Bill > S4615

Introduced Session

This bill, the "Protection of Homeownership and Limiting Institutional Investor Acquisition Act": (1) restricts institutional investor acquisition of single-family homes and imposes certain tax penalties on acquisition of single-family homes by institutional investors; (2) provides down payment assistance and funding for certain homebuyers and developers for the purchase and development of starter homes; (3) reduces the timeframe for the approval of development applications to certain municipal government entities, and expedites starter home inspections; (4) requires the creation of a buyer's home purchasing guide and establishment of a public awareness campaign concerning the impact of institutional investors on the housing market; (5) permits resident taxpayers who are first-time homebuyers to claim certain gross income tax deductions; and (6) establishes the "Starter Home Development Incentive Program" within the New Jersey Economic Development Authority. Restrictions on Institutional Investor Acquisition of Single-Family Homes and Imposition of Certain Tax Penalties: Sections 3 through 6 of the bill prohibit certain institutional investors from placing a bid on or purchasing a single-family home during the first 90 days that the home is available, and subject an institutional investor who owns or acquires a single-family home to certain taxes. Specifically, the bill prohibits an institutional investor, as defined in the bill, from contacting the owner of a single-family home, or the owner's agent, with respect to the single-family home, or soliciting, placing a bid on, or inducing an offer for, a single-family home during the first 90 days that the single-family home is "on the market and available for purchase," as the term is defined in the bill. To discourage circumvention of the bill by institutional investors, the bill provides that an institutional investor that places a bid on, acquires, or purchases a single-family home outside of the 90-day period set forth in the bill is to be subject to an annual State tax in an amount equal to the product of $25,000, and the number of single-family homes owned by the institutional investor as of the last day of the tax year. The State tax revenue collected through the tax is to be credited to the New Jersey Housing and Mortgage Finance Agency to establish new programs or supplement existing programs that award grants to provide down payment assistance to families purchasing single-family homes in the State. The bill authorizes the Director of the Division of Taxation (director) and the Commissioner of Community Affairs (commissioner) to require institutional investors to report certain information provided in the bill. The bill also prohibits an institutional investor from leasing a single-family home acquired or purchased by the institutional investor for a period of five years following the date of acquisition or purchase. The bill would not apply to certain nonprofit organizations; small institutional investors, as defined in the bill; financial institutions owning or acquiring a single-family home through foreclosure or through a secured transaction; institutional investors acting as condemnors; governmental authorities; or other institutional investors excepted from the requirements of the bill by the commissioner. An institutional investor that violates the bill is to be required to alienate the single-family home within six months of acquisition, and any profit received is to be payable to the Attorney General. A violation of the bill is to also constitute an unlawful practice in violation of the New Jersey consumer fraud act. Further, notwithstanding a penalty collected by the Attorney General pursuant to the bill, the bill permits any person or entity directly and adversely affected by a violation to file a complaint against an institutional investor in violation of the bill. The complainant would be permitted to recover $20,000, which is required to be proportionately divided amongst any person or entity, including a small institutional investor, directly and adversely affected by a violation who filed a complaint within 24 months of the date that the violation occurred, in addition to certain fees and expenses incurred in proving a violation of the bill. This portion of the bill would take effect on the first day of the sixth month next following the date of enactment, and sections 5 and 6 of the bill would apply to the tax year beginning on or after January 1 following the date of enactment. Down Payment Assistance, Developer Funding, and the Community Investment Fund: Sections 7 through 11 of the bill provide down payment assistance and developer funding for the purchase and development of starter homes and affordable starter homes. The bill modifies a down payment assistance loan program (loan program), established for the benefit of first-time homebuyers pursuant to a recently enacted statute, P.L.2023, c.78 (C.55:14K-104 et seq.). The bill also modifies the Resilient Home Construction Pilot Program (construction program), established to provide funding for developers to rehabilitate existing homes and construct new affordable homes for sale, changing it from a pilot program to a permanent program in the New Jersey Housing and Mortgage Finance Agency (agency). The bill ensures that a portion of the funding for the loan program and construction program, respectively, is to be allocated to provide down payment assistance for first-time homebuyers to purchase starter homes and affordable starter homes, and funding for developers to construct starter homes and affordable starter homes, as those terms are defined in the bill by size and formal price control. In addition to the loan awards already offered through the loan program, the bill authorizes the agency to provide an additional zero-interest, forgivable loan award of up to $5,000 if the first-time homebuyer provides matching down payment funds in an amount to be determined by the Executive Director of the agency. The bill also establishes a revolving fund in the agency, to be known as the Community Investment Fund, for carrying out the purposes of the loan program (fund), and permits moneys held in the fund that are not able to be disbursed immediately to be invested and reinvested. The bill requires that a portion of the money expended from the fund for the loan program be used for down payment assistance for first-time homebuyers to purchase starter homes and affordable starter homes. Sections 7 through 11 of the bill would take effect immediately. Shortened Timeframe for Land Use Applications for Development and Expedited Inspections for Starter Homes: Sections 12 through 16 of the bill reduce certain allowed timeframes under the "Municipal Land Use Law," P.L.1975, c.291 (C.40:55D-1 