N.J. Affordable Housing

It appears that the state of flux concerning New Jersey’s affordable housing obligation will continue. On October 8, 2010, the Appellate Division invalidated crucial components of the revised third-round rules implemented by the Council of Affordable Housing in 2008. These revised rules were in response to the Appellate Court’s 2007 decision which invalidated COAH’s original third-round rules.
Growth Share Methodology Invalidated

One of the key components of the court’s decision was the rejection of COAH’s growth share methodology. As was the case in the 2007 decision, the court invalidated the growth share methodology because it enabled a municipality to avoid its affordable housing obligation by adopting land use regulations that discourage growth. By discouraging growth, the need for affordable housing decreases. In essence, the growth share methodology impermissibly gave municipalities the ability to determine their own obligation. The Appellate Division directed COAH to adopt revised affordable housing obligations as established by the first-round and second-round affordable housing cycles.

The court also struck down regulations pertaining to municipally-sponsored affordable housing projects. Under the proposed third-round rules, a municipality could obtain substantive certification by proposing municipally-sponsored 100% affordable housing projects without setting forth a plan that provides the location of the project, site suitability, source of funds to construct and operate the project or the identity of the entities that will construct and operate the project. The court found that this amounts to nothing more than speculation of compliance and, therefore, does not provide a realistic opportunity for the construction of affordable housing.

Incentives Critical

Another important holding in the court’s decision dealt with the manner in which COAH incentivized private developers to construct affordable housing. These incentives come in the form of increased densities and decreased costs. Without these incentives the projects would not be financially feasible. The court continues to recognize that adequate affordable housing will not be created unless these projects make financial sense to those developing them. The court found that the third-round’s proposed minimum densities, coupled with the maximum affordable housing setasides, did not provide enough incentive for the construction of inclusionary developments.

The court has ordered COAH to adopt revised regulations which comply with their decision within five months. The court declined to issue a blanket of proceedings before COAH or the courts pending the adoption of revised rules. However, any interested party may apply for a stay which should be decided in light of the status of the individual municipality’s compliance with its affordable housing obligations and all other relevant circumstances.

Still a Moving Target

New Jersey’s affordable housing obligation continues to be a moving target. Our firm will continue to monitor the impact this case, as well as pending litigation proposing to abolish COAH, will have on the development community. It is important to note that this is a synopsis of the court’s holding. The decision is an in-depth analysis of the state’s current affordable housing obligation which discusses issues beyond the scope of this article. Therefore, if you have any questions or concerns relating to the state of affordable housing, it would benefit you greatly to contact our office to discuss the matter in greater detail.

Andrew S. Kohut is an Associate Attorney at WJ&L who works actively in our Land Use practice. N.J. Affordable Housing

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