State Starts to Apportion All $60M Affordable-Housing Funds in 2020 Budget

Colleen O'Dea | February 24, 2020 | Housing
Plan is to put priority on smaller rental or ownership units that typically have ties to community-based groups looking to address local housing-equity issues
Credit: Steffen Coonan via Pexels
Building affordable housing

As Gov. Phil Murphy prepares to present his New Jersey budget tomorrow — one that housing advocates hope will spend the maximum amount on building affordable homes — the administration has begun working with local officials and builders on divvying up $60 million in the current budget for construction.

Last year, Murphy became the first governor in about a decade to actually allocate essentially all of the money collected in realty-transfer fees that are supposed to be earmarked for building affordable homes in a state that has some of the most expensive housing in the nation. Last week, his administration released a detailed plan for spending the $60 million in the state Affordable Housing Trust Fund.

The administration is going to use the money to help fund smaller rental and ownership projects of 25 or fewer units that often have difficulty obtaining financing. These projects tend to be developed by community-based organizations that have a strong connection to housing-equity issues in their communities and seek to fill gaps in existing home stock.

Several housing advocates were thrilled by the announcement.

“We are very excited about the department’s plans,” said Staci Berger, president and CEO of the Housing and Community Development Network of New Jersey. “For nearly a decade, we have been fighting to restore the Affordable Housing Trust Fund, which is crucial to addressing our state’s housing affordability crisis … The parameters of the program will allow the AHTF to be used in communities around the state, to create all kinds of affordable homes and allow our sector to innovate in the process.”

History of diverting funds

Since fiscal year 2010, more than $300 million meant for the construction of affordable homes has been spent instead on other state housing programs.  During that time, money collected from a realty-transfer fee the state imposes when a home is sold have been diverted from its original intent for years in order to plug holes in the state budget. Murphy himself had diverted most of the funds in his first budget.

In the current fiscal year, the only fund diversion is supporting the state’s rental assistance program.

Officials with the state Department of Community Affairs said they met with stakeholders to craft a plan for spending the funds in a way to make the biggest impact.

The money is to be allocated through three funds, all focused on building housing for households earning less than 80 percent of the median income for various areas of the state, with priority given to those units affordable to those with even lower incomes. DCA sets limits by household size and area. The median household income in New Jersey was close to $82,000 in 2018, according to the U.S. Census’ American Community Survey,

The number of homes that can be built with the $60 million will depend on a number of factors, including whether and how much other funding sources are also spent on the housing projects.

In a statement, Murphy called the plan “a significant step in the right direction to address our state’s affordable housing crisis.”

Priced out of reach

There is unquestionably a need for affordable housing in the state. The most recent Out of Reach Report from the National Low Income Housing Coalition found the average household would have to earn $28.86 an hour to reasonably afford the median rent for a two-bedroom unit. The median monthly rent for a one-bedroom apartment was $1,226. Close to 43% of the state’s more than 1.1 million renter households spent 35% or more of their income on rent, and thus were considered housing-burdened. A Superior Court judge determined two years ago that the state requires about 155,000 more low-cost homes to meet the needs of residents.

With the Cherry Hill-based Fair Share Housing Center having reached court settlements with some 350 municipalities to at least zone for tens of thousands of new affordable homes, there are a lot of pending projects to spend the money on and many of these will be vying for the pot of money

“A lot of the 100 percent affordable-housing projects rely on outside funding,” said Anthony Campisi, a Fair Share spokesman. “This is a new pot of money that will get those projects off the ground more quickly.”

DCA is earmarking roughly half of the $60 million to help pay for developments municipalities have committed to through their settlements to building. A municipal settlement fund will help communities create smaller-scale projects that fit into the landscapes of their neighborhoods. Money could go to municipalities or developers supported by the municipality, and towns will be required to invest in the projects in some way — either with their own trust-fund dollars, the use of publicly-owned property or some other investment. The maximum subsidy available per project will be $6 million.

Another $4 of every $10 to be spent will be through a neighborhood partnerships fund. This is to support the development of affordable housing in towns that receive Urban Aid. Priority will be given to communities that coordinate with other state investments or agencies, such as the Neighborhood Preservation Program, Opportunity Zone Challenge Grants or transit village program. Also given priority will be partnerships with private-sector investors such as community development financial institutions, philanthropic foundations and hospitals. These also will be capped at a maximum of $6 million.

The rest of the money is to be placed in an innovation fund and used to finance creative projects, as well as funds for studies, plans and technical services. It will prioritize projects that may not fit under the umbrella of the other two funds, including tiny homes, housing aimed at the working poor — Asset Limited, Income Constrained, Employed (ALICE) — population and new technologies. A portion may also be used for grants to municipalities to create long-term affordable housing plans and for capacity-building initiatives. The maximum subsidy available per project is $2 million.

DCA Commissioner Sheila Oliver, who is also the lieutenant governor, has the discretion to alter the amount directed to each fund, or to waive provisions of these guidelines, to reflect the demand for funds and the state’s priorities.

Oliver said in a statement that the plan DCA drafted “makes sense.” The investment by the state, municipalities and developers “will strengthen neighborhoods, create more diverse communities and stimulate economic development throughout the state.”

Berger said she hopes this plan is just going to be the start of a steady stream of state support for housing and that Murphy’s 2021 budget will not include any diversions.

“We expect the budget to continue to fund the AHTF without any substantial diversions again this year,” she said.