Project Community
Center for Urban Policy Research
This report examines the impacts of the New Jersey Housing & Jobs Initiative proposed by a coalition led 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 Initiative will address barriers to providing the residents of New Jersey with safe, low-cost housing and encourage opportunities to assist in the economic development of low-income communities. The first three elements of the Initiative will respond to the need to make more housing affordable to a greater number of the state’s residents. The Affordable Housing Development Fund will provide $160 million of funding to create at least 4,500 units of affordable housing. This expenditure will expand affordable housing production capacity and increase the supply of this much needed resource. Targeting operating subsidies to reduce rents to affordable levels for very low-income households will be achieved through allocation of $50 million for the Project-Based Rental Assistance Program. The demand for financial assistance by low- and moderate-income households to buy their first homes will be met by the downpayment and closing cost assistance provided by the $30 million set aside for the Homeownership Fund.
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.
The fourth component of the Initiative, the Economic Development Fund, will respond to the economic development needs of poor areas. The Economic Development Fund, will invest initially $41 million to support small business development with technical assistance, venture capital, and entrepreneurial training as a strategy to revitalize the economies of distressed communities and give low- and moderate-income persons real economic opportunity. This fund can result in savings to the state 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.
The Nonprofit Financial Assistance Fund, the final element of the Initiative, will support the positioning of community-based organizations as a major partner in neighborhood revitalization efforts. This fund will expand the capacity of New Jersey’s "third sector" of nonprofit organizations by providing $9 million for operating grants. The assistance will be used to build upon the community-based organizations’ history of success in improving the lives and neighborhoods of people living in underserved areas with better housing and services.
The economic impacts of the Housing and Jobs Initiative will be substantial and provide a significant benefit to the state’s economy. In addition, the five components of the Initiative will provide social impacts to address urgent community needs for affordable housing and the revitalization of distressed neighborhoods. A description of the major impacts of all five elements of the Initiative follows.
The combined impacts of the Affordable Housing Development Fund and the Economic Development Fund will result in the creation of between 8,500 to 12,000 jobs mainly in the construction, retail, service, and manufacturing areas. 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. Figure 1 below displays the distribution of these jobs by industry.2 These 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.
These two funds will generate effects through the state’s economy which will boost income for municipalities and the state. The combined annual revenue from both funds generated to the state and affected local governments is projected to be between $20.6 million and $25.4 million. The source of these revenues will be from property taxes after the expected housing production is completed under the Affordable Housing Development Fund and personal and corporate income, sales and proportionate property taxes anticipated from the new businesses and jobs created by the Economic Development Fund. The annual revenues from the Economic Development Fund will rise beyond initial estimates as more jobs are created from money reloaned.
The Initiative’s plan to provide project-based rental assistance to publicly assisted families is a potential alternative to costly emergency assistance placements in hotels and shelter for some homeless families. As an example, housing provided to one now-homeless family through this provision can save the state and county $6,794 a year in emergency assistance payments.
The Homeownership Fund has the potential of making the "American dream" of homeownership more affordable to a wider segment of the state’s residents. Help to pay closing costs and downpayment assistance could save a potential buyer $933 in additional financing costs at 5 percent interest and $1,642 at 8 percent interest for each $1,000 of grant assistance.
The Nonprofit Financial Assistance Fund will expand the achievements of New Jersey’s community-based organizations. These organizations have produced over 10,000 affordable units in the past twenty-five years and are building or rehabilitating one-third of all new affordable units in the state. Their accomplishments also include the development of a range of economic development projects such as a supermarket, office and retail space, credit unions, and job training programs. A vast array of other needs in areas such as education, health, social services and employment are met by these organizations through the human service programs they operate.
The proposed Initiative will comprehensively address the state’s needs for affordable housing and jobs in a cost-effective manner. The expected economic return from the Affordable Housing Development Fund and Economic Development Fund on state and local revenues will outweigh the cost of financing the bond to pay for the Initiative. Assuming a thirty-year bond repayment period at a tax exempt interest rate of 4.75 percent, the financing cost would be $16,533,333 a year.3 In comparison, these two funds, as stated earlier, are anticipated to bring between $20.6 million and $25.4 million in annual taxes. The Initiative will be administered by existing state agencies and augment current programs which will require minimal, if any, increases in staff.
In summary, the New Jersey Jobs & Housing Initiative will address the state’s need for increased affordable housing production, allow the working poor and those on lower incomes to obtain safe and decent housing, remove barriers for would-be first-time homebuyers, support the preservation and expansion of small businesses to rebuild the economies of distressed communities, and expand the capacity of community organizations to replicate their successes in improving lives and neighborhoods.
2 The affordable Housing Development Fund is expected to generate between 5,955 and 9,528 jobs. Employment from the Economic Development Fund is estimated at 2,560 positions.
3 Assume average maturity of fifteen years:
$290,000,000 X 15 X 4.75% =
$206,000,000
Repayment of principal
$290,000,000
$496,000,000
$496,000,000 paid out over thirty years = $16,533,333
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