Explainer: Coming to Terms With the Intricacies of Fair Housing — After COAH

Meir Rinde | July 21, 2015 | Explainer, Housing
From builders remedy and growth share to rehabilitation and vacant land

*The endless jockeying over towns’ obligations to create more affordable housing has pitched into high gear since March. That’s when the state Supreme Court ruled that the Council on Affordable Housing, the 30-year-old state agency that is supposed to oversee local housing plans, had failed to do its job.

With COAH defunct, the role of making sure towns follow the state’s Fair Housing Act and legal precedents fell to individual Superior Court judges. The state Supreme Court said towns that wanted to participate in the process were to submit housing plans to a court by July 9.

More than 200 towns have made some kind of court filing — typically either an affordable-housing plan or a request for guidance — and more are continuing to file, according to the Fair Share Housing Center, the Cherry Hill nonprofit whose suit led to the Supreme Court decision.

Why would towns participate? The big stick behind the Fair Housing Act has always been the threat that a developer or an advocacy organization like FSHC will sue a town and force it to accept housing it doesn’t want. That could be housing in an area currently zoned for business development, or higher-density housing than the zoning presently calls for. Under the Supreme Court’s Mount Laurel decision in 1983, a developer can win a “builder’s remedy” lawsuit that forces a zoning change if the developer makes 20 percent of the project low- and moderate-income housing.

The Supreme Court said towns that submit affordable housing plans get a temporary, five-month reprieve from lawsuits. If a court subsequently agrees that a plan meets a town’s legal obligations, that town becomes immune to such lawsuits for 10 years. It must implement the plan by actually creating new housing, however, or its compliance with the law may be challenged. In addition, FSHC says it will argue that a town that makes a court filing other than a plan should not get the five-month reprieve.

Why would towns not participate? Municipalities that receive urban aid from the state, including Camden, Newark, and 56 others, are exempt, although they are supposed to rehabilitate affordable housing that has become dilapidated. (See the discussion of rehabilitation below.) Some towns have “naturally affordable” housing, including older or smaller units, or trailer parks. In other towns, officials may think that a developer will not challenge their zoning, or prefer to deal with lawsuits individually as they come.

How much affordable housing must a town build? That fiercely debated question is at the center of the legal and political battles that rendered COAH basically useless for several years and finally moribund.

Earlier this year the FSHC commissioned Princeton University professor David Kinsey to calculate new “Third Round” numbers for how much affordable housing each of the state’s 565 municipalities must build. These figures describe the accumulated need from 1999, when the Second Round ended, to 2025. They vary from a few houses in some small towns to the maximum of 1,000, which has been disputed. State regulations also cap the obligation at 20 percent of a community’s housing stock.

Kinsey found a combined prospective-need obligation for all municipalities of 201,382 units, or nearly 350,000 units when unfulfilled past obligations and rehabs of existing housing are included. The FSHC has said that because towns get bonuses for building certain kinds of housing, the actual number of units will be much lower.

Some towns and their lawyers reject these projections, saying there is no way they can fit so many new units. Jeffrey Surenian, an attorney who represents at least 48 municipalities, called FSHC’s numbers “patently impractical and completely contrary to the public interest.” The FSHC counters that there are a number of ways towns can meet their obligations, including redeveloping commercial properties or converting market-rate housing to affordable.

COAH’s own Third Round estimates, as calculated by Rutgers professor Robert Burchell, pegged the prospective obligation at 31,000 units and the total need at 115,000.

How are the obligations calculated? Kinsey’s analysis has 23 steps, drawing on a variety of economic and demographic data to evaluate how many low-income people need housing and how the need should be divvied up among towns.

Adam Gordon, the assistant executive director at the FSHC, offered a summary. The state is divided into six large regions, each containing a few counties. Census data is used to calculate the growth in the number of lower-income households since 1999, and state projections of future growth are used to develop figures through 2025. That gives a number for how much housing is needed in each region.

To calculate each town’s “fair share” of the regional need, three factors are used. They are: (1) how much the town’s job base has increased, calculated using assessments of the value of commercial and industrial land; (2) income levels, with wealthier towns getting a higher obligation; and (3) amount of vacant or undeveloped land, the most controversial factor.

The resulting numbers are adjusted to account for past demolitions of affordable housing, which increases the obligation, and two factors called filtering and conversion that reduce the obligation. Filtering refers to unaffordable market-rate homes declining in value over time and becoming affordable housing. Conversions are nonresidential properties that become housing, like lofts in former warehouses.

[related]Finally, the 1,000-unit and the 20 percent caps are applied. Gordon noted that the 1000-unit cap was meant to apply to housing need over a 10-year period, not the 26-year period the Third Round has been stretched to cover. Application of the cap will be fought out in court, he said.

