Gov. Murphy wants to give money to build affordable housing in NJ backyards and basements

Several New Jersey towns could receive funds to encourage developing affordable accessory dwelling units — smaller, independent structures on the same lot as a single-family home — under a pilot program Gov. Phil Murphy proposed in his Tuesday fiscal year 2025 budget address.

Advocates hail the practice as part of a solution to address the state’s affordable housing shortage.

Under the $10 million proposal, 10 or more municipalities would be awarded up to $1 million through a competitive grant process.

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Towns partnering with nonprofits can provide up to $100,000 in forgivable capital loans and construction financing to homeowners looking to build or redevelop accessory dwelling units, such as a basement apartment, a tiny house in the backyard or an apartment over the garage.

In return, homeowners who receive the assistance would have to have a minimum 10-year deed restriction to reserve the unit for renters or buyers who make under 80% of the area median income.

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The program is not guaranteed. After Murphy presents his budget proposal, the Senate and Assembly draft their appropriations bill, which can deviate from what the governor announced. Murphy has until July 1 to sign a bill to avert a government shutdown.

Though New Jersey doesn’t have a statewide law allowing ADUs, some towns, such as Princeton, Montclair, Maplewood and East Orange, are passing local ordinances that govern or restrict how they operate. The Murphy administration is hoping this program would inspire more towns to adopt ADU ordinances so they could be eligible for the funding.

Money from Affordable Housing Trust Fund

Murphy’s proposal is inspired by an $85 million program in New York state, as well as assistance offered in Boston and San Diego.

In New Jersey, the money would come from the state Affordable Housing Trust Fund, which is funded through a portion of the realty transfer fee paid by property sellers when they transfer deeds to homebuyers.

The fund is meant to finance building of new affordable units for families making up to 80% of the area median income.

Under Murphy's proposal, homeowners seeking to build ADUs would also receive technical assistance for the permit, design and construction phases. Priority would be given to towns that include other development incentives in their program proposals.

“Our budget will increase funding for the construction of new affordable housing units all across New Jersey,” Murphy said in his Tuesday budget address. “We need to keep building. Because New Jersey is popular — and the demand for housing continues to outpace supply.”

Dozens of advocacy groups, developers and individuals signed on to a letter to Murphy in December 2023 urging him to prioritize creating more housing options using ADUs.

"ADUs can give homeowners a new source of income, create more housing options to help ease our overburdened rental market, and enable multigenerational living," wrote the authors, which included AARP New Jersey, the Housing & Community Development Network of New Jersey and the Regional Plan Association.

"They create more affordable housing units and allow seniors to age in place by giving elderly homeowners the ability to have a live-in caretaker or more income to pay expenses," the group wrote.

Rework process to zone for affordable housing

Murphy’s proposal comes as the Legislature is debating a reworking of the state’s process to zone for and create affordable housing statewide in advance of the summer of 2025, when towns are constitutionally mandated to begin identifying how they will meet their “fair share” of affordable housing obligation under the Mount Laurel doctrine, a series of significant state Supreme Court cases beginning in 1975.

The bill, S50/A4, would create a process through the Department of Community Affairs to assign obligations to towns. It passed the Assembly in mid-February and is stalled in the Senate, where it would need to be approved by the Senate Budget and Appropriations Committee and full chamber before being sent to the governor’s desk.

Opposition has primarily centered around overdevelopment, as developers often build 80% market-rate units to be able to cover the cost of the 20% affordable units. The bill includes incentives for redevelopment, and advocates and supporters stress that the bill is only a piece of the puzzle to tackle the shortage of 200,000 or more affordable units needed across the state.

This article originally appeared on NorthJersey.com: Affordable housing in NJ backyards? Phil Murphy wants to give grants