NJHMFA LIHTC Projects

NJHMFA LIHTC Projects: Where are They Today, and Who Needs Them Tomorrow?

The NJHMFA is, in many ways, a forward-looking organization and a national leader in state housing finance. In 2018 alone, NJHMFA received awards for its efforts surrounding smart growth, historic preservation, supportive housing, and best practices in multifamily housing. [i]  In order to remain an innovative leader in state housing finance, NJHMFA must look not only at New Jersey’s housing needs today, but also at the housing needs of tomorrow.

In this paper, I first examine the location of NJHMFA’s recent Low Income Housing Tax Credit (LIHTC) projects. The location of many of these projects in NJ State Development and Redevelopment Plan smart growth areas reveals important implications for equity. By locating LIHTC projects in these high opportunity areas, NJHMFA is not only satisfying the preferences of many NJ residents, but also avoiding concentrating poverty in the state. 

As New Jersey residents age, move, and become more diverse, the state will face new housing needs. Population projections can help paint a picture of where families may choose to live, what housing needs young workers face, and how to meet the needs of the growing senior population. These projections have significant implications for future LIHTC allocations. Using projections from the New Jersey Department of Labor, I identify projected population changes and how this may impact housing needs. I conclude with policy recommendations and research questions for NJHMFA to consider when thinking through its future priorities.

Background

Demographic shifts are intrinsically tied to demand for various housing options. In New Jersey, demographic shifts have led to an increase in demand for housing within municipalities that follow smart growth policies. [ii]  Smart growth land use policies pose significant benefits for communities that adopt them. While multiple definitions of smart growth exist, a number of common themes arise among them. Key features of smart growth include walkable communities, mixed-use centers, a variety of housing and transportation choices, increased land-use density, and a commitment to environmental conservation.  [iii]  Smart growth increases residents’ freedom to choose where they live, work, and play by engaging community members in development decisions, pursuing environmentally sustainable development, preserving open space and agriculture, making the most of existing infrastructure, and maximizing housing and transportation choice. [iv] 

Like any planning decisions, smart growth policies present both costs and benefits. Some of the costs associated with smart growth policies include a decrease in privacy due to higher-density land use and high transportation-related infrastructure costs for sidewalks, curbs, and public transportation. Still, smart growth policies stand to offer significant benefits for residents. Smart growth can increase housing options by, for instance, reducing restrictions on multi-family housing. It improves amenity accessability for those without cars, reduces pollution, and reduces congestion by making neighborhoods walkable. [v] 

A study by NJ Future identifying the current state of housing preferences by generation in New Jersey predicts an increase in demand for municipalities that adhere to smart growth policies.  [vi]  The study focused on Millenials, Generation X, and Baby Boomers, and identified their preferences for municipalities based on a number of smart growth metrics. The metrics included net activity density (population, employment, and developed acres), the presence of a mixed-use center, and the municipality’s walkability. The results showed that while Millennials and Generation Xers are interested in living in NJ’s denser, walkable municipalities, Baby Boomers are remaining in suburban settings. The narrative of younger individuals choosing to live in cities holds true in New Jersey. Municipalities that scored well on the report’s smart growth metrics were significantly more likely to have large populations of Millennials and Generation Xers. Putting larger cities aside, many parts of the state struggle to attract and retain younger people. Some Generation Xers are choosing to leave larger city environments and move into the suburbs, but the types of suburbs they choose still score relatively well in their adherence to smart growth policies. [vii] 

 Still, the overall population of New Jersey is becoming increasingly older. Although Millenials are now the largest generation in history, the population of Millenials in New Jersey is decreasing. The state’s loss of young people could be due to insufficient affordable housing - New Jersey has the highest percentage of young people aged 18-34 living with their parents - or due to a lack of housing stock in areas that meet their preferences. Municipalities that follow smart growth policies are in higher demand among Millennials and Generation Xers. Although this is more pronounced among Millennials, even Generation Xers moving to suburbs are choosing suburbs that score well on smart growth metrics. While Baby Boomers are choosing to age in place, members of this generation may downsize in the years to come. Municipalities that follow smart growth policies are better able to meet seniors’ needs, as high-desity municipalities reduce social isolation and the need to drive to amenities. Despite previous housing preference trends, it is possible that aging members of this population will choose to move to these age-friendly municipalities.  [viii] 

What Needs does HMFA Currently Address?

