The “New” New Jersey Affordable Housing: An Overview

The new law makes several significant changes as to who and what entities will be making the decisions and setting down the rules to follow.  Of substantial note, the law abolishes the Council on Affordable Housing (COAH), initially established by the Fair Housing Act (FHA), and which has remained relatively defunct in recent years. In its place, its responsibilities and functions are now tasked to both the Department of Community Affairs (DCA) and the Administrative Office of Courts (AOC).

As detailed below, the DCA will set down the initial calculation to enable a municipality to determine its present need and prospective fair share affordable housing obligation.  The DCA is also required to maintain certain information on its website, including a current municipal status report detailing the number of affordable housing units actually constructed, construction dates, certificates of occupancy, the start and expiration dates of deed restrictions, the status of residential and non-residential development fees, collected and expended, including purposes and amounts of such expenditures, and the current balance in the municipality’s affordable housing trust funds. As a result, municipalities are to provide this information to the DCA to enable compliance with this requirement.

The law establishes a new mechanism for dispute resolution, through the Affordable Housing Dispute Resolution Program (the “Program”), within the AOC, having the purpose of “efficiently resolving disputes” involving the Fair Housing Act. Members of the Program (an odd number of at least three and no more than seven leading the administration of the Program) shall be appointed by the Administrative Director of the Courts within 60 days of the law’s adoption and must be current or retired judges having prior experience in the Mount Laurel field.  The law provides that the Program, in its discretion and in accordance with Rules of Court, may also utilize the services of one or more special masters to assist in the dispute resolution and communication process. The Administrative Director of the Courts is also designated with establishing procedures for the purpose of resolving Fair Housing Act disputes in which the Program is unable to address same within the time limitations established by the law.  As a part of these procedures, the Chief Justice of the Supreme Court is required to designate a Superior Court judge who sits within the vicinage, or a retired judge who served within the vicinage during his/her tenure, to serve as a county-level housing judge to resolve disputes as to compliance with the FHA of fair share plans and housing elements of municipalities within his/her county.

Interestingly, the DCA is to produce a report determining the regional need and municipal obligations for each region and municipality in the State. This report is to be issued by October 20, 2024.  According to the law, the DCA’s calculation of regional need and municipal present and prospective obligation will be in accordance with the methodologies set forth within the March 8, 2018, unpublished decision of Judge Jacobson, In the Matter of the Application of the Municipality of Princeton. Despite issuance of the report, each municipality is essentially able to set its own present and prospective fair share obligation. Indeed, while consideration of the calculations contained in the DCA report seemingly should be given, the law permits a municipality to diverge from the DCA’s calculations in determining its obligation so long as it adheres to the methodologies set forth in the law.  The obligation determination shall be adopted through a binding resolution no later than January 31, 2025 and filed with the Program no later than 48 hours following adoption (which would be published on the Program’s website along with the municipality’s website).  If a municipality does not meet the January 31^st deadline, it loses immunity from exclusionary zoning litigation.  If the municipality meets this deadline, then the municipality’s determination of its obligation for the fourth round would be established by default, and would bear a presumption of validity as of March 1, 2025, unless challenged by an interested party on or before February 28, 2025 (see below).

Some key requirements in determining municipal obligations:

• The DCA will first determine whether a municipality is a qualified urban aid municipality, and if so, the municipality would not have a prospective need obligation.
• Vacant Land Consideration: The law permits a municipality to adjust for lack of available land as part of determining its prospective need obligation.  However, there is a requirement to identify parcels likely to redevelop during the current round of obligations to address at least 25% of the prospective need obligation that has been adjusted, and adopt zoning laws that allow for such adjusted obligation, or demonstrate why the municipality this is not possible. The Program, as part of providing compliance certification, must also confirm that land was correctly excluded.
• A municipality would be permitted to reduce its prospective need to prevent establishing a prospective need obligation that exceeds 1,000 units in total or 20 percent of the estimated occupied housing stock at the beginning of the 10-year round, whichever limitation results in a lower number.

