BRIEFLY EXPLAIN THE RECENT NJ SUPREME COURT DECISION RELATED TO AFFORDABLE HOUSING OVERSIGHT.

After sixteen years without viable and constitutional regulations for Affordable Housing, the Supreme Court created new mechanisms to meet Affordable Housing goals. To really explain this issue, we need to go back for some history. In 1975 the Supreme Court said every municipality has an obligation to provide a reasonable opportunity for Affordable Housing. In other words, there needs to be a variety of choice in housing for residents and citizens of New Jersey at all income levels. In the eighties, the courts created a methodology to provide Builders’ Remedies, whereby builders who brought suit and established that municipalities engaged in exclusionary zoning would be granted the remedy of rezoning of their property for an inclusionary development, providing for a percentage of affordable housing within a market rate project. In response the legislature adopted the Fair Housing Act (FHA) whereby the Council on Affordable Housing (COAH) was delegated as the authority to create and enforce regulations concerning affordable housing. Since 1999, COAH has failed to act in a responsible manner to create those regulations—we’ve been without constitutionally satisfactory regulations for sixteen (16) years.

Continue Reading Affordable Housing Oversight: Q & A

The National Association of Homebuilders released a report, consistent with our predictions, indicating that approved lots ready for construction are a scarcity. 62% of builders indicate that the supply of developed lots is low or very low. This phenomenon, at record levels since at least 1997 when records were kept, is likely due to the great recession. For the most part, developers retrenched during the great recession and did not seek approvals for new developments. Instead, they hoarded cash in an effort to position themselves to come out of the great recession or for simply survival.

Unfortunately, few, if any, developers were in a position – or thought it wise – to be investing in approvals for projects for future development. This problem is likely exacerbated in New Jersey where development approvals, particularly for larger developments, can often take two to four years. As the recession subsided, developers in a position to do so typically bought up approved developments and/or brought already approved projects they owned off the shelf for development.

Prior to the great recession – and one could argue it was a depression for the real estate market – developers were largely building homes in New Jersey as fast as they could get them approved. Accordingly, there was not a glut of unbuilt lots. Once developers stopped spending money on future development once the recession hit, we found ourselves in the position we are today. The scenario was predictable.

Interestingly, much of the development in the future may be inclusionary development (including a set-aside for affordable housing) that will arise as a result of the groundbreaking affordable (Mt. Laurel) housing decision in March by the New Jersey Supreme Court. We addressed the affordable housing decision in a previous blog post, which you should definitely check out.

As you are undoubtedly well aware, the March 10, 2015 ruling from the New Jersey Supreme Court stripping the Council On Affordable Housing (COAH) of their oversight of the constitutional obligation of every municipality in New Jersey to plan for and accommodate affordable housing has effectively changed the rules for all of us.

The Rules Have Changed!
Not only have nearly 400 New Jersey municipalities been put on notice that they must submit suitable plans for affordable housing to the Courts by July 8, 2015; but this ruling gives builders and developers legal remedies (outside of the administrative appeals process within COAH) with which to compel these municipalities to comply. If you have a property/site that you believe is suitable for affordable housing, the time to act is now.

For your convenience, here is a breakdown of the ruling and the implications for owners and developers in a video podcast Q&A.

https://www.youtube.com/watch?v=7T978BBWm8g

How Can We Help?
Stark & Stark’s attorneys are prepared to leverage our relationships at the municipal level along with our intimate understanding of the zoning and land use process to help get your sites included in municipal affordable housing plans. Our litigators are also ready to counsel you on the legal remedies at your disposal if/when your property/site is excluded from an affordable housing plan. Don’t wait until it’s too late.

On March 10, 2015, setting aside the state’s “non-functioning” affordable housing process, the New Jersey Supreme Court issued a ruling removing executive branch jurisdiction over low- and moderate-income housing and sent enforcement and oversight back to the trial courts. The ruling is the most significant action in 40 years, when the court originally established the so-called Mount Laurel doctrine, which held that municipalities must provide their “fair share” of affordable housing.

In many ways, the recent decision turns back the clock to a time when individuals, developers, and advocates had to sue to prevent municipalities from blocking approval of zoning for affordable housing development. Although generally regarded as unlikely, the Council on Affordable Housing (COAH) – the executive branch body tasked with setting fair housing obligations and approving municipal plans for meeting those obligations – still has the opportunity, as spelled out in the court’s decision, to reverse their inaction and set new rules.

