War of Words Over NJ’s Affordable-Housing Needs Sparked by Two New Reports

Colleen O'Dea | September 29, 2015 | Housing
Consultants argue that calls for hundreds of thousands of affordable units around state are skewed by invalid assumptions, impossible to achieve

Credit: WHYY/NewsWorks
affordable housing
New Jersey’s always contentious affordable-housing scene got even more charged with the release on Monday of two reports by the New Jersey State League of Municipalities that question the validity and practicality of obligations calculated by advocates earlier this year.

Fair Share Housing Center, the Cherry Hill-based advocates leading the charge to get homes affordable to those with low- and moderate-incomes, released an expert report five months ago that found New Jersey municipalities have to provide 350,000 units to cover past, present, and future needs. That figure is equal to roughly 10 percent of the total number of housing units currently built in the state.

The report lists each municipality’s estimated obligation, ranging from about 10 to 4,000, but it averages out to roughly 620 units per town.

The League contracted with two consultants to analyze this large number from two different perspectives. One determined that Fair Share’s numbers are overstated due to the methodologies used by its consultant, David Kinsey, a visiting lecturer at Princeton University’s Woodrow Wilson School of Public and International Affairs. The other found that, based on historical housing trends, adding that many units in the next decade would be impossible.

“We find no credible evidence to support the conclusion that New Jersey’s economy will be able to increase its historic level of housing production to a level that will allow the inclusionary zoning strategy to come close to achieving the aspirational goals of affordable housing advocates,” wrote Robert Powell Jr. and Gerald Doherty of Nassau Capital Advisors in their report.

They looked at the way the state’s “inclusionary zoning strategy” works and the number of units it has produced in the past, as well as future projections and determined that, at most 38,400 units could be built through 2025, but a more likely scenario is the construction of between 17,000 and 24,000 units.

The report by the Princeton firm states that a key problem with New Jersey’s method for providing affordable housing is that developers must agree that such incentives as density bonuses — the construction of more units in exchange for designating 20 percent of the total as affordable — make it worth their while to build so-called Mount Laurel units.

The state Supreme Court, in two rulings involving Mount Laurel, has ordered that municipalities must provide their “fair share” of housing for the low- and moderate-income residents. The Legislature enacted the Fair Housing Act, which created the Council on Affordable Housing — now essentially defunct — to determine housing needs and oversee the process of approving plans for affordable construction.

“The FHA specifically noted that nothing in that statute ‘shall require a municipality to raise or expend municipal revenues in order to provide low and moderate income housing,'” according to the report. “The inclusionary zoning strategy can succeed only to the extent that private developers are willing to invest substantial amounts of capital in the New Jersey housing market. Thus, the production of affordable housing over the next ten years is largely dependent upon the ability of the New Jersey economy to support the production of new market rate housing by private developers in quantities sufficient to subsidize the desired number of affordable units.”

And housing production trends this century do not support anything close to Kinsey’s estimate of need. In the past 15 years, an average of about 25,000 housing permits were issued each year. More recently, during the post-recession years of 2010 through 2014, fewer than 16,000 permits were issued annually on average, according to the report.

Using a densit- bonus system in which 20 percent of units in a housing development are set aside as affordable, a total of 1.75 million new homes would be needed to generate 350,000 Mount Laurel units.

Kevin Walsh, Fair Share’s executive director, said the practicality of the task of providing needed housing is not at issue. He said the Nassau report “contributed an absolutely irrelevant claim that the housing obligations we have calculated cannot be met in 10 years. But that is not what the law requires — and zoning lasts for more than a decade.”

He said “many towns’ real goal is to keep families and people with disabilities out — and they’ll find whatever nonsensical excuse then can to accomplish that.”

Fair Share has said that Kinsey’s estimates are just that and the complexities of the state’s housing programs mean the actual number of units built would be much smaller. It estimated the future need at just over 200,000 units, with the remainder being homes that are currently needed and ones that should have been built between 1987 and 1999.

But Econsult Solutions, Inc., with which the league contracted to specifically analyze Kinsey’s calculation of obligations, concluded that Kinsey’s approach included “a number of methodological issues that result in a significant overstatement of calculated affordable housing obligations for New Jersey localities.”

Specifically, the consultant took issue with 10 assumptions Kinsey made in doing his analysis. Econsult was not contracted to conduct its own calculation of need, nor did its report state that it could provide a total calculation-error estimate. But its report contends that the use of one of these methodologies — the estimates for the proportion of the population identified as low- and moderate-income — would lead to an overestimate of more than 100,000 units.

“Any calculation of the degree of sophistication required to estimate affordable-housing need and allocate that need to produce municipal obligations by necessity includes a number of choices on the part of the analyst which influence the final result,” Econsult’s report states. “The report prepared by Dr. Kinsey appears to contain a series of such decisions that result in a systematic increase in the final calculation of affordable housing obligations. Further, the consequences of these choices create logical and analytical problems that further upwardly bias the final calculation. These issues call into question the appropriateness of the results as a basis for municipal housing obligations.”

Walsh called Econsult’s report “as offensive and alarming as they come.” He charged the league with seeking to exclude the disabled from the calculation of affordable housing need. And he criticized the report’s conclusion that Kinsey’s estimate should be reduced by 76,000 because that is the number of extremely low-income households — those at just 20 percent of the median income level — who would not be able to afford the privately built units anyway.

“Adults with autism and people with developmental and disabilities and mobility impairments, as well as others who need supportive housing, and who have very low incomes would be disregarded under the League’s approach,” Walsh said. “This is as bad as it gets in wealthy New Jersey’s towns’ efforts to exclude.”

Michael Cerra, NJSLM assistant executive director, said the league’s board did not ask Econsult to calculate housing obligations for municipalities because that is a task appropriate for a state agency or the Legislature. But since the Supreme Court’s March decision taking COAH out of the process and turning it over to the courts, the league is trying to give municipal officials “the tools and resources” to help them as they appear before judges across the state who will be determining their housing obligations.

More than 100 municipalities signed an agreement to work with attorney Jeffrey Surenian and have Robert Burchell compute their individual housing obligations to present to the courts. The Rutgers professor had calculated the final estimates for COAH last year as it attempted to adopt new housing rules, but the council deadlocked and the rules did not take effect. Burchell became ill over the summer and Rutgers has since cancelled its contracts with the municipalities. Resolutions approved by at least one town indicate that Econsult will be replacing Burchell in working with Surenian and performing the calculations for municipalities.

If Econsult’s analysis provides affordable housing obligations significantly smaller than those Fair Share put forth — and that’s likely, given its report to the league — housing advocates and municipal officials are likely to be butting heads over and over again in courtrooms throughout the state for months to come.

“The League and Econsult are denying reality and paying homage to home rule without regard to the real human toll exclusion and the current shortage of homes has on New Jersey families,” Walsh said. “At a time when nearly 900,000 New Jersey households — nearly one in four households in our state — pay an unsustainably large portion of their income on housing, the League has offered only further tactics designed to exclude families from our state’s many opportunities.”

Cerra said the reports can speak for themselves, but he added that the Nassau analysis of inclusionary zoning points to the failure of the state’s strategy for increasing its affordable housing stock over the past three decades and the need to give municipalities new tools to get more homes built for those with limited means.