Any interested party seeking to challenge a municipality’s determined obligation must do so through the Program and must file same by February 28, 2025. (Again, if no challenge is filed with the Program by this time, the municipality’s’ adopted obligation number is set by default).  If a challenge is in fact filed with the Program, it must state with particularity how the adopted municipality’s calculation fails to comply with the law’s established methodology and must also include the challenger’s own calculation of fair share obligations in compliance with the law.  The Program would facilitate a resolution of the dispute no later than March 31, 2025 and, in its decision as to any dispute, the Program could (a) make a finding that the municipality’s determination of its present and prospective need obligation did not facially comply with the requirements of the law and thus revoke the municipality’s immunity (b) make a finding that an adjustment of the municipality’s determination of its present and prospective need obligation is necessary to comply with the law’s requirements without revoking immunity; or (c) reject a challenge and affirm the municipality’s determination.  A municipality’s determination of its obligation would bear a presumption of validity as to any challenge commenced through the Program before the issuance of compliance certification, if found to be in compliance with the methodologies set forth in the law. A decision would be provided to the municipality and all parties that have filed challenges no later than March 31^st. The Administrative Director of the Courts is to establish procedures for any further appellate review of such determinations.

After the obligation determination is established, a municipality must then adopt a Housing Element and Fair Share Plan (HEFSP), along with amendments to zoning and other related ordinances by June 30, 2025. These documents must be filed with the Program within 48 hours of adoption.  The failure to meet these deadlines – including filing with the Program – would result in the loss of immunity from exclusionary zoning litigation.

What must be included in the HEFSP?
The HEFSP must include an inventory of the municipality’s housing stock, a determination of the present and prospective fair share, a consideration of the properties most appropriate for construction of low- and moderate-income housing and a spending plan as to current funds in the municipal affordable housing trust fund and projected funds towards the current round.  Another key aspect of the HEFSP is the requirement to include a status update on the municipality’s satisfaction of its fair share obligation from the prior rounds as established by prior approval, including to what extent the prior obligation is unfulfilled or whether the municipality has any credits in excess of prior round obligations.  If any prior round obligation remains unfulfilled, or a municipality never received an approval for any prior round, the municipality must address such unfulfilled prior round obligation in the HEFSP.  To that end, if a site previously identified and not developed no longer remains a realistic opportunity, the site shall be replaced with an alternative site generating an equivalent number of affordable units. Notably, units that are included as part of the municipality’s unfulfilled prior round obligation shall not count towards the cap on units in the municipality’s prospective need obligation.  In addition, the HEFSP must also include an analysis of consistency with the State Development and Redevelopment Plan, and for certain municipalities within the Highlands Region, inclusion of an analysis of the plan’s compliance with the Highlands Regional Master Plan.

How is a municipality to satisfy its obligation?
In adopting its HEFSP, the municipality may provide for its fair share of low and moderate-income housing by a variety of techniques or a combination of techniques which provide a realistic opportunity for the provision of the fair share obligation, subject to certain limitations and requirements, including as follows.

• Families with Children: A municipality must provide a minimum of 50 percent of the actual affordable housing units, exclusive of any bonus credits, created to address its prospective need affordable housing obligation through the creation of housing available to families with children.
• Senior (age-restricted) Housing: Up to 30 percent of the units of a municipality’s prospective affordable housing obligation may be satisfied through the creation of age-restricted housing, exclusive of any bonus credits.
• Transitional housing: A municipality may be credited up to as much as 10 percent of its affordable housing obligation through transitional housing. The law defines “transitional housing” as temporary housing, including but not limited to, single room occupancy housing or shared living and supportive living arrangements, that provides access to onsite or off-site supportive services for very low-income households who have recently been homeless or lack stable housing.
• Bonus Credits: Only 25% of a municipality’s prospective need obligation may be satisfied through bonus credits, which must be authorized by the FHA. A municipality may not receive more than one type of bonus credit for any unit. The types of credits that can be included in a municipality’s HEFSP include:

1. Special needs: One unit of credit and one bonus credit for each unit of housing for individuals with special needs or permanent supportive housing;
2. Non-profit partnership housing: One unit of credit and one-half bonus credit for each unit created in partnership sponsorship with a non-profit housing developer;
3. Transit housing: One unit of credit and one-half bonus credit for housing unit located in a Garden State Growth Zone or in certain transit-oriented locations;
4. Age Restricted housing: One unit of credit and one-half bonus credit for each age-restricted housing unit;
5. Family housing: One unit of credit and one-half bonus credit for each unit of family housing with at least three bedrooms above the minimum number required by the bedroom distribution;
6. Re-Use of commercial space: One unit of credit and one-half bonus credit for each housing unit constructed on land previously used for retail, office, or commercial space;
7. Affordability controls: One unit of credit and one-half bonus credit for each existing rental housing unit for which affordability controls are extended through municipal contributions;
8. 100% affordable development: One unit of credit and one bonus credit for each unit within a 100 percent affordable development built through municipal contributions of real property or funding;
9. Very low income housing: One unit of credit and one-half bonus credit for each housing unit of very low-income households; and
10. Conversion of Market rate: One unit of credit and one bonus credit for each unit created by transformation of existing market rate units to affordable housing.

