A5673

An Act concerning mixed-income housing development, supplementing P.L.1992, c.79 (C.40A:12A-1 et seq.), and amending P.L.2025, c.111.

Be It Enacted by the Senate and General Assembly of the State of New Jersey:

1. (New section) The Legislature finds and declares that:

a. A nationwide crisis of housing affordability has grown for many years, and has created serious challenges for many middle-income households, in addition to households of low- and moderate-income;

b. Despite investment by all levels of government over many years in various programs to finance and otherwise incentivize the construction of affordable housing by private developers, New Jersey has been unable to evade this housing affordability crisis;

c. The direct development of affordable housing by government entities had been, for a time, a significant source of the nation’s affordable housing supply, and can serve as an important component of the State’s housing supply; and

d. The establishment of an authority dedicated specifically to directly creating mixed-income housing will enhance the State’s efforts to alleviate the affordability crisis.

2. (New section) a. As used in this section:

"Low- and moderate-income housing" means housing affordable in accordance with the Uniform Housing Affordability Controls, promulgated pursuant to subsection b. of section 36 of P.L.2024, c.2 (C.52:27D-313.3), and occupied or reserved for occupancy by households with a gross household income equal to less than 80 percent of the median gross household income for households of the same size within the housing region in which the housing is located.

"Middle-income housing" means housing affordable according to federal Department of Housing and Urban Development or other recognized standards for home ownership and rental costs and occupied or reserved for occupancy by households with a gross household income of 80 percent or more, but not exceeding 120 percent, of the median gross household income for households of the same size within the housing region in which the housing is located.

"Mixed-income housing" means a housing development in which no less than 40 percent, and no more than 60 percent, of the dwelling units are restricted for use as low- or moderate-income housing, and the remaining dwelling units are restricted for use as middle-income housing.

b. There is established in, but not of, the Department of Community Affairs the Direct Development Authority for the purpose of developing mixed-income housing, applying the powers of a housing authority pursuant to section 16 of P.L.1992, c.79 (C.40A:12A-16). The powers of the Direct Development Authority shall include, but not be limited to, the power to plan, construct, own, operate, maintain, reconstruct, improve, alter, and repair any mixed-income housing project; to accept from the State or federal government, or any other lawful source, funds or other financial assistance for the development of mixed-income housing; and to lease or sell dwelling units in a mixed-income housing project to qualifying tenants or buyers.

c. An Authority Chief shall be appointed by the Governor, with the advice and consent of the Senate, to lead the Direct Development Authority and shall serve at the pleasure of the Governor. The Direct Development Authority shall be staffed, at the direction of the Governor, by employees of the Department of Community Affairs, the New Jersey Housing and Mortgage Finance Agency, and the Economic Development Authority.

d. The development funding needs of the authority shall be provided in part through tax credit auction proceeds made available pursuant to subparagraphs (a) and (f) of paragraph (1) of subsection b. of section 4 of P.L.2025, c.111 (C.55:14K-107).

e. (1) Prior to developing a housing project, the Direct Development Authority shall consider each condition established in this paragraph as a separate factor in favor of initiating the project. The authority shall consider the development of a project as more favorable if the proposed project is located in close, convenient proximity to:

(a) public transportation;

(b) one or more public primary or secondary schools;

(d) healthcare providers.

(2) In addition to the factors considered pursuant to paragraph (1) of this subsection, the authority shall consider the initiation of a prospective development more favorably if (a) the local infrastructure is sufficient to support the project without extensive additional investment; and (b) the county in which the prospective project is located faces a pronounced shortage of low- and moderate-income housing and middle-income housing.

f. On an annual basis, the Direct Development Authority shall prepare and submit a report to the Governor, and, pursuant to section 2 of P.L.1991, c.164 (C.52:14-19.1), to the Legislature. The report shall also be made available to the public on the Internet website of the authority. The report shall include, but shall not be limited to:

(1) a summary of each project developed, and each project maintained, by the authority;

(2) a summary of the use of each funding source for the authority, including any tax credit auction proceeds made available pursuant to subparagraphs (a) and (f) of paragraph (1) of subsection b. of section 4 of P.L.2025, c.111 (C.55:14K-107);

(3) the geographic distribution of the projects;

(4) the number of housing units created by projects of the authority, including the number of low- and moderate-income housing units, and the number of middle-income housing units; and

(5) the average development cost per housing unit developed.

g. The Commissioner of Community Affairs, on an annual basis, shall commission an independent audit of the activities of the Direct Development Commission. The results of the independent audit shall be open to public inspection and shall be provided to the Governor, the State Comptroller, the State Treasurer, and, pursuant to section 2 of P.L.1991, c.164 (C.52:14-19.1), to the Legislature.

3. Section 4 of P.L.2025, c.111 (C.55:14K-107) is amended to read as follows:

4. a. (1) Beginning on the effective date of P.L.2025, c.111 (C.55:14K-106 et al.), the agency shall sell up to $500,000,000 in tax credits over the course of no more than six years.

(2) The competitive auctions shall be conducted in a manner consistent with the processes set forth in section 24 of P.L.2020, c.156 (C.34:1B-292), as determined by the agency. The agency shall be permitted to join or be added to any contracts that the New Jersey Economic Development Authority has utilized for its auctions, although auctions held for the purposes of administering P.L.2025, c.111 (C.55:14K-106 et al.) shall not be counted towards the limitation imposed pursuant to subsection d. of section 24 of P.L.2020, c.156 (C.34:1B-292) and the requirement on purchasers under paragraph (3) of subsection b. of section 24 of P.L.2020, c.156 (C.34:1B-292) shall not apply. The agency shall deposit funds received at an auction pursuant to this subsection minus those reserved for administrative or operational costs into a nonlapsing account established and maintained by the agency for the purposes of administering P.L.2025, c.111 (C.55:14K-106 et al.).