Continue Reading Are You Ready? New Jersey Supreme Court Sends Affordable Housing Oversight Back to Trial Courts

The New Jersey Supreme Court, after giving the administration countless opportunities to address the issue by other means (constitutional legislation or regulation), has now scheduled a motion by the Fair Share Housing Center to be heard by the Court on January 6, 2015. The motion seeks to enforce the previous order of the Supreme Court directing the Council on Affordable Housing (COAH) to adopt regulations consistent with the second round rules. The language in the Order essentially invites the legislature or COAH to act so in hopes that the Court can avoid a constitutional crisis. While understandable that the Supreme Court wishes to avoid harsh action against State leadership, based upon over 15 years of failure of the executive branch to adopt legal and constitutional regulations or adopt new legislation (previous legislation was conditionally vetoed by Governor Christie and then dropped by the legislature), it would appear that the Supreme Court is expecting a different result after 15 years of recalcitrance and the express failure of COAH to adopt regulations. While the Supreme Court has been reluctant to do so, absent a reversal by this administration, it would appear that the only appropriate remedy is for the Court to order placement of a special master to adopt regulations or to allow parties to file builder’s remedy lawsuits to address the failure to provide reasonable opportunities for affordable housing. Please click here for a copy of the Supreme Court Order.

As Chair of the Land Use Section of the New Jersey State Bar Association, and with the extensive efforts of the Section’s membership, we have advanced a position which opposes the latest round proposed COAH (Council on Affordable Housing) regulations as unconstitutional and in direct contravention of the New Jersey Supreme Court’s directive. These regulations continue to burden affordable housing in New Jersey despite better than 20 years since COAH last adopted constitutional regulations. It is important to the residents and employers of the State of New Jersey that there be opportunities for affordable housing.

Individuals are migrating out of state and employers are often not willing to invest in New Jersey due to the high cost of housing. The latest proposal simply sets up years of additional litigation challenging the apparent unconstitutionality of the regulations without providing a realistic opportunity for achieving much needed housing. Based upon our collective efforts, the Bar Association has taken a needed and appropriate position by strongly opposing the longstanding failure by COAH. We thank them for that support.

The case of Advance at Branchburg II, LLC V. Township of Branchburg Board of Adjustment, (N.J. Super. Ct. App. Div. 2013) dealt with the issue of whether a residential development could be treated as an inherently beneficial use when only approximately 20% of the development was utilized for affordable housing.  The developer was seeking a d (1) use variance for a multi- family residential development consisting of 292 units, of which 59 would be affordable housing units.   The developer argued that the inclusion of the affordable housing component rendered the entire development an inherently beneficial use. 

Applicants have an easier standard in use variance cases if the proposed use is deemed inherently beneficial.  A use that is deemed inherently beneficial presumptively satisfies the positive criteria, while no such presumption exists for a use that is not inherently beneficial.

The Court noted that affordable housing is an inherently beneficial use.  However, in this instance, the developer was proposing to include affordable housing units to a development in which approximately 80% of the units are market rate units.  The developer argued that the market rate units are inherently beneficial as they support the affordable housing units.  In other words, the ability to build the affordable housing units is contingent on being able to construct the market rate units.

While the Court acknowledged that market rate units are needed to develop affordable housing, the Court refused to deem the entire project as one involving an inherently beneficial use.  The Court stated that the developer does not have to build a large predominantly market rate development requiring a use variance in order to finance the construction of the 59 affordable housing units.   The Court refused to allow the inclusion of the affordable housing units to transform a predominantly market rate residential project into an inherently beneficial use. 

This case is illustrative in showing how a Court determines the appropriate standard in a use variance case when there is an inherently beneficial component, but the project’s predominant use is not inherently beneficial.  

The New Jersey Department of Community Affairs and the Christie Administration along with the newly created Office of Recovery and Rebuilding released the Community Development Block Grant Disaster Recovery Action Plan resulting from the damage from Superstorm Sandy and the allocation of over $1.8 billion in the first phase of federal funding for cleanup, rebuilding and recovery. Some highlights of the plan, and important issues to note, are as follows:

