Despite campaign Promises, Murphy Plans to Raid Affordable-Housing Fund

Published May 10, 2018
By Colleen O'Dea

The governor wants to use almost $78 million dedicated to building homes for low- and middle-income residents to plug holes in the general fund

As a candidate, Phil Murphy pledged he would not follow his predecessor’s path and divert affordable-housing funds to plug holes in the state budget. But as governor, he is doing just that and more, proposing to take even more money away from two sources of housing funds than former Gov. Chris Christie.

Specifically, Murphy’s $37.4 billion budget plan would divert $59.3 million from the state Affordable Housing Trust Fund — which is supposed to be dedicated to building homes for low- and moderate-income residents — to pay for housing-related programs that typically are funded through general revenues. He is also planning to take $18.5 million from the state Housing and Mortgage Financing Agency, which helps provide financing for affordable developments, for general housing programs.

The diversion of nearly $78 million shocked and disappointed affordable-housing advocates, who had expected Murphy to use that money to build affordable homes based on what he had said during the campaign.

“It is distressing and it came as a surprise,” said Staci Berger, president and CEO of the Housing and Community Development Network of New Jersey. “We are communicating our concerns both to the Legislature and the governor’s office.”

She called the Affordable Housing Trust Fund “the single largest source of public investment in affordable homes in the state.” The need for public funds for affordable housing is especially important because developers cannot make back their construction spending and investments because they cannot charge market rates for the homes they build. Having a large pot of money to help communities, organizations, and nonprofit developers fund construction “is the missing key piece to solving the housing crisis.”

Affordable housing out of reach

New Jersey remains among the most expensive states in the nation to live. The 2017 Out of Reach report from the National Low Income Housing Coalition ranked New Jersey 7th most expensive; minimum wage worker would have to work 106 hours a week to be able to afford a fair-market rental unit. A Mercer County Superior Court judge wrote in a March ruling that the state needs 155,000 new affordable homes.

The money is sorely needed now, as some 200 municipalities have reached court settlements with Fair Share Housing Center, agreeing to zone for or even build tens of thousands of affordable units.

“This continued underfunding poses a significant problem for municipalities, particularly in light of the State Supreme Court’s ruling creating a ‘gap obligation’ and the subsequent significant obligations for municipalities,” said Michael Cerra, assistant executive director of the New Jersey State League of Municipalities, referring to the court decision requiring municipalities to provide for housing needs that accrued during a 15-year period in which the state had no valid rules on affordable housing. “But it also demands for the Legislature to reengage and for the new administration to join the playing field and develop a reasonable and rational state housing policy.”

Murphy’s campaign website seemed pretty clear in stating his position against Christie’s practice of using Affordable Housing Trust Fund dollars every year, and HMFA money in the 2017 fiscal year, to help balance the budget.

“We face an affordable housing crisis in our state,” reads a web page that pledges Murphy will make home ownership “more affordable and accessible.” The page goes on to say, “Phil will tackle it head-on by” and lists his first action as “Stopping Governor Christie’s practice of diverting affordable housing funds to plug holes in the budget.”

No comment

Murphy’s spokesman Dan Bryan, who was also a campaign spokesman, did not return a request for comment. Jennifer Sciortino, a spokeswoman for the state treasurer, said all the money is being used for housing assistance.

“Budget language authorizes monies deposited in the Affordable Housing Trust Fund to be used to offset a variety of programs that support the general goal of preserving affordable housing opportunities, such as the State Rental Assistance Program, which provides funding for tenant-based and project-based rental assistance for low-income individuals and households, as well as emergency housing assistance and services for the homeless,” she said. “The governor’s budget is committed to supporting the mission of the HMFA and making sure affordable housing opportunities abound for all New Jerseyans.”

The problem is that the programs being funded used to be, and housing advocates say should be, funded through general revenues. Realty transfer fees that are based on the sales price of a home — the fee on a house that sells for $325,000 would be $1,910 — are deposited into the Affordable Housing Trust Fund and are supposed to be dedicated to the construction of homes for those with low- and moderate-incomes.

"Projects funded by the state housing-trust fund help working families across New Jersey and strengthen local communities,” said Anthony Campisi, a Fair Share spokesman. “We hope that Gov. Murphy and the Legislature can work together to preserve important funding sources, like this, which tackle our state's housing-affordability crisis by providing funding to build or renovate homes.”

Corzine: the first diversion

While Christie turned the taking of dedicated funds to use for general purposes into an art form, it was actually Gov. Jon Corzine who was the first to divert money from the housing trust fund in his last budget, for FY 2010, which was struck during the Great Recession. Since fiscal year 2010, about $306 million meant for the construction of affordable homes has been spent instead on other state housing programs.

In his first budget, Murphy has adopted some of Christie’s other fund diversions. For instance, he proposes using more than $136 million in clean-energy funds for other purposes to help balance the budget. He also plans to put about half of the $141 million the state will receive from settlements with Volkswagen involving air-pollution violations and cheating on emissions tests into the general fund, instead of spending it on clean-car initiatives.

Further, Murphy’s budget would take $8 million more from the Affordable Housing Trust Fund than Christie’s last budget, which is funding state government through June 30. It also takes money from the HMFA, which Christie did only once, in fiscal 2017.

“People are very much looking for an end to the budget practices that were followed during the last eight years,” Berger said.

Budget language indicates the biggest chunk of the money, $46.5 million from the Affordable Housing Trust Fund, would pay for three programs in the Department of Human Services meant to help those receiving services or public assistance payments or homeless — the Client Housing, General Emergency Assistance and Social Services for the Homeless programs. Language in his budget also seeks to use $30.3 million from the housing trust and the HMFA for local planning and affordable-housing services, including staff, and the Shelter Assistance, Prevention of Homelessness, Neighborhood Preservation, Main Street New Jersey, and State Rental Assistance programs. Additionally, it would fund the state match for two U.S. Housing and Community Development-funded programs and technical assistance grants to nonprofit housing organizations.

The Affordable Housing Trust Fund expects to receive a total of $95 million, which would leave about $35.7 million left. Sciortino noted that the budget estimates the state financing 3,500 housing units, “not including those built from other revenue sources, such as the federal Community Development Block Grant — Disaster Recovery grant funding.”

But the budget does not show any funds in that line, nor in the federal Sandy recovery aid account, to be used to rebuild following 2012’s superstorm Sandy. The last time the state had money from those federal programs was in fiscal 2017, when it got a total of $443 million in Sandy and disaster-recovery funds, the budget shows.

Advocates say Sandy money has paid for a significant amount of housing construction over the past several years. That loss of funds, on top of the diversion, “takes a bad situation and makes it worse,” Berger said.

After the recession and New Jersey’s long climb out of it, development is getting underway around the state, and the money is needed to help ensure that continues and that people of modest means, including those with disabilities, are not shut out of homes.

“More people with special needs are living more stably and independently than ever, but even as we have an ever-growing need — more people diagnosed with disabilities, struggling with addictions — and we know how to help and what works, we have a distressing situation,” said Diane Riley, executive director of the Supportive Housing Association of New Jersey. “Towns are finally ready to create more affordable housing, but there are less and less capital dollars available to help create it. The timing is critical to leverage an investment using the affordable housing fund in the way it was intended — to create more housing.”

Neither of the Legislature’s budget committees has considered the budgets of the Department of Community Affairs, which oversees affordable-housing programs. The first hearing, by the Senate committee, is scheduled for next Thursday. Advocates plan to be there to testify.

Said Berger, “It is our sincere and fervent hope that we are able to make sure folks understand how critically important these resources are to neighborhoods across the state.”