S3410

An Act providing project gap financing for low- to middle-income housing development, supplementing chapter 14K of Title 55 of the Revised Statutes, and making an appropriation.

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

1. P.L. , c. (C. ) (pending before the Legislature as this bill) shall be known and may be cited as the “Entry-Level Home Production Incentive Act of 2026.”

2. The Legislature finds and declares that:

a. A combination of factors, including rising home prices, persistently elevated mortgage rates, and a limited housing inventory, have severely eroded the ability of many people, particularly middle-income young adults, to afford to purchase their first home;

b. A limited availability of sufficient financing options for developers of low-, moderate-, and middle-income housing has restricted the ability of many development projects for those of modest incomes;

c. The need to address the financing shortfalls experienced by many developers is central to the objective of increasing the supply of housing; and

d. It is necessary and in the public interest for the Legislature to establish a dedicated fund to bridge certain shortfalls in development financing, thereby assisting in the development of low- to middle-income housing.

3. As used in P.L. , c. (C. ) (pending before the Legislature as this bill):

“Agency” means the New Jersey Housing and Mortgage Finance Agency established pursuant to P.L.1983, c.530 (C.55:14K-1 et seq.).

“Area median income” means the median gross household income for households of the same size within the housing region in which the housing is located, as determined pursuant to the rules and regulations adopted by the agency.

“Authority” means the New Jersey Economic Development Authority established pursuant to P.L.1974, c.80 (C.34:1B-1 et seq.).

“Cost of development” means the consideration given, valued in money, whether given in money or otherwise, for the materials and services which constitute the development and includes all costs associated with the structural components within a property developed pursuant to P.L. , c. (C. ) (pending before the Legislature as this bill), and any soft costs associated with a development project if permitted by rules and regulations adopted by the agency or authority, as applicable.

“Fund” means the “Entry‑Level Home Development Fund,” established within the agency pursuant to subsection b. of section 4 of P.L. , c. (C. ) (pending before the Legislature as this bill).

“Government-restricted municipality” means a municipality in this State with a municipal revitalization index distress score of at least 75, that met the criteria for designation as an urban aid municipality in the 2019 State fiscal year, and that, on the effective date of P.L.2020, c.156 (C.34:1B-269 et al.), is subject to financial restrictions imposed pursuant to the “Municipal Stabilization and Recovery Act,” P.L.2016, c.4 (C.52:27BBBB-1 et seq.), or is restricted in its ability to levy property taxes on property in that municipality as a result of the State of New Jersey owning or controlling property representing at least 25 percent of the total land area of the municipality or as a result of the federal government of the United States owning or controlling at least 50 acres of the total land area of the municipality, which is dedicated as a national natural landmark.

“Industrialized or modular building” means any building of closed construction, including, but not limited to, modular housing that is factory-built, single-family, and multi-family housing, including closed-wall, panelized housing, as well as other modular, nonresidential buildings. “Industrialized or modular building” shall not include any structure subject to the requirements of the National Manufactured Home Construction and Safety Standards Act of 1974 (42. U.S.C. s.5401 et seq.).

“Low- to 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 reserved for occupancy pursuant to the rules and regulations adopted by the agency, by households with a gross household income not exceeding 120 percent, of the area median income, unless a different percentage is specified pursuant to subsection a. of section 4 of P.L. , c. (C. ) (pending before the Legislature as this bill).

“Minority” means a person who is:

(1) Black, which is a person having origins in any of the black racial groups in Africa;

(2) Hispanic, which is a person with origins in Mexico, South or Central America, or the Caribbean Islands, regardless of race;

(3) Asian American, which is a person having origins in any of the original peoples of the Far East, Southeast Asia, Indian subcontinent, Hawaii, or the Pacific Islands; or

(4) American Indian or Alaskan native, which is a person having origins in any of the original peoples of North America.

“Minority business” means a business which is: (1) a sole proprietorship owned and controlled by a minority; (2) a partnership or joint venture owned and controlled by minorities in which at least 51 percent of the ownership interest is held by minorities and the management and daily business operations of which are controlled by one or more of the minorities who own it; or (3) a corporation or other entity whose management and daily business operations are controlled by one or more minorities who own it, and which is at least 51 percent owned by one or more minorities, or, if stock is issued, at least 51 percent of the stock is owned by one or more minorities.

“Program” means the “Entry-Level Home Production Incentive Program,” established pursuant to subsection a. of section 4 of P.L. , c. (C. ) (pending before the Legislature as this bill).

