A temporary legislative committee on Monday approved rules for administering a new revolving loan program to improve housing supply in the state. Low-interest loans worth up to $30 million will be available to applicants, mostly private and nonprofit developers, starting with the first round of loans in early September.

The loan program will be overseen by New Mexico Finance Authority staff and approved by a newly created board of governor-appointed members, commercial developers and others. Loan recipients are expected to be private developers and nonprofit housing agencies.

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

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The loan program will encourage the development of “workforce housing,” which officials say is housing for those whose incomes are too high to qualify for federal housing assistance but too low to afford anything in the current overheated housing market.

The program also aims to subsidize infrastructure projects that support the construction of affordable housing and are eligible for state and federal subsidies.

Taken together, the loan program’s two goals are intended to complement existing programs run by various local and state housing authorities, as well as Housing New Mexico, which administers numerous programs for low-income renters and prospective homebuyers.

Points system defined for applicants

The Regulate and an associated Policy Manual describe a 100-point system that rewards applicants whose projects are located in rural areas, use local developers, are close to amenities and transportation, are affordable, and where more than 65% of the project costs are covered by the team for which they are applying for a loan.

According to the guidelines, up to 40 points can be awarded to projects that demonstrate a community need, use inclusive design techniques or leverage local training programs and developers.

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Up to 25 points can be awarded for projects that use the funds efficiently, pay back quickly, and keep costs low. For example, applicants who apply for funds for a project that spends more than $100,000 per housing unit will not receive any points.

A maximum of 15 points are awarded to projects that can be implemented quickly and successfully, have a “high potential for success based on financial feasibility” and have an experienced development team.

Finally, up to 20 points could be awarded to projects that demonstrate that local governments have joined in with zoning reforms and flexible land use regulations. “The development of affordable housing is often hampered and made more expensive by local government regulations,” the guidelines state.

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

Loans are limited to $15 million

Marquita Russel, executive director of the Mortgage Finance Authority, told the legislative committee Monday that staff who developed the guidelines sought to make them even more narrow by identifying specific gaps in how to prioritize funding, including where in New Mexico such housing projects are urgently needed, whether they should be for infrastructure or development, whether they should be multifamily or single-family, and other factors.

“Ultimately, there wasn’t enough national 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 cases, just missing.”

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

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The agency will begin accepting applications for the latest round on September 4. The loan amount is capped at $15 million, but Russel indicated that the board will 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 open on January 8, and a third will begin on April 30, according to Russell’s presentation on Monday.

When New Mexico’s governor signed the bill authorizing the loan program in February, she urged Russell and the agency to have the first project approved by the fall, citing the urgent need for new housing across the state.

State Senator Michael Padilla (D-Albuquerque), chairman of the NMFA Oversight Committee, praised the quick release of the rules as debate concluded Monday afternoon.

“Things are moving quickly,” he said. “I was really hoping this wouldn’t take two or three years while I try to get the damn rules sorted out. So I’m really happy.”