New Jersey housing with financial alert tag

July 20, 2021, saw affordable housing nonprofit Jersey City Community Housing Corporation file for Chapter 11 bankruptcy, seeking to restructure its debts while dealing with a legal claim against the City of Jersey City.

The company owns properties at 16 Bergen Avenue, 299 Bergen Avenue, and 108 Storms Avenue in Jersey City, which were intended to be turned into low-income housing for the area. The property at 108 Storms Avenue was listed in August 2017 as being planned to have four residential rental units reserved for “low-to-moderate income” families with support from the Department of Housing and Urban Development (HUD).

Bankruptcy documents list both 299 Bergen Avenue and 108 Storms Avenue as being “partially developed” housing projects, without detailing the extent of work done.

The three properties are valued at $2,750,000, according to Jersey City Community Housing Corporation’s bankruptcy petition. Additionally, the company claimed $3,000 in financial assets as well as a $5 million legal claim against Jersey City, which is still in litigation.

However, the non-guaranteed nature of the company’s legal claim puts it in a difficult position, as it lists a significant $2,439,118.70 in total liabilities.

Despite the difficulty, the company likely hopes to avoid a permanent shutdown of its operations. Chapter 11 bankruptcy, which is often known as “reorganization” bankruptcy, allows a debtor to avoid full liquidation of its assets by creating a plan to reorganize its debts and pay its creditors over time — all while maintaining its operations.

In previous years, Jersey City Community Housing Corporation and its owner, former NBA player Terry Dehere, has come under fire from Jersey City residents over the slow-moving nature of the company’s renovations.

In 2015, residents of the McGinley Square neighborhood near the company’s 108 Storms Avenue building called on Dehere to either renovate or demolish the building, claiming that it was “unsafe” and detrimental to the community.

At the time, resident Jose Collazo — who lived next door to the property — noted that his family feared for their safety, claiming that it was “just a matter of time” before the building collapsed.

According to the city, during an “aggressive” plan to renovate the city’s abandoned buildings, they had contacted Dehere about his properties and considered the situation satisfactory after Dehere stated he would keep them in good condition.

However, city spokesman Ryan Jacobs added that “Obviously that did not happen here.”

Low-income housing construction has not gone smoothly in Jersey City

Though the city has made affordable housing a priority in the past few years, the process has been a major struggle for city officials and private companies alike.

Jersey City very recently had to give up more than $1.6 million in federal grant money from HUD after affordable housing units at three properties — including 299 Bergen Avenue and 108 Storms Avenue — failed to be built.

HUD spokeswoman Olga Alvarez noted that the city applied for a “voluntary grant reduction” totaling $1,663,859. 

“The money was removed from existing grants because the projects were determined to be ‘incomplete’, meaning they did not produce affordable housing units,” Alvarez specified.

However, Jersey City spokeswoman Kim Wallace-Scalcione noted that Jersey City “has implemented necessary mechanisms and oversight to ensure every project’s affordable housing units are built citywide.”

Others are concerned about the way that Jersey City has handled the housing rights of low-income people in the area. Since December 2020, Fair Share Housing Center Inc. — a nonprofit focused on defending low-income housing rights and ensuring areas provide affordable housing has pushed for a controversial Jersey City inclusionary zoning ordinance to be overturned.

At its surface, the ordinance requires residential developments to set aside 20% of all housing units to be used as affordable housing for 30 years.

However, the nonprofit claims that the ordinance allows developers to “buy their way out” of affordable housing requirements, and further adds that the city council may have violated state law by adopting the ordinance prior to any outside review.

Most recently, the company filed two motions on June 25, 2021, seeking summary judgment and sanctions against the city, asserting that the ordinance is “deeply flawed” and could possibly provide “lucrative giveaways to politically connected developers without meaningfully addressing the city’s growing housing affordability crisis.”

A separate lawsuit from the Jersey City Redevelopment Agency is targeting the Hudson County Urban League’s affordable housing branch, with a claim that the Urban League sold $1.5 million of vacant city lots that were meant to be developed into affordable housing after the city sold it to the nonprofit for $1 in 2004.

Wallace-Scalcione noted that the nonprofit Urban League was sold the land in order to construct “24 affordable housing units specifically for veterans, which were never built.”

Other companies have struggled as communities nationwide try to focus on affordable housing projects

Unfortunately, Jersey City isn’t alone in its struggles to work on affordable housing projects, especially in the New Jersey area.

On May 13, 2021, Camden, New Jersey’s Ground Up Incorporated real estate development company — which markets itself as a company focused on repairing properties and providing “sustainability enhancements” before converting them to “high and low-income” rental properties and commercial units — similarly filed for Chapter 11 bankruptcy after dealing with mounting debts.

On-time payment in these situations can be a major issue for contractors and the businesses themselves. As organizations like Jersey City Community Housing often rely on the support of nonprofits and community leaders, funds are also often not readily on hand — a problem exemplified by the low cash reserves noted in the company’s bankruptcy filing — sometimes making contractor payment difficult. For example, the nonprofit Ground Up Incorporated struggled with close to $900,000 in liens on 13 of its properties before declaring bankruptcy.

These types of issues threaten to make the relationship between nonprofits and contractors tenuous due to the issues with cash flow in the industry. Many contractors and subcontractors simply can’t deal with late payment: A 2019 study by construction finance platform Rabbet found that slow payments were costing general contractors and subcontractors $64 billion per year, and only 39% of subcontractor respondents to the study said that they could cover late payments with existing funds.

Many communities are trying their best to assist these organizations, despite difficulties. Camden, much like Jersey City, has been focused on community revitalization and assisting low-income families. “There are some pockets of real progress and there are some very visible neighborhood transformations that have occurred,” Camden County United Way president Michael Moynihan said.

Additionally, larger metropolitan areas are working to keep focus on affordable housing, even with struggles. As per previous Levelset coverage, the city of Cincinnati has significantly concentrated on these considerations: “An April 2021 release from the city promised to devote $35.5 million in public funding towards affordable housing, organized in tandem with a fundraising campaign intended to attract an additional $30 million in private donations. The bulk of the public funding comes from a $34 million loan from the US Department of Housing and Urban Development.”

National politicians are looking to focus on these issues, as well. Minnesota Senator Amy Klobuchar noted in May 2021 that “Across the country, it is unacceptable that families must struggle to keep a roof over their heads.”

 In proposing a bill to strengthen the federal government’s commitment to affordable housing, Klobuchar added that “The Housing Supply and Affordability Act is a bipartisan solution that will provide grants to help communities identify their housing challenges, improve affordability, and implement unique solutions to expand their housing supply.”