New Jersey Administrative Code › Title 5 - COMMUNITY AFFAIRS › Chapter 80 - NEW JERSEY HOUSING AND MORTGAGE FINANCE AGENCY › Subchapter 33 - LOW INCOME HOUSING TAX CREDIT QUALIFIED ALLOCATION PLAN › Section 5:80-33.12 - Application to a cycle/eligibility requirements

Current through Register Vol. 56, No. 14, July 15, 2024
(a) A
				mixed-income project, mixed-use project, or affordable project linked to a
				market-rate or commercial component that is part of a municipal fair share housing
				development plan or a court-approved judgment of repose or compliance, including,
				but not limited to, developments that have received a density bonus, may not compete
				for tax credits (ceiling tax credits), unless the applicant can conclusively
				demonstrate that the market-rate residential or commercial units are unable to
				internally subsidize the affordable units and the affordable units are developed
				contemporaneously with the commercial or market-rate residential units. This
				subsection shall not be evaded by failing to apply all or any portion of the subsidy
				to the low- or moderate-income units, by diverting all or any portion of the subsidy
				to other uses, or by using any other device by which all or any portion of the
				subsidy is not used to benefit low- or moderate-income housing. For example, if a
				site was originally zoned at four units per acre and a rezoning resulted in six
				units per acre with a 20-percent set-aside for low- and/or moderate-income units,
				then the site would be the recipient of a density bonus. If the developer built at
				six market units per acre, subdivided a portion of the acreage, and donated the
				subdivided portion to a for-profit or nonprofit developer, then the new owner may
				not compete for ceiling tax credits if the market-rate residential units were able
				to subsidize the affordable units. Alternatively, if on the same site the number of
				low- and moderate-income units is increased without a corresponding increase in
				density, then the additional affordable units would be eligible to compete for
				ceiling tax credits. In determining whether an applicant has conclusively
				demonstrated that the market-rate residential or commercial units are unable to
				internally subsidize the affordable units, NJHMFA shall apply the standards set
				forth at N.J.A.C. 5:80-33.9(b)1 
				through 4.
(b) In performing its review
				of all applicable eligibility requirements, NJHMFA staff may contact the applicant
				to ask questions if there are unclear aspects of the application. Such contact
				should not be construed by the applicant as an approval or rejection, but simply as
				an attempt to clarify the application.
(c) Applications shall meet all of the eligibility
				requirements listed in this section by the application deadline in order to be
				admitted into a cycle. NJHMFA reserves the right to contact the applicant if the
				need arises.
1. Applications shall include the
				information set forth at (c)1i, either (c)1ii or (c)1iii, and (c)1iv below in order
				to demonstrate the need and demand for the proposed project in a market area. If
				NJHMFA determines an insufficient market need or demand exists, the project shall be
				deemed ineligible.
i. The proposed development,
				including all amenities and services, shall be described in a narrative format by
				the applicant. The narrative shall include an explanation of how the services shall
				be paid for, as well as the need and demand for the project and its impact upon the
				neighborhood. Commercial space, if any, shall be disclosed. Photographs of the site
				and existing structures shall be provided from all significant perspectives and show
				all significant nearby land uses, including, but not limited to, those land uses
				listed at N.J.A.C.
				5:80-33.15(a)11. Preliminary
				drawings of the finished project, including the site plan, floor plan, and
				elevations drawn to scale, shall be submitted with the narrative.
ii. A market study, certified to both the
				applicant and NJHMFA in the analyst's Certification, shall be submitted for all
				projects. Two copies of the report shall be submitted. The market study shall be no
				more than six months old. Projects applying for additional credits from the Reserve
				that have already received a previous allocation of tax credits shall not be
				required to submit a new market study. The analyst shall state in the certification
				that all market study requirements have been fully addressed. If any relevant
				information cannot be obtained, the analyst shall explain why the information cannot
				be obtained. The study shall also identify any assumptions, estimates, projections,
				and models used in the analysis. The assumptions used in the market study (for
				example, project rents, unit mix, amenities, etc.) must precisely reflect the
				information provided in the tax credit application. The data and analysis shall
				clearly indicate enough demand in the market to support the proposed development.
				Any additional information appropriate to the market area and the project shall be
				submitted to demonstrate the demand for the proposed housing project. The report
				shall include, at a minimum:
(1) A brief executive
				summary that includes the appropriate vacancy rate, capture rate, absorption period,
				and the market advantage compared to comparable market-rate properties given the
				rents projected by the applicant, as well as a detailed table of contents that
				clearly identifies the location of the items listed below;
(2) A description of the proposed site, including
				pictures of the site and existing structures, pictures of the immediate
				neighborhood, visibility/access/exposure, proximity to retail and employment,
				detailed neighborhood and market area maps showing all significant nearby land uses,
				block and lot numbers of each parcel, site acreage, available public services and
				public transportation, and existing infrastructure. A description of the proposed
				improvements including unit mix, a commentary on the preliminary drawings including
				unit size and design, proposed project and unit amenities, and any applicable tenant
				charges, tenant-paid utilities, and project-paid utilities shall be provided.
