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NJ Supreme Court Ruling Could Leave Towns on Hook for 120,000 Affordable Units

Court rules housing responsibilities continued to accrue during 16-year period when affordable-housing regulation was in dispute

supreme court
Members of the New Jersey Supreme Court

New Jersey municipalities will have to accommodate low-income residents who could not afford a place to live during a 16-year period when affordable-housing regulations were in dispute, the state Supreme Court ruled on Wednesday in another landmark decision.

While the full impact of the decision is unclear, it could mean municipalities being required to zone for 120,000 additional homes for low-income residents.

In the unanimous decision, the court further strengthened the constitutional obligation that all municipalities have to provide places to live for people of low- and moderate incomes, known as the Mount Laurel Doctrine because the original cases involved that Burlington County township. In this case, the fact that the state agency charged with determining municipal housing requirements and overseeing the process did not do its job properly for 16 years does not exempt towns from having to meet housing needs that existed during that period and continue to exist today.

This decision appeared to largely be a victory for Fair Share Housing Center, a Cherry Hill-based affordable housing advocate, who had appealed a lower court ruling of a case involving 13 Ocean County municipalities seeking to have a Superior Court judge determine their housing obligations.

That task used to be the job of the state Council on Affordable Housing, created by the Fair Housing Act that the Legislature passed in 1985 in response to two Supreme Court rulings that all municipalities have a constitutional obligation to provide their fair share of regional affordable-housing needs. Municipalities have to at least zone for low-cost homes, or allow builders to construct affordable units as part of larger developments. Two years ago, the Supreme Court took that duty away from COAH after the agency had failed, after several tries, to adopt new rules, as required by the FHA, to replace ones that expired in 1999.

In the complex case before the Supreme Court, Fair Share had appealed an appellate court ruling that the FHA only required municipalities meet three types of housing needs: unfulfilled prior-round obligations; rehabilitation or replacement of existing units in poor condition, known as present need; and estimate homes that will be needed by those of low and moderate income over the next decade, or prospective need. There was no provision for calculating any housing need for 1999-2015, the so-called gap period, because it did not fall into any of the other three categories.

Because there were no valid housing rules in force during that time period and because the law does not specifically state there is an obligation for housing needs that accrued during such a gap period, municipalities had argued that they should not have to provide for low-cost homes for that time period.

The Supreme Court clearly disagreed.

“As to the fundamental disagreement — whether the gap period must be addressed — we waste no time in settling that issue,” wrote Justice Jaynee LaVecchia in the unanimous decision. “There is no fair reading of this Court’s prior decisions that supports disregarding the constitutional obligation to address pent-up affordable housing need for low- and moderate-income households that formed during the years in which COAH (the state Council on Affordable Housing) was unable to promulgate valid Third Round rules.”

The actual numbers are going to be decided by the trial courts, with guidance from the ruling. It is possible, if not probable, that the method of calculating the need that arose during the gap period will wind up before the high court eventually.

“Our concern now is how do you actually figure this out,” said Mike Cerra, assistant executive director of the New Jersey State League of Municipalities. He likened the ruling to “the end of a movie that sets up the sequel with a plot twist. It seems very likely that we will be back before this same court again.”

The league was a party to the case. Although it began with 13 municipalities, only one — Barnegat — remains. The other dozen Ocean County towns have since settled with Fair Share and agreed to zone for more than 7,000 units among them.

Superior Court judges, or settlements between municipalities and housing advocates, are now responsible for dictating each municipality’s affordable-housing obligations. Cases involving more than 350 municipalities are either currently before the courts or have been settled. Most of the disputes between municipalities and housing advocates have raged over the size of prospective need. Fair Share had included gap period obligations in its calculations of prospective need, saying that low-income households were created or moved into New Jersey during the gap period of 1999-2015 and municipalities had an obligation to provide homes for them. Attorneys for municipalities had contended that since the law did not provide for a gap period obligation, none existed.

With its 6-0 ruling — Chief Justice Stuart Rabner recused himself — the Supreme Court dismissed that notion.

“The need of presently existing low- and moderate-income households formed during the gap period must be captured and included in setting affordable housing obligations for towns that seek to be protected from exclusionary zoning actions,” LaVecchia wrote. “Attending to that need is part of the shared responsibility of municipalities. We hold that towns are constitutionally obligated to provide a realistic opportunity for their fair share of affordable housing” for that period.

It determined that the gap period should be included in the calculation of “present need,” which now counts only “deficient housing units.”

The court did not, however, approve any numbers or methodology for establishing obligations. And, in a nod to arguments that gap-period calculations could lead to counting households that may have been low-income at the time but are no longer, the court specified that “present need is not calculated in a way that includes persons who are deceased, who are income-ineligible or otherwise are no longer eligible for affordable housing” or who are in deficient units.

