N.J. SUPREME COURT

In the Matter of the Adoption of N.J.A.C. 5:96 and 5:97 by the New Jersey Council on Affordable Housing

RESIDENTIAL AND COMMERCIAL REAL ESTATE

New Jersey Law Journal

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In the Matter of the Adoption of N.J.A.C. 5:96 and 5:97 by the New Jersey Council on Affordable Housing, A-90 September Term 2010; Supreme Court; opinion by LaVecchia, J.; dissent by Hoens, J.; decided September 26, 2013. On certification to the Appellate Division, 416 N.J. Super. 462 (App. Div. 2010). [Sat below: Judges Skillman, Fuentes and Simonelli in the Appellate Division.] DDS No. 34-1-1444 [84 pp.]

In this appeal, the court considers the validity of the most recent iteration of regulations applicable to the third round of municipal affordable housing obligations (Third Round Rules) adopted pursuant to the Fair Housing Act (FHA). With those regulations, the Council on Affordable Housing (COAH) proposed a "growth share" methodology for assessing prospective need in allocating a municipality's fair share of the region's need for affordable housing.

The court's Mount Laurel decisions recognized a constitutional obligation that municipalities, in the exercise of their delegated power to zone, "afford[] a realistic opportunity for the construction of [their] fair share of the present and prospective regional need for low and moderate income housing." Mount Laurel I was followed by years of political inertia, failing to address the constitutional deprivation affecting the least fortunate in our society. The court preferred a legislative solution. However, in the absence of a legislative response, the court was compelled in Mount Laurel II to fashion a remedy designed to curb exclusionary zoning practices and to foster development of affordable housing for low- and moderate-income individuals. It was an extraordinarily detailed remedy.

Thereafter, the Legislature enacted the FHA, which codified the core constitutional holding undergirding the Mount Laurel obligation and included particularized means by which municipalities could satisfy their obligation, mirroring the judicially crafted remedy. The FHA also created COAH, and provided it with rulemaking and adjudicatory powers to execute the provision of affordable housing. In regulations covering prior time periods (the First Round Rules and Second Round Rules), the methodologies used by COAH largely followed the remedial approaches established in Mount Laurel II.

In this case, the court reviews the Appellate Division's invalidation of the most recent iteration of the Third Round Rules. In the Third Round Rules, COAH proposed a new approach — a "growth share" methodology — for assessing prospective need in the allocation of a municipality's fair share of the region's need for affordable housing. In its decision, the Appellate Division expressed doubt about whether any growth share methodology could be compatible with the Mount Laurel II remedy for determining a municipality's affordable housing obligation. That overarching question looms over all other issues in this challenge to the Third Round Rules.

Held: The Third Round Rules are at odds with the Fair Housing Act, which incorporated the Mount Laurel II remedy, and therefore are ultra vires.

Under the revised Third Round Rules, a municipality accrues its affordable housing obligation as a percentage of growth that actually occurs within its borders. The growth share obligation is based on ratios formulated from statewide — not regional — data on projected housing need, employment and residential growth. Although COAH initially calculates a municipality's projected growth share obligation, the regulations provide that a municipality only incurs the obligation to the extent growth actually occurs as determined by COAH's biennial review process. To the extent the growth share approach is not based on region-specific data and is not structured to establish a firm obligation in respect of prospective affordable housing need, it is inconsistent with the Mount Laurel II remedy.

In the three decades since Mount Laurel II, many changed circumstances have influenced the development of housing in New Jersey. In light of those changes, the Legislature may wish to consider the benefits of an alternate remedy that accounts for current circumstances. The judicial remedy imposed in Mount Laurel II is not a straightjacket to legislative innovation for satisfaction of the constitutional obligation.

