In a landmark 3-2 decision issued yesterday, In re Adoption
of N.J.A.C. 5:96 & 5:97 by N.J. Council on Affordable
Housing, the New Jersey Supreme Court upheld the invalidation
of COAH's Third Round Rules (the "Rules"), holding
that the Rules were in conflict with the Fair Housing Act (FHA) as
currently written. The court reasoned that COAH's growth share
methodology was not founded in regional need and failed to impose
definitive obligations contrary to the FHA and Mount
Laurel. The court mandated that COAH adopt new regulations
based on the methodology of the prior rounds within five
months' time. The court noted the prior rounds' methodology
had withstood the test of litigation in the past.
However, the court did not stop its analysis with that ruling. It
opened the door to allowing new legislative solutions that satisfy
the Mount Laurel affordable housing obligation. The court
separated the constitutional obligation for towns to provide
affordable housing from the remedy of calculating and satisfying
that obligation. In so doing, the court noted that, after three
decades of economic and social change, a new remedy "may be
successful at producing significant numbers of low- and
moderate-income housing."
The court signaled that the Legislature may amend the FHA or enact
a new statutory framework to allow COAH greater flexibility in
adopting creative affordable housing solutions. The remedy
previously adopted in prior round rules "should not be viewed
as a constitutional straight jacket to legislative
innovation." In fact, the court noted a different type of
growth share approach may very well be successful and in harmony
with Mount Laurel. However, the court did not give
additional guidance as to what alternative method would be
acceptable.
What this means for developers in New Jersey
This decision has significant ramifications for developers.
First, the court has set a deadline of five months for COAH to
promulgate rules consistent with the FHA and based on the prior
round methodology. These new rules likely will result in
significant obligations for municipalities that have chosen to use
this time of uncertainty to do nothing with regard to affordable
housing. One can anticipate that these municipalities will
aggressively lobby the Legislature to make significant amendments
to the FHA. Despite that, the next several months should create an
opportunity for developers to work with willing towns in developing
sites that provide affordable housing, similar to 2008 when towns
had to revise their affordable housing plans based on the then-new
Third Round Rules.
Second, it seems inevitable that the Legislature will resume its
involvement in the affordable housing arena. Because the court did
not provide any real constitutional parameters as to what would be
acceptable under Mount Laurel, whatever legislation is
adopted will likely result in further litigation.
The court's decision is the first step toward providing
developers and municipalities with guidance as to what the
framework will be in connection with their affordable housing
obligations. However, this is not the final act in this drama, and
it remains to be seen what the playing field will look like a year
from now.
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