Chaos or crisis: Either word (or both) will do to when describing New Jersey's affordable housing situation and its residential real estate market. Lawmakers on Tuesday launched a new effort to address both problems, providing low-cost housing and dealing with the flood of foreclosures at the same time.
The New Jersey Residential Foreclosure Transformation Act, S1566/A2168, seeks to create a new state agency that would buy up foreclosed properties and turn some of them into affordable units.
“Not only will it provide more affordable housing, but it will reduce the number of boarded-up houses that drag down property values, build up neighborhoods, and boost the economy,” said state Sen. Raymond Lesniak (D-Union), cosponsor of the bill in the Senate. “It’s positive in so many ways.”
The bill would create an agency within the New Jersey Housing and Mortgage Finance Agency to purchase and deed-restrict foreclosed properties to be used as affordable housing.
Lesniak said that more than $500 million is available from the State Affordable Housing Trust Fund, federal dollars, and money from the recent foreclosure settlement. The agency also could take advantage of the bonding capabilities of the HMFA,.
The bill, said Lesniak, has the potential to turn 10,000 foreclosed properties into affordable housing. He expects the measure to create new “workforce housing” for teachers, firefighters, and middleclass families.
State Sen. Barbara Buono (D-Middlesex), the other cosponsor of the bill in the Senate, called it a “novel approach” to solving multiple problems “without contributing to overdevelopment and sprawl.”
A large supply of properties is ready to be tapped.
“There are tens of thousands of vacant foreclosed homes in New Jersey, with many more being added every day,” said Lesniak. “They exist in every municipality in the state.”
The website RealtyTrac lists 35,456 New Jersey properties in some stage of foreclosure, including pre-foreclosure, auction, and bank ownership.
Jeffrey Otteau, president of Otteau Valuations Group, put that number much higher, at 150,000.
Otteau said the bill would go far beyond creating more affordable housing and reducing vacancies. It would also help stabilize the entire housing market and boost consumer confidence, which could lead to more home sales and the economic activity associated with them, including the purchase of furniture, appliances, carpeting, and other items.
S1566 is slated for its first hearing in Trenton on Thursday before the Senate Economic Growth Committee.
The bill has support from a broad coalition that includes New Jersey municipalities, realtors, builders and bankers.
“This legislation helps both homeowners and mortgage holders and puts into place a program that will stabilize housing prices, preserve residents’ quality of life, and address the state’s dearth of affordable housing,” said Dominick Paragano, president of the New Jersey Builders Association.
Michael Affuso, senior vice president and director of government relations with the New Jersey Bankers Association, said the bill should also help address the public safety concerns surrounding vacant properties. Their number is expected to rise precipitously at some point, when the largest mortgage lenders, essentially stopped by a December 2010 Supreme Court order, start filing foreclosure actions again.
“The existing process to deal with abandoned properties in foreclosure will be strained to its limits,” Affuso said.
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