Towards Debt-Free Housing in New Brunswick, NJ

Jim Zarra of a church in New Jersey gave me a tour of 2 houses that they own and run that are in many ways, debt-free and public benefit.    They also have an 11 unit addition to their church that is also part of this program.   Their program leverages government money to get it going with no money upfront and then, in 20 years in one case, and 30 years in another, would be theirs free-and-clear making it a possible way to create permanently debt-free housing.

As I understand it, this is how it works:

They buy a house and fix it up using money from the county and then they repay the “mortgage” back to the county.     But this is a special mortgage, in that they do not have to pay anything while they use it for the purpose the county designated.     In other words, the mortgage payment is waived on the months they house people with the right issues they are trying to help.   In this case the tenants are homeless veterans, or those with mental health issues, or those recently homeless.

So the 501c(3) non-profit organization set up by the church buys properties and gets a one-time payment from the county to pay for the purchase price and the renovation.  In one case this was $100,000 purchase price and $40,000 for renovations to bring a 1200 square foot house up to snuff.   I toured this and one other and they look very nice.    Five formerlessly homeless guys live in one (2 in a room) and 3 young women live in the other (one in a bedroom).

Because the houses have no mortgage payment, they cost only 25% to 40% of what other rentals houses cost to operate.   Since they have been recently renovated, the number is actually much less.    They do pay property tax and insurance.

Further, these individuals have rent vouchers that are meant to pay for market based rent.    This can be $1100 or $560 in their cases.    This assumes that the landlord has more costs than a regular lower middle-class unit because of the special needs of these tenants.    But it still comes to much more than the costs of running these houses.  This means they are starting to build up a reserve that is allowing them to purchase more houses.

Therefore the county is paying for the property and paying market rents.

At the end of the mortgage period the houses are the non-profit’s free and clear.   They can sell them or do whatever.    Of course, my interest is in making permanently debt-free housing, but this is not required in any way from the county’s perspective.    Seems like a very good deal for the church, and I commend their expansion in this area.

Is this how other housing projects work?    Does anyone know?


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