NJHMFA’s primary goal is to fund affordable home ownership and housing opportunities. Through its LIHTC allocations, NJHMFA makes choices that can significantly impact outcomes for the low-income residents living in those homes. Examining LIHTC project placement today helps paint a picture of NJHMFA’s policy priorities. Since its 2013 QAP revision, the NJHMFA has avoided concentrating poverty and has, instead, awarded LIHTC credits to projects largely located in smart growth areas.

NJ Future conducted a study on on LIHTC projects between 2005-2012 and in 2013-2015 to identify how changes in the QAP impacted LIHTC project locations. [ix]  In 2013, NJHMFA adjusted its QAP to encourage affordable housing construction in areas with public transit, jobs, and good school districts. While 66% of all projects pre-2013 were located in distressed areas, roughly 80% of all post-2013 projects were located outside of high poverty areas. [x]  LIHTC projects were also largely not located in areas that the state has identified as areas in need of rehabilitation [xi]  or redevelopment. [xii] 

Some clusters of LIHTC developments were located in Opportunity Zones, which are areas designed to promote investment in low-income and distressed communities. [xiii] Though it largely has invested in high opportunity areas, NJHMFA can help drive growth by balancing project placement in high opportunity areas with investments in distressed neighborhoods. Additionally, the clusters of LIHTC developments located in Opportunity Zones are largely in Newark [xiv]  and Camden, [xv]  which have seen significant growth in recent years.

These extremely positive results place NJHMFA as a leader in the equity arena. Nationwide, only about 17% of LIHTC projects have been built in high opportunity areas. [xvi]  NJMHFA has made significant strides towards helping break cycles of poverty by placing units in areas well-positioned for growth.

Given the high demand for housing in smart growth areas, as well as the potential for future demand for housing in these areas, NJHMFA is proactively addressing housing need across generations. The trend of placing LIHTC projects in smart growth areas has continued through 2019.  [xvii]  By adjusting its QAP to favor high opportunity areas, NJHMFA LIHTC projects have largely been located in smart growth areas and designated centers [xviii]  (indicated in blue, with designated centers [xix]  in green).

What Needs Should HMFA Address in the Future?

Considering populations shifts is crucial in understanding the future housing needs that New Jersey may need to meet. The state’s growth rests upon its ability to retain young people, maintain a thriving labor force, keep up with housing demand, and meet the needs of children and seniors. Understanding these projections can help NJHMFA identify needs it must address in a future New Jersey with a residential makeup quite different than today.

In order to conduct my analyses, I utilized data prepared by the New Jersey Department of Labor and Workforce Development (NJDOL). I focused on economic and demographic projections prepared by the Division of Economic and Demographic Research. The data includes population and labor force projections for all counties in New Jersey from 2014 to 2034. As projections, the results are not predictions, but are measures if assumptions about future patterns actually hold. In creating these projections, the NJDOL assumed that identifiable demographic and economic trends would continue steadily, absent any unusual, unexpected shifts or outside intervention. A number of categories are included among these projections, including age, race, sex, and civilian labor force participation. The projections for each category were all created using shared data and assumptions, making them consistent across categories. [xx]  My analyses focus on changes in the overall population, as well as population changes among seniors, labor force participants, and children. 