				Detailed monthly utility allowance figures shall be presented separately for each
				utility type (for example, electric, gas, etc.) and for each unit type within the
				project;
(3) Geographic definition and
				analysis of the market area, including a comprehensive and reasonable rationale for
				the suggested market area with supporting evidence. For example, the market area may
				be defined as the area in which similar properties compete with the subject property
				for tenants, or the area immediately surrounding the project from which 60 to 70
				percent of the residents are expected to be drawn, taking into account political and
				natural boundaries, socioeconomic characteristics, and the areas from which nearby
				rental developments draw new tenants. The market area shall be evaluated on the
				basis of employment and income levels and trends, the presence of local
				revitalization projects, the number of substandard units in the market, and the
				number of cost-burdened households in the market. Interviews shall be conducted with
				area apartment managers to establish mobility patterns in the area. Particular
				attention should be given to tax credit properties. As available, the results of the
				interviews shall be reported, showing the percentage of residents by
				neighborhood/community. For cases in which the subject property is an existing
				rental development or later phase of an existing development, detailed tenure by
				prior residence must be shown. Additional explanation shall be provided for any
				market area with boundaries in excess of three miles (urban site) or five miles
				(rural site) of the site;
(4) An
				economic analysis that provides the reader context to better understand the
				household and rent trends in the market. Topics to be addressed shall include:
(A) Presentation of data and analysis pertaining
				to the trend in resident employment and unemployment;
(B) Presentation of data and analysis pertaining
				to trends over the past five years in total at-place employment (that is, jobs) in
				the county in which the subject site is located;
(C) Presentation of data and analysis pertaining
				to at-place employment by industry sector for the primary market area (PMA) or
				smallest available geographic area that includes the PMA and comparison to
				appropriate larger geographic area (that is, city, county, metropolitan statistical
				area, or labor market area);
(D) A list
				of major employers in the PMA or other appropriate small geographic area and
				announced changes in workforce (that is, expansions, contractions, and relocations),
				as well as newly announced employers and their anticipated effect on the local
				economy; and
(E) A map of major
				employers and employment centers in relation to the subject
				property;
(5) A demographic
				analysis of the owner and renter households in the market area at (c)1ii(3) above
				that are income eligible and can afford to pay the rent (assuming potential
				households may spend up to 40 percent of their income on housing expenses). When
				appropriate, the eligible households shall also be analyzed by household size, race,
				ethnicity, and age. Market studies submitted for projects applying to the
				Age-Friendly Senior Cycle shall include an evaluation of the market for the eligible
				population over 70 years old. Demographics from the last decennial census shall be
				updated to reflect current market conditions and shall be the basis for projected
				demographics. This research data shall be provided in the appendix and shall be from
				an organization such as Nielsen or a governmental source such as the American
				Community Survey, metropolitan planning organizations, or local planning agencies.
				Supportive Housing projects shall also provide demographics on the special needs
				population in the project in order to substantiate need and demand at projected rent
				levels;
(6) Rent, vacancy, and amenity
				surveys by unit size of market rate, affordable, and subsidized properties. The
				affordable property survey shall include all LIHTC properties in the market area and
				those projects that are currently under construction or have received preliminary
				site plan approval. A rent adjustment analysis of the most comparable properties to
				the subject shall be presented to derive a market rent for each unit type. Data
				shall include, at a minimum, a grid analysis by unit size for rents, amenities, unit
				features, unit square footage, age, number of bathrooms, tenant-paid utilities, rent
				per square foot, location, physical condition, and curb appeal. Rents shall be
				adjusted, especially for utility and amenity charges, so that appropriate
				comparisons can be made. The proposed rent shall have at least a 10-percent rent
				advantage in relation to the estimate of market rent. Additional information
				concerning unit mix, vacancy and turnover rates, operating expenses, rent trends,
				rent concessions, rent control, waiting lists, absorption per month, design,
				contact, and contact phone number shall be provided in a grid or narrative format,
				when available. The market study shall contain a minimum of three rent comparables
				for each unit size. All comparable properties should be within the delineated market
				area when possible. In cases where a comparable project has to be chosen from
				outside the market area (for example, where there is not enough similar rental
				product in the market area), appropriate adjustments should be made for location
				differences. At least one picture of each comparable and a detailed street map that
				shows the location of each comparable shall be provided. In addition, if the
				building that is the subject of the tax credit application is currently occupied,
				rent rolls and current tenant incomes shall be provided and analyzed;
(7) The capture rate, absorption period, and the
				impact the proposed rental housing may have on existing inventory. The capture rate
				is the number of units in the project divided by the net demand for the project,
				where the net demand is the number of households that are income eligible and can
				afford to pay the rent minus the number of comparable affordable units in the market
				area. For purposes of the market study, the maximum annual household income for the
				tax credit units shall be equal to 50, 60, or 80 percent of the area median income
				(depending on whether the applicant chooses the 20 percent at 50 percent, 40 percent
				at 60 percent, or average income Federal set-aside) of a household. The maximum
				income limit shall be based on an average household size of 1.5 persons per bedroom
				for the largest tax credit unit. For single room occupancy projects, the maximum
				income limit shall be based on the assumption of one person per unit. Maximum income
				limits for all proposed senior projects shall be limited to a two-person household.
