$25 million cut costs NJ $175 million
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Governor Christie’s budget proposes to reduce the state’s affordable housing trust fund by $30 million. If this is allowed to happen, not one dollar will be available either to build or rehabilitate new affordable homes, or to support the ability of New Jersey’s non-profit sector to continue creating homes for people in the future.
By recapturing unspent trust fund balances from this year, and refusing to appropriate the full amount required by law to the trust fund for the coming year, Gov. Christie is violating the spirit – and possibly the letter – of the state law that clearly directs that all of certain real estate transfer tax receipts be dedicated to affordable housing. We are not seeking additional funding for these programs – only that the funds guaranteed by state law be retained.
Gov. Christie’s budget proposes to recapture $13.925 million from FY2010 funds already in the trust fund. The Governor’s budget also appropriates only $32 million out of $48 million in projected FY2011 realty transfer fund proceeds to the state’s affordable housing trust fund. Every penny of that $32 million is already earmarked for rental assistance and other non-production programs. These are worthy programs, but they will not create any of the homes we need. As a result of these cuts, fewer New Jersey residents will have decent homes they can afford.
These cuts will also eliminate jobs and reduce potential tax revenues for state and local governments. If these cuts are not stopped, $30 million will be lost ($25 million for housing production, and $5 million to support non-profit capacity) and our communities will lose out on much larger economic benefits.
For New Jersey, this $25 million investment means:
- Leveraging at least $100 milliion  in total housing investment, the majority of which will be private investment in New Jersey’s economy.
- Creating 1,100 one-time jobs, including both construction jobs and related secondary jobs created as a result
- These workers will earn $72 million in total income, and pay $1.6 million in state income taxes
- Purchases of construction materials and spending by the workers hired as a result of this activity will generate $1.8 million in state sales tax revenues.
- Once the homes are built, they and their residents will generate 200 ongoing jobs, and $220,000 per year in state income taxes.
- Generating $1.3 million per year in local property tax revenues.
- Over 5 years, the state and its localities will realize over $11 million in total sales, income and property tax revenues.
The cuts will also undermine the state’s nonprofit affordable housing producers, putting many of them out of business. These groups work to revitalize areas where market developers rarely go, doing far more than just building homes for people who are not served by the private sector. Their work helps to stabilize families, provide pathways to prosperity, generate local and state tax revenues, and create the conditions that make private sector investment possible. If their capacity is diminished, millions of dollars in potential investment in our communities will be lost.
Gov. Christie has made economic recovery a priority. Creating homes is economic development, as much as building factories, stores and office buildings. New Jersey’s elected leaders need to restore the trust fund and invest in the creation of more homes for people, to help bring New Jersey’s economic recovery that much closer.
1 Assumes an average total development cost of $200,000 per unit, which is conservative.
2 Derived from National Association of Home Builders (2009) “The Local Impact of Multifamily Construction in a Typical Metropolitan Area.” (NAHB study). For purposes of this analysis, we used the average of the projected impacts of rental apartments and multifamily condominiums.
3 NAHB study
4 Assumes that state income taxes are an average of 2.2% gross income.
5 This represents a combination of sales taxes paid on taxable construction materials in the housing projects and the sales taxes paid on retail expenditures by the workers whose jobs are created as a result of the housing. With respect to sales taxes on construction materials, we have assumed that 30% of development budgets are taxable construction materials, and 50% of the developers are non-profit, and thus eligible for a sales tax exemption. We have assumed that 15% of worker incomes were spent on expenditures subject to NJ sales tax.
6 NAHB study
7 Assumes average of $50,000 annual FTE wage per job created and income taxes at average of 2.2% of gross income.
8 Assumes that the 500 units are divided between 250 rental and 250 homeownership units. Rental units pay a payment in lieu of taxes of 15% of gross rent roll on average annual rents of $10,000 ($833/month), while sales units pay taxes on an average property value of $150,000 at an average rate of 2.5% of equalized valuation.