State court knocks down affordable housing rules
Attorney believes regional approach is what judges want
BY MARK ROSMAN
Staff Writer

An Appellate Court threw New Jersey's latest round of affordable housing rules out the window on Jan. 25. The ruling means that many local officials who were planning how their towns would provide affordable housing now through 2014 may have to rethink the way they were going to do that.

Affordable housing, as defined by the state Council on Affordable Housing (COAH), is housing that is sold or rented at below-market rates to people who have an income that qualifies under regional income guidelines set by the state.

COAH dates back to the 1980s. The council's rules have already provided affordable housing in two previous rounds.

COAH's third-round regulations require municipalities to construct one affordable housing unit for every eight market units constructed and one affordable housing unit for every 25 jobs created.

According to a press release from Hill Wallack LLP, the legal firm that represented one of the plaintiffs, the New Jersey Builders Association, the court ordered COAH to adopt lawful third-round regulations within six months. It barred COAH from acting on any of the more than 250 pending petitions by municipalities for approval of their housing plans until it adopts lawful regulations.

Hill Wallack said the court held that COAH's so-called "growth share methodology," which calculates municipal housing obligations based upon municipalities' own projected housing and employment growth, is unconstitutional.

Stephen M. Eisdorfer, one of the Hill Wallack attorneys who argued the case, told Greater Media Newspapers the court ruled that the third-round methodology was unconstitutional because it treats each town as separate and not part of a region. In that way, each town was able to decide how much it wanted to grow or did not want to grow. The court said affordable housing is a regional obligation and that a town cannot decide to make an individual determination, Eisdorfer explained. He said the court ruled that a methodology that does not determine a regional need is unconstitutional.

However, state Department of Community Affairs spokesman Chris Donnelly said it is not correct that the methodology that COAH will have to come up with under the new guidelines will be based on a regional need and not town by town.

Donnelly added that COAH administrators are in the process of carefully analyzing and reviewing the Appellate Division decision with their attorneys and the attorney general's office.

For local purposes, regions of interest are the Monmouth, Ocean and Mercer region; and the Middlesex, Hunterdon and Somerset region.

According to the Hill Wallack press release, the court also ruled that ordinances that require builders to construct affordable housing in every development without providing compensating incentives discourage production of affordable housing. It held that such ordinances are not a constitutionally acceptable means of meeting the municipal housing obligations.

Eisdorfer explained that this essentially means that a town cannot order a builder to construct homes at a financial loss, as he said selling homes at below market rates would do.

Eisdorfer said the court also addressed the issue of a significant number of affordable housing units being set aside by municipal officials as age-restricted housing. He said the ruling indicates the court wants more affordable housing that is not age-restricted (i.e., open to people of all ages, with children). The attorney said

the court has indicated that while a set-aside of 25 percent of affordable housing as age-restricted may be acceptable, a number between 26 and 50 percent being set aside as age-restricted affordable housing is not acceptable.

Eisdorfer said this aspect of the issue dates back to the 1970s when the issue of age-restricted housing was being argued in New Jersey courts. It was argued at that time that too much age-restricted housing is itself an exclusionary device.

One of the other parties in the litigation against COAH was the Fair Share Housing Center, Cherry Hill. Adam Gordon, a staff attorney with that organization, explained several aspects of the court's ruling last week regarding COAH's third-round methodology.

The Fair Share Housing Center is a nonprofit public interest organization dedicated to defending and advancing the affordable housing doctrine to provide more affordable housing in New Jersey.

Peter J. O'Connor, the executive director of the organization, was quoted in a published report last week as saying the real need for affordable housing units in the state is about 650,000.

Gordon said the housing center's calculations account for the more than 100,000 families in New Jersey who are paying more than 30 percent of their monthly income on housing. Those families are known as cost burden households, according to Gordon.

The attorney added that COAH's regulations, which would reportedly address a 77,600 affordable unit need, do not account for cost burden households.

Gordon noted that COAH's third-round rules ignored the state's current need for affordable housing, such as cost burden households. He said the first- and second-round affordable housing regulations did a better job of assessing the actual need for affordable units.

Another difference in the third-round rules, according to Gordon, is that COAH used the idea that older houses are getting cheaper to purchase to eliminate more than 60,000 projected units of affordable housing units needed across the state.

Gordon said the court declared last week that this concept was not supportable.

The attorney said the third-round rules should be based on a regional need instead of each town determining its own growth. He noted that this regional method was used to generate calculations for the first and second rounds.

Gordon said he believes the new third-round rules will generate an increase in the number of affordable housing units required in the state.

After the regional need is calculated, a determination would be made regarding which towns would have to build the affordable units. Gordon said this determination would be made based on several factors, including how much developable land a town has available, how many jobs are created in each town and the amount of existing affordable housing in each town.

According to Gordon, only three towns have currently received substantive certification from COAH for their third-round obligation. He said it is unclear what will happen with those plans now that the third-round methodology has been declared unconstitutional.

The court's decision on Jan. 25 affected COAH's second-round calculations as well. Second-round certification was required to be obtained in the 1990s, but many municipalities have never obtained that certification.

According to Gordon, there are about 250 municipalities that have still not received second-round certification. The attorney noted that since the initial third-round rules were made in 2004, the only way to petition for second-round certification was to petition for third-round approval at the same time.

As part of COAH's third-round rules, the council reduced the number of second-round affordable housing units needed in some towns for no apparent reason, Gordon said.

For example, Gordon said, some towns have arbitrary reductions of about 300 affordable units, and no one can figure out why. He said COAH personnel never explained why the reductions were made.

In addition to the court's decision on third-round methodology, the court also declared that the second-round reductions "defy comprehension," according to Gordon.

He noted that this decision throws the second round into question as well, but only regarding how COAH came up with the reductions. Gordon said the parties to the litigation are not challenging the methodology used for the council's second-round obligation.

The attorney added that his organization would like to work with COAH on the new formula instead of continuing litigation back and forth.

N.J. Department of Community Affairs Commissioner Susan Bass Levin issued a statement following the Appellate Division ruling on the adoption of COAH's third-round substantive certification rules and said, in part, "We are deeply concerned that some aspects of the Appellate Court's decision could have the effect of limiting the construction of affordable housing while market rate housing continues to be built. It could also lead to increased density and unnecessary sprawl, a result that would be extremely detrimental to the people of New Jersey."

The New Jersey State League of Municipalities agreed with Levin and said in a statement, "The League is profoundly disappointed in this decision due to its negative impact on local governments, taxpayers and, most importantly, those in need of affordable housing. This decision, if not reversed, will set back the cause of affordable housing 15 years.

"This opinion, unless corrected, will result in windfall profits for developers, the loss of thousands of units of affordable housing for the poor pursuant to ordinances adopted pursuant to COAH regulations and utter chaos for hundreds of municipalities that reasonably relied upon a COAH regulation soundly rooted in Supreme Court precedent.

"The decision rejects various elements of a plan to provide more affordable housing than any prior method created by COAH or the courts. Prior methods, from the inception of the [affordable housing] doctrine in 1983, have produced only 29,000 affordable units, while the growth share model was designed to produce 50,000 units by 2014 as development occurred in the state.

"COAH regulations were changing the ground rules for developing in New Jersey and forcing developers to factor in the need for affordable housing as they developed their land," the league said.