Overall Population and Housing Trends

From the early 1990s to the 2000s, most growth took place in suburban and exurban counties. Since 2010, New Jersey’s population growth shows migration towards urban centers in North Jersey, including Hudson, Essex, Bergen, and Union counties. The top seven counties that have seen the greatest rates of growth have also gained the largest numbers of residents. The seven counties that have seen the greatest rates of growth are Ocean, Union, Essex, Hudson, Bergen, Mercer, and Middlesex. The counties that have seen the greatest growth in housing units are Morris Hudson, Gloucester, Somerset, Burlington, Middlesex, and Ocean. The influx of residents into urban environments is consistent with research identifying a shift towards younger residents preferring walkable, mixed-use living environments. [xxi] 

Counties projected to see the greatest population growth rates by 2034 include Middlesex (15%), Hudson (14.5%), Somerset (14%), and Ocean (14%). Projections for South Jersey include lower population growth rates, hovering near 1% and 2% for counties indicated in pale green. [xxii] 

Seniors

New Jersey will soon face a dramatic rise in its senior population. The NJDOL expects this population to increase by 63%, making seniors (age 65 and older) nearly 20% of the total population by 2030. [xxiii] 

Although all counties will see an increase in their senior populations, certain counties will face particularly high increases. By 2034, the senior population will increase by 59% in Mercer, 59% in Hunterdon, 63% in Sussex, 71% in Middlesex, and 80% in Somerset. [xxv] 

Housing for seniors will be a crucial market in New Jersey. Presently, members of the Baby Boom generation live in cities that do not score well on smart growth metrics. Housing preferences from decades ago have important modern-day implications for seniors in the state. As seniors age in place, they find themselves in suburban, car-dependent neighborhoods. Given the housing stock of the state, many seniors will be living in single-family homes without easy access to neighborhood amenities, increasing their risk of social isolation. [xxvi] 

Access to affordable housing will be particularly important for cost-burdened seniors across the state. Cost burdened seniors pay more than 30% of their income on housing, a particularly poignent problem as incomes tend to decrease with age. Across metropolitan areas in New Jersey, households age 65 and older who are cost burdened ranges from 25% to 46%. Trenton, Newark, and Jersey City all have some of the highest rates in the nation of cost-burdened homeowners age 65 and older. [xxvii] 

Labor Force

The aging Baby Boomers in New Jersey will have a significant impact on labor force participation rates. As more New Jersey residents retire, the share of working age residents between the ages of 18 to 64 years old is expected to decline. Labor force participation by race will also shift by 2030. The white, non-Hispanic labor force has already begun to decline, and by 2030, the labor force will no longer be comprised of a non-Hispanic white majority. Instead, significant labor force growth is expected among Asian and Hispanic populations, as well as growth among those who belong to two or more races or other races. [xxviii] 

Labor force growth among workers age 55 and over is expected to slow, with the largest growth rates in the next decade occurring among workers between 35-44 and 25-34. As a result of an aging labor force, it is particularly important that young people choose to locate in New Jersey. Given the fact that labor force growth rates will be particularly high among Millennials and Generation Xers, policies to increase the availability of affordable housing in the types of municipalities that these generations typically settle in may help further drive growth. [xxx] 

Children and Families

In order to study potential shifts in need for family housing, I analyzed data on children 14 and under. Given that the QAP identifies large family units as 3 bedrooms, the presence of children may be a useful proxy for family housing. The population of children in middle school (age 14) and younger is not expected to grow significantly by 2034. Nevertheless, counties with growth expected include Bergen (17%), Hudson (15%), and Morris (14%) (indicated by green areas on map). In some counties, this population is actually expected to decrease. The most significant reductions are expected in Hunterton (-25%), Salem (-15%), and Sussex (-13%), but a total of 8 counties expect reductions in the population of children by 2034 (indicated by white areas on map). [xxxi] 

Though family housing is crucial, the QAP mandates that it account for 50% of NJHMFA’s LIHTC allocations. Given the projected slow rates of growth among this population, an increase in the share of LIHTC family cycle allocations (beyond the 50% currently set aside in the QAP) is likely unneccessary at this time.

Policy Recommendations

Addressing Senior Population Needs

NJHMFA must clearly focus efforts on addressing the needs of the increasing senior population. Given the fact that New Jersey’s housing stock is dominated by single family detached homes, policymakers must begin planning now to meet the future housing needs of seniors who may not be able to age in place.

