Thursday, June 12, 2008
By David Sandahl
A radical change in affordable-housing policy and financing is racing through the New Jersey Legislature. Largely unnoticed behind the commotion of state budget negotiations, pending legislation may quickly burden New Jersey taxpayers with huge new tax increases.
With the highest property taxes in the nation and a distressed economy, the cost of living in New Jersey has taken on new urgency. More and more New Jerseyans wonder how they can afford to live here, with recent studies showing that the proportion of residents leaving the state outnumbers those arriving by three to one. The cost of housing and high property taxes are critical to many in their decision to leave.
New Jersey has sought to provide an opportunity for affordable housing in every municipality through land-use planning and zoning since the first Mount Laurel court decision in 1975. The Council on Affordable Housing (COAH) was established in state law to provide "sound, affordable housing for low and moderate income households."
This is sensible policy. Decent, affordable living places for police officers, teachers, firefighters, grow ing families and senior citizens are essential to every community. My town, Hopewell Township, has worked proactively to meet the challenge of providing affordable housing for 25 years, achieving cer tification by COAH in several successive rounds of rules.
But pending legislation, Assembly bill A500 and Senate bill S1783, radically changes New Jersey's approach to affordable housing. (The legislation and contact information for state lawmakers can be found online at njleg.state.nj.us.)
In the past two weeks, commit tees in the New Jersey Assembly and Senate voted for sweeping new restrictions on the tools towns can use to provide affordable housing while nearly doubling the number of units required over the next 10 years. The 115,000 affordable units that municipalities must now provide statewide are financed by a development fee that covers less than 25 percent of the cost of construction.
Meeting the new affordable- housing target will be expensive. Using the average $160,000 cost per affordable unit determined by COAH, building 115,000 new units by 2018 results in a whopping statewide cost of $18.4 billion. The problem for New Jersey taxpayers is that a good part of this amount will be financed through increased local property taxes.
In Hopewell Township, we have estimated a $116,500 gap between the revenue provided by the new fees mandated by A500 and S1783 and the cost of constructing each affordable unit. That financing gap swells to more than $120 million when applied to the new require ment for affordable housing in our town. Statewide, the New Jersey League of Municipalities estimates the affordable housing funding deficit to be at least $4.8 billion.
Under current state law, municipalities are not required to "raise or expend municipal revenues ... to provide low and moderate in come housing," meaning that affordable housing has, for the most part, not been financed by local property taxes. But with other affordable housing tools and development fees eliminated under the proposed law, the weight of the financial burden will fall on New Jersey municipalities.
In our town, with an annual budget of less than $20 million, we will need to borrow a very large amount of money to meet this re quirement. Financing more than $120 million in construction costs for 10 years would drive more than $14 million a year in new debt service costs, more than doubling our current municipal tax rate. This does not include the higher water, sewer, public safety, emergency service and school costs that the increase in affordable housing would bring.
The full New Jersey Legislature has not yet approved the pending legislation, but will act soon. A vote in the Assembly is scheduled for Monday and in the Senate on Thursday of next week. Final action by both the Assembly and the Senate is currently expected by June 30.
Rather than rushing into this potential fiscal disaster, the Legislature should instead:
use the proposed joint Hous ing Commission to complete a disciplined assessment of the need for affordable housing and alternative approaches to meeting the need;
insist that the Corzine administration conduct an interagency review of the policies of different state departments that interact with, and often contradict, rational municipal planning for affordable housing, economic development, environmental conservation and the quality of life in our communities, and
complete a detailed fiscal analysis, addressing not only elements of state costs, but also the impacts on New Jersey's municipalities and property taxpayers.
Taking the time to complete a rational analysis will undoubtedly frustrate some affordable-housing advocates. But hasty approval of legislation that boosts property taxes and the cost of housing will surely make the affordable-housing problem, and the plight of New Jersey taxpayers, even worse.
David Sandahl is a member of the Hopewell Township Committee, responsible for finance, planning and legal matters, and he is a Member of the Hopewell Township Planning Board.