What Comes After COAH?

Maura McDermott | November 5, 2010 | More Issues
Killing COAH is easy. The hard part is fashioning a fair, effective affordable-housing system to take its place

COAH is charged with developing affordable housing, like these units in Old Tappan, for New Jersey's 566 municipalities.
The overhaul of New Jersey’s affordable housing system is going back to the drawing board.

The proposed law that abolishes the Council on Affordable Housing (COAH) and creates an entirely new system in its place is undergoing revisions, according to Senator Raymond Lesniak (D-Union) and Assemblyman Jerry Green (D-Union), both of whom recently introduced similar versions of the legislation. But after blowback from affordable housing advocates and public criticism from Gov. Chris Christie, Lesniak said an amended proposal will be introduced into both houses of the state legislature next week.

Green said that some of the changes will address housing and civil rights activists’ warnings that the bill could be declared unconstitutional if it does not compel towns to create affordable homes. Even so, Green said, “I’m not forcing housing on any municipality, especially if that community is built out.”

The measure is the latest bid to address arguably the most contentious issue in state politics.

The Mount Laurel Decisions

In New Jersey, one of the nation’s most expensive places to live, the state Supreme Court ruled in its landmark 1975 and 1983 Mount Laurel cases that towns have a constitutional obligation to ensure that residents have affordable places to live. The Fair Housing Act of 1985 created the Council on Affordable Housing to oversee towns’ efforts to live up to those rulings.

The council gave towns quotas in the 1980s and 1990s. But in 2004 COAH changed its rules, instead linking towns’ affordable housing obligations to their expected growth. Those rules — known as “growth share” — were overturned in court as unconstitutional, and COAH revised them in 2008.

The new growth share system was rejected as unconstitutional by an appellate panel last month. The state must impose requirements similar to the strict quotas handed down in the 1980s and 1990s, the panel ruled.

Now the question is, can lawmakers obey the constitution without “forcing” towns, as Green put it, to accept affordable housing?

Killing COAH

Green introduced his bill on October 18, 10 days after the appellate ruling. Like the bill Lesniak sponsored earlier this year, the measure abolishes COAH, helping Christie fulfill his campaign promise that the agency would be “gutted” on his watch.

Even so, Christie said Wednesday he would not sign Green’s measure if it reaches his desk. Green’s legislation calls for a 2.5 percent fee on commercial development that would be used to fund affordable housing initiatives.

Christie called the fee “silly” — saying the state should encourage commercial growth during such bleak economic times, not tax it. By contrast, the governor praised Lesniak’s bill — which does not include the fee and which passed the Senate 28-3 but stalled in the Assembly — as a bipartisan measure.

Green did not return calls on Thursday seeking comment on Christie’s veto threat. However, Lesniak said Thursday that Green’s revised legislation might drop the fee, or it might only impose it if the $300 million New Jersey Affordable Housing Trust Fund falls below a set threshold. The fee is an important subsidy for affordable housing, but it should only be imposed once the economy recovers, Lesniak said.

The legislature will seek public comment on the two revised bills Monday. Lesniak’s original bill will be amended to match Green’s measure, the senator said.

A Cool Reception

Housing advocates and builders have given a cool reception to the two measures, warning that any legislation that does not compel towns to accept lower-cost homes would violate the appellate panel’s ruling.

If the legislation lets towns evade their affordable housing obligations, it will eventually be overturned by the courts, said Kevin Walsh, associate director of the Fair Share Housing Center, who argued his group’s case before the appellate panel.

“That’s an impossible task, to pass constitutional muster without providing some check on municipal discretion,” Walsh said in an interview.

Green said earlier this week he is confident the new version would survive court scrutiny.

In Green’s initial proposal, a new system would be run by the state Department of Community Affairs. It would establish three tiers of requirements, to be applied depending on the concentration of affordable housing and poverty in each town:

  • Towns where more than half of the children receive free lunch would not be required to accept any new affordable housing.
  • Towns where at least 12 percent of housing is deemed affordable, or where at least 25 percent of children qualify for free or reduced-priced lunch, would have discretion in whether to require developers to build affordable housing.
  • Towns that lack significant numbers of affordable homes and have few children poor enough to qualify for federal free lunch would be governed by the strictest rules. These towns would need to set aside 10 percent of new homes as lower-cost units. However, the bill lets towns permit developers to pay a fee instead of building lower-cost units.
  • In addition to those requirements, all but the poorest towns would need to zone 20 percent of buildable land to be affordable as “workforce” housing for those who earn up to 150 percent of the area’s median income.

    An Urgent Need

    The measure would provide some relief to towns weighed down by obligations to accept “staggering” amounts of development, said Michael Cerra, senior legislative analyst at the New Jersey State League of Municipalities.

    Local officials understand the urgent need for lower-cost housing, Cerra insisted. The trouble is that it’s very expensive to create such housing, he said.

    The state banned the agreements that once allowed suburbs to avoid building affordable units by paying fees to cities like Trenton and Newark to build them instead. Now that towns must build those units themselves instead of paying a comparatively low fee, their costs have risen.

