The Biz4NJ News Service reports on current issues that affect the NJ business community
Converting Foreclosed Properties into Affordable Housing
Making Lemons into Lemonade in the NJ Housing Market
Wednesday, February 15, 2012:
The New Jersey Residential Foreclosure Transformation Act, S1566/A2168, seeks to create a new state agency within the New Jersey Housing and Mortgage Finance Agency that would buy up foreclosed properties and turn some of them into affordable units. While the initiative has the broad support of virtually every interest group, it could also reduce the overall amount of affordable housing available in communities.
One of the controversial features of the "Foreclosure Transformation Act," is that it allows localities to treat each affordable unit made available as the equivalent of two so far as each locality's state obligations to convert foreclosed properites into affordable housing.
Veteran legislator Ray Lesniak, quoted in an article by Colleen O'Dea on NJspotlight.com says “Not only will it provide more affordable housing, but it will reduce the number of boarded-up houses that drag down property values, build up neighborhoods, and boost the economy,” Sen. Raymond Lesniak (D-Union) and State Senator Barbara Buono (D-Middlesex) are the two cosponsors of the bill in the Senate.
Lesniak in the NJ Spotlight article said that more than $500 million is available from the State Affordable Housing Trust Fund, federal dollars, and money from the recent foreclosure settlement. The agency also could take advantage of the bonding capabilities of the HMFA,.
The website RealtyTrac lists over 35,000 New Jersey properties in some stage of foreclosure, including pre-foreclosure, auction, and bank ownership. This is likely to be a conservative number as not all these transactions are typically listed on Realty Trac
S1566 is slated for its first hearing in Trenton on Thursday before the Senate Economic Growth Committee.
The bill has support from a broad coalition that includes New Jersey municipalities, realtors, builders and bankers.
The concept also appears to have the backing of affordable housing advocates, though they predictably do not support the provision that would give communities a two-for-one bonus against their state Mount Laurel obligations for transitioning foreclosed homes into low-income units.
“They’re just giving away the store if they do that,” said Kevin Walsh, associate director of the Cherry Hill-based Fair Share Housing Center, in the same NJ Spotlight article referenced. He reportedly called the bill “overall, a good piece of legislation" but quipped “A person can’t live in a bonus, they can live in a house. At minimum, they should cap that.”
Lesniak’s response to the suggestion of a cap on the two-for-one affordable housing credit: “Absolutely not.”
Says Colleen O' Shea in her article in NJ Spotlight,
"Regardless of the political give and take, few would deny that the state has a critical need for affordable units. The 2011 Out of Reach report by the National Low Income Housing Coalition found that almost 6 in 10 renters could not afford the average fair market rent for a two-bedroom apartment in the state. Before it was eliminated, COAH estimated 138,000 low- and moderate-income units were needed in New Jersey through last year and another 104,000 would be required through 2018 to ensure all residents an affordable home.
According to the DCA, about 135,000 new and refurbished affordable housing units have been approved statewide, with about 75,000 completed as of March 1, 2011. As of February 3, municipalities reported $268 million in unspent Affordable Housing Trust Fund balances.
Predictably the New Jersey League of Municipalities supports Lesniak’s bill as it reduces the obligations that cities have to convert foreclosed homes into low income units.
The New Jersey Council on Affordable Housing (COAH) was established in 1985 to ensure that cities and towns in New Jersey lived up to the first Mount Laurel decision, which determined that towns have a constitutional obligation to ensure that residents have affordable places to live. Today however it no longer exists as a separate entity because Governor Christy filed a reorganization plan in 2011 abolishing COAH and transferring its duties to the State Department of Community Affairs. The issue was then disputed by the Fair Share Housing Center and is currently in litigation.
Andrea Dealmagro (http://newjersey2013.wordpress.com) points out that local taxes will need to be lowered to make the new housing viable. She also comments on other financial implications of the legislation below:
According to Andrea "The security issue [in urban areas] must be addressed before the housing renewal happens. Private capital is not attracted to crime-ridden areas and the government cannot supplant the private sector. The State of New Jersey simply does not have enough money for that.
Lesniak is counting on the bonding authority of NJ HMFA - that means more borrowing. Yes, we balance the state budget every year but the independent agencies are bonding the state's future right and left. Every independent authority bond is backed by the good faith and credit of the State of New Jersey."
Bottom-line: With all its flaws, Biz4NJ relunctantly endorses this legislation even if it does short change those who need affordable housing while buying the support of the powers that be.
The funding by the state is of course key. And who funds the good faith and credit of the State of New Jersey?
You do my friend and fellow tax payer, you do.
Text of the Act: http://www.njleg.state.nj.us/2012/Bills/S2000/1566_I1.HTM