“Project financing gap” means the part of the total cost of development, including reasonable and appropriate return on investment, that remains to be financed after all other sources of capital have been accounted for, including, but not limited to, developer contributed capital, which shall not be less than 20 percent of the total cost of development, and investor or financial entity capital or loans for which the developer, after making all good faith efforts to raise additional capital, certifies that additional capital cannot be raised from other sources; provided, however, that for a redevelopment project located in a government-restricted municipality, the developer contributed capital shall not be less than 10 percent of the cost of rehabilitation. Developer contributed capital may consist of cash, deferred development fees, costs for project feasibility incurred within the 12 months prior to application, property value less any mortgages when the developer owns the project site, and any other investment by the developer in the project deemed acceptable by the agency or authority, as provided by regulations promulgated by the agency or authority, as applicable. Property value shall be valued at the lesser of either: (1) the purchase price, provided the property was purchased pursuant to an arm's length transaction within 12 months of application; or (2) the value as determined by a current appraisal.

“Women’s business” means a business which is: (1) a sole proprietorship owned and controlled by a woman; (2) a partnership or joint venture owned and controlled by women in which at least 51 percent of the ownership is held by women and the management and daily business operations of which are controlled by one or more women who own it; or (3) a corporation or other entity whose management and daily business operations are controlled by one or more women who own it, and which is at least 51 percent owned by women, or, if stock is issued, at least 51 percent of the stock is owned by one or more women.

4. a. There is established in the New Jersey Housing and Mortgage Finance Agency a program to be known as the “Entry-Level Home Production Incentive Program” for the purpose of allocating moneys made available by the “Entry‑Level Home Development Fund” in order to fund the project financing gaps of development projects that include low- to middle-income housing though production assistance pursuant to paragraph (1) of this subsection, and the provision of infrastructure loans pursuant to paragraph (2) of this subsection.

(1) The agency shall provide project financing gap funding through production assistance in the form of gap grants of up to:

(a) $40,000 per unit of low- to middle-income housing; and

(b) $70,000 per unit of low- to middle-income housing, if the housing is occupied or reserved for occupancy by households with a gross household income not exceeding 100 percent, of the area median income.

(2) The New Jersey Economic Development Authority shall provide project financing gap funding through an infrastructure loan, as a one- to three-percent fixed-rate loan for up to 20 percent of project costs, for a development project, if no fewer than 20 percent of the dwelling units in the development project consist of low- to middle-income housing.

b. There is established in the New Jersey Housing and Mortgage Finance Agency a fund to be known as the “Entry‑Level Home Development Fund” for the purpose of providing the moneys necessary for the “Entry-Level Home Production Incentive Program,” established pursuant to subsection a. of this section. At the request of the Chief Executive Officer of the authority, the agency shall, on an annual basis, provide no less than one-third of the moneys annually appropriated to the fund to the authority for the provision of infrastructure loans pursuant to paragraph (2) of subsection a. of this section.

c. The agency or authority, as applicable, shall not provide project financing gap funding through the program to any development project unless:

(1) the developer commits to occupancy requirements that shall comply with rules and regulations adopted by the agency, which shall require the initial purchaser of a low- to middle-income housing unit to occupy the unit for no less than five years, or pay a penalty to the agency of $10,000; and

(2) the dwelling units in the development project that are initially sold as low- to middle-income housing units shall be reserved for occupancy as low- to middle-income housing for no less than 10 years following initial occupancy, in accordance with the rules and regulations adopted by the agency.

d. The agency or authority, as applicable, shall prioritize project financing gap funding through the program to a development project that:

(1) is within a municipality that has adopted an ordinance to establish overlay zoning, allowing small-lot duplexes, triplexes, or townhome development, in accordance with the provisions of the model ordinance adopted by the agency pursuant to subsection a. of section 5 of P.L. , c. (C. ) (pending before the Legislature as this bill);

(2) is a women’s business or a minority business;

(3) satisfies the energy efficiency standards adopted by the rules and regulations of the agency; or

(4) is an industrialized or modular building.

e. The agency, in consultation with the authority, shall annually prepare a report to the Governor, and the Legislature pursuant to section 2 of P.L.1991, c.164 (C.52:14-19.1), presenting the following information with respect to the associated year of the program:

(1) the number of housing units produced with the assistance of program support;

(2) the income restrictions provided for the housing units produced;

(3) the amount of funding extended in the form of production assistance, and as infrastructure loans; and

(4) such additional information as the Executive Director of the agency determines appropriate.

