by: Katharine A. Muscalino
The Urban Transit Hub Tax Credit program was introduced in 2008 to provide financial incentive to developers, property owners, and tenants to make substantial capital investments in Urban Transit Hubs. Originally endowed with $1.5 billion, the program has evolved considerably since its inception and is nearing exhaustion.
Of the $1.5 billion dedicated to the Urban Transit Hub Tax Credit program, $250 million has been earmarked for residential projects. As of February 14, 2012, New Jersey’s Economic Development Authority (“EDA”) has already allocated $219.6 million to individual residential applicants, and just extended an additional $17.7 million to Pennrose, a developer proposing to demolish Trenton’s Miller Homes public housing project with low-rise residences. Because so few tax credits remain for residential projects, the EDA has announced it is no longer accepting applications for residential Urban Transit Hut Tax Credits. The remaining unassigned residential tax credits will be allocated to previously approved “ready-to-go” residential projects that have applied for amendments to their Urban Transit Hub Tax Credit applications to increase their credits to up to 35% of their project financing. The Pennrose project, originally approved for tax credits equaling 25% of its project financing and now approved for credits for 35% financing, is one such “ready-to-go” project whose tax credits have been increased by the EDA.
Of the $1.3 billion of tax credits that have not been set aside for residential projects, $100 million has been dedicated to Offshore Wind projects by the Offshore Wine Economic Development Act (expiring January 2013) and $200 million has been set aside for the Grow NJ program (expiring July 2014). An additional $696.5 million has been allocated to individual commercial projects, leaving just $253.5 million available for commercial projects in Urban Transit Hubs. Developers, owners, and tenants of commercial property in an Urban Transit Hub should submit their tax credit applications as soon as possible to insure they don’t miss out.
Residential projects in the Urban Transit Hubs need not abandon hope altogether yet. The EDA has directed that in September 2012, the agency will undertake an evaluation of the commercial projects in its “pipeline,” meaning those that have already submitted an application and are waiting to be approved, as well as the progress of approved projects. Depending on its conclusions following this review, the EDA may recommend that any remaining commercial allocations, as well as the $100 million earmarked for the Offshore Wind project, be reallocated to new residential projects in Urban Transit Hubs and to Grow NJ projects. The EDA will make its final determination as to the reallocation of the Offshore Wind $100 million following the program’s January 2013 sunset, and may introduce a competitive process for the award of any remaining tax credits.
by: Katharine A. Muscalino
The Appellate Division recently held that the pending uncertainty regarding affordable housing legislation, resulting from the elimination of the Council on Affordable Housing and Appellate Division’s rejection of the Third Round Fair Share rules is no excuse for courts to dismiss builder’s remedy lawsuits. In Bonnabel v. Township of River Vale, the trial court dismissed a builder’s remedy lawsuit because it was uncertain as to the legal standard that would ultimately apply to the builder’s remedy. In addition to the builder’s remedy lawsuit, the builder had filed an appeal of COAH’s third round certification of the Township’s plan. If the builder fails to prevail in his challenge to the third round certification, the fair share plan enjoys a presumption of validity and the builder must prove his builder remedy claims by “clear and convincing evidence”. If the builder were successful in his appeal of the third round certification, the Township’s fair share plan would not have a presumption of validity and the builder’s remedy suit would be subject to a less stringent standard. Because the appeal of the third round certification remains in limbo pending the Supreme Court’s consideration of the third round rules, the trial court dismissed the builder’s remedy action without prejudice, specifying that the plaintiff could refile his complain once the COAH appeal was decided, the governing standard was established. All time periods, causes of action, and defenses were to be preserved.
The Appellate Division overturned the trial court’s dismissal, finding that the uncertainty surrounding the applicable legal standard did not constitute a failure to state a viable claim or non-justiciability. It ordered that the case be reinstated, and directed the trial court to either 1) stay the case in full until the COAH waiver appeal was decided; 2) stay a trial but allow discovery to proceed; or 3) let the case proceed to trial, with the court making findings under both scenarios. If the court were to proceed with trial, the judge would address whether the builder’s trial proofs overcame the presumption of validity, and if they fail to do so, whether they at least satisfy the lesser proof standard.
The case will be helpful to builders who struggle to make progress in development while municipalities and courts continue to drag their feet as they await the New Jersey Supreme Court’s decision on the Third Round rules.
by: Peter J. Gallagher
News about a housing recovery usually focuses on home sales, but Bloomberg ran a story this week, "U.S. Can Rent Its Way To A Housing Recovery" (h/t/ Land Use Prof Blog) that suggests that this focus may be off. The author suggests that the Obama Administration should allow a tax write-off for investors who buy empty properties and rent them out. The author claims this would help with two of the biggest problems with the housing market – the large amount of owner-occupied houses on the markets, which pushes prices down, and the millions of homes with negative equity: “Dealing with excess inventory by shifting vacant properties into the rental market would help to stabilize prices and thereby mitigate, to some degree, the negative-equity issue — although additional action would also be warranted to attack such ‘underwater’ situations." The ideas expressed in the article are obviously not without controversy, however, as even a cursory glance at the comments posted about the article make clear.
by: Peter J. Gallagher
The New York Times is reporting that the government is soliciting ideas for turning its glut of vacant, foreclosed houses into rental units that could be managed by private parties or sold in bulk ("U.S. Seeks Ideas On Renting Out Foreclosed Property"). The goal of the program would be to "stabilize neighborhoods where large supplies of empty, foreclosed properties have hurt property values" and "clear the nation’s balance sheet of real estate holdings that, because they have been difficult to sell individually, have hung over the housing market and stunted sales of existing homes and new construction." The request for ideas comes from the Federal Housing Finance Agency, the Department of Housing and Urban Development, and the Treasury Department, and you can click here to submit your ideas.
As the article notes, the percentage of homes owned by the government that are currently in foreclosure is somewhat staggering:
Of the 248,000 homes owned by Fannie Mae, Freddie Mac and the F.H.A. at the end of June, 70,000 were listed for sale, said Corinne Russell, a housing finance agency spokeswoman. The remainder were not yet on the market or the agencies had already received an offer from a prospective buyer.
But it is possible that hundreds of thousands of more homes that are now in the foreclosure process could come into the possession of the federal government in the next few years, housing experts say.
The government is now looking for a few good men ideas for how to deal with this crisis. Among those already proposed are "rent-to-own programs, in which previous homeowners or current renters could lease properties as a path to ownership, and ways in which the properties can be used to support affordable housing."
If you have any thoughts, be sure to let us know when you let the government know.
by: Peter J. Gallagher
The SEC announced yesterday that JPMorgan Securities LLC agreed to pay $153.6 million to settle SEC charges that the company "misled investors in a complex mortgage securities transaction just as the housing market was starting to plummet." Pursuant to the settlement, "harmed investors will receive all of their money back.” Just like it did with Goldman Sachs and its now infamous ABACUS 2007-1 deal, the SEC alleged that JPMorgan allowed a hedge fund manager to pick the assets that went into its (equally obscurely named) Squared CDO 2007-1 deal without disclosing that the hedge fund chose the worst assets it could find because it planned to short the offering. You know how this story ended – investors lost their shirts, the hedge fund got rich(er).
The settlement has been widely reported in the media, with some interesting takes on the meaning of the settlement to the overall prosecution (by the SEC, private investors, attorneys general, and the DOJ) of the banks for their role in the crisis. Among the more interesting pieces:
"Is JPMorgan's Settlement The End Of Subprime Claims?" (Reuters) (arguing that that the settlement was a win for JPMorgan but that it does not mark the end of the pain for the bank or its competitors who all face dozens of pending investor lawsuits)
"JPMorgan Settlement Suggests More Pain Ahead For Wall Street" (WSJ – Law Blog) (predicting increased pressure by the SEC on other banks for similar settlements and including the most bizarre and disturbing quote from an email that the JPMorgan employee in charge of selling the Squared CDO 2007-1 deal wrote to his sales team: “We are soooo pregnant with this deal, we need a wheel-barrow to move around . . . Let’s schedule the Cesarean please!”)
"JPMorgan Settlement With SEC Recalls Case Against Goldman Sachs" (providing more detailed reporting on the story and less commentary than the others)