Since 2010, 24% of NJHMFA’s awards have gone towards senior LIHTC developments. Although this is higher than the 20% set aside in the QAP for the senior cycle, it may be insufficient to meet future senior housing needs. Additionally, there are few LIHTC projects in the counties projected to see the greatest growth in senior populations.  [xxxii]  The agency should reexamine the funding it allocates towards its senior cycle and identify if it may be prudent to increase senior cycle funding. Keeping LIHTC senior cycle funding at its current level may be insufficient to meet the looming increase in demand.

Updating the QAP Smart Growth Definition

Given all the components included under the smart growth umbrella, it can become a nebulous concept. Smart growth becomes even more difficult to pin down when considered at the state level. New Jersey’s definition of smart growth is found in the New Jersey State Development and Redevelopment Plan. Adopted in 2001, the plan is now nearly two decades old. The NJHMFA’s definition of smart growth is based on the SDRP and reads as follows:

“Smart growth areas” means areas that promote growth in compact forms and protect the character of existing stable communities. A compact form of development combines an efficient use of land, natural resources, and public services. An area shall be considered to be a smart growth area if it is within Planning Area 1 [metropolitan], Planning Area 2 [suburban], or within a Designated Center on the State Plan Policy Map. In the Pinelands Area, an area shall be considered to be a smart growth area if it is within a Regional Growth Area, a Pinelands Village, or a Pinelands Town. [xxxiii]  

NJHMFA has made significant strides since 2013 in locating its projects in high-opportunity areas. Still, the current state delineated smart growth areas may soon be as outdated as its definition. NJHMFA should identify other smart-growth related metrics and regions with promising growth in order to ensure that LIHTC projects are located in existing and upcoming high-opportunity areas. It should also consider updating its QAP accordingly, allocating more points for locating in areas that appear to be growing.

Questions for Further Research

Demographic and Populations Forecasts

This report was created using NJDOL populations projections, not forecasts. A key difference between the two is that forecasts are speculations on what will likely happen, while projections do not assert an expectation that the events will happen. [xxxiv]  Though projections are useful, forecasts tailored to NJHMFA’s needs would be a highly valuable tool. Forecasts that focus on special needs populations that may need supportive housing in the future is not presently available and may be particularly useful data for the NJHMFA. NJHMFA should thus work with the NJDOL’s Division of Economic and Demographic Research in order to develop these forecasts and identify concrete demographic shifts that may affect the agency’s future goals.

Identifying Workforce Housing Opportunities

Given New Jersey’s struggle to attract and retain young people, coupled with an aging workforce, NJHMFA should explore options to create workforce housing. One promising initiative is MassHousing’s $100 million Workforce Housing fund, which focuses on creating rental housing for households with incomes too low to afford market rent but too high for subsidized housing. This program is aimed at individuals and families whose incomes fall between 60% and 120% of Area Median Income. Additionally, 20% of the units in the development must be at or below 80% of Area Median Income. The program aims to create 1,000 units of statewide housing. [xxxv]  In New Jersey, a workforce housing program may be beneficial in areas that attract young people but are increasingly expensive. NJHMFA should conduct further research into the program to determine whether a similar program would be promising in New Jersey.

Conclusion

           NJHMFA has established itself as a state housing finance leader in its ability to address housing need, preference, and equity issues through its LIHTC allocation. By encouraging development in smart growth areas, NJHMFA is helping ensure that many of its LIHTC project residents can enjoy the benefits of living in high opportunity areas. Utilizing population projections to paint a picture of New Jersey’s future can help NJHMFA in visioning where the agency may need to refocus its priorities. Although only time will tell what New Jersey’s future housing needs will be, by maintaining a forward-looking stance, NJHMFA can continue to be a national leader in state housing finance.

References:

[i] NJHMFA 2018 Annual Report. New Jersey Housing and Mortgage Finance Agency, 2018,  www.njhousing.gov/2018annualreport/ .

 [ii]  Evans, Tim. Where Are We Going? Implications of Recent Demographic Trends in New Jersey. New Jersey Future, Sept. 2017,  https://www.njfuture.org/wp-content/uploads/2017/09/New-Jersey-Future-Demographic-Trends-by-Age-September-2017.pdf 

 [iii]  “APA Policy Guide on Smart Growth.” American Planning Association,  www.planning.org/policy/guides/adopted/smartgrowth.htm .

