A new assistance program for needy first-time homebuyers and a new tax incentive to encourage saving for a first home are the latest legislative efforts to help people purchase a house in one of the most expensive states for housing in the nation.
The Senate Community and Urban Affairs Committee on Thursday approved two bills to expand financial assistance to help people buy or rehab a first home. It also endorsed a measure that would provide a period of mortgage forbearance to some homeowners impacted by the coronavirus pandemic.
One bill (S-1762) would create the New Jersey First-Time Home Buyer Savings Account Program. Under this program, people with incomes of $175,000 or less and who have never owned a house would be able to establish a special savings account at a participating bank to deposit money toward a home purchase. A saver would get a 5% state income-tax credit for contributions of up to $15,000 a year to the account. The tax credits and any interest earned on the account would be tax-free as long as they were used to buy a home or pay bank fees on the account.
“Homeownership and the financial challenges that come with it can be daunting for first-time homeowners,” said Sen. Vin Gopal (D- Monmouth), one of the bill’s sponsors. “The establishment of this savings account program will encourage healthy financial decisions for new homeowners.”
Attaining the American dream
Another bill (S-242) would establish the “New Jersey American Dream Program” within the Department of Community Affairs to provide financial assistance to low- and moderate-income people seeking to buy or rehabilitate a first home. Under the measure, the state would spend $25 million from general funds to provide up to 6% of the purchase price of a home or a maximum $10,000 to those with an income of no more than 80% of the area median-household income. In the most expensive counties, Hunterdon, Middlesex and Somerset, a couple without children would be eligible if their income did not exceed about $76,000. The program would be active for at least four years.
“It can be difficult for lower-to-moderate-income individuals to obtain homeownership, especially with the pandemic taking a heavy toll on the economy over the last year,” said Sen. Troy Singleton (D-Burlington), who chairs the committee. “These first-time homebuyer assistance programs are needed now more than ever to ease the financial burdens that they may encounter when trying to become property owners.”
Staci Berger, president and CEO of the Housing and Community Development Network of New Jersey, said this program would provide targeted help to those who might otherwise have trouble affording a home in the state. According to Zillow, the average New Jersey home was valued at more than $387,000 in March 2021, more than $110,000 higher than the national average.
“We think this is a great idea,” Berger said. “It provides down payment assistance to folks who need it. It seems like a much better approach than taking money from the Affordable Housing Trust Fund.”
The network and some other housing advocates are opposing the Murphy administration’s budget proposal to use tens of millions of dollars from that fund, which is supposed to build or support homes for those with no more than 80% of the median income, for other purposes. One of those is a $20 million transfer from the fund for the New Jersey Housing and Mortgage Finance Agency’s (HMFA) Down Payment Assistance program. That program provides a $10,000 interest-free forgivable loan to first-time homebuyers to cover a down payment and closing costs, and while HMFA officials say it is used overwhelmingly by the low-income it has a higher income cap — a person with up to 140% of the area’s median income is eligible. Current federal funding for that program is expiring.
The committee also approved S-3669, which would require creditors to provide as many as 180 days of mortgage forbearance to some homeowners who seek it during the COVID-19 pandemic emergency period. Those with a household income of no more than 1.5 times the area median and who have suffered a substantial loss of income or other financial hardships would be eligible. No fees, fines or penalties could accrue during any forbearance period. Any time in which a mortgage went unpaid would be tacked on to the end of the loan term. People could seek relief for missed mortgage payments dating back to the start of the emergency, March 9, 2020.
All the bills were all released unanimously by the committee and proceed to the floor of the Senate for a vote by the full house.