“None of the expert reports addressing the gap need have, as yet, been tested through cross-examination,” the ruling states. “It is not for us, as an appellate court, to reconcile untested expert reports. That is a job for the trial courts.”

That the setting of obligations will go back to Superior Court judges is why attorneys for the municipalities do not consider the decision a total loss.

“It made clear that trial judges have wide discretion in defining the prospective need,” said Jeffrey Surenian, lead attorney for some 280 municipalities that banded together and hired their own expert to calculate their obligations. “It gives us an opportunity to re-examine the numbers based upon the decision.”

In a statement, the league called the ruling “nuanced,” and added, “This is a complicated decision, which will be discussed and debated for months to come.”

Fair Share, however, called the decision “an important victory” in a statement following the release of the ruling.

"This decision clears away one of the main obstacles remaining in the fight for fair housing in New Jersey,” said Kevin Walsh, executive director of the Fair Share Housing Center. “The towns who were fighting in court … now know that they will not be rewarded for further obstruction and delay."

According to data from FSHC, 94 municipalities have already settled cases and agreed to provide for almost 32,000 units. Some of those include housing developments that have already begun.

"Shovels are already in the ground to build more homes for New Jersey families," Walsh said.

Staci Berger, president and CEO of the Housing and Community Development Network of New Jersey, also cheered the decision and called for officials to do more to make sure more homes are built.

“The need for affordable homes in this state has grown tremendously over the last two decades coinciding with a recession, a foreclosure crisis, and a devastating natural disaster,” she said. “New Jerseyans and their needs did not simply disappear during the gap period and as the Court ruled, they cannot be ignored. “We are glad the court recognized that all communities must address the real housing needs of New Jersey … In wake of this decision, we urge our elected officials and our future leaders to make the investments needed to help make our communities more affordable for all.”

Fair Share’s expert had calculated the housing need from the beginning of the gap period through 2025 at about 202,000 new units. In averaging that out to 7,756 homes a year, that would mean about 124,000 units accrued during the gap period. In its statement, Fair Share said that had the municipalities prevailed before the court “up to 60 percent of obligations municipalities must meet would have disappeared.” Sixty percent of its expert’s calculation would equal 121,000 homes. Econsult, the consultant working with Surenian’s group, had put that number at closer to 36,000 without considering any gap period obligation.

Anthony Campisi, a spokesman for Fair Share, said it’s unclear exactly how many housing units will result from the decision, but the center still thinks the overall number statewide will total around 200,000.

“We need to analyze the ruling more closely to figure out how figures would change,” he said. “Some towns will see their obligations be reduced, but other towns will see their obligations increase.”

The uncertainty and continuing involvement of the Supreme Court in the issue made the league renew its call for the Christie administration and the Legislature to take some action, something the court again wrote that it would welcome.

“While the Supreme Court attempts to forge a middle ground, this decision is vague as to how to determine this additional present need obligation,” said Michael J. Darcy, the league’s executive director. “Thus, the ruling provides little guidance and will likely result in additional property tax resources being expended. We again call upon the Administration and Legislature to craft long-overdue reforms and promulgate a reasonable, rational state housing policy.”

Two Republican legislators weighed in following the decision, calling for changes that would take the matter out of the courts’ hands and likely leave towns with smaller housing obligations.

Sens. Christopher Bateman (R-Somerset) and Steven Oroho (R-Sussex) are co-sponsoring S-2216, which would drastically change the way affordable housing obligations are calculated and make it easier for municipalities to meet those obligations.

“I’ve been saying all along that the Legislature should be the ones making decisions on affordable housing,” Bateman said. “The chaos and delays we’ve experienced in the wake of leaving these rulings to the courts are unacceptable. We need to establish a common sense plan to give our communities the ability to decide for themselves what works best.”

"Towns will be forced to conduct expensive new studies and analyses as a result of today's ruling, and likely will end up in litigation once again," said Oroho. "Property taxpayers will continue to pay the price for an activist Court’s repeated attempts to effectuate a flawed social policy."

He and Bateman, along with other Republicans and two Democrats, are also co-sponsors of a bill, S-2254, that would specifically prohibit the use of the housing need for any gap period in determining municipal obligations. While the Supreme Court has already appeared to decide that issue, the court again seemed to invite the Legislature to act.

“We recognize, as we have before, that the Legislature is not foreclosed from considering alternative methods for calculating and assigning a municipal fair share of affordable housing,” the decision concludes, “and to that end, we welcome legislative attention to this important social and economic constitutional matter.”

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