 [iv]  “APA Policy Guide on Smart Growth.” American Planning Association, www.planning.org/policy/guides/adopted/smartgrowth.htm.

 [v]  Litman, Todd, Evaluating Transportation Land Use Impacts Considering the Impacts, Benefits and Costs of Different Land Use Development Patterns, Victoria Transport Policy Institute, March 2010,  https://www.vtpi.org/landuse.pdf 

 [vi]  Evans, Tim. Where Are We Going? Implications of Recent Demographic Trends in New Jersey. New Jersey Future, Sept. 2017,  https://www.njfuture.org/wp-content/uploads/2017/09/New-Jersey-Future-Demographic-Trends-by-Age-September-2017.pdf 

 [vii]  Evans, Tim. Where Are We Going? Implications of Recent Demographic Trends in New Jersey. New Jersey Future, Sept. 2017,  https://www.njfuture.org/wp-content/uploads/2017/09/New-Jersey-Future-Demographic-Trends-by-Age-September-2017.pdf 

 [viii]  Evans, Tim. Where Are We Going? Implications of Recent Demographic Trends in New Jersey. New Jersey Future, Sept. 2017,  https://www.njfuture.org/wp-content/uploads/2017/09/New-Jersey-Future-Demographic-Trends-by-Age-September-2017.pdf 

 [ix]  Evans, Tim. Assessment of the New Jersey Low Income Housing Tax Credit Program. New Jersey Future, May 2017,  www.njfuture.org/wp-content/uploads/2017/05/New-Jersey-Future-Assessment-of-the-NJLIHTC-program.pdf .

 [x]  Evans, Tim. Changes in Affordable Housing Tax Credit Criteria Move More People to High-Opportunity Areas. New Jersey Future, 23 May 2017, www.njfuture.org/2017/05/23/lihtc-changes/.

 [xi]  NJ Municipal Resolutions on File at the New Jersey Department of Community Affairs, Areas in Need of Rehabilitation, Local Planning Services and NJ Department of State, Office for Planning Advocacy, 2018,  https://services.arcgis.com/Aur8tCo478N3VovT/arcgis/rest/services/Areas_in_Need_of_Rehabilitation/FeatureServer 

 [xii]  NJ Municipal Resolutions on File at the New Jersey Department of Community Affairs, Areas in Need of Redevelopment, Local Planning Services and NJ Department of State, Office for Planning Advocacy, 2018,  https://services.arcgis.com/Aur8tCo478N3VovT/arcgis/rest/services/Areas_in_Need_of_Redevelopment/FeatureServer 

 [xiii]  Opportunity Zones, NJ Department of Community Affairs, Office of Local Planning Services, 2019,  https://services.arcgis.com/Aur8tCo478N3VovT/arcgis/rest/services/Opportunity_Zones/FeatureServer 

 [xiv]  New Jersey Business Special Section - Newark: Growth & Revitalization. New Jersey Business, 29 Aug. 2018, lsc-pagepro.mydigitalpublication.com/publication/?i=522903&ver=html5&p=1#{%22page%22:0,%22issue_id%22:522903}.

 [xv]  Young, Jonathan. “Camden's Growth About More than Lower Unemployment.” NJ Spotlight, 19 Sept. 2019,  www.njspotlight.com/2019/08/19-08-05-op-ed-camdens-growth-about-more-than-lower-unemployment/ .

 [xvi]  Evans, Tim. Changes in Affordable Housing Tax Credit Criteria Move More People to High-Opportunity Areas. New Jersey Future, 23 May 2017, www.njfuture.org/2017/05/23/lihtc-changes/.

 [xvii]  LIHTC Allocations – 2010-2019, data from New Jersey Housing and Mortgage Finance Agency, 2019.