    Making matters worse, the 2.5 percent fee on commercial developments that was expected to raise as much as $160 million a year for the state’s affordable housing trust fund, instead raised a fraction of that sum because of the impact of the economic downturn, Cerra said. That fee was temporarily suspended due to the recession.

    “Towns saw their obligations increasing, and the funding decreasing,” Cerra said.

    Suburban Sprawl

    Besides, Cerra said, COAH’s affordable housing quotas led to suburban sprawl in the 1980s and 1990s. Towns had to give developers incentives to build the lower-cost units, and they did so by allowing them to build more homes on smaller plots of land. “That places infrastructure demands on the municipality: water, sewers, schools,” he said.

    Letting towns determine how much they will grow was “an attempt to learn from our mistakes,” Cerra said.
    However, housing advocates said they fear Green’s legislation would let towns duck their responsibilities to accept affordable housing.

    “If they haven’t done it before and we had COAH try to force them to do it and they still didn’t do it, what in the world makes anyone think they’re going to do it now?” said Michael McNeil, chair of the state NAACP’s housing committee.
    In particular, housing advocates took aim at the measure allowing developers to pay a fee instead of building affordable homes. The fee is too low, and besides, towns could simply decline to spend the funds on homes for the needy, Walsh said.

    The “workforce” housing provision also came under criticism. In Middlesex, Hunterdon and Somerset counties, 150 percent of median household income is $150,000, according to federal data. At that income level, families can find housing without government help, said Alan Mallach, an expert witness in the 1975 Mount Laurel case and a senior fellow at the Center for Community Progress in Washington, D.C. The legislation should require more housing for those who earn less than 80 percent of median income, as the court ordered in the 1983 Mount Laurel decision, Mallach argued.

    Lesniak rejected those criticisms, saying the new system would be an enormous improvement over COAH, and arguing the fee provides “flexibility” that would create more affordable housing units.

    Green said he has sought input from civil rights and housing groups as well as Christie and Lesniak in crafting his legislation. “Everyone has to be able to compromise and do what’s right for the people of New Jersey who need housing,” Green said. “We’re not talking about just poor people here. We’re talking about teachers, firefighters, law enforcement, being able to afford to live in their own communities.”

    The State’s Highest Court

    Even as legislators debate the measure creating a new affordable housing system, at least two groups have indicated they will appeal the recent Appellate Division ruling to the state Supreme Court.

    The League of Municipalities hopes the state’s highest court will let towns continue to use the “growth share” method that links affordable housing obligations to future growth, Cerra said. That method helps towns provide affordable housing without forcing them to overbuild, he said.
    Walsh said his housing group will appeal to the Supreme Court as well, seeking to strengthen the requirements for towns to accept affordable housing. He argued growth share gives towns too many loopholes, letting them block lower-cost homes.

    The legislative wrangling and the potential for a renewed court battle come as the state is struggling to emerge from the downturn in the housing market.

    New Jersey’s supply of affordable housing dropped sharply last year, according to the state Department of Community Affairs, which includes COAH. Last year, towns reported providing 709 homes for low- and moderate-income residents, according to the department. That’s less than half the average of 1,597 affordable homes produced annually in the previous 10 years, according to the agency.

    Defining Affordable

    The state deems a home “affordable” if the household spends 30 percent or less of its income on housing. Most affordable housing programs are targeted at low- and moderate-income residents. Those who earn between 30 percent and 50 percent of median income are considered low income, while those who make 50 percent to 80 percent of the median are considered moderate income.

    In many cases, affordable units are built without subsidies, by private developers who construct lower-cost homes in exchange for permission to build more units per acre. That worked well when there was a strong demand for market-rate housing, but the downturn has slowed construction of market-rate and affordable units alike, Walsh said.

    Projects that rely on federal and state subsidies also have suffered. Tax credits attracted $170 million in private investment last year, a drop of nearly 25 percent compared with the $226 million raised in 2006, according to the state.

    The state’s income from the realty transfer tax, which also supports affordable housing, fell from $45 million to $23 million in the same time period, a 24 percent decrease.

    Restrictive local zoning laws make matters worse, according to a recent study commissioned by the state Department of Transportation. In the 15 towns along Route 1 from New Brunswick to Trenton, current zoning laws would permit the creation of enough commercial space to create nearly 488,000 jobs, but only enough residential space for 37,000 homes, according to PlanSmart NJ, which helped conduct the study.

    The lack of inexpensive housing forces many workers in the area to live in Pennsylvania, where homes are cheaper, and endure long commutes that clog local roads, according to the group.

    The New Jersey Builders Association’s attorney in the appellate case, Stephen Eisdorfer, said he could not comment on the proposed legislation, but he said any system that gives towns discretion to determine their own affordable housing obligations would turn the clock back and violate the state constitution.

    “To say that towns get to decide whether or not they want affordable housing, that’s where we were before Mount Laurel 1,” Eisdorfer said. “How do you keep poor people out? You zone for large lots, you prohibit multifamily housing, you do everything you can to deter development.”

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