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Municipal Affordable Housing Obligations are Now Determined by the Courts

NAIOP NJ - The WeekEnder Brief

Kevin J. Moore

March 13, 2015

In its unanimous decision on March 10, 2015, in In Re Adoption of N.J.A.C. 5:96 & 5:97 by N.J. Council on Affordable Housing (M-392-14 (067126), the New Jersey Supreme Court held that the courts, and not the Council on Affordable Housing ("COAH"), will determine if municipalities have met their constitutional affordable housing obligations under the Mount Laurel doctrine.  However, builders' remedy lawsuits will not be immediately available to property owners in municipalities that either have substantive certification under COAH's invalidated Third Round Rules or were participating in the COAH process to obtain it.  Further, the Court created a process by which these municipalities can obtain the equivalent of substantive certification from the courts and thus immunity from builders' remedy lawsuits.

This decision does not create a direct link between non-residential development and municipal affordable housing obligations nor does it impact the Statewide Non-Residential Development Fee.

Under this decision, each municipality which has substantive certification under the invalidated Third Round Rules or was participating in the COAH process under these rules will have 120 days from the date of the Court's decision to file a declaratory judgment action seeking a judicial declaration that its housing plan is presumptively valid; because it presents a realistic opportunity for the provision of the municipality's fair share of its housing region's present and prospective need for low and moderate income housing.  During this 120 day period, the municipality is immune from builders' remedy lawsuits.

These declaratory judgment actions will be heard by designated Mount Laurel judges in each judicial vicinage in the State, and each municipality will have to file such an action on notice to all interested parties who will also have the opportunity to be heard by the trial court.  Under the Supreme Court's decision, during this process, municipalities with substantive certification are treated differently than municipalities which were participating in the COAH process but did not obtain substantive certification.  Municipalities with substantive certification can submit their housing element and implementing ordinances for review by the trial court, which should be "generously inclined" to grant applications for immunity from builders' remedy lawsuits during the necessary review process.  Builders' remedy lawsuits will not be authorized against such municipalities unless the trial court determines that the substantive certification that was granted by COAH is invalid, no constitutionally complaint supplementing plan has been developed by the municipality and builders' remedy lawsuits are appropriate and may proceed against that municipality.

Under the Supreme Court's decision, municipalities, without substantive certification, that were only participating in the COAH process, will have no more than five months in which to submit their housing element and affordable housing plan to the trial court, during which period the trial court "may provide" initial immunity from builders' remedy lawsuits.  However, the Supreme Court's decision later states that a trial court should only allow a builders' remedy lawsuit to proceed against a participating municipality after the trial court has had the opportunity to fully address the municipality's constitutional compliance and has found it "wanting."

In accordance with the Supreme Court's decision, if a trial court determines, with respect to either a municipality with substantive certification or a participating municipality, through the declaratory judgment action process outlined by the Supreme Court, that the municipality's housing plan presents a realistic opportunity for the provision of its fair share of its housing region's present and prospective need for low and moderate income housing, the trial court is to grant the municipality the judicial equivalent of substantive certification and accompanying protection from builders' remedy lawsuits as provided under the Fair Housing Act ("FHA").

Pursuant to the Supreme Court's decision, in determining whether a municipality's housing plan presents a realistic opportunity for the provision of its fair share of its housing region's present and prospective need for low and moderate income housing, the trial courts are to use the methodologies of COAH's First and Second Round Rules to establish present and prospective statewide and regional affordable housing need.  In accordance with the Supreme Court's decision, the parties to the declaratory judgment actions provided for by this decision should provide computations of housing need and municipal obligations based on those methodologies to the trial court.  Further, the Supreme Court stated that all municipalities must meet their prior round affordable housing obligations and that unfulfilled prior round obligations should be the starting point for a trial court's determination of a municipality's fair share responsibility.

Under the Supreme Court's decision, trial courts should have the same discretion and flexibility that COAH had in making determinations of municipal affordable housing obligations and in approving compliance plans.  However, the Supreme Court stated that the trial courts should avoid sanctioning any methodologies of the Third Round Rules for determining need or providing compliance that were expressly invalidated in prior Appellate Division decisions.  Additionally, pursuant to the Supreme Court's decision, trial courts do not have to reallocate excess present affordable housing need (dilapidated and run-down housing) in determining municipal fair share obligations and do not have to include the cost burdened poor in a municipality's present need calculation.  Further, the Supreme Court specifically approved the trial courts' use of certain bonus credits allowed in the first and second versions of the Third Round Rules, including bonus credits for affordable housing units with affordable housing controls that have been extended beyond their original expiration dates, bonus credits for very low income housing (housing affordable to households earning 30% or less of the region's median income) and bonus credits for affordable housing units in smart growth areas, redevelopment areas and rehabilitation areas.

In closing, it was apparent from the Supreme Court's opinion that it came to its decision reluctantly, only after total and prolonged inaction by COAH, and would welcome active good faith compliance with the FHA by COAH or legislative reform.