Robert C. Larson Awards 2018 Finalist: New Jersey Housing and Mortgage Finance Agency

The Low-Income Housing Tax Credit (LIHTC) program is the single largest source of funding for affordable housing in the United States. The program awards federal tax credits to affordable housing developers, which are typically sold to private investors to generate equity for construction funding. In return, the investors receive 10 years of tax credits and other benefits. The State of New Jersey’s Housing and Mortgage Finance Agency is the sole entity in the state tasked with awarding LIHTCs, and the state’s program is among the most innovative in the country. To help strengthen the program and its reach in New Jersey, NJHMFA made significant changes in the way tax credits are awarded via its Qualified Allocation Program (QAP), which leverages their investment, and also works to deconcentrate areas of poverty.

NJHMFA’s changes have helped guide affordable housing growth across the state, shifting projects to high opportunity areas that are job centers, have high-performing schools and access to public transit. As a result of the changes, 60% of the units funded with 9% tax credits have been developed in suburban municipalities, successfully highlighting NJHMFA’s priorities.

But NJHMFA also went one step further by developing a separate reserve of 9% credits, the Mixed-Income Reserve, to spur developers to build much needed mixed-income projects. Despite the availability and widespread interest in LIHTCs, developers were not putting forward mixed-income projects in New Jersey. Mixed-income projects are significantly more difficult to develop – investors generally shy away from risk, and these types of projects compound risk by including both market-rate units as well as affordable units. Offering LIHTCs in a separate reserve specifically for mixed-income projects removed the element of competition among developers. Instead, developers only need to meet a threshold of QAP points to be awarded tax credits for their projects. As a result, the interest in the program continues to expand: in the most recent round of LIHTC awards announced in August 2017, the number of mixed-income projects awarded topped the total number of projects awarded in the previous rounds.

Approximately $2 million in 9% tax credits is available, and regulations require that at least one urban and one suburban project are funded. Applicants need only meet a threshold 65% of the points in the family scoring criteria, and if multiple eligible projects apply, credits are awarded based on a tiebreaker, which is the least amount of tax credits requested per tax credit bedroom. The most recent round of LIHTC awards – the largest in the state’s history – took place in 2017 and included four Mixed-Income Reserve awards.

NJHMFA’s changes have helped guide affordable housing growth across the state, shifting projects to high opportunity areas.


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