et seq.) related to the approval of an application for development, an application for certain site plans, or for an application for certain subdivisions, if at least 40 percent of the units to be developed, total acreage, or lots on which residential dwellings are constructed, are to be used for starter homes. Further, for the inspection of any work related to the construction or development of a starter home, the bill permits an owner, agent, or other responsible person in charge of work to contract with and utilize a private on-site inspection agency authorized by the department to conduct on-site inspections, and further permits the private on-site inspection agency to perform any requested inspections related to the development of a starter home, regardless of whether the enforcing agency is able to perform a requested inspection within three business days of the date for which the inspection is requested. Sections 12 through 16 of the bill would take effect immediately. Buyer's Home Purchasing Guide and Institutional Investment Impacts Public Awareness Campaign: Sections 17 and 18 of the bill require the Department of Banking and Insurance, in consultation with the New Jersey Housing and Mortgage Finance Agency and the Department of Community Affairs, to: (1) publish and disseminate a buyer's guide for individuals who are purchasing a home; and (2) undertake a public awareness campaign concerning the impacts of institutional investment in the State housing market and to promote resources available for homebuyers. Sections 17 and 18 of the bill would take effect immediately. Tax Incentives for Individual Homebuyers: Sections 19 through 22 of the bill permit resident taxpayers of this State who are first-time home buyers to claim a gross income tax deduction for certain expenses. Specifically, the bill allows a resident taxpayer who is a first-time home buyer, as defined in the bill, to claim a gross income tax deduction for the amount paid by the taxpayer as a down payment for the purchase of a single-family residence during the taxable year. The bill also allows a first-time home buyer to claim a gross income tax deduction for the amount of mortgage interest paid by the taxpayer to an eligible lender during the taxable year, up to amounts allowable under the federal Internal Revenue Code, on a single-family residence that is purchased and occupied as the owner's primary residence. If applicable, a first-time home buyer would also be allowed to claim a gross income tax deduction for any mortgage insurance payments paid by the taxpayer during the taxable year, up to $3,000. Sections 19 through 22 of the bill would take effect immediately, and apply to taxable years beginning on or after January 1 of the year next following enactment. Tax Disincentives for Business Entities Owning Single-Family Residences: Sections 23 and 24 of the bill prohibit certain business entities from claiming deductions or expenses under the corporation business tax and gross income tax for depreciation allowances and business interest expenses related to single family residences owned by the business. Under the bill, a corporation business taxpayer that owns more than 20 single-family residences, as defined in the bill, during the privilege period would be required to include the amounts of certain deductions specified in the bill, if claimed for federal income tax purposes in connection with a single-family residence owned by the taxpayer, to the taxpayer's entire net income for the privilege period. The bill also prohibits the taxpayer from claiming a deduction for depreciation in relation to single-family residence ownership. Additionally, business interest expenses and depreciation deductions related to single family residences owned by certain pass-through business entities, which own more than 20 single-family residences, are not to be included in the calculation of the various categories of business income, which are calculated net of expenses. As a result, the taxable income generated by these business entities would not be reduced based on these expenses and deductions. Sections 23 and 24 of the bill would take effect immediately, and apply to privilege periods and taxable years beginning on or after the January 1 following the date of enactment. Starter Home Development Incentive Program: Sections 25 through 28 of the bill establish the "Starter Home Development Incentive Program" (incentive program) within the New Jersey Economic Development Authority (EDA). The purpose of the incentive program is to attract developer investment in the development of starter homes in the State. Under the bill, "starter home" means a unit of single-family housing that consists of not more than 1,800 square feet of floor area. The bill defines a "single-family home" as a one- to four-family residence, a condominium unit, or a cooperative unit. Under the program, the EDA would provide tax credits to eligible developers, following the approval of an application by the EDA. Eligible projects would include projects that primarily include the construction or rehabilitation of one or more starter homes. Under the bill, projects that include at least 10 starter homes would receive a tax credit in the amount of 30 percent of the developer's eligible project costs, whereas projects that include less than 10 starter homes would receive a tax credit in the amount of 20 percent of the developer's eligible project costs. Under the bill, "eligible project costs" means the costs to complete the development of an eligible project, which costs are eligible for subsidy pursuant to the federal Low Income Housing Tax Credit Program, and which costs are incurred by a developer before the issuance of a permanent certificate of occupancy for the eligible project, or before such other time specified by the EDA. The bill provides that an eligible developer that executes an incentive award agreement with the EDA may receive tax credits as authorized under the agreement, subject to the approval of annual compliance reports submitted by the developer to the EDA. After issuance of the certificate of compliance by the EDA, the taxpayer would be permitted to claim the tax credit. Any amount of tax credit that cannot be used on a tax period may be carried forward for use in the seven tax periods following the period for which the credit was issued. The bill also allows a taxpayer to apply for a tax credit transfer certificate so that all or part of the credit awarded may be sold or assigned to a third-party purchaser, as provided for in the bill. Sections 25 through 28 of the bill would take effect immediately.

Committee Categories

Angela Mcknight (D)*,  Benjie Wimberly (D)*, 

Introduced in the Senate, Referred to Senate Community and Urban Affairs Committee (on 06/19/2025)

Official Document