Applications open in Sept. for first round of $125 million in state housing loans

Workers paint a new market-rate apartment complex near Old Town Albuquerque in December 2022. Applications for a $125 million loan program open in September, aimed at spurring workforce housing development and affordable housing infrastructure across the state. (Photo by Patrick Lohmann / Source NM)

A key part of what state lawmakers called a “historic” investment in affordable housing will take a major step forward in September, when applications open for what will ultimately be $125 million in loans to develop middle-income housing and affordable housing infrastructure.

An interim legislative committee Monday approved rules for administering a new revolving loan program to boost the state’s housing supply. Up to $30 million in low-interest loans will be available to applicants, largely private and nonprofit developers, when the first round of loans opens up in early September.

The loan program is overseen by staff from the New Mexico Finance Authority and approved by a newly created board, which includes members appointed by the governor, commercial developers and others. Loan recipients are expected to be private developers and housing nonprofits.

Lawmakers approved the loan program in February, part of what they touted as the biggest one-time investment in housing in state history. In total, the Legislature approved about $200 million in one-time spending, including $20 million on homelessness initiatives and $50 million for the New Mexico Mortgage Finance Authority, which recently rebranded as Housing New Mexico.

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The loan program is spurring development of “workforce housing,” which authority officials say is housing for those who make too much income to qualify for federal or state housing aid but too little to afford anything in the current, hot housing market.

The program also seeks to subsidize infrastructure projects that would support new affordable housing development, which are projects that qualify for state and federal subsidies.

Taken together, the two goals of the loan program are to complement existing programs by various local and state housing agencies and Housing New Mexico, which oversees numerous programs for low-income renters and prospective homebuyers.

Point system defined for applicants

The rules and a related policy guide describe a 100-point system that will reward applicants whose projects are in rural areas, use local developers, are close to amenities and transportation, are affordable and have more than 65% of the project costs covered by the entity seeking a loan.

Under the guidelines, up to 40 points could be awarded for projects that demonstrate they meet a community need, use inclusive design techniques, or use local apprenticeship programs and developers.

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Up to 25 points can be awarded for projects that use the funding efficiently, pay it back quickly and keep costs low. Applicants that seek funding for a project that spends more than $100,000 per dwelling unit won’t receive any points, for example.

A maximum of 15 points would be awarded for projects that are ready to be built quickly and successfully, showing a “high potential for success based on financial feasibility” and having an experienced development team in place.

Finally, up to 20 points could be awarded for projects that demonstrate local governments have bought in through zoning reforms and flexible land use regulations. “Development of attainable housing is frequently hindered by and made more costly by local government regulations,” the guidelines note.

The loans will be 60% of the Wall Street Journal prime rate on the day they are issued. The current rate is 8.5%, so such a loan given today would be 5.1%.

Loans to be capped at $15M

Marquita Russel, CEO of the Mortgage Finance Authority, told the legislative committee Monday that the staff who developed the guidelines tried to tailor the policy even more narrowly, identifying specific gaps for funding prioritization, including where in New Mexico such housing projects were highly needed, whether they should be for infrastructure or development, whether they should be multi-family or single-family, and other factors.

“Ultimately, there wasn’t enough statewide data to really support that kind of prioritization,” she said. “So they couldn’t decide where there were gaps, because the data is inconsistent or in some instances, just missing.”

Still, recent studies show New Mexico is experiencing a housing affordability crisis. A report late last month by Housing New Mexico found monthly rent increased by nearly 17% since 2018, and 28% of homeowners spend roughly a third or more of their incomes on mortgages. Also, homelessness in Albuquerque increased by more than a quarter over last year, according to a recently released point-in-time count.

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The authority will accept applications for the latest round starting Sept. 4. Loans are limited at $15 million, though Russel suggested the board would try to avoid awarding the maximum amount: “Our board would like to see smaller portions of that” $15 million cap, she said.

The next application window will be open Jan. 8, and a third will begin April 30, according to Russel’s presentation Monday.

When New Mexico’s governor signed the bill approving the loan program in February, she challenged Russel and the authority to get the first project approved by this fall, citing the pressing need for new housing across the state.

State Sen. Michael Padilla (D-Albuquerque), who chairs the NMFA Oversight Committee, praised the quick release of rules as the debate wrapped up Monday afternoon.

“This thing’s moving quickly,” he said. “I was really hoping this thing wouldn’t last two or three years, trying to get the dang rules together. So, I’m really glad.”