot of different approaches to get it right.”