For the second time in three years, the New Jersey Appellate Division has struck down the affordable housing regulations of the Council on Affordable Housing (COAH). On October 8, 2010, the Appellate Division issued a decision finding that COAH’s revised third-round rules covering the period from 1999 to 2018 suffered from many of the same flaws as the original third-round rules rejected by the court in a January 2007 opinion.1 In In the Matter of the Adoption of N.J.A.C. 5:96 and 5:97 by the New Jersey Council of Affordable Housing, A-5382-0, the court addressed 22 separate appeals by a variety of parties, and, most importantly, called upon COAH to abandon the “growth share” method for determining municipal affordable-housing obligations. The court remanded to COAH with instructions to adopt new regulations within five months based on the first- and second-round methodologies used during the late 1980s and 1990s.2

Below is a summary of the portions of the third-round rules invalidated by the Appellate Division:

  • Growth Share: The critical part of the Appellate Division’s decision was the invalidation of COAH’s growth-share methodology. It found the methodology to be flawed in two significant ways. First, the court concluded that COAH failed to establish that each region had sufficient vacant land to provide a realistic opportunity to meet the statewide and regional need. Second, the court stated that the growth-share methodology allowed municipalities to avoid satisfying their housing obligations by adopting land-use regulations that discouraged growth. COAH was ordered by the court to use similar, court-approved, methodologies from the prior rounds to determine each municipality’s prospective affordable housing obligation under the Fair Housing Act.
  • Incentives for Developers: The presumptive minimum densities and maximum set-asides set forth in the regulations were deemed by the court to be insufficient to create incentives for developers to construct inclusionary developments.
  • Municipally Sponsored Projects: The court also struck down the rule that permitted a municipality to obtain from COAH substantive certification of vague compliance plans that relied on municipally-sponsored projects comprised totally of affordable housing, without specifying the location of projects, sources of funding, suitability of the sites or evidence that a municipality controlled the sites. The court noted that COAH’s sole justification for such a rule was based on the flawed growth-share methodology.
  • Prior Round Rental Bonus: The court struck down the rule that allowed a municipality to claim a rental bonus credit for affordable rental units planned under prior round obligations without a requirement that the units actually be constructed within a certain period of time.
  • Compliance Bonuses: The court invalidated the rule establishing compliance bonuses for municipalities that granted approvals or executed a developer’s agreement for inclusionary projects between the initial 2004 rule issuance and the 2008 re-issuance.

The Appellate Division upheld the following sections of the revised third-round regulations:

  • Smart Growth and Redevelopment Area Bonuses: Under the rules, municipalities receive a one-third unit bonus credit for each affordable housing unit built in a transit-oriented development or in a local redevelopment area. The court found such bonuses to be permissible because they encouraged development in these areas as validly required by the Fair Housing Act.
  • Prior Round Obligations: The court found it appropriate for COAH to determine that the second-round affordable housing obligations established in 1993 should be used as the prior round component of affordable housing obligations under the revised third-round rules.
  • Urban Share: COAH’s determination not to reallocate the present need for affordable housing in urban municipalities to other municipalities was viewed as acceptable by the court. The court did offer guidance that urban municipalities likely should not be responsible for additional affordable housing obligations.
  • Municipal Expenditures: The court held that the COAH regulations did not improperly require municipalities to expend revenue to satisfy municipal housing obligations.

The Appellate Division declined to issue a blanket stay of proceedings before COAH or in the courts pending the adoption of new regulations in compliance with the court’s remand. The court stated that applications for a stay are to be decided on a case-by-case basis in light of the status of the individual municipality’s compliance with its obligations. The State League of Municipalities has filed a notice of petition with the New Jersey Supreme Court seeking certification of the Appellate Division decision.

With this latest Mount Laurel decision, the state of affordable housing policy in New Jersey remains in serious disarray. On October 18, 2010, Assemblyman Jerry Green introduced a bill (A-3447) that abolishes COAH and transfers the responsibility for administering the Fair Housing Act to the Department of Community Affairs. A similar bill, known as S-1, was passed by the Senate back in June, but was never considered by the Assembly. The current bill has been assigned to the Assembly Housing and Local Government Committee, which is scheduled to meet in early November. It is too early to predict what will be the result of either the court appeals or the legislative initiatives.