When Anthony Marchetta was growing up in New Brunswick, he lived in a community where shoemakers and lawyers could live on the same street and send their kids to the same school. It so happened that Marchetta was the son of the shoemaker, an immigrant from Italy who was determined to raise a successful family. Although the Marchettas were not wealthy, all five children went on to successful careers.
Marchetta attributes this good fortune partially to the fact that they grew up in a place where they had access to the same resources as the wealthier families just down the street. Communities like that are rarer today, with neighborhoods and even entire towns sharply divided by income.
Today Marchetta is the executive director of the New Jersey Housing and Mortgage Finance Agency, a government body that functions as the state’s $4 billion affordable housing bank. The NJHMFA finances single family homes and larger multi-unit affordable housing developments throughout the state.
Marchetta’s goal in using these resources is to help create for today’s families the same opportunities that he had growing up in a neighborhood that was not segregated by income, like many places are today. “Ever since then I have personally believed that mixed income is the right way to go,” he says. “Mixed income makes a lot of sense for a lot of good reasons: culturally and educationally.”
Marchetta will speak at the Princeton Regional Chamber of Commerce on Wednesday, July 26, from 7:30 to 9:30 a.m. at the Springdale Golf Club in a panel on “Affordable Housing: Providing Entry Into Our Communities.” Other speakers on the panel include Jonathan Gershen, vice president and general counsel of the Gershen Group, a property management company, and Stephen M. Eisdorfer, a Hill Wallack attorney who specializes in affordable housing law. Tickets are $40, $30 for members. For more information, call 609-924-1776 or visit www.princetonchamber.org.
Housing in New Jersey is in high demand, and while classical economics would predict that builders would bring supply and demand into balance by creating lots of cheap homes and high density development, a variety of factors have prevented this from happening. The result is that the median home price in New Jersey is around $300,000 according to Zillow.com, compared to a national average of around $200,000.
According to Marchetta, New Jersey’s strong economy and good transportation infrastructure and good schools keep land valuable. A unionized construction workforce and high standards for building codes mean that new construction is more expensive than elsewhere.
Then there is the Not In My Back Yard (NIMBY) factor. New Jersey’s tradition of home rule gives townships broad powers over zoning and development, and townships have historically tried to keep out high-density housing, resulting in suburban sprawl. The Mount Laurel supreme court decision of 1975 created a legal obligation for towns to allow affordable housing to counteract this tendency.
Translating a paper rule into brick-and-mortar homes has proven difficult and is part of the mission of Marchetta’s agency. Marchetta, a Christie appointee, says that since 2010 his agency has produced more affordable housing than any other gubernatorial administration previously.
The NJHMFA has used a variety of financial tools to promote the construction of affordable homes and to help families buy them, including tax credits and low-interest loans for developers who are building projects that include affordable units; downpayment assistance and low-interest loans for first-time homebuyers, Hurricane Sandy relief programs, and various other incentives. It also administers the federal low income housing tax credit program.
One recently added tool in the HMFA’s arsenal may come as a surprise to anyone who closely followed the housing crash of 2008: mortgage-backed securities. This financial instrument, which consists of a bundle of mortgages sold by lenders to an investor, helped create the subprime lending market because lenders were more willing to make risky loans knowing that another investor would ultimately be responsible for them. Securities with too many bad loans in them became “toxic assets” on the balance sheets of banks, fuelling the financial crisis.
But Marchetta says subprime loans gave mortgage-backed securities a bad rap, and that there is nothing wrong with them in principle. “The mortgage-backed security concept isn’t so bad. It was the practice that caused people trouble in 2007 and 2008,” he says.
Since 2015 the NJHMFA has written 2,000 to 3,000 loans a year and bundled them into mortgage backed securities. Marchetta says none of the loans are the variable-rate, or “no document” loans that caused such trouble in the early 2000s. He hopes to issue 1,000 loans next year.
Another innovation under Marchetta is the state’s conduit bond program, launched in 2012, which allows private developer to build projects using government-issued bonds backed up by insurance. The agency has used this tool to fund about $1 billion worth of projects around the state that included affordable housing. Marchetta says the conduit bond program became necessary after the financial crash because the low interest municipal bonds typically used for such projects became riskier, and higher interest, after Detroit and several other cities declared bankruptcy. At the same time, the Federal Reserve was keeping interest rates low, meaning that private loans were much cheaper, so there was little incentive for developers to use the HMFA’s programs and build affordable housing.
Marchetta says the conduit bond program has been a great success, and has revived affordable home building around the state.
Marchetta’s familiarity with the financial wizardry in structuring these programs comes from his long background in housing, both on the private and public side. He is a graduate of Rutgers, where he earned both a master’s degree in regional planning and an MBA. Early in his career, he was executive director of the Department of Housing and Community Development for Middlesex County. In 1988 he served on the state’s planning commission, helping create New Jersey’s master redevelopment plan. He later worked in real estate development, most recently serving as vice president of LCOR Inc., where he led development teams on residential and commercial projects. He lives in Princeton with his wife and has six adult children.
Marchetta has seen his vision of mixed-income housing come to life in several projects, most recently the HMFA-funded Hahne’s Building in Newark, which combines affordable and market-rate apartments and shops in a redeveloped 115-year-old building.
He has also used the federal tax credit program to encourage mixed-income development. The NHHMFA has wide leeway in how it spends its $20 million tax credit from the federal government, and in 2013 the agency changed the program’s guidelines to favor projects that are built near mass transit stations, creating housing opportunities for people to commute by means other than cars. The move earned the agency praise from NJ Future, the nonprofit planning group. This little-publicized policy change was meant to help recreate the neighborhoods of Marchetta’s youth, where lower-income families would have a chance to rise to the top.
“That’s something I’m fairly pleased about,” Marchetta says.