Project Community
Center for Urban Policy Research
This report examines the need for, and the impacts to be created by the New Jersey Housing & Jobs Initiative as proposed by the Affordable Housing Network of New Jersey. The Initiative is a $290 million proposal consisting of five elements: an Affordable Housing Development Fund, a Project-Based Rental Assistance Program, a Homeownership Fund, an Economic Development Fund, and a Nonprofit Financial Assistance Fund. The Initiative would be financed by a $290 million general obligation bond.
The five components of the New Jersey Housing & Jobs Initiative will address urgent community needs for: 1) a greater supply of, and access to, more affordable housing; 2) economic opportunities to start new businesses and encourage revitalization of the state’s distressed neighborhoods; and, 3) support to expand the capacity of nonprofit community-based development organizations. The impacts of the Housing and Jobs Initiative will be substantial and return significant economic benefits. Adoption of the Housing and Jobs Initiative would be a prudent and practical public policy for the state.
The Initiative’s proposals to allocate $160 million to an Affordable Housing Development Fund to create at least 4,500 units of affordable housing and invest initially $41 million in small business development through an Economic Development Fund will produce large numbers of jobs. The combined impacts of these two Funds will create between 8,500 and 12,000 jobs mainly in construction, retail, service and manufacturing.1 The employment created from the Affordable Housing Development Fund will last for the duration of the housing production period which is estimated to be seven years. The jobs generated by the Economic Development Fund are expected to be continuous, and since it is assumed that half of this fund will be revolving loans, the level of employment is anticipated to grow. The jobs will benefit a wide range of the state’s workforce, from high-skilled workers, such as construction tradespersons, to opportunities for medium- to low-skilled occupations, such as machine and vehicle operators, material movers, food service workers, and secretaries.
The expected revenues to governments from the Initiative will be significant. Some of the estimated tax revenue from the Affordable Housing Development Fund will accrue one-time based on the economic activity from the actual housing construction and an additional amount will recur due to annual property taxes on the units built. The Affordable Housing Development Fund will generate on a one-time basis between $19.6 million and $31.4 million in state taxes and $20.4 million to $32.7 million in local property tax revenues, as a result of the housing production activity on workers incomes,
materials purchased and company revenues. When all of the production is completed, annual revenue from property taxes in localities where the housing units are built or rehabbed, is expected to be between $8 million and $12.8 million.
The creation of permanent jobs and leasing of commercial space by small businesses developed through the Economic Development Fund will also impact favorably on government revenues. All of this fund’s expected state and local revenues are expected to be annual. After the initial allocation (plus leveraging) of this fund has been distributed and all of the expected jobs have been created, the state will receive nearly $6.2 million annually in personal and corporate income and sales taxes. Property tax revenue to localities is expected to be $6.4 million each year. As part of the Economic Development Fund is repaid and loaned again, revenues will climb in proportion to additional jobs created.
The Initiative will also bring about cost savings. Its plan to provide project-based rental assistance to very poor families is a potential alternative to costly emergency assistance placements in hotels and shelter for some homeless families. As an example, permanent housing from this provision can save the state and county $6,794 per homeless family with potential savings of $917,190 a year (see p. iii). Savings to the state would also be achieved through expected reductions in unemployment costs and helping people to move off welfare through the increased economic opportunities for starting new businesses and entrepreneurial training provided by the Economic Development Fund.
The Initiative’s impacts far outweigh its cost. The cost of financing the bond to pay for the Initiative is less than the expected economic benefits. Assuming a 30-year period to repay the bond at a tax-exempt interest rate of 4.75 percent, the financing cost would be $16,533,333 a year. By comparison, the Affordable Housing Development Fund, in addition to yielding one-time revenues of $40 million to $64.1 million, combined with the Economic Development Fund would render between $20.6 million and $25.4 million annually in new revenues to state and local governments when all of the housing units and jobs have been created. It will be administered by existing state agencies and augment current programs, requiring minimal, if any, increases in staff.
The various housing programs sponsored through the Initiative will enable the state’s residents to have more choices about where they can live. This increased mobility will allow people to potentially move closer to their work sites resulting in less commuting costs and reduced traffic. Creating more housing opportunities for New Jersey’s workforce also makes the state more competitive in attracting new businesses.
A brief description of each element of the Initiative with highlights of the expected impacts follow.