 [xviii]  Karp, Steven. New Jersey Smart Growth Areas, Geographic Information Science at State of New Jersey, New Jersey Office for Planning Advocacy, 2018,  https://services3.arcgis.com/iy3mGBSHxkFa1uPL/arcgis/rest/services/New_Jersey_Smartgrowth_Areas_New_Jersey/FeatureServer 

 [xix]  Karp, Steven. Designated and Proposed Centers of the NJ State Development and Redevelopment Plan (NJSDRP), Geographic Information Science at State of New Jersey, New Jersey Office for Planning Advocacy, 2018,  https://services3.arcgis.com/iy3mGBSHxkFa1uPL/arcgis/rest/services/Designated_Centers_of_the_NJ_State_Development_and_Redevelopment_Plan/FeatureServer 

 [xx]  Estimate and Projection. Australian Bureau of Statistics, 2013, www.abs.gov.au/websitedbs/a3121120.nsf/home/statistical+language+-+estimate+and+projection.

 [xxi]  Evans, Tim. New County Population Estimates: More of the Same Changes. New Jersey Future, 24 Apr. 2019, www.njfuture.org/2019/04/24/county-population-estimates-2018/.

 [xxii]  LIHTC Allocations – 2010-2019, data from New Jersey Housing and Mortgage Finance Agency, 2019.

 [xxiii]  Wu, Sen-Yuan. Population and Labor Force Projections for New Jersey: 2010 to 2030, New Jersey Department of Labor and Workforce Development, 2013,  https://www.nj.gov/labor/lpa/content/njsdc/2013WU%20PopLFProj2030.pdf 

 [xxiv]  Wu, Sen-Yuan. Population and Labor Force Projections for New Jersey: 2010 to 2030, New Jersey Department of Labor and Workforce Development, 2013,  https://www.nj.gov/labor/lpa/content/njsdc/2013WU%20PopLFProj2030.pdf 

 [xxv]  LIHTC Allocations – 2010-2019, data from New Jersey Housing and Mortgage Finance Agency, 2019.

 [xxvi]  Evans, Tim. Where Are We Going? Implications of Recent Demographic Trends in New Jersey. New Jersey Future, Sept. 2017,  https://www.njfuture.org/wp-content/uploads/2017/09/New-Jersey-Future-Demographic-Trends-by-Age-September-2017.pdf 

 [xxvii]  “Housing America's Older Adults 2019.” Housing America's Older Adults 2019 , Joint Center for Housing Studies of Harvard University, 16 Oct. 2019, harvard.us7.list-manage.com/track/click?u=32bdef9ad4f5c24e42bebf634&id=d99ba6d97d&e=7d779e42da.

 [xxviii]  Wu, Sen-Yuan. Population and Labor Force Projections for New Jersey: 2010 to 2030, New Jersey Department of Labor and Workforce Development, 2013,  https://www.nj.gov/labor/lpa/content/njsdc/2013WU%20PopLFProj2030.pdf 

 [xxix]  Wu, Sen-Yuan. Population and Labor Force Projections for New Jersey: 2010 to 2030, New Jersey Department of Labor and Workforce Development, 2013,  https://www.nj.gov/labor/lpa/content/njsdc/2013WU%20PopLFProj2030.pdf 

 [xxx]  Wu, Sen-Yuan. Population and Labor Force Projections for New Jersey: 2010 to 2030, New Jersey Department of Labor and Workforce Development, 2013,  https://www.nj.gov/labor/lpa/content/njsdc/2013WU%20PopLFProj2030.pdf 

 [xxxi]  LIHTC Allocations – 2010-2019, data from New Jersey Housing and Mortgage Finance Agency, 2019.

 [xxxii]  LIHTC Allocations – 2010-2019, data from New Jersey Housing and Mortgage Finance Agency, 2019.

 [xxxiii]  New Jersey Housing and Mortgage Finance Agency QAP, 2019,  https://www.state.nj.us/dca/hmfa/media/download/tax/qap/tc_qap_proposed_2019_2020.pdf 

 [xxxiv]  Estimate and Projection. Australian Bureau of Statistics, 2013, www.abs.gov.au/websitedbs/a3121120.nsf/home/statistical+language+-+estimate+and+projection.

 [xxxv]  MassHousing Workforce Housing Initiative. MassHousing, 2019, www.masshousing.com/portal/server.pt/community/developers/204/workforce_housing.