A new $300 million housing fund would be the largest increase in New Jersey’s affordable housing program in more than a decade but would provide only a fraction of such housing the state needs.

Gov. Phil Murphy has proposed a new Affordable Housing Production Fund, paid for largely by federal COVID-19 recovery money. The fund, included in his budget proposal under review by the Legislature, would build 3,300 units of designated affordable housing for residents with low and moderate incomes over the next four years. All those affordable buildings would be zoned to meet municipalities’ court-mandated obligations according to the court’s Mount Laurel doctrine.

Staci Berger, president and CEO of the Housing and Community Development Network of New Jersey, called Murphy’s proposal “historic.”

Melanie Walter, executive director of the state Housing and Mortgage Finance Agency (HMFA) that would oversee the program, called it “the largest dedicated fund” the agency has had to work with, other than disaster-relief funding like that following Superstorm Sandy. She said it will enable the agency to double housing production, important given the huge need.

New Jersey consistently ranks among the states with the most expensive housing costs in the nation.

“When we look around the state, the number of people who are just waiting for anywhere to go, it’s like 30,000,” Walter said. “But the total statewide affordability gap, between rental and homeownership, is 300,000 units … We have to chip away at that.”

HMFA’s use of low-income housing-tax credits and other traditional financing paid for building 5,574 affordable units and 609 beds for those with special needs during the first three years of Murphy’s tenure. Of the total construction costs, $1 billion would come from the federal COVID-19 funds, combined with tax credits and some money from special needs and affordable-housing trusts, said Amy Palmer, an HMFA spokeswoman.

Affordable construction after COAH

Getting a handle on affordable housing construction in the state is virtually impossible today. No state agency has been overseeing the process since 2015, when the state Supreme Court declared the Council on Affordable Housing (COAH) “moribund” and ordered the courts to determine how much affordable housing each town should be required to make available. The courts were making those decisions after a series of landmark Supreme Court rulings, known as the Mount Laurel decisions, which required every municipality to provide opportunities for affordable housing. With the required zoning in place, towns could build the properties themselves, or allow private developers to complete them.

The Fair Share Housing Center, the organization whose lawsuit brought affordable housing needs back to the courts, has been a party to more than 340 municipal housing agreements, with just two — Franklin in Gloucester County and Alpine in Bergen County — left unsettled. The center does not have an exact count of how many houses have been built and how many are pending. Adjustments used in calculating municipal housing requirements makes that number difficult to determine, said Alex Staropoli, Fair Share’s director of advocacy and communications. The group estimates that municipalities have agreed to the construction of about 50,000 housing units. Some of them would be in mixed-use buildings that include market-rate rental properties. And that includes the  3,300 affordable units in development that Murphy hopes to fund with the federal dollars.

“Some of them have been waiting to do these buildings for half a decade,” Walter said. “They just couldn’t do it because they couldn’t score high enough” to qualify for HMFA funding in the past because the agency gets so many applications.

Using federal funds to pick up the pace

Fair Share and other advocates had been urging administration officials to use federal American Rescue Plan (ARP) funds to build housing given the slow pace at which affordable units have been added for years.

“One of the things that is stifling integration in our state and exacerbating racial disparities is a lack of access to affordable-housing opportunities in places with access to good schools and good jobs,” Staropoli said. “And so we wanted to make sure that with the historic investment that the federal government has made in states through the ARP funding, that New Jersey was really taking advantage of that to address the housing issues in New Jersey.”

Historically, some individuals and communities have been reluctant to accept affordable housing nearby, but Murphy, in laying out his plan, said the homes are needed by average New Jerseyans.

“Let’s not lose sight of who actually benefits when we build more affordable housing,” he said. “It’s the educator or first responder who can finally live within the community they serve. It’s also the server at the local diner, the cashier at the grocery store and the young family just starting out who want to be able to raise their child where the schools are good and the quality of life is high.”

Walter said that has been sinking in.

“The number of mayors who’ve called wondering if they’ll qualify has been honestly encouraging,” she said. “You know, you always wonder if they really want the housing and they’ve been very positive about the program.”

The income limits to qualify for housing in the most expensive region of the state — Hunterdon, Middlesex and Mercer counties — range as high as $110,000 for median-income housing for a family of three, according to Affordable Housing Professionals of New Jersey.

The state Affordable Housing Trust Fund is again helping to build some affordable homes after years of disuse.

Trust fund back in building business

The Department of Community Affairs, which oversees housing issues, expects that by the end of the current fiscal year, it will have funded the construction of 415 units during the first 4 1/2 years of the Murphy administration, using about $66 million from the state Affordable Housing Trust Fund. That fund receives a portion of real estate transfer fees and is supposed to be used to build new homes. But for a decade, three governors had diverted the money to the state budget’s general fund. It wasn’t until the 2019 fiscal year that Murphy began funding the trust, and he has increased that funding every year since, although sometimes after prodding by lawmakers and advocates.

Gov. Chris Christie’s administration made the HMFA its lead in financing affordable home construction, using tax credits and federal disaster assistance funding to replace homes destroyed by Superstorm Sandy. But it didn’t deposit money into the trust fund and sought, unsuccessfully, to take control of dollars held in municipal trusts to finance affordable housing construction in their other communities.

It took time for the state fund to grow again. At the start of the current fiscal year, the fund had $140 million, with $40 million of that expected to have been spent by June 30, according to the state treasurer’s office. The state expects to deposit another $100 million into the fund in the fiscal year that begins in July.

Importance of trust fund cash

Trust fund dollars are critical in enabling smaller and nonprofit developers to build affordable housing, because they are typically building smaller projects and generally don’t qualify for HMFA funding, which covers developments of 40 or more units. And projects where all the units are in the affordable housing program have the greatest need for state support, because they will generate smaller rental income than market-rate rentals, meaning it will be more difficult for a developer to cover construction costs.

The administration’s efforts at spending the trust fund money were hampered by the COVID-19 pandemic. Its plan for spending trust dollars was unveiled in February 2020, just two weeks before the state’s first case of the disease was identified. That led to a monthslong state shutdown, including of construction projects, and a redirection of energy toward averting a different kind of housing crisis as both homeowners and renters impacted by the pandemic were unable to pay their bills and would have faced foreclosure or eviction without action. It wasn’t until late 2020 that the Department of Community Affairs began awarding trust funds to affordable development applications.

It also took time for nonprofits to ratchet their development offices back up. Berger said some nonprofits had shut their development offices completely, given there was little or no funding for them. Experienced developers had moved on.

“A decade of disinvestment takes a huge toll,” she said.

But the opportunity provided by the proposed housing investments is great, she added.

“We have a chance to make transformational, once-in-a-lifetime investments that create housing stability and affordability,” Berger said.

Still, not all the money from the trust fund is being spent to build new units, which was the intention. As in the past, the administration is planning to use about $29 million in trust fund dollars to provide rental assistance to keep low-income residents in their apartments and another $7 million to support homelessness prevention programs and shelters.

“While they don’t build or create new affordable housing opportunities, they are servicing the needs of very-low, low- and moderate-income people,” Berger said, adding she hopes the state will return to funding those programs using general fund budget dollars soon.

In the meantime, developers are eager to get more state assistance to build more homes as soon as possible, she said. “Our members are absolutely ready to build.”