What’s the issue with vacant and undeveloped land? Towns with more vacant land and thus more room for development get a higher obligation; those with less land have their obligation reduced. Under the Christie administration, COAH attempted to use this factor to allow towns without vacant land to eliminate their obligation, Gordon said.

“They tried to change how the vacant-land factor was used from being just sort of one factor in the mix to being the be-all and end-all,” he said. “Some towns are trying to make this argument now. ‘Oh, we have no vacant land, we shouldn’t have to do anything. Never mind that over there, someone is trying to redevelop that office park into apartments. Don’t worry about that.’”

“We think that vacant land shouldn’t be the be-all and end-all. It can be one factor,” Gordon said.

What else did COAH try to change? The rules in the First Round and Second Round were largely the same, but when COAH introduced the Third Round rules it added a factor called “growth share,” which pegged affordable housing obligations to the number of permits issued to build new market-rate housing.

The concept had been proposed by Rutgers professor John Payne as a simpler way to calculate affording-housing needs, but COAH altered it to give towns much greater control over their obligations. The original growth-share factor only considered housing construction and not job projections or commercial construction. The innovation was welcomed by the New Jersey State League of Municipalities and many towns as a way to avoid sprawl.

“‘Growth Share’ provides a municipality with a mechanism to predetermine its future affordable-housing obligations by careful and deliberate land use planning,” an NJSLOM official wrote at the time. “No longer will the obligation of municipalities to provide for affordable housing be based upon speculative projections of population, employment and economic growth. Instead, it will be based upon actual residential growth and employment growth.”

But to the FSHC and other affordable housing advocates, growth share looked like an easy way for towns to escape their obligations by simply blocking any residential construction.

“It basically gave towns in New Jersey the ability to just say ‘no,’ and particularly as it developed, the ability to say, ‘We’ll go ahead and build shopping centers and office parks, but, oh, you want to build apartments next to them for people who work there? Oh, we don’t have any obligation because we denied that application.’ That’s what we were seeing all over the place,” Gordon said.

COAH’s Third Round rules were first adopted in 2004, successfully challenged in 2007, revised in 2008, and shot down again in 2013, when the state Supreme Court invalidated the growth-share concept and some other new provisions.

How does rehabilitation work? The affordable-housing battle has its roots in a case brought in 1971 by black residents living in converted chicken coops that Mount Laurel Township was condemning while barring the construction of affordable housing. The subsequent legal reforms both prohibited exclusionary zoning and gave towns credit for rehabilitating existing low-income housing.

David Kinsey’s spreadsheets include a page listing each town’s “present need,” a figure based on census data on old and deficient housing. Towns are supposed to fix up those units, of which Kinsey calculates there are 62,000 statewide. Exclusionary zoning isn’t a big issue in poor cities, so they’re not worried about developer lawsuits and many never file fair-share plans, but they too are supposed to rehabilitate deficient affordable housing, Gordon said.

Rehabilitation is often funded with small grants by county-level programs, sometimes using state and federal money. Building owners may receive several thousand dollars to replace a roof or make other improvements, Gordon said.

What happens now? Judges across the state are beginning to process the submissions from towns. Some are fair-share plans that lay out how towns will meet their affordable-housing obligations, using the FSHC’s numbers or some other figures, such as the lower numbers calculated by Burchell. A number of towns have hired him as an expert witness.

Other submissions, like a filing by Allendale Borough in Bergen County, do not include numbers because the towns say the courts need to provide guidance the way COAH used to do. The FSHC will take the position that such requests are “inadequate” and do not allow a town to begin its five-month period of immunity from builder’s lawsuits, Gordon said.

With a different judge handling these cases in each of the state’s 15 court districts, it’s not entirely clear how the process will work, though a decision in Middlesex County earlier this month potentially offered some clarity. In a case involving Monroe Township, Judge Douglas Wolfson said that “a good faith attempt” to satisfy affordable-housing obligations will earn a town temporary immunity from builder’s suits, provided it files its fair-share plan within five months. That gives Monroe until November 9. Wolfson also confirmed that developers and the FSHC could weigh in on whether a town’s plan satisfies the law. The FSHC hailed the decision, while the League of Municipalities argued that Wolfson’s decision is not binding on other judges and may not affect towns other than Monroe.

“All of this means that we can expect a lot to happen over the next five months,” wrote FSHC executive director Kevin Walsh. “Municipalities that are responsible and proceed in good faith have nothing to worry about. Municipalities that have done little and propose further delay, perhaps because the mayor wants to exclude lower-income folks or because of bad legal advice, face the risk of builder’s remedy litigation.”

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