Unlocking Affordable Housing Capital: NJHMFA Gap Financing & Camden's ERB
In affordable housing development, the "gap"—the difference between total development costs and supportable debt/equity—is the hardest piece of the puzzle to solve. NJHMFA and specialized boards like Camden's ERB provide the critical soft funds needed to make these projects a reality.
The Affordable Housing Production Fund (AHPF)
Launched to address the backlog of 100% affordable projects, the Affordable Housing Production Fund (AHPF) has been a game-changer. It provides direct subsidy financing to close gaps caused by rising interest rates and construction costs.
- Eligibility: Primarily for 100% affordable projects that are part of a municipal Fair Share Settlement.
- Funding: Can provide millions in gap financing, often structured as soft debt (cash flow contingent).
- Goal: To ensure that projects with municipal support don't stall due to market volatility.
Camden Economic Recovery Board (ERB)
For developers working in Camden, the Economic Recovery Board (ERB) is a vital partner. A subsidiary of the NJEDA, the ERB manages a specific pool of funds dedicated to the revitalization of Camden.
The ERB provides grants and low-interest loans for:
- Residential Development: Market-rate and affordable housing projects.
- Commercial Revitalization: Retail and office projects that create jobs.
- Infrastructure: Improvements needed to support new development.
Strategic Note: ERB funds can often be stacked with NJHMFA financing and ASPIRE tax credits, but careful coordination is required to ensure subsidy layering compliance.
Other NJHMFA Gap Strategies
Beyond the AHPF, NJHMFA administers several other tools to fill the capital stack:
Key Programs
- Special Needs Housing Trust Fund: Capital financing for supportive housing projects serving special needs populations.
- Money Follows the Person (MFP): Set-aside funds for units designated for individuals transitioning from institutional settings.
- Section 811 PRA: Project-based rental assistance for persons with disabilities, providing long-term operating support that allows for more leverageable debt.
Structuring the Stack
Successful affordable housing development in NJ is an exercise in "layering." A typical capital stack might include:
- First Mortgage: Tax-exempt bond financing (NJHMFA).
- Equity: 4% LIHTC equity.
- Gap Source 1: ASPIRE tax credits.
- Gap Source 2: AHPF or Municipal Trust Funds.
- Gap Source 3: Deferred Developer Fee.
Navigating the interplay between these sources—especially regarding lien priority and cash flow distributions—is where the deal is won or lost.
Struggling to Fill the Gap?
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About the Author
Ryan Goldfarb is a real estate development advisor specializing in New Jersey projects. He helps developers navigate the complex landscape of state and federal incentives.
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