That said, the policy adopted by the Legislature cannot be rewritten by COAH to the degree it has done through the growth share methodology. The FHA tracked the Mount Laurel II allocation methodology for satisfaction of present and prospective need based on the housing region. COAH was not free to abandon that approach, and the court is not free to ignore the legislative choice. The growth share methodology is inconsistent with the FHA. The changes in the Third Round Rules are beyond the purview of the rulemaking authority delegated to COAH because they conflict with the FHA, rendering the regulations ultra vires.

Moreover, due to COAH's failure to enact lawful regulations to govern municipalities' ongoing obligations to create affordable housing under the FHA, the court must endorse the remedy imposed by the Appellate Division. The growth share methodology is so intertwined with the new regulatory scheme that it cannot be severed. The court's conclusion requires a new adoption of regulations to govern the third-round municipal obligations consistent with the strictures of the FHA. The court endorses the Appellate Division's five-month deadline for reimposing third-round obligations based on the previous rounds' method of allocating fair share obligations among municipalities. The court affirms the Appellate Division's judgment with respect to the invalidity of the Third Round Rules under the FHA.

Justice Hoens, dissenting, joined by Justice Patterson, agrees that the judicial remedy created 30 years ago is not the only constitutionally permissible method for providing affordable housing, but expresses the view that the growth share approach is consistent with both Mount Laurel II and the FHA.

The judgment of the Appellate Division is affirmed as modified.

Justice Albin and Judge Rodríguez, temporarily assigned, join in Justice LaVecchia's opinion. Justice Hoens filed a separate, dissenting opinion in which Justice Patterson joins. Chief Justice Rabner and Judge Cuff, temporarily assigned, did not participate.

For appellants and cross-respondents: New Jersey State League of Municipalities — Edward J. Buzak (The Buzak Law Group); Clinton Township et al. — Jonathan E. Drill (Stickel, Koenig & Sullivan; Stuart R. Koenig on the briefs); Fair Share Housing Center — Kevin D. Walsh (Walsh and Adam M. Gordon on the briefs). For respondents: New Jersey Builders Association — Stephen M. Eisdorfer (Hill Wallack; Eisdorfer and Thomas F. Carroll III on the brief); New Jersey Council on Affordable Housing et al. — Geraldine Callahan, Deputy Attorney General, (Jeffrey S. Chiesa, Attorney General of New Jersey; Callahan, George N. Cohen, and Donald M. Palombi, Deputy Attorneys General on the briefs); New Jersey chapter of the National Association of Industrial and Office Properties — Kevin J. Moore (Sills Cummis & Gross; Moore and Peter M. Flannery on the brief); Kenneth Martin et al. — Jeffrey L. Kantowitz (Law Office of Abe Rappaport). For respondents and cross-appellants Borough of Atlantic Highlands et al. — Jeffrey R. Surenian (Jeffrey R. Surenian and Associates; Surenian, Nancy L. Holm, Michael A. Jedziniak, and Donna A. McBarron on the briefs). For amici curiae: The Corporation for Supportive Housing et al. — Tracy A. Siebold (Ballard Spahr); New Jersey Future et al. — Kenneth H. Zimmerman and Catherine Weiss (Lowenstein Sandler; Zimmerman, Weiss, Michael J. Hahn, Michael T.G. Long, and Ryan J. Cooper on the brief); New Jersey State Conference of the National Association for the Advancement of Colored People et al. — Lawrence S. Lustberg (Gibbons; Lustberg and Eileen M. Connor on the brief); The International Council of Shopping Centers — Kevin J. Moore (Sills Cummis & Gross); Pennsauken Township et al. — Georgette Castner (Montgomery, McCracken, Walker & Rhoads; Castner and Myron Orfield, of the Minn. bar, on the brief); American Civil Liberties Union of New Jersey Foundation — Ronald K. Chen (Chen, Edward L. Barocas, Jeanne M. Locicero and Alexander R. Shalom on the brief); Catholic Charities et al. — Martin F. McKernan Jr. (McKernan, McKernan & Godino); Legal Services of New Jersey — Melville D. Miller Jr., President, and Connie M. Pascale.

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