Legislation sponsored by Assembly Democrats Jerry Green, Troy Singleton, Mila Jasey, John Wisniewski, Annette Quijano and Benjie Wimberly that would transform foreclosed properties into affordable housing was approved Thursday by an Assembly committee.
“Abandoned properties are a nuisance. They often invite criminal activity and drag down the value of other properties in the neighborhood,” said Green (D-Middlesex/Somerset/Union), who chairs the Assembly Housing and Community Development Committee, which released the bill. “Then there is the issue of affordability in New Jersey, which is one of the most expensive states in the country to live in. This bill helps tackle both problems by taking vacant properties that are contributing nothing but headaches to neighborhoods and municipalities and repurposing them as affordable housing.”
The bill (A-470), the “New Jersey Residential Foreclosure Transformation Act,” would create the “New Jersey Foreclosure Relief Corporation” as a temporary entity within the New Jersey Housing and Mortgage Finance Agency (HMFA) for the purpose of purchasing foreclosed residential properties from institutional lenders and dedicating them for occupancy as affordable housing.
“Abandoned properties are a burden to municipalities, especially ones already struggling financially. They strain municipal resources, cut into property tax revenue, attract crime and undermine the quality of life of remaining residents,” said Singleton (D-Burlington). “This bill would not only help rid municipalities of these troublesome properties, but replace them with affordable housing.”
“Many abandoned properties have sat vacant and unmaintained for years. Not only are they costly eyesores for municipalities, they can be health and safety hazards,” said Jasey (D-Essex/Morris). “In a time when we are all being asked to do more with less, turning these properties into affordable housing helps towns increase revenue while providing an important resource for needy residents.”
“Abandoned properties do nothing to help reinvigorate neighborhoods facing economic decline. The longer a house sits idle and deteriorated, the harder it is to reclaim them,” said Wisniewski (D-Middlesex). “This bill helps reduce the strain that these properties put on municipalities and on neighborhoods while creating much needed affordable housing options for low-income residents.”
“The impact of the housing crisis is still felt in many neighborhoods. Vacant properties drain municipal resources and destabilize neighborhoods,” said Quijano (D-Union). “Communities need healthy neighborhoods to be economically strong and people need housing they can afford. This bill helps us fulfill both needs by taking stagnant properties and putting them back to work.”
“Vacant properties blight neighborhoods and depress property values, which is unfair to those remaining residents who have kept up their homes but are still affected by the repercussions through no fault of their own,” said Wimberly (D-Bergen/Passaic). “By giving municipalities the power to reclaim ailing properties, we can rebuild neighborhoods that have been hit hard by foreclosures.”
Under the bill, the corporation would have the authority to purchase foreclosed residential property and mortgage assets from institutional lenders to produce affordable housing and dedicate it as such for 30 years. The bill directs the corporation to enter into contracts or loans, or both, with no more than two experienced, financially sophisticated, community development financial institutions to enhance the ability of the corporation to fulfill its purpose of producing affordable housing.
The municipality where the property is located would have the right of first refusal to purchase the property and dedicate it as affordable housing. Under the bill, the municipality could purchase the property for use as affordable housing, decline to buy it, or authorize the corporation or its contractors to use monies from the municipality’s affordable housing trust fund to purchase the property.
If a municipality does not exercise its right of first refusal to buy a property, the corporation may buy it and convey it for occupancy as affordable housing subject to a 30-year deed restriction to another public agency, a community development corporation, a developer, or a qualifying household.
If the corporation, its contractors or a municipality purchases an eligible property from monies deposited in a municipality’s affordable housing trust fund, the municipality would receive bonus credits toward any constitutionally-imposed obligation to provide affordable housing.
The bill also establishes a mechanism through which a “foreclosure-impacted municipality” – a municipality that has 10 or more foreclosed homes listed on a multiple listing service for at least 60 days – can insulate its affordable housing trust funds from the laws that will require the transfer of its trust fund monies to the “New Jersey Affordable Housing Trust Fund.” Such a municipality would have to adopt a resolution committing the expenditure of its municipal affordable housing trust fund monies for the production of affordable housing, and authorizing the transfer of at least $150,000 of its municipal affordable housing trust fund monies to the corporation to produce affordable housing.
The bill requires the corporation to use funds transferred from a foreclosure-impacted municipality to produce affordable housing within that municipality. If the corporation is unable to use the funds within two years of the date of transfer, it would have to return the remaining funds to the municipality and the municipality would have at least six months from the date the funds are returned to commit the funds in accordance with other provisions of law. During this time, all municipal trust fund monies designated for the purchase of foreclosed properties would be protected from transfer to the state. A municipality would receive bonus credits, as otherwise provided by the bill, for affordable housing produced by the corporation or by one of its contractors pursuant to this mechanism.
The bill would also create the “Foreclosure to Affordable Housing Transformation Fund,” a nonlapsing, revolving fund where funds appropriated or otherwise made available for the corporation to fulfill its purposes would be stored. The HMFA would administer the fund and would be authorized to transfer into the fund any amounts it has that could be used to produce affordable housing.
The bill would also authorize HMFA to issue bonds to fund the activities of the corporation. The bill calls for prioritization of the allocation of tax-exempt private activity bonds in order to allow the corporation to fulfill the purposes of the bill. Also, in any year in which the proceeds from the Realty Transfer Fee additional fee exceed $75 million, the first $10 million above the $75 million collected would be transferred into the “Foreclosure to Affordable Housing Transformation Fund” for the production of affordable housing. The bill would authorize the Commissioner of Community Affairs to transfer into the fund certain amounts held for the production of affordable housing, including but not limited to monies deposited in the “New Jersey Affordable Housing Trust Fund.”
Lastly, under the bill, the corporation would cease its operations on December 31, 2017. On that date, any assets, properties, or funds held by the corporation would transfer to the HMFA.
The bill was approved by the Assembly Housing and Community Development Committee.