The CHOICE Program: Financing Mixed-Income Housing in NJ

For developers of for-sale housing, the "appraisal gap" in emerging markets can be a deal-killer. The NJHMFA CHOICE Program (Choices in Home Ownership Incentives Created for Everyone) solves this by providing construction subsidies and low-cost financing to make mixed-income projects viable.

What is CHOICE?

CHOICE is NJHMFA's flagship program for promoting homeownership in developing markets. It is designed to stimulate the production of new, mixed-income housing by subsidizing the difference between the cost to build and the market value of the homes.

The program serves two clients: the Developer (through construction financing and subsidies) and the Homebuyer (through favorable mortgage products).

Developer Benefits

For developers, CHOICE offers a capital stack solution that reduces equity requirements and risk.

Project Eligibility

To qualify for CHOICE, a project generally must:

• Be a new construction or substantial rehabilitation project.
• Create for-sale housing units (condos, townhomes, or single-family).
• Include a mixed-income component. While market-rate units are allowed, a portion of the units (typically 20% or more) must be affordable to low- and moderate-income households to unlock the deepest subsidies.
• Be located in an eligible smart-growth area or redevelopment zone.

The "Appraisal Gap" Solution

In many NJ municipalities, the cost to build a new home (e.g., $350,000) exceeds the current market value (e.g., $300,000). Banks won't lend on the full cost, and developers can't cover the difference.

CHOICE fills this gap. The subsidy covers the $50,000 shortfall, allowing the developer to build a high-quality product, sell it at a market-clearing price, and still achieve a profitable exit. As more units are built and sold, comparable values in the neighborhood rise, eventually eliminating the need for subsidy in future phases.

Homebuyer Benefits

The program also makes it easier to sell the units by offering buyers:

• 100% Financing: No down payment required for qualified buyers.
• No PMI: No private mortgage insurance, significantly lowering monthly payments.
• Below-Market Rates: 30-year fixed interest rates that are typically lower than conventional mortgages.