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Affordable housing fee remains in limbo as latest suspension bill sits on Christie's desk

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Commercial construction in Linden.
Commercial construction in Linden. - (AARON HOUSTON)

Developers have long said uncertainty over New Jersey's affordable housing policy has stalled the progress of new projects across the state.

For commercial builders, there’s another component of the fight that remains unresolved: the 2.5 percent fee assessed on nonresidential projects that is used to fund affordable housing.

The fee, which goes into a municipal housing trust fund, was created by legislation enacted in 2008, only to be suspended in 2009 and then again in 2011 amid the sluggish economy. The most recent moratorium expired July 1, 2013, and commercial development and business groups have since pushed to suspend the fee once again.

Michael Allen Seeve, president of the development trade group NAIOP New Jersey, said a 2.5 percent assessment can translate into a sizable amount when it comes to commercial projects. And the fee “gets the most sort of visceral negative reaction from prospective tenants” who may end up bearing the additional cost.

“It’s significant enough to sort of turn people off,” said Seeve, who is president of Woodland Park-based Mountain Development Corp. “And, obviously, it stems from the laudable effort of improving affordable housing, but it ends up, I think, having the equally negative result of costing people jobs.”

A bipartisan bill to reinstate the moratorium through the end of this year has been awaiting action by Gov. Chris Christie since being passed by both houses of the Legislature on June 30, though its prospects are uncertain. A spokesman for Christie's office declined to comment until there is action to announce from the governor.

The bill that extended the moratorium through June 2013 was signed into law in August 2011 by Lt. Gov. Kim Guadagno, who was serving as acting governor at the time.

NAIOP New Jersey CEO Michael McGuinness said Tuesday his group “remains cautiously optimistic” that Christie will sign the bill extending the moratorium, which he noted “passed nearly unanimously by the Legislature over seven weeks ago.”

“We hope that after careful consideration of the number jobs that are at risk and the magnitude of the adverse impacts in towns throughout all of New Jersey including Paulsboro, South Brunswick and Summit, that the bill will be enacted,” McGuinness said in a prepared statement. “Our industry is on the front lines of economic development and this bill is nothing more than an economic jolt to allow stalled projects to advance and create jobs for a number of individuals that are currently unemployed and would appreciate having an opportunity to have a paycheck to take care of themselves and their families.”

He said NAIOP’s “best estimates” are that enactment of the bill would generate more than 4,000 permanent full-time jobs and an equal number of construction jobs.

Advocacy groups focused on affordable housing have long opposed the moratorium, arguing the fee is a small cost of doing business. But developers and public officials say it’s a deterrent to new commercial projects in an economy that’s still recovering from the recession.

State Sen. Raymond Lesniak (D-Union), one of the primary sponsors of the most recent bill, said he hopes that “either the economy can rebound so that the fee won’t be an impediment to job creation, or we can find another way to help produce affordable housing in the state.”

“One or the other has to happen,” Lesniak said. “We won’t be able to eliminate the fee, in my opinion, unless we can find an alternate way to solve the affordable housing needs of the state.”

That’s another question altogether.

After years of legal wrangling and a new round of litigation over the past year, new rules from the state Council on Affordable Housing are mired in controversy. The rules aim to guide local governments on how to calculate their affordable housing obligations when working with developers, but they face more challenges from advocates who say they don’t go far enough.

McGuinness noted that “this bill is not about COAH reform, which is something the Legislature needs to tackle.”

In the meantime, business groups say the fee should be suspended once again in order to spur new commercial development and ease the burden on municipal tax rolls. Seeve said “the irony is the state has such a great, aggressive incentive program, and it sort of defeats half of the good work of that program by imposing a fee on the same people who may qualify for incentives.”

The state’s business and development incentives were overhauled last year under the high-profile Economic Opportunity Act.

Seeve added that the need to extend the moratorium is especially glaring, since borrowing rates are low and companies are more willing to consider new spaces.

“The way it’s working today, it’s not in concert with everything else that people want to do in the state,” he said. “The same people that you want to provide housing for, you want to provide jobs for them, so things that take away jobs are totally self-defeating.”

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Joshua Burd

Joshua Burd

Josh Burd covers real estate, economic development and sports and entertainment. Before joining NJBIZ in 2011, he spent four years as a metro reporter in Central Jersey. His email is joshb@njbiz.com and he is @JoshBurdNJ on Twitter.

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