Other interesting plan components, limitations, and plan requirements:

• Affordability controls: For housing units for which affordability controls are extended for a new term of affordability, a 30-year minimum deed restriction would be required.  A 100 percent affordable rental property maintains the right to extinguish a deed restriction regardless of the original length, beginning 30 years after the start of the restriction, provided certain actions are taken for the purpose of affordability preservation, and a new deed restriction of at least 30 years is provided.
• Development Fees: The law requires that each municipality authorized to retain and expend non-residential development fees provide the DCA with an accounting of all such fees that have been collected and expended within 180 days following enactment of the law. This is to be followed with a detailed accounting of all such fees that have been collected and expended the previous year to be provided by February 15^th.  The law prohibits spending such funds on the costs associated with obtaining a judgment of repose and seeking immunity but allows a certain percentage of the funds to pay for administrative costs within the Program, such as developing and determining municipal obligation and preparing a HEFSP.

Following the filing of a municipality’s HEFSP, an interested party has until August 31, 2025, to file a challenge with the Program alleging that the HEFSP is not in compliance with the FHA.   Any such challenge shall not allege or assert that the challenger’s site is a better site than one included in the HEFSP, but rather must specify which about the municipal HEFSP does not – and which sites do not – comply with the FHA.  If no challenge is made before the August 31^st deadline, the Program will review the HEFSP for consistency with the FHA and to determine whether the plan enables the municipality to satisfy its fair share obligation, issuing a compliance certification unless this finding is not met.   If a challenge is filed, the Program would facilitate communication between the municipality and the challenger, and provide the municipality until December 31, 2025, to commit to revising its HEFSP in response to the challenge, or to provide an explanation as to why it will not make the requested changes, or both. The law requires that municipalities adopt related implementing ordinance amendments and resolutions on or before March 15, 2026, which then must be filed with the Program. If a municipality fails to meet these deadlines, then the municipality’s immunity from exclusionary zoning litigation would end. Notably, the pendency of any ongoing dispute would not change the deadline for adoption of implementing ordinances and resolutions, but the implementing ordinances and resolutions adopted prior to the resolution of the dispute may be subject to changes to reflect the results of the dispute. However, as an alternative to adopting all necessary implementing ordinances and resolutions by the March 15th deadline, a municipality involved in a continuing dispute over the issuance of compliance certification would be permitted to adopt a binding resolution by this date to commit to adopting the implementing ordinances and resolutions following resolution of the dispute, with any adjustments to be made.

Once a municipality has received a compliance certification or otherwise obtained a judgment of repose, the municipality shall make its HEFSP, as well as any subsequently adopted implementing ordinances and resolutions, available to the DCA and the Program.  A determination by the Program as to the present and prospective need obligation or as to issuance of compliance certification is to be considered a final decision, subject to appellate review.

The timeline established in the freshly adopted law places strict deadlines for the parties involved and governed by the law to take action.  The first deadline – for the DCA to complete and issue its regional needs and municipal obligations report – is rapidly approaching, on October 20, 2024.  Only two months from that date, each municipality must adopt its own binding resolution as its respective obligation.  Will these dates be met?  Does the established timeline really take into account the professional review that might be necessary – and the basic scheduling issues (and reorganization processes) of land use boards and governing bodies?  If a municipality does not meet a deadline – what will actually happen, besides losing immunity?  How would a municipality’s obligation ultimately be set if no action was taken?   What challenges to these municipal determinations will follow? While the challenge process for filing has been set down – it remains to be seen who will file, procedurally how exactly does a filing occur, and what will any such challenges allege?  How all of these issues, and the reality of finding enough potential and realistic locations for affordable housing (and detailing same in housing elements and fair share plans by the deadline) are handled will be an interesting and challenging process to watch and in which to participate.  The land use community is eagerly waiting to see how it will all play out.