What New Jersey Residential Developers Need to About the New ERG Program

What New Jersey Residential Developers Need to About the New ERG Program

New Jersey’s Economic Redevelopment and Growth (ERG) Program is up and running again, thanks to the Economic Recovery Act (ERA)...

New Jersey’s Economic Redevelopment and Growth (ERG) Program is up and running again, thanks to the Economic Recovery Act (ERA). The New Jersey Economic Development Authority (NJEDA) is now accepting applications for the residential component, under which residential ERG projects can receive tax credits of up to 40 percent of total eligible project costs. 

“Thanks to the foresight of Governor Murphy and the Legislature in reopening the ERG program, essential housing projects throughout New Jersey that have been on hold will be able to move forward while the new programs created by the Economic Recovery Act are under development,” NJEDA Chief Executive Officer Tim Sullivan said in a press statement. “This will not only provide much-needed new housing in our state, but it will also drive economic growth by creating construction jobs and attracting more workers to New Jersey. This is always important, but it is especially crucial now as we begin recovering from the economic impacts of COVID-19.”

Economic Redevelopment and Growth Program

The ERG program aims to help developers and businesses address revenue gaps in development projects.  It can also apply to projects that have a below-market development margin or rate of return. The grant is not intended to take the place of conventional debt and equity financing, and the NJEDA advises that applicants should generally have their primary debt financing in place before applying. 

The ERG program previously stopped accepting new applications in June 2019 upon the program’s sunset. Under the Economic Recovery Act, residential ERG projects can receive tax credits of up to 30 percent of total eligible project costs. Projects in five cities — Atlantic City, Camden, Paterson, Passaic, and Trenton – are eligible to receive tax credits up to 40 percent of eligible project costs. 

The expanded ERG program will be administered based on pre-existing ERG regulations and statutes, as amended by the Economic Recovery Act. Under the amendments to the ERG program, program participants must comply with new prevailing wage and minimum wage requirements. In order to receive ERG support, projects must also meet Green Building Requirements. Any construction contracts associated with the project must use prevailing wage labor rates and meet affirmative action requirements. The developer must also submit satisfactory evidence of actual project costs prior to the first disbursement of funds under the agreement or issuance of the tax credit under the approval letter, as applicable.

Eligibility Requirements for Residential ERG Program

To receive ERG support, residential projects must satisfy the following requirements:

• Include multi-family residential units or dormitory units for purchase or lease.
• Be located in a qualifying incentive area and have projects costs totaling $5 million, $10 million or $17.5 million, depending on location
• Not have commenced any construction at the site of a proposed redevelopment project prior to submitting an application, except that if the NJEDA determines that the project would not be completed otherwise, or in the event the project is to be undertaken in phases.
• Demonstrate that a project financing gap exists.
• Reserve at least 20 percent of units constructed for occupancy by low or moderate income households with affordability controls as required under the rules of the Council on Affordable Housing, unless the municipality in which the property is located has received substantive certification from the council and such a reservation is not required under the approved affordable housing plan, or the municipality has been given a judgment of repose or a judgment of compliance by the court, and such a reservation is not required under the approved affordable housing plan.

NJEDA Now Accepting Applications

The NJEDA began accepting applications on June 1, 2021, and will continue to accept applications until December 31, 2021 or until available funds are exhausted. All applicants will be required to apply via NJEDA’s online application located here.

For interested developers, time is of the essence. The NJEDA will review applications on a first-come-first-serve basis, where only complete applications will be advanced to the underwriting process of application review. In the event the NJEDA receives applications for Residential ERG tax credits in excess of the $50 million allotment contained in the ERA, the first applications submitted that collectively meet or exceed the $50 million cap will be reviewed for completeness, with each developer notified within seven to ten business-days of receipt if the application has been deemed complete. Applicants whose applications have been deemed incomplete will be given an additional ten business-days to cure any deficiencies. If at the end of the ten-day cure period, the applications are still incomplete, they will be notified the application will not be advancing and a new application would need to be submitted for further consideration. Any other applications received will be reviewed in the order in which they were received only if any of the applications from the initial batch which did not meet or exceed the limit remain incomplete after the time to cure or subsequently if an application is found to not be eligible for an award based upon the underwriting review. As these additional applications are reviewed, they will receive the same notification of completeness within seven to ten business-days and given ten business-days to cure any deficiencies.

If you have questions, please contact us

If you have any questions or if you would like to discuss the matter further, please contact me, Pat McNamara, or the Scarinci Hollenbeck attorney with whom you work, at 201-896-4100.