(TRENTON) – Legislation sponsored by Speaker Pro Tempore Jerry Green (D-Middlesex/Somerset/Union) and Bonnie Watson Coleman (D-Mercer/Hunterdon) to further extend the moratorium on development fees for non-residential construction projects, transform foreclosed properties into affordable housing and protect certain municipalities from having their affordable housing funds raided by the state was approved Monday by the General Assembly.
“New Jersey consistently ranks as one of the most expensive states to live in. Not surprisingly, we also have some of the highest foreclosure rates in the country. Meanwhile, while we have slowly made some gains, our job market is still a long way from recovery,” said Green, who chairs the Assembly Housing and Local Government Committee. “This bill would help attract more development and hence create needed jobs by reinstating the moratorium on these fees, while putting in place the controls that will allow New Jersey to meet the affordable housing needs of its residents.”
“Economic realities are forcing many families to foreclose on their homes. Many of these properties end up vacant, undermining the health, safety and economic vitality of neighborhoods, depressing their property values and reducing revenues to municipalities. On the other side of the coin, you have families of lower financial means struggling to find adequate, affordable housing,” said Watson Coleman. “This bill helps address this pervasive problem by taking foreclosed properties that threaten the stability of neighborhoods and turning them into affordable housing. It’s a win-win.”
The bill (A-4251/S-2716) extends the moratorium on the imposition of fees on non-residential construction projects for two and a half years, until January 1, 2016. The statewide non-residential development fees were enacted as part of revisions to the Fair Housing Act and Municipal Land Use Law in 2008. The 2.5 percent fee was charged to office, commercial and industrial real estate developers to help municipalities meet affordable housing obligations. A moratorium of the non-residential fee requirement was initially placed on the imposition of fees in 2009. In 2011, the moratorium on the imposition of the fees was extended by two years, until July 1, 2013.
The bill also creates the “New Jersey Residential Foreclosure Transformation Act,” which establishes the “New Jersey Foreclosure Transformation Program” as a temporary program within the New Jersey Housing and Mortgage Finance Agency (HMFA) to purchase foreclosed residential properties from institutional lenders and dedicating the properties for occupancy as affordable housing. Under the bill, the HMFA must cease the program’s operations on December 31, 2017.
“Foreclosures in New Jersey continue to rise with no relief in sight. The administration’s answer to this problem has been to hold on to money allocated to help property owners avoid this very situation. Now it wants to take away funds from municipalities meant to create affordable housing,” said Green. “Foreclosed properties can quickly turn into nuisance properties, attracting criminal activity and driving down property values. This bill helps us accomplish two things: it helps reduce the growing number of foreclosure properties, while helping meet the demand for affordable housing.”
The bill empowers the HMFA to purchase foreclosed residential properties and mortgage assets from institutional lenders in order to produce affordable housing and dedicate it as such for 30 years.
The bill directs the HMFA 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 HMFA to fulfill its purpose of producing affordable housing. Under the bill, the HMFA or, if applicable, one of its contractors, must give the municipality where the property is located (1) a right to consent or withhold consent to the proposed purchase and dedication as affordable housing, as well as (2) the right of first refusal to purchase the property and dedicate it as affordable housing.
A municipality may exercise its right to buy and dedicate eligible property for affordable housing, decline the option to buy, or decline to exercise the option and instead authorize the HMFA or its contractors to use monies from the town’s affordable housing trust fund to buy the property.
The bill also provides that whenever the HMFA, its contractors or a municipality buys an eligible property using monies deposited in a municipality’s affordable housing trust fund, the town is to receive two units of credit toward any Council on Affordable Housing-imposed obligation to provide affordable housing for each eligible unit of affordable housing dedicated and provided.
The bill awards municipalities additional unites of credit, above the actual number of dedicated affordable housing units produced, as an incentive for them to authorize the use of their affordable housing monies for the purchase of eligible properties and to dedicate them as affordable housing.
In addition, the bill 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.”
“To take funds meant to create affordable housing when there is a need for more affordable housing is just mind-boggling,” said Watson Coleman. “These funds have a specific purpose: to create moderately priced housing for families of lower means; not help the administration plug holes in the budget. There is no honor in boasting about a budget balanced on the backs of our most vulnerable residents.”
A foreclosure-impacted municipality can accomplish this by adopting 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 HMFA for the HMFA to use to produce affordable housing. If a municipality adopts the resolution to authorize the transfer within 60 days after the effective date of the bill, the municipality would be deemed to have committed the funds by the deadline established in A-500.
Under the bill, the HMFA must use the funds transferred from a foreclosure-impacted municipality to produce affordable housing within that municipality. If the HMFA is unable to use all of the transferred funds within two years of the date of transfer, it must return the remaining funds to the municipality, which 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.
The bill also establishes the “Foreclosure to Affordable Housing Transformation Fund,” a non-lapsing, revolving fund to serve as the repository for funds appropriated or otherwise made available for the HMFA to fulfill its purposes. The HMFA would administer the fund and would be authorized to transfer into the fund any amounts it has that may be used for the production of affordable housing.
Lastly, the bill requires the HMFA to make an annual report on the program’s activities to the governor and the Legislature, setting forth a complete operating and financial statement covering the program’s operations, transactions, and holdings during the year. The report must be posted on the agency’s website.
The bill was approved 46-27-5 by the Assembly and now awaits further consideration by the Senate.