A public hearing before the New Jersey Council on Affordable
Housing (COAH) is scheduled July 2 on the third iteration of
COAH's "Third Round" affordable housing regulations.
COAH published its proposed new Third Round regulations earlier
this month in the New Jersey Register after several long
years of litigation and court orders concerning its growth share
regulations. These published regulations differ slightly from the
regulations released by COAH at its April 30 meeting. The public
comment period on these regulations runs to August 1.
Whether these new regulations comply with the Supreme Court
directive and the Mount Laurel doctrine is an analysis and
discussion too lengthy for an update; however, it is important for
residential and commercial developers to understand what the
publication and likely adoption of these rules mean over the next
year.
Nonresidential Developers
For nonresidential developers, it is important to understand that
these proposed regulations have no impact on the Nonresidential
Development Fee. The moratorium on the Nonresidential Development
Fee expired in July 2013, which means that the fee remains in
effect today for nonresidential projects that received approval
after July 1, 2013. Just prior to the end of the 2013 legislative
term, the Assembly passed a bill extending the moratorium, but that
bill was not enacted before the end of the term. In January, bills
were proposed in both the Senate and the Assembly to repeal the
Nonresidential Development Fee (bills S934 and A127, respectively),
but those bills have been in committee since then.
Thus, as it stands today, the Nonresidential Development Fee
remains in effect and, when required, must be paid by
nonresidential developers.
Residential Developers
For residential developers, now is the time to assess strategy
regarding identifying potential projects and how to approach
municipalities about projects. The proposed new regulations, as in
the past, break a town's affordable housing obligations into
three components: (1) a rehabilitation obligation, (2) an
unanswered prior obligation, and (3) prospective need. Notably,
despite the Supreme Court striking down only COAH's growth
share methodology (prospective need), COAH recalculated all three
components again.
COAH in its appendices calculates each town's components of its
fair-share obligation. The regulations, however, create certain
caps and reductions to these obligations, such as the
following:
- 1,000 Unit Cap, which states that a town should not have to provide more than 1,000 units within 10 years, unless circumstances show the town can accommodate that growth.
- Buildable Limit, which is based on a development capacity analysis performed by COAH. Towns that receive a buildable limit reduction still have to identify additional opportunities for development as they come up (similar to the "unmet need" concept of the prior regulations when vacant land adjustments were granted).
- 20 Percent Cap, which essentially provides a formula to ensure that a town's prospective need obligation does not exceed 20 percent of the town's housing stock.
- Substantial Compliance Reduction, which is a percentage reduction in the unanswered prior obligation when a town has "substantially complied" with a prior round substantive certification and actually created a substantial percentage of new units that were part of the prior round.
Concerning zoning for affordable housing, the new regulations
propose a concept of "Economic Feasibility Studies" to be
submitted with fair-share plans to demonstrate that each site
identified for affordable housing is realistic and would attract
capital to construct the affordable housing. The proposed
regulations provide that inclusionary zoning ordinances shall be
premised on a 10 percent set-aside for affordable housing. However,
the Economic Feasibility Study must draw a rational nexus between
the density allowed and the affordable set-aside required (and any
other compensatory benefits), and, if necessary, the percentage
set-aside should be adjusted. Unlike the prior Third Round
regulations, there are no presumptive minimum densities.
Rental bonus credits and similar types of bonus credits have been
eliminated. There is still a cap of 25 percent of a town's
obligation that can be satisfied through age-restricted housing,
unless a town can demonstrate a need for a higher percentage.
Groups have come out in favor of and in opposition to these new
regulations. Many have complained that these regulations are not
mirrored after the First and Second Round regulations, as was
directed by the Supreme Court. In many instances, municipal
obligations are lower than they were under the prior Third Round
regulations. The constitutionality of these regulations will
obviously be the focus of many of the various groups
involved.
COAH is scheduled to have a public hearing on July 2 in connection
with these proposed regulations. Comments are required to be
submitted to COAH by August 1. Both residential and nonresidential
developers should be focused on strategy about how to deal with
these regulations when they are adopted and the timing of proposed
legislation impacting the Nonresidential Development Fee.
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