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May 6, 2008
Re:

A-500, Affordable Housing

 

 

Dear Mayor:

The League opposes A-500, which modifies provisions of the Fair Housing Act.   While the League supports the provision of affordable housing and workforce housing, it is our collective opinion that this legislation narrows municipal compliance mechanisms, and as drafted forces taxpayers to pay for the provision of affordable housing. Further, it creates a new category of housing and places the provision of this housing on local governments and the costs on taxpayers.

Regional Contribution Agreements (RCAs)
Since their inception, RCAs have provided over $216 million in funding for new and rehabilitated housing, proving to be a reliable funding source.  A-500 proposes to eliminate RCA funding and replace it with $20 million of State revenues generated by the realty transfer fee.   In the current budget environment, in which both the State and local governments confront very difficult choices, we believe it is not in the public interest to eliminate a source of funding that is generated by developers and not taxpayers, and divert resources from the State Budget.     

The $20 million figure is arrived at by calculating the average annual amount of RCA funding since 1985. For the majority of this time, the funding has averaged about $25,000 per unit transferred. But A-500 does not take into account the increase to $35,000 per unit as implemented in 2004, or the proposed increase to a range between $67,000 and $80,000 in the proposed “third round” regulations.  In other words, the $20 million figure is not inflation adjusted and is insufficient for the future need, based on the very figures put forth by COAH.  

The League is also concerned that the replacement funding could be diverted to other budgetary purposes at some future date.  If the State Legislature takes away a permanent source of funding for housing, then it is incumbent for the Legislature to replace it with a permanent source of funding.  

Middle Income Households
A-500 creates the new category of “middle income” households, in addition to the existing, defined categories of low and moderate income households.  This will require COAH to recalculate the statewide need.  As part of its proposed third round regulations, COAH calculated a need of 115,000 for the low and moderate income housing. This calculation, however, has been widely disputed by many local governments who contend that the consultants retained by the agency relied on out-of-date and inaccurate data.   

Further, considering the very strong possibility that the COAH need figures will be challenged, we do not think it is advisable to ask the agency to now add a new category and recalculate, at least until the status of COAH’s third round regulations is known. 

Commercial Development Fee
A-500 would implement a 2.5% commercial development fee.  While the League does not dismiss, by any means, the implementation of such a fee, the revenues generated by such a fee will not even pay for half of the projected housing obligation generated by the commercial component.

COAH projects that 46,000 affordable housing units are to be created as a result commercial development through 2018.  Based on our discussions with the Department of Community Affairs, it is estimated that upper end of what can be raised through a 2.5% fee assessed on non-residential development is $125 million annually.   It is further estimated that this amount will pay for approximately 19,200 units through 2018.

That means that over this period of time, funding for remaining units generated by commercial development (which would be 26,000, according to the COAH estimates) would fall to property taxpayers.    

Forfeiture of Municipal Trust Fund Dollars
A-500 would establish that funds collected by a municipality into its local trust fund must be expended within four years. Such funding is intended to be expended for the provision of affordable housing within the current housing cycle.  There are already very tight controls on the use of funds collected by municipalities through development fees and payments-in-lieu of construction. At a minimum, a municipality should not forfeit funding collected for the provision of housing during the third round until the third round is over.    

State Housing Commission
A-500 creates a new “State Housing Commission.” The League has long supported a top to bottom review of the Fair Housing Act, as well as the creation of a “blue ribbon” study panel. We do have concerns, however, about creating another State bureaucracy to interact with local governments.  We believe A-500 needs clarification as to how this new office will interact with COAH, the Office of Smart Growth, the Department of Environmental Protection and other relevant state agencies. 

For more on this bill, please see our letter of http://www.njslom.org/ml041808.html. We anticipate that the Assembly Housing and Local Government Committee will consider the bill very soon, and we suggest you contact the committee with your concerns (Click here for contact information.) Questions on this correspondence can be directed to Mike Cerra at mcerra@njslom.com or 609-695-3481 x120.

 

                                                                        Very truly yours,

 

                                                                        William G. Dressel, Jr.
                                                                        Executive Director

 

                       

 

 

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