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New Jersey Supreme Court Decides COAH Is Ineffective and Opens the Courtroom Doors for Enforcement of Municipal Fair Share Housing Obligations – Gives Municipalities 120 Days to Act

This article was initially posted on March 24. On April 14 the post was updated to provide a more in depth analysis of the decision.

On March 10, 2015 the New Jersey Supreme Court took another step in the continuing battle over the constitutional obligation of municipalities to provide for affordable housing. This time the Court effectively threw out the Third Round Rules promulgated by the Council on Affordable Housing (“COAH”) under the Fair Housing Act (“FHA”), and returned the determination of whether the zoning and housing element of a municipality meets its constitutional obligation to the courts.

Background

Over three decades ago the New Jersey Supreme Court ruled, in the first Mount Laurel case that a municipality’s “power to zone carries a constitutional obligation to do so in a manner that creates a realistic opportunity for producing a fair share of