(3) The agency shall be limited to selling $100,000,000 in tax credits annually and shall not sell tax credits for less than 80 percent of the tax credit amount.

b. (1) (a) Fifty percent of the proceeds deposited into the nonlapsing account created pursuant to paragraph (2) of subsection a. of this section shall be reserved for use by the agency for the purposes of providing financial assistance to create middle-income workforce housing. Fifty percent of the proceeds deposited into the nonlapsing account created pursuant to paragraph (2) of subsection a. of this section shall be reserved for use by the agency for the purposes of providing financial assistance to create low- and moderate-income housing toward the fulfillment of a municipality's current or prior round fair share affordable housing obligation pursuant to the "Fair Housing Act," P.L.1985, c.222 (C.52:27D-301 et al.).

(b) The 50 percent set asides established by subparagraph (a) of this paragraph for monies deposited into the nonlapsing account in each program funding year, pursuant to paragraph (2) of subsection a. of this section, shall remain in effect until December 31 of that year. If any funds deposited into the nonlapsing account during that program funding year remain unreserved for qualified projects subject to the set asides after December 31 of the program funding year when the monies are deposited, the set aside shall no longer apply to those funds, which may then be used for any qualified project under sections 4 through 7 of P.L.2025, c.111 (C.55:14K-107 through 55:14K-110). The initial program funding year shall begin on July 1, 2025, and shall conclude on December 31, 2025. Each subsequent program funding year shall conform to the calendar year.

(c) In the distribution of proceeds pursuant to this section for the purposes of providing financial assistance to create low- and moderate-income housing toward the fulfillment of a municipality's current or prior round fair share affordable housing obligation pursuant to the "Fair Housing Act," P.L.1985, c.222 (C.52:27D-301 et al.), the agency shall prioritize an application for development that is in a distressed older suburban municipality, as defined in section 3 of P.L.2025, c.111 (C.55:14K-106).

(d) Housing created pursuant to this section may include, but shall not be limited to, new construction or the rehabilitation or construction of residential units within multiple dwellings.

(e) Following the enactment of P.L.2025, c.111 (C.55:14K-106 et al.), the agency shall promptly and actively promote the middle-income workforce housing component of the housing program established pursuant to this section to ensure that a substantial range of potential applicants to obtain funding to provide middle-income workforce housing are made aware of the program. The promotion efforts of the agency shall include, but shall not be limited to: the provision of information sessions on the program and application process and the provision of technical assistance to applicants in completing the application process.

(f) A portion of the proceeds reserved by the agency, pursuant to subparagraph (a) of this paragraph, to provide financial assistance for the creation of middle-income workforce housing, and low- and moderate-income housing, shall be allocated to the Direct Development Authority, established pursuant to section 2 of P.L. , c. (C. ) (pending before the Legislature as this bill), for the purpose of developing mixed-income housing.

(2) The agency shall promulgate guidelines for a housing program to fulfill the purposes of this section within 90 days following the effective date of P.L.2025, c.111 (C.55:14K-106 et al.) to govern the application and award processes for qualified projects seeking funds deposited under P.L.2025, c.111 (C.55:14K-106 et al.). In addition to any other eligibility requirements that the agency deems appropriate, the project financing subsidy authorized under this section shall only be made available to projects in receipt of a Four-Percent Low Income Housing Tax Credit administered by the agency.

(3) The agency may utilize up to five percent of the proceeds to reimburse for administrative and operational costs, including contracts necessary to hold the auction.

(cf: P.L.2025, c.111, s.4)

4. This act shall take effect immediately.

STATEMENT

This bill establishes the "Direct Development Authority" (authority) in, but not of, the Department of Community Affairs for the purpose of developing mixed-income housing. The bill defines "mixed-income housing" as a housing development in which no less than 40 percent, and no more than 60 percent, of the dwelling units are restricted for use as low- or moderate-income housing, as defined in the bill, and the remaining dwelling units are restricted for use as middle-income housing, as defined in the bill.

The bill provides the authority with powers including the authorization to plan, construct, own, operate, maintain, reconstruct, improve, alter, and repair any mixed-income housing project; to accept from the State or federal government, or any other lawful source, funds or other financial assistance for the development of mixed-income housing; and to lease or sell dwelling units in a mixed-income housing project to qualifying tenants or buyers.

The bill directs the authority to evaluate several conditions as factors when considering whether to initiate a housing project, including the prospective project’s proximity to public transportation, schools, grocery stores, healthcare providers, the sufficiency of local infrastructure, and the existing availability of low-, moderate-, and middle-income housing within the same county.

The bill directs the authority to produce an annual report on various components of its activities, submit the report to the Governor and Legislature, and make the report publicly available. The bill also requires the Commissioner of Community Affairs, on an annual basis, to commission an independent audit of the activities of the Direct Development Commission. The results of the audit are to be open to public inspection and provided to the Governor, the State Comptroller, the State Treasurer, and the Legislature.

An Authority Chief is to lead the authority and is to be appointed by the Governor with the advice and consent of the Senate, and is to serve at the pleasure of the Governor.

The development funding needs of the authority are to be provided in part through tax credit auction proceeds made available through the enactment of P.L.2025, c.111 (C.55:14K-106 et al.).

The bill is to take effect immediately.