				The minimum annual household income for the tax credit units shall be equal to the
				lowest tax credit gross rent multiplied by 30 (which assumes that potential
				households may spend up to 40 percent of their income on housing expenses on a
				monthly basis). The absorption period is a forecast of the number of months that
				will elapse from the completion of construction to stabilization (93 percent
				occupancy) of the project as a whole, taking into consideration a reasonable vacancy
				rate. Sample calculations of capture rate and absorption period shall be shown in
				the report, and NJHMFA shall be able to reconstruct the estimates using the data and
				methods in the market study. When additional analysis is appropriate, methods shall
				consider demographic trends, age of householders, the size of renter households, the
				unit mix of the project, the amount of home ownership in the target population, the
				cost of home ownership in the market area, approved projects not yet placed in
				service, and any other significant factors. Tine impact of tine subject project on
				existing housing in the market area shall also be addressed;
(8) If applicable, the appropriate rent per square
				foot and vacancy factor based on market conditions for any commercial space in the
				project;
(9) A conclusion forecast
				regarding the potential viability of the proposed project which states the strengths
				and weaknesses of the project, compatibility of surrounding land uses,
				appropriateness of project design and amenities, and the reasonableness of projected
				rents. In addition, the analyst shall state whether sufficient demand from targeted
				households exists for the development as proposed. Suggestions to make the project
				more marketable shall be provided if appropriate. All conclusions shall be based on
				data analyzed in the body of the report; and
(10) A statement of the competency of the analyst
				conducting the study. The market analyst shall certify that:
(A) They are an independent, third-party
				professional with no financial interest in the project other than in the practice of
				their profession (for example, their fee for preparing the report is not contingent
				upon project completion and/or an award of tax credits);
(B) They have the requisite knowledge to conduct
				the study;
(C) They have personally
				inspected the subject property and the comparable properties analyzed in the report;
				and
(D) They have conducted the study in
				accordance with the Model Content Standards for Market Studies for Rental Housing of
				the National Council of Housing Market Analysts (NCHMA), 1400 16th Street NW, Suite
				420, Washington, DC 20036, whose Model Content Standards are available at
http://www.housingonline.com/councils/national-council-housing-market-analysts/model-content-standards/
,
				incorporated herein by reference, as amended and supplemented.
(11) The provisions at
				N.J.A.C.
				5:80-33.11(d) and (e) shall not
				apply to market studies submitted pursuant to this subsection. Instead, during the
				market study review process, a reviewer contracted by NJHMFA shall notify the
				independent, third-party professional who completed the market study by telephone
				and, simultaneously, in writing, by email about significant missing or unclear
				components of the market study. A copy of such correspondence shall also be
				simultaneously sent to NJHMFA and the tax credit applicant. Failure of the
				independent, third-party professional who completed the market study to provide a
				sufficient response within five business days about significant missing or unclear
				components of a market study shall result in an application being declared
				ineligible.
iii. For projects
				of 25 units or less and projects receiving Project Based Section 8 rental assistance
				for 100 percent of the units, the form of market analysis described below may be
				submitted in lieu of the market study requirements listed at (c)1ii(1) through (7)
				above:
(1) The third-party analyst shall provide a
				description of the proposed site and proposed improvements, a geographic definition
				and analysis of the market area, age and income demographics within the defined
				market area, and rent, vacancy, and amenity surveys by unit size of market-rate,
				affordable, and subsidized properties. In addition, a rent adjustment analysis shall
				be provided of the properties most comparable to the subject property. For
				suggestions, see (c)1ii above; and
(2)
				The requirements at (c)1ii(8) through (11) above shall be complied
				with.
iv. Updates of market
				studies more than six months old shall reflect a recent site visit by the market
				analyst, updated information on the comparable properties, and an analysis of any
				significant changes to the subject development. Only one update to the market study
				is permitted. Applicants shall submit both the original market study and any
				applicable update in the application submission.