WHAT IS AFFORDABLE HOUSING?
Affordable housing, unlike market rate housing, has affordability controls limiting the rent or sales price for at least 30 years. The New Jersey Council on Affordable Housing considers housing “affordable” if the household pays approximately 28% or less of the household’s gross income on housing costs. Affordable housing is priced to be affordable to households earning up to 80% of the area median income for the region in which the affordable housing is located.
WHO QUALIFIES FOR AFFORDABLE HOUSING?
In order to be eligible for affordable housing in New Jersey, a household’s income must be below the income limit for the region in which the affordable housing is located, either for low or moderate levels. A moderate-income household is classified as earning between 50 percent and 80 percent of the area median income. A low-income household is classified as earning less than 50 percent of area median income. A very low income household is classified as earning less than 30 percent of area median income.
An applicant does not have to currently live in the region in which the applicant is interested in applying for an affordable unit. An applicant’s income qualification is determined by the Region Income Limits for where the applicant wants to live.
All affordable units are required to be affirmatively marketed . An Affirmative Marketing Plan is a regional marketing strategy designed to attract households of all majority and minority groups, regardless of race, creed, color, national origin, ancestry, marital or familial status, gender, affectional or sexual orientation, disability, age, or number of children to housing units which are being marketed by an Administrative Agent or a developer, sponsor, owner or property manager of affordable housing. The primary objectives of an Affirmative Marketing Plan are to target households who are least likely to apply for affordable housing, and to target households throughout the entire housing region in which the units are located.
Before any household can purchase a restricted unit, the Administrative Agent, must certify the household as eligible. Certification of a household involves the verification of two critical pieces of data: 1) Household size and composition, including gender; and 2) The total income and assets for all household members over 18 years of age. The certification process begins with the applicant completing an application in its entirety and providing the required backup documentation. Once eligibility documents and data have been collected, the Administrative Agent can begin the process of calculating the household’s income. (Various properties utilize slightly different methods of calculating the income of applicants for affordable housing. Much depends on the particular program under which a property is operated. Outlined below is the most common set of requirements used in calculating income for households in New Jersey in UHAC; however, these requirements do not apply to programs which are regulated by the federal government).
PROCEDURE FOR INCOME-ELIGIBILITY CERTIFICATION
The Administrative Agent shall require each member of an applicant household who is 18 years of age or older to provide documentation to verify their income. The household shall have twenty (20) days from first notification to submit all required documents. Income verification documentation should include, but is not limited to the following for each and every member of a household who is 18 years of age or older:
- Four current consecutive pay stubs [including both the check and the stub], including bonuses, overtime or tips, or a letter from the employer stating the present annual income figure or if self-employed, a current Certified Profit & Loss Statement and Balance Sheet.
- Copies of Federal and State income tax returns for each of the preceding three tax years – A Form 1040 Tax Summary for the past three tax years can be requested from the local Internal Revenue Service Center or by calling 1-800-829-1040.
- A letter or appropriate reporting form verifying monthly benefits such as
- Social Security or SSI – Current award letter or computer print out letter
- Unemployment – verification of Unemployment Benefits
- Welfare -TANF current award letter
- Disability – Worker’s compensation letter
- Pension income (monthly or annually) – a pension letter.
- A letter or appropriate reporting form verifying any other sources of income claimed by the applicant, such as alimony or child support – copy of court order or recent original letters from the court or education scholarship/stipends – current award letter.
- Current reports of savings and checking accounts (bank statements and passbooks) and income reports from banks or other financial institutions holding or managing trust funds, money market accounts, certificates of deposit, stocks or bonds (In brokerage accounts – most recent statements and/or in certificate form – photocopy of certificates).
- Evidence or reports of income from directly held assets, such as real estate or businesses.
- Interest in a corporation or partnership – Federal tax returns for each of the preceding three tax years.
- Current reports of assets – Market Value Appraisal or Realtor Comparative Market Analysis and Bank/Mortgage Co. Statement indicating Current Mortgage Balance. For rental property, attach copies of all leases.
The following is a list of various types of wages, payments, rebates and credits. Those that are considered as part of the household’s income are listed under Income. Those that are not considered as part of the household’s income are listed under Not Income. Restricted units constructed with Federal funds should consult the appropriate regulations, for example, HUD Section 42, to ensure compliance with applicable Federal regulations.
- Wages, salaries, tips, commissions
- Regularly scheduled overtime
- Social security
- Unemployment compensation (verify the remaining number of weeks they are eligible to receive)
- Verified regular child support
- Net income from business or real estate
- Interest income from assets such as savings, certificates of deposit, money market accounts, mutual funds, stocks, bonds
- Imputed interest (using a current average annual rate of two percent) from non-income producing assets, such as equity in real estate. Rent from real estate is considered income, after deduction of any mortgage payments, real estate taxes, property owner’s insurance.
- Rent from real estate is considered income
- Any other forms of regular income reported to the Internal Revenue Service
- Rebates or credits received under low-income energy assistance programs
- Food stamps
- Payments received for foster care
- Relocation assistance benefits
- Income of live-in attendants
- Student loans
- Personal property such as automobiles
- Lump-sum additions to assets such as inheritances, lottery winnings, gifts, insurance settlements
- Part-time income of persons enrolled as full-time students
- Court ordered payments for alimony or child support paid to another household shall be deducted from gross annual income
To calculate income, the current gross income of the applicant is used to project that income over the next 12 months.
Only full-time income of full-time students is included in the income calculation. A full-time student is a member of the household who is enrolled in a degree seeking program for 12 credit hours or more per semester; and part-time income is income earned on less than a 35-hour workweek.
THE REAL ESTATE ASSET LIMIT
Except for federal programs, if an applicant’s primary residence, which is to be sold upon purchase of an affordable unit, has no mortgage debt and is valued at or above the regional asset limit as published annually by COAH with COAH’s Annual Regional Income Limits Chart, the household must be determined ineligible for certification.
However, if the applicant’s existing monthly housing costs including taxes, homeowner insurance, and condominium or homeowner association fees exceed 38 percent of the household’s eligible monthly income, the household will be exempt from the asset limit.
An applicant must provide a recent, Market Value Appraisal or Realtor Comparative Market Analysis, on the home they own unless the applicant has mortgage debt on the home or can demonstrate that the existing monthly housing costs exceed 38 percent of the household’s eligible monthly income, in which case the applicant is exempt from the asset limit.
Before obtaining a professional appraisal, the applicant should review the property’s tax appraisal and the current market value and compare it to the asset limit to avoid any unnecessary expense. For instance, if homes are commonly selling in the applicant’s neighborhood for over $250,000, it is unlikely that an appraisal will determine a value below the asset limit. The maximum asset limit for Region 5 in 2009 is $144,185.
INCOME FROM REAL ESTATE
If real estate owned by an applicant for affordable housing is a rental property, the rent is considered income. After deduction of any mortgage payments, real estate taxes, property owner insurance and reasonable property management expenses as reported to the Internal Revenue Service, the remaining amount shall be counted as income.
If an applicant owns real estate with mortgage debt, which is not to be used as rental housing, the Administrative Agent should determine the imputed interest from the value of the property. The Administrative Agent should deduct outstanding mortgage debt from the documented market value established by a market value appraisal. Based on current money market rates, interest will be imputed on the determined value of the real estate.
MAXIMUM MONTHLY PAYMENTS
The percentage of funds that a household can contribute toward housing expenses is limited. However, an applicant may qualify for an exception based on the household’s current housing cost (see below). The Administrative Agent, will strive to place an applicant in a unit with a monthly housing cost equal to or less than the applicant’s current housing cost.
A certified household is not permitted to purchase a unit that would require more than 33 percent of the verified household income to pay principal, interest, taxes, homeowner and private mortgage insurance and condominium or homeowner association fees, as applicable. However, at the discretion of the Administrative Agent, this limit can be exceeded if the applicant:
- Obtains a firm mortgage loan commitment at the higher level from a licensed financial institution, under terms consistent with the requirements of the New Jersey Home Ownership Security Act of 2002, N.J.S.A. 46:10B-22 et seq.; and
- Submits a certification from a non-profit counselor approved by HUD or the New Jersey Department of Banking and Insurance that the household has received counseling on the advisability of the loan transaction.
The Administrative Agent, is responsible for providing housing counseling, or providing referrals for counseling, as a part of the Affirmative Marketing Plan and during the application process. Although housing counseling is recommended, a household is only required to attend counseling if their monthly housing expense exceeds UHAC standards. A HUD-approved housing counseling agency, or a counseling agency approved by the NJ Department of Banking and Insurance, meets UHAC’s requirements for an experienced Housing Counseling Agency. If the Administrative Agent is not approved by HUD or by the NJ Department of Banking and Insurance, the Agent will make referrals to one of the HUD-approved housing counseling agencies in New Jersey. This counseling to low- and moderate-income housing applicants will focus on subjects such as budgeting, credit issues, and mortgage qualification, and is free of charge. A list of non-profit counselors approved by HUD and/or the New Jersey Department of Banking and Insurance is included on COAH’s website and is available from the Administrative Agent.
THE APPLICANT INTERVIEW
Ideally, the prospective applicant will be available to meet with representatives from the Administrative Agent to review the certification and random selection processes in detail and ask any questions they may have about the project or the process. However, scheduling time off from work may prove burdensome to the applicant. Applicants may also have mobility issues or special needs that also pose an obstacle to an interview. Therefore, the Administrative Agent is prepared to complete the certification process via telephone and mail. The Administrative Agent will attempt to achieve the following objectives:
- Confirm and update all information provided on the application.
- Explain program requirements, procedures used to verify information, and penalties for providing false information. Ask the head of household, co-head, spouse and household members over age 18 to sign the Authorization for Release of Information forms and other verification requests.
- Review the applicant’s identification and financial information and documentation, ask any questions to clarify information on the application, and obtain any additional information needed to verify the household’s income.
- Make sure the applicant has reported all sources for earned and benefit income and assets (including assets disposed of for less than fair market value in the past two years). Require the applicant to give a written certification as to whether any household member did or did not dispose of any assets for less than fair market value during the past two years.
- Explain the requirement of obtaining a mortgage commitment in For-Sale properties.
RECORDS, DOCUMENTS, HOUSEHOLD COMPOSITION AND CIRCUMSTANCES
The following are various records for documenting household information:
- Social Security records or cards. Either individual Social Security card or letter from Social Security Administration
- Adoption papers, or legal documents showing adoption in process
- Income tax return
- Birth Certificate or Passport
- Alien Registration Card
APPROVING OR REJECTING A HOUSEHOLD
The Administrative Agent must notify applicant households of their eligibility within twenty (20) days of their determination.
Households with a verified total household income that exceeds 80 percent of the regional income limit for the appropriate family size are ineligible for purchase or rental of restricted units. A letter rejecting the household’s application shall be mailed to the household.
Similarly, households with a verified total household income that is within the income limits, but too low to afford any of the units administered by the Administrative Agent shall be sent a letter rejecting the household’s application, and/or referring them to housing counseling.
In addition to non-eligibility based on income, the Administrative Agent may deny a certification because of the household’s failure or inability to document household composition, income, assets, sufficient funds for down payment, or any other required facts and information. A household may also be denied certification if the Administrative Agent determines that there was a willful or material misstatement of fact made by the applicant.
DISMISSAL OF APPLICATIONS
Applications can be dismissed for the following reasons:
- The application is not signed or submitted on time.
- The applicant commits fraud, or the application is not truthful or complete.
- The applicant cannot or does not provide documentation to verify their income or other required information when due.
- The household income does not meet the minimum or maximum income requirements for a particular property.
- The applicant owns assets that exceed the Asset Limit.
- The applicant fails to respond to any inquiry in a timely manner.
- The applicant is non-cooperative or abusive with the staff, property manager, landlords or the sellers of affordable units.
- The applicant changes address or other contact information without informing the Administrative Agent in writing.
- The applicant is unable to obtain suitable and legitimate financing for a sale unit or fails to verify attendance in a homebuyer credit counseling program when required to do so by the program rules.
- The applicant does not respond to periodic update inquiry in a timely fashion.
- The applicant fails to sign the Compliance Certification, Certificate for Applicant, Contract for Sale, Deed Restriction as may be required.
- The applicant, once approved, fails to close on a sale in a timely manner.
Applicants will also be removed from all lists held by the Administrative Agent once they have been approved for an affordable unit. However, these applicants may re-apply for other opportunities in that municipality once they have occupied their unit.
Applicants who are dismissed must re-apply. A minimum time period of six months applies in most situations where the applicant has been withdrawn for fraud, poor credit, uncooperative behavior or other serious matters.
Applicants are not automatically removed from sales lists if they do not respond to a Notice of Availability.
Applications may be held in abeyance for a period not to exceed 60 days if there is an error on the credit report, so that the applicant can correct the error and re-apply. Units will not be held open for that applicant. However, once the credit report is corrected, the applicant will be given a priority for the next opportunity at that property.
FAIR HOUSING AND EQUAL HOUSING OPPORTUNITIES
It is unlawful to discriminate against any person making application to buy or rent a home with regard to race, creed, color, national origin, ancestry, age, marital status, affectional or sexual orientation, familial status, disability, nationality, sex, gender identity or expression or source of lawful income used for mortgage or rental payments.
For more information on discrimination or if anyone feels they are a victim of discrimination, please contact the New Jersey Division on Civil Rights at 1-866-405-3050 or http://www.state.nj.us/lps/dcr/index.html.