$160 million in funding to be administered by the New Jersey Department of Community Affairs to establish an Affordable Housing Development Fund.
The Affordable Housing Development Fund will create at least 4,500 affordable housing units for rental and homeownership. This effort will help the state take a large forward step toward responding to the urgent need for 85,000 to 100,000 new affordable units over the next five years, elevate the low rate of current production, and make real gains against factors such as substandard conditions which are eroding the current supply.
The fund’s estimated economic impacts (assuming leveraging) will be as follows.
For every million dollars of fund investment, with leveraging, it will create a range of thirty-seven to almost sixty new jobs, add between $122,600 and almost $200,000 in total state tax revenue, generate from $127,700 to over $200,000 in one-time local tax revenues, and add $50,000 to $80,000 annually in property taxes for municipalities where the units are built.
$50 million in funding for a Project-Based Rental Assistance program.
The Project-Based Rental Assistance Program will make one-fifth of the new units produced affordable to very low-income households for thirty years. This program will provide project-based subsidies which will allow 900 poor households with minimum wage incomes or lower, who often spend over 50 percent of their income for rent, to afford housing that is safe and decent.
This fund represents a cost-effective alternative for the state and county governments to serve New Jersey’s homeless population by providing less costly and permanent housing for homeless persons who are now being placed in very expensive and grossly inadequate hotels and motels. The average 1994 state/county cost of placing a homeless family in a hotel/motel for a year was $8,646. In comparison, the per unit cost of the rental subsidy is only $1,852 annually (excluding bond interest), about one-fifth the cost of hotel/motel placements. Reducing these emergency housing expenses can bring about considerable savings for the state and county governments. For each homeless family, now in a hotel/motel placement, which will be housed through the Project-Based Rental Assistance Program, the state and county governments will save $6,794 per year in emergency assistance payments (after subtracting the bond costs). If 15% (135) of the subsidized units become occupied by homeless families now in motels, the savings to the state and municipal governments would be $917,190 a year. Targeting a portion of the units receiving subsidy for homeless public assistance recipients will multiply these savings. This program will also provide an important measure to ensure that the rental needs of this population are addressed as part of the state’s economic recovery.
Social impacts generated by the Project-Based Rental Assistance Program will include: 1) stabilizing the family environment; 2) keeping intact social and care-giving networks; 3) ensuring consistency in children’s schooling arrangements, and 4) providing a foundation to pursue employment goals. The program will enable the state to serve its neediest residents.
$30 million in funding to be administered by the New Jersey Housing & Mortgage Finance Agency to establish a Homeownership Fund.
The Homeownership Fund will enable 4,300 homebuyers to purchase their first home by providing an average of $7,000 in loans and grants for downpayment and closing costs. This component of the Initiative can remove obstacles to homeownership. Often, the amount of rent which renters pay equals a mortgage payment. Many renters may wish to make the transition to homeownership but lack the thousands of dollars in up-front capital needed to obtain a mortgage and pay the expenses of the real estate transaction. The Homeownership Fund can remove these barriers. The fund’s impacts will include the following.
$41 million in funding to be administered by the New Jersey Urban Development Corporation to establish an Economic Development Fund.
The Economic Development Fund will subsidize small business and job creation ventures and support and expand technical assistance and entrepreneurial training programs in low-income areas of the state, particularly urban and rural, as a strategy to revitalize the economies of distressed communities. These activities will bring urgently needed jobs to these communities and empower residents to start their own businesses. This will also help neighborhood regeneration by providing new services to residents. The fund will utilize the experiences of existing small business development programs and loan pools in New Jersey which have successfully launched new jobs and businesses, and leveraged additional capital. The fund’s economic impacts (assuming leveraging) are estimated to be:
$9 million in funding to be administered by the New Jersey Department of Community Affairs to establish a Nonprofit Financial Assistance Fund for nonprofit housing and community economic development corporations.
The Nonprofit Financial Assistance Fund will provide support to help forty nonprofit housing development corporations to expand their affordable housing production capacity and twenty community economic development groups to initiate or expand economic development projects to create businesses and jobs. This fund will assist New Jersey’s "third sector" of nonprofit organizations, which have taken a major role in improving the lives and neighborhoods of people in underserved areas with better housing and services. The fund’s impact will:
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