S1022 – Coming to a Foreclosed Home Near You

One of the sponsors of the bill, senator Raymond Lesniak (D-Union) portrayed the initiative as “a way to support property values and reduce crime by getting people into vacant homes, provide municipal tax revenues while stabilizing the housing market.” The other sponsors of the bill are senators Barbara Buono (D-Middlesex) and Assemblyman Jerry Green (D-Union).

This is the wrong approach to a dual problem: We have many foreclosed homes in New Jersey and we also have many people that for one reason or another can not afford a home. More foreclosed homes are coming down the pipe because the judicial moratorium on foreclosures has been lifted. As more homes are foreclosed, more people will become homeless.

S1022 will authorize the N.J. Housing and Mortgage Finance Agency (HMFA) – an independent authority with bonding capability as all independent authorities have – to create a corporation: The New Jersey Foreclosure Relief Corporation (NJFRC). NJFRC will start up with Council on Affordable Housing (COAH) funds frozen everywhere in the state. The life of this corporation is limited to 5 years but its effects will last 30 years. Its purpose will be to purchase foreclosed homes from the institutional owners (see banks) and…

“(2)   Every eligible property purchased pursuant to this act shall be restricted for occupancy as affordable housing for a period of 30 years.  The restriction shall be set forth in the deed and recorded in the office of the county recording officer of the county wherein the real estate is situated.  Affordability controls shall be imposed upon purchase and maintained upon transfer in accordance with the provisions of the Uniform Housing Affordability Controls promulgated by the agency.”

Municipalities will have the opportunity to purchase the home(s) but…

“8.    a.  A municipality that purchases an eligible property pursuant to this act shall sell and convey or lease the housing unit or units acquired within 60 days of the date of purchase, unless it is not possible to do so due to practical or market conditions.  In the event that an eligible property is not conveyed or leased within 180 days of the date of purchase, or remains vacant for a 180-day period during the pendency of affordability controls, the corporation, or the agency as successor to the corporation, may commence proceedings to take control of the property and to sell and convey or lease the property in furtherance of the purposes of this act and deed restrictions of record.”


“b.    The governing body of a municipality that purchases an eligible property pursuant to this act may, by resolution, authorize the private sale and conveyance or the lease of a housing unit or units acquired pursuant to this act.  Every deed and rental agreement shall contain a provision specifying the requirement that the housing unit or units shall remain available to low and moderate income households for a period of at least 30 years.”

The houses so acquired will be sold or leased to families of low and moderate incomes plus individuals with special needs. They could also be used as half-way houses.

Individuals with special needs are defined in the bill as: “Individuals with mental illness, individuals with physical or developmental disabilities, and individuals in other emerging special needs groups identified by State agencies, who are at least 18 years of age if not part of a household. Special needs populations also include victims of domestic violence; ex-offenders; youth aging out of foster care; individuals and households who are homeless; and individuals with AIDS/HIV.”

I am not politically correct: I prefer an empty house to having bad neighbors. Better to be alone than in crappy company. That is how I think. I would not mind at all some of the categories mentioned in the above paragraph as neighbors but I would mind some of them. So would most people, including the sponsors of this bill. Nor have I much sympathy for the ultra-right wing Koch brothers (who oppose the bill) or for the former candidate for governor of New Jersey, Steve Lonegan (who also opposes the bill) yet I strangely find myself in their camp in this case. I believe the bill, if it becomes law, will have disastrous consequences for New Jersey and homeowners of New Jersey. If senator Lesniak seriously believes that planting a half-way house in an urban neighborhood or a suburb will increase the property values in the area, he should have his head examined.

I understand perfectly well that we have case law on the subject and that all the individuals mentioned above must live somewhere. It is an issue of humanity. But I also know that because most people function on the principle of not-in-my-backyard, property values will plummet wherever this new government “corporation” places one of its 30-year-deed-restricted houses. This will lead to lower property values, more foreclosures, and outright flight.

NJ Spotlight quotes Lonegan referring to this bill as “COAH on Steroids.” He is right. Christie, for his part, only cares about taking the COAH money to balance FY 2012-13 budget. He is seldom in New Jersey anyway.

I fear the HMFA will issue bonds once the COAH funds are used up and de facto this will become another fiscal liability for the State of New Jersey. Then the operation will become a bailout for banks and other investors who hold foreclosed property, all at the expense of taxpayers. New Jersey taxpayers will be hit twice: First they pay for it and second are imposed the neighbors they do not want.

Furthermore, the NJFRC would just become another little nest of political patronage.

The real and sustainable ways to help the housing industry and simultaneously those people of moderate income are to implement the reforms I propose. Among them are: a) Abolishing the property tax on primary residences of NJ taxpayers; b) Structural reforms in the extensive government apparatus of NJ abolishing one or more layers; c) Drastic increase in the minimum wage; d) State income tax code reform.

This is a bad bill for New Jersey. It will be a bad law if it becomes one.