  1. Sandy survivors have until April 1, 2013, to register for disaster assistance through FEMA.
  2. Funds will be available to victims of Sandy in various categories, including low income individuals, other homeowners and renters, small businesses, no interest loans and grants, neighborhood and community revitalization grants, tourism, public assistance projects, nonprofit housing developers, a tourism marketing campaign, blight reduction loans to developers and various other categories that warrant more detailed and thorough review by individuals, business and municipalities affected by Sandy, as well as business and developers looking to assist in creating the economic opportunity and housing in affected areas.
  3. A large focus of the various grants and loans is to assist in providing affordable housing opportunities to qualified individuals and potential developers – both owner-occupied and rental units — but not all funds are so reserved and most funds are expected to be allocated relatively quickly, particularly those that are not income capped.
  4. Funds have been allocated in specific buckets, some of which are sizeable and others of which are rather limited. The smallest buckets are typically for market rate housing, as compared to affordable or income restricted housing.
  5. This is the first phase of funding, but there is no evidence that future funding will apply to the same categories. As with many programs, allocation is often on a “first-come, first-serve” basis. Accordingly, taking advantage of these programs in a timely fashion will be critical.
  6. After a seven day comment period, the Action Plan will be submitted to HUD for approval.

A more complete summary of the Action Plan is attached here.

The complete Action plan is attached here.

The DCA resource page is linked here.

As a general rule, a property owner must be current with its property taxes when it files a complaint with the New Jersey Tax Court to appeal a property tax assessment. If the taxes are not current, the municipality can move to dismiss the complaint.

 

Is there an exception to this rule? Yes, but it is very limited.

 

The New Jersey Tax Court can “relax the tax payment requirement and fix such terms of payments as the interests of justice may require.”  N.J.S.A. 54:51A-1(b).  Recently, the New Jersey Tax Court reviewed a case where a property owner asked the court to relax the payment requirement because the municipality was partially to blame for the financial problems arising from the development of the property being appealed.  Evans-Francis Estates Associates, LP v. Township of Cherry Hill, Docket No. 012386-2011, New Jersey Tax Court, Nov. 9, 2011.   The owner alleged the municipality’s reluctance to allow affordable housing units to be constructed on the property contributed to the financing obstacles.  However, the owner conceded that the collapse in the tax credit equity market contributed to delays in starting construction.

 

The Court applied the following three part test when reviewing the request to relax the tax payment requirement:

At a minimum, it would seem that such circumstances must be (1) beyond the control of the property owner, not self-imposed, (2) unatributted to poor judgment, a bad investment or a failed business venture, and (3) reasonably unforseable.
 

The Court found the property owner failed to meet any part of the test because the “obstacles encountered by the plaintiff in securing the approvals and financing necessary to construct its project are commonplace and reasonably foreseeable.”   The Court was not persuaded that the municipality’s conduct was a mitigating factor or that the severe economic times excuse the obligation to pay property taxes.
 

The case demonstrates the challenges facing property owners in these tough economic times when it comes to appealing a distressed property. To appeal, a property owner must find a way to be current through the first quarter of the year or risk having its appeal dismissed, good times or bad. 

The real estate industry has seen a lot of changes over the past several years, and now, for those in the state of New Jersey, there is one more. In the matter of Fair Share Housing Center Inc. v. N.J. State League of Municipalities, the New Jersey Supreme Court took what at first blush might have been thought an unusual decision yesterday, declaring that the New Jersey League of Municipalities is a “public agency” possessing “government records” and therefore is subject to disclosure under the Open Public Records Act. The League is a nonprofit, unincorporated association representing all of New Jersey’s 566 municipalities, which includes over 13,000 municipal officials and over 560 mayors. 

 

The League is the lobbying arm of New Jersey’s municipalities and is supported in large part from public funding in the form of membership dues. Additionally, its employees participate in the Public Employees’ Retirement System, after The League was declared a public agency for that purpose by a 1955 Attorney General Opinion. Given that the lobbying done by The League on behalf of municipalities throughout the state of New Jersey, which until now the documentation for was private, one would expect a treasure-trove of information to become available to those seeking to challenge the lobbying and other efforts of The League in the future. 

 

In this instance, Fair Share Housing was seeking information regarding the League’s position opposing affordable housing regulations proposed by the New Jersey Council on Affordable Housing (COAH). Therefore, all COAH regulations adopted in the past 10 years have been declared unconstitutional. The latest regulations are on appeal before the New Jersey Supreme Court challenging the latest determination of unconstitutionality. The League has largely been supportive of these unconstitutional regulations and has opposed reasonable attempts at legislation and regulations enforcing a municipality’s obligations to zone for reasonable opportunity for housing for all of the residents of New Jersey.

 

Here in my firm’s Lawrenceville, New Jersey office, I expect this decision to be a source of conversation among our attorneys. If you have questions about how this decision could impact you and your business, feel free to contact me to discuss this matter in more detail.