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Wolff & Samson PC
Counsellors At Law Real Estate  "With the parties waiting in their respective corners, the next round is about to begin." In January 2007, more than three years after COAH adopted its "Third Round" regulations governing affordable housing for 2004-2014, the State's intermediate appellate court issued a decision eviscerating the regulations and literally sending COAH back to the drawing board to rewrite its rules, giving it just six months. The suit challenging the regulations was filed on the same day they were adopted. The lawsuit was remarkable because, on the one hand, developers and affordable housing advocates unexpectedly sided together in complaining that the regulations failed to adequately provide, and in fact undermined, affordable housing goals. Conversely, the State and municipalities defended the regulations as not only adequate, but unique in that they provided local authorities with more input and control over the calculations of their affordable housing obligations. In April, both sides asked the NJ Supreme Court to intervene. Each side must wait to see whether the Court, which mandated municipal affordable housing obligations more than 30 years ago with its Mount Laurel decision, will agree to hear the case. Undoubtedly, the Court will. How much of its prior doctrine it is inclined to review is an important question. The now-stricken Third Round regulations were noteworthy in that they featured a creative method of calculating a municipality's affordable housing obligation: Each municipality was obliged to provide affordable housing according to its "growth share," a new formula linking the required number of affordable housing units to the number of new market rate units for which certificates of occupancy were issued. Also new: Non-residential developers were given an affirmative obligation to build affordable housing units based on the sf of their new facilities and anticipated job growth. The Growth Share formula provided for one affordable housing unit for every eight market rate housing units built, and one affordable housing unit for every 8,333 sf of office or 25,000 sf of retail space. Finaliy, the new regulations allowed municipalities to charge steep "payments in lieu" of developing affordable housing units, but neglected to provide a guarantee as to when or where the units would be built. While Third Round litigation raged, municipalities embraced the Growth Share formula. Indeed, more than half of municipalities submitted Third Round plans for COAH's review and approval. Nonetheless, the Court cited legal deficiencies in the Growth Share formula, struck down the Third Round rules and gave COAH six months to rewrite them. Builders and towns await the rewritten regulations, and developers' groups are already posturing for what may be the inevitable next court battle. In the meantime, it is unclear what becomes of those builders of residential and non-residential construction that had entered into development agreements with towns pursuant to the Growth Share formula. Since the formula has been declared null and void, it would seem that so are agreements made pursuant to it. There are legal and equitable arguments on both sides, but no safe assumptions. In fact, in an order issued on March 30, 2007, the Appellate Court "stayed" any municipal ordinance implementing the Growth Share formula in effect at the time of the issuance of the Court's January 25, 2007 opinion and held that, "the validity of any ordinance should be tested on a 'case-by-case' basis after COAH promulgates [its] new rules." Practically read, the Court has all but told the parties that they can fight it out later. In the meantime, it is unclear whether towns can continue to demand the exorbitant payments adopted under the Third Round rules. Recognizing its six-month deadline was approaching, in early May COAH asked the Court to extend the deadline by six months. Assuming the request is granted, new rules may not be promulgated until early 2008. If the new rules increase a developer's obligation on affordable housing, which is likely inasmuch as Governor Corzine campaigned on increasing the number of new units by 100,000, one would expect a series of aggressive lawsuits by developers seeking to "grandfather" prior agreements. If the formula reduces the developer's obligation, one might expect municipalities to seek to enforce agreements as they try to preserve their affordable housing gains. With the parties waiting in their respective corners, the next round is about to begin. Who will win is little more than a guess. This article is reprinted with permission from Real Estate New Jersey, June, 2007. The views expressed here are those of the author and not of Real Estate Media or its publications. Copyright @ 2007 ALM Properties, Inc. All rights reserved. © |