5. a. The Executive Director of the New Jersey Housing and Mortgage Finance Agency shall, in accordance with the “Administrative Procedure Act,” P.L.1968, c.410 (C.52:14B-1 et seq.), adopt rules and regulations as necessary to effectuate the provisions of P.L. , c. (C. ) (pending before the Legislature as this bill), which rules and regulations shall include, but shall not be limited to:

(1) the publication of an overlay zoning model ordinance to provide restrictions pursuant to paragraph (1) of subsection d. of section 4 of P.L. , c. (C. ) (pending before the Legislature as this bill); and

(2) the development of energy efficiency standards for development project prioritization pursuant to paragraph (3) of subsection d. of section 4 of P.L. , c. (C. ) (pending before the Legislature as this bill).

b. The Chief Executive Officer of the New Jersey Economic Development Authority shall, in accordance with the “Administrative Procedure Act,” P.L.1968, c.410 (C.52:14B-1 et seq.), adopt rules and regulations as necessary to effectuate the provisions of paragraph (2) of subsection a. of section 4 of P.L. , c. (C. ) (pending before the Legislature as this bill).

6. There is appropriated from the General Fund to the “Entry‑Level Home Development Fund” in the New Jersey Housing and Mortgage Finance Agency, a sum of $300,000,000 to effectuate the provisions of P.L. , c. (C. ) (pending before the Legislature as this bill).

7. This act shall take effect on the first day of the third month next following enactment, except the Executive Director of the agency and the Chief Executive Officer of the authority shall take anticipatory action necessary to effectuate the provisions of P.L. , c. (C. ) (pending before the Legislature as this bill).

STATEMENT

This bill establishes the “Entry-Level Home Production Incentive Program” (program) in the New Jersey Housing and Mortgage Finance Agency (agency) for the purpose of funding the project financing gaps, as defined in the bill, for development projects that include low- to middle-income housing. The bill defines “low- to middle-income housing” as housing affordable according to certain recognized standards for home ownership and rental costs, and reserved for occupancy by households with a gross household income not exceeding 120 percent, of the area median income, unless the bill expressly specifies a different percentage.

The project financing gap funding required by the bill is to be provided though production assistance, and the provision of infrastructure loans. Production assistance is to be provided by the agency in the form of gap grants of up to $40,000 per unit of low- to middle-income housing reserved for occupancy by households with a gross household income not exceeding 100 percent of the area median income, and $70,000 per unit of low- to middle-income housing reserved for occupancy by households with a gross household income not exceeding 100 percent of the area median income. The bill directs the New Jersey Economic Development Authority (authority) to provide project financing gap funding through infrastructure loans, as one- to three-percent fixed-rate loans for up to 20 percent of project costs, for development projects, if no fewer than 20 percent of the dwelling units in the project consist of low- to middle-income housing.

The bill establishes a fund in the agency to be known as the “Entry‑Level Home Development Fund” (fund) for the purpose of providing the moneys necessary for the program. At the request of the authority, the bill requires the agency, on an annual basis, to provide no less than one-third of the moneys annually appropriated to the fund to the authority for the provision of infrastructure loans.

The bill prohibits the provision of project financing gap funding through the program to any development project unless:

· the developer commits to occupancy requirements to ensure that the initial purchaser of a low- to middle-income housing unit is to occupy the unit for no less than five years, or pay a penalty to the agency of $10,000; and

· the dwelling units that are initially sold as low- to middle-income housing units are reserved for occupancy as low- to middle-income housing for no less than 10 years following initial occupancy.

The bill requires project financing gap funding to be prioritized for development projects that:

· are within a municipality that has adopted an ordinance to establish overlay zoning, allowing small-lot duplexes, triplexes, or townhome development, in accordance with the provisions of a model ordinance adopted by the agency through the rules and regulations adopted as required by the bill;

· are women’s businesses or a minority businesses, as defined in the bill;

· satisfy energy efficiency standards adopted through rules and regulations of the agency; or

· consist of industrialized or modular buildings.

The bill requires the agency, in consultation with the authority, to annually prepare a report to the Governor, and the Legislature, presenting certain information, including:

· the number of housing units produced with the assistance of program support;

· the income restrictions provided for the housing units produced;

· the amount of funding extended in the form of production assistance, and as infrastructure loans; and

· such additional information as the agency determines appropriate.

The bill directs the agency and authority to adopt rules and regulations necessary to effectuate the provisions of the bill. \

The bill requires an appropriation of $300 million from the General Fund to the Entry‑Level Home Development Fund in the agency.

The bill is to take effect on the first day of the third month following enactment.