Affordable Housing Law

New Jersey’s affordable housing landscape remains in flux. Since COAH was stripped of its authority in 2015, New Jersey courts have been tasked with establishing affordable housing obligations for municipalities and certifying municipal plans to meet those obligations through declaratory judgment actions.

The New Jersey Legislature is on the cusp of enacting legislation (A4/S50) that will dramatically alter how affordable housing is built in New Jersey by permanently abolishing COAH, establishing new affordable housing quotas, and altering municipalities’ immunity to builder’s remedy suits, among other key changes. Under the proposed changes, the Department of Community Affairs (DCA) would assume many of COAH’s former duties, including calculating regional needs and municipal present and prospective obligations, while a new Affordable Housing Dispute Resolution Program (Program) would be established within the Administrative Office of the Court (AOC) to handle disputes.

Scarinci Hollenbeck’s affordable housing team is at the forefront of the ongoing reforms. We stand ready to help municipalities navigate the challenges of complying with whatever comes next and also look forward to helping developers identify new opportunities. We encourage everyone involved in the New Jersey affordable housing industry to regularly visit our website for legal updates and contact us with any questions about how you may be impacted by the proposed changes.

A builder can file a lawsuit challenging a New Jersey municipality’s compliance with its obligations to provide low- and moderate-income housing, which is known as a “builder’s remedy suit.” Under Toll Bros. v. Twp. Of West Windsor, 334 NJ Super. 109 (App. Div. 2000), a developer is entitled to a builder’s remedy if (1) it succeeds in Mount Laurel litigation; (2) it proposes a project with a substantial amount of affordable housing; and (3) the site is suitable, i.e. the municipality fails to meet its burden of proving that the site is environmentally constrained or construction of the project would represent bad planning.

When a builder’s remedy is granted against a municipality, the court (rather than the municipality) determines the zoning of the subject property. Accordingly, a developer who succeeds in a builder’s remedy suit may be entitled to a court-ordered zoning designation, which may cover zoning issues such as density, setbacks, building heights, and lot coverage. In a successful builder’s remedy suit, developers may also be entitled to recover attorney’s fees and costs, the fees of a court-appointed special master who assists in developing the zoning scheme for the property, and the costs of any infrastructure improvements, such as sewer and water system upgrades and road improvements.

The New Jersey Fair Housing Act (FHA) established the Council on Affordable Housing (COAH) to oversee compliance with the Mount Laurel Doctrine. However, after failing to enact its third round of implementing regulations, the Supreme Court of New Jersey transferred the administration of affordable housing rules to the courts, effectively stripping COAH of any power.  If enacted, A4/S50 will formally end COAH’s troubled tenure.

Under the “Mount Laurel doctrine,” every town in New Jersey has a constitutional obligation to create a “realistic opportunity” for the construction of its “fair share” of affordable housing. In the vast majority of cases, municipalities find it extremely difficult to achieve this legal mandate.

In turn, developers and landowners enjoy substantial leverage when proposing a project that includes a mix of market-rate and affordable units (“inclusionary development”). This leverage permits developers and landowners to demand much higher density than the current zoning as an “internal subsidy” for providing affordable units. This extra density also typically increases the overall ROI on the project.

In addition to the above, such projects (1) are often given priority with regard to water and sewer capacity; (2) are protected from burdensome, profit-draining conditions commonly demanded by land use boards; and (3) often qualify for additional financial subsidies from sources including tax abatements, PILOT agreements, and residential and nonresidential affordable housing development fees collected and held in trust by towns to assure the economic feasibility of inclusionary projects.

Finally, redevelopers enjoy the various benefits listed above, and often wield additional leverage due to the developer-friendly statutory features in the Local Redevelopment and Housing Law (Local Redevelopment Law), N.J.S.A. 40A:12A–1 to –63 and the availability of condemnation pursuant to the Local Redevelopment Law and the New Jersey Fair Housing Act, N.J.S.A. 52:27D-301 to -329.