LEGISLATIVE FISCAL ESTIMATE
[Second Reprint]
ASSEMBLY, No. 5597
STATE OF NEW JERSEY
220th LEGISLATURE
DATED: AUGUST 30, 2023
SUMMARY
Synopsis: Establishes Nonprofit Housing Construction and Rehabilitation Pilot
Program to facilitate affordable housing construction.
Type of Impact: Time-limited State cost increase.
Agencies Affected: Department of Community Affairs.
Office of Legislative Services Estimate
Fiscal Impact Duration of Pilot Program
State Cost Increase Indeterminate
Potential State Revenue Increase Indeterminate
 The Office of Legislative Services (OLS) concludes that the bill will, contingent on
appropriations for the Nonprofit Housing Construction and Rehabilitation Pilot Program, result
in annual cost increases to the Department of Community Affairs in indeterminate amounts
associated with providing grant funding to eligible nonprofit entities to construct or rehabilitate
dwelling units for low- to moderate-income households for a period of approximately five
years.
 The bill is also expected to result in increased administrative costs to the Department of
Community Affairs associated with promulgating rules and regulations, establishing a grant
application process and selecting grant recipients, and preparing reports concerning the pilot
program.
BILL DESCRIPTION
The bill would establish the Nonprofit Housing Construction and Rehabilitation Pilot Program
for the purpose of providing grant funding to eligible nonprofit entities to be used for dwelling unit
construction or rehabilitation, as defined in the bill, for purchase by low- or moderate-income
households. The bill permits an eligible nonprofit entity to condition the purchase and occupancy
Office of Legislative Services Legislative Budget and Finance Office
State House Annex Phone (609) 847-3105
P.O. Box 068 Fax (609) 777-2442
Trenton, New Jersey 08625 www.njleg.state.nj.us
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of housing built with program funding on the provision of labor, or sweat equity, to be spent in
construction or rehabilitation, by one or more members of the purchaser household, the requisite
hours of which would be determined by the nonprofit entity.
The bill would require the Department of Community Affairs to provide grant funding, if, and
to the extent that, appropriations are made to the department for dedication to the program, to not
less than two, and not more than six eligible nonprofit entities. Grant funding would include non-
interest bearing advances to nonprofit housing sponsors to defray development costs. The
department would establish an application process for participation in the program, and select
eligible nonprofit entities on the basis of experience and capacity to efficiently and satisfactorily
carry out construction and rehabilitation projects for low- or moderate-income households. An
eligible nonprofit entity that participates in the program would be required to expend the funding
provided to it for the purposes of the program in accordance with timeframes to be established by
rules and regulations of the department. The bill further requires the department to submit interim
and final reports on the operation of the program.
Each dwelling unit construction or rehabilitation that is substantially funded through the
program would provide a municipality with one credit towards its prospective fair share affordable
housing obligation if the constructed or rehabilitated dwelling unit is initially occupied by a low-
or moderate-income household, and contains provisions for living, sleeping, eating, sanitation,
cooking, and reasonable living space as specified in the bill.
The pilot program is to expire approximately five and a half years following the effective date
of the bill.
FISCAL ANALYSIS
EXECUTIVE BRANCH
None received.
OFFICE OF LEGISLATIVE SERVICES
The OLS concludes that the bill will, contingent on appropriations for the pilot program, result
in annual cost increases to the Department of Community Affairs in indeterminate amounts
associated with providing grant funding to eligible nonprofit entities to construct or rehabilitate
dwelling units for low- to moderate-income households for a period of approximately five years.
The OLS is unable to predict the amounts that will be annually appropriated for the purposes of
the pilot grant program and therefore the amounts that may be provided to the two to six eligible
nonprofit entities for the construction or rehabilitation of a dwelling unit for a low- to moderate-
income household. The OLS is also unable to predict the extent to which an eligible nonprofit
entity will engage in new construction or rehabilitation projects with grant funds, or the magnitude
of rehabilitation efforts that will be necessary to complete rehabilitation projects.
The OLS notes the bill does not specify whether the construction of new housing units under
the pilot program will be multi-family housing or single-family housing. However, according to
a 2020 report from the Metropolitan Policy Program at Brookings concerning multi-family
housing construction costs in the United States, many factors translate into different per-unit
construction costs, including sizes, architectural styles, land values, building materials, building
codes, and zoning requirements. For new construction, the report estimated that a low-rise
building with up to 50 units would cost approximately $150 to $225 per square foot, and that a
mid-rise building with up to 200 units would cost approximately $175 to $250 per square foot.
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The federal Bureau of Labor Statistics’ CPI Inflation Calculator suggests that from January 2020
to June 2023 those two cost ranges would increase to $177 to $266 and $207 to $296, respectively.
The United States Census Bureau notes that, in 2022, the median size of multifamily housing units
built for sale was 1,311 square feet, resulting in projected per unit costs of $232,047 to $348,726
for units in low-rise buildings, and $271,377 to $388,056 for units in mid-rise buildings.
Therefore, if every grant dollar were to be dedicated to new construction, then every $1 million
dedicated to grants could result in the production of between three and four multifamily housing
units, based on State grant funding alone, without any nonprofit entity or purchaser contributions
to unit construction. Assuming, however, that each unit meets only the minimum definition for
being substantially funded through the pilot program, at 20 percent of project costs, that would
result in the production of between 15 and 20 multifamily housing units per $1 million.
The OLS further notes that a Habitat for Humanity chapter in Maryland reports that a Habitat
for Humanity house costs approximately $135,000 to $165,000 to build. If all dwelling units were
built under those expectations, approximately 30 to 37 dwelling units could be substantially funded
through the pilot program per $1 million. In New Jersey, Morris Habitat for Humanity (serving
Morris and Middlesex Counties and the Greater Plainfield area) reported completing or continuing
construction on 41 homes in 2021, and completing 87 home repairs, and spending $2.1 million on
home building. The report from Morris Habitat for Humanity does not, however, provide
information on the overall costs of a newly constructed single-family home.
The bill also provides for the Department of Community Affairs to collect unspent grant
funding from eligible nonprofit entities after a period of time to be determined by the department.
To the extent that eligible nonprofit entities that were issued grant funding pursuant to the bill do
not spend the monies within the allotted time, the department may experience an indeterminate
revenue increase.
The bill is also expected to result in increased administrative costs to the Department of
Community Affairs associated with promulgating rules and regulations, establishing a grant
application process and selecting grant recipients, and preparing reports concerning the pilot
program.
Section: Local Government
Analyst: Abigail Stoyer
Associate Fiscal Analyst
Approved: Thomas Koenig
Legislative Budget and Finance Officer
This legislative fiscal estimate has been produced by the Office of Legislative Services due to the
failure of the Executive Branch to respond to our request for a fiscal note.
This fiscal estimate has been prepared pursuant to P.L.1980, c.67 (C.52:13B-6 et seq.).