Affordable Ownership Unit Extension Program

BACKGROUND: ALLENDALE’S AFFORDABLE OWNERSHIP UNITS

As part of New Jersey’s affordable housing framework under the Fair Housing Act, municipalities across the state are required to provide housing that is affordable to low- and moderate-income households. Allendale satisfied a portion of its obligation through the creation of deed-restricted affordable ownership units — homes sold at below-market prices to income-qualified buyers, subject to long-term controls on resale.

Most of Allendale’s prior-round affordable ownership units were sold to their initial certified owners beginning around 2002. Each sale was accompanied by an Affordable Housing Agreement — a legal instrument recorded with the Bergen County Clerk — that restricts the use, occupancy, and resale price of the home for a minimum period of 30 years.

WHAT THE AFFORDABLE HOUSING AGREEMENT COVERS

The Affordable Housing Agreement is the governing document for each unit. Among other things, it establishes:

• A 30-year affordability control period beginning on the date of initial closing;
• A maximum resale price formula, calculated using an index tied to regional median income, ensuring the home remains affordable to future buyers;
• A requirement that the unit be sold only to certified low- or moderate-income households, through a process administered by the NJHMFA Housing Affordability Service (HAS);
• The “95/5” repayment rule (described below), which applies if an owner sells at market price after the control period expires; and
• A provision allowing the Borough to extend the affordability controls by municipal resolution — which is the legal basis for the current extension program.

WHAT THE “95/5” RESTRICTION MEANS

Allendale’s prior-round units are subject to what is commonly called a “95/5” restriction. This rule applies at the first non-exempt sale after the 30-year control period expires. If a unit is sold at market price at that point, 95% of the price differential — the difference between the market sale price and the current maximum restricted resale price — must be paid into the Borough’s Affordable Housing Trust Fund at closing. The seller retains only 5% of that difference, in addition to the restricted resale price. This rule is set out in Section IV.C.2 and the definition of “Repayment” in Section I of the Affordable Housing Agreement.

THE BOROUGH’S EXTENSION PROGRAM

As Allendale’s prior-round units approach the end of their initial 30-year control periods, the Borough has decided to extend the affordability controls on qualifying units rather than allowing them to exit the affordable housing program. This decision is authorized directly by each unit’s Affordable Housing Agreement, which the original owners agreed to at the time of purchase.

HOW THE EXTENSION WORKS

The extension is accomplished through a municipal resolution adopted by the Borough’s governing body. The resolution specifies the new control period and a revised ending date. It takes effect upon filing with the New Jersey Housing and Mortgage Finance Agency (NJHMFA), and an amendment to the Affordable Housing Agreement is then recorded with the Bergen County Clerk to reflect the new ending date – sixty (60) years from the original purchase date.

The extension does not require the owner’s signature to take effect — it is a municipal act authorized by the terms of the existing agreement.

Owners will receive two letters from the Administrative Agent during the extension process. The first letter is being sent now as preliminary advance notice and introduces the program, explains the Borough’s incentive offer, and outlines the financial framework that will apply. The second letter will be sent approximately 24 months before the scheduled expiration of the current 30-year affordability control period on each unit and will begin the formal, unit-specific extension process — including the inspection schedule, the timing of the Borough’s extension resolution, and the issuance of the cash incentive payment. Once the resolution has been adopted, owners will be notified by certified mail, return receipt requested, that the recording process is underway.

INCENTIVES THE BOROUGH IS OFFERING OWNERS

The Affordable Housing Agreement does not require the Borough to make any payment to owners in connection with the extension. Nevertheless, the Borough is voluntarily offering the following to each owner whose unit is extended:

EXTENSION VS. EXIT SALE: A COMPARISON

FREQUENTLY ASKED QUESTIONS

Do affordability controls automatically expire after 30 years?

No. Under Section III.B of each unit’s Affordable Housing Agreement, the controls do not terminate on the 30-year anniversary date. They remain in place until the first non-exempt sale of the unit after that date. This means an owner who simply continues to live in the unit past the 30-year mark remains subject to all affordability controls until a qualifying sale actually occurs — or until the Borough acts to release or extend the controls.

What gives the Borough the authority to extend the controls without the owner’s consent?

The authority comes from the Affordable Housing Agreement itself — signed by the owner at the time of purchase — expressly states that the affordability controls “may be extended by municipal resolution.” By entering into that agreement as a condition of purchasing an affordable unit, the original owner consented to this mechanism. No additional legislative or regulatory authority is required.

Can an owner sell the unit after going through the extension?

Yes. Participating in the extension does not eliminate an owner’s right to sell. Once the extension is executed, the unit enters a new affordability control period — typically 30 years, beginning the day after the existing controls expire. During that new period, the following rules apply:

• Sales are permitted, but must be to a certified low- or moderate-income household at the maximum restricted resale price, through the HAS resale process.
• The 95/5 rule does not apply to a sale during the new control period at the restricted price — it only applies to a market-price exit sale after the new control period has itself expired.
• Owners must give 90 days’ advance written notice to the Administrative Agent of any intent to sell, as required by the Affordable Housing Agreement.
• At the end of the new control period, controls again remain in effect until the first non-exempt sale after expiration, and the Borough retains the right to consider another extension at that time.

In practical terms, selling after an extension works the same way as selling during the original 30-year control period — through HAS, at the restricted resale price, to a certified buyer. The extension preserves both the affordability of the unit and the owner’s flexibility to sell if circumstances change.

To begin a resale, contact HAS at HAS@njhmfa.gov or write to NJHMFA–HAS, Attn: HAS Resale Assistant, P.O. Box 18550, Trenton, NJ 08650-2085.

How does the extension benefit the broader Allendale community?

Each unit that exits the affordable housing program represents a permanent reduction in the Borough’s stock of deed-restricted affordable homes — homes that can never easily be replaced at current land and construction costs. By extending the controls, the Borough ensures that these units remain available to income-qualified residents for another generation.

The funds used to pay owner incentives and cover code repairs come from the Borough’s Affordable Housing Trust Fund, which is dedicated by law to the creation and preservation of affordable housing within Allendale.

Where can residents learn more about Allendale’s affordable housing obligations and the rules governing these units?

Residents can learn more about the Borough’s plans to address its affordable housing obligation in its recently-approved Fourth Round Housing Element and Fair Share Plan. 

New Jersey’s affordable housing framework is administered by the New Jersey Housing and Mortgage Finance Agency (NJHMFA). General information about the Uniform Housing Affordability Controls (UHAC) — the statewide regulations that govern the administration of affordable units — is available at nj.gov/dca/hmfa/about/uhac.

For questions specific to Allendale’s program, contact the Administrative Agent using the information below.

The Borough will also be publishing a Policies and Procedures Manual for the extension program in the near future. The Manual will set forth the step-by-step procedures the Borough and the Administrative Agent will follow in administering the program — including inspection protocols, contractor selection, scope-of-work development, and the issuance of incentive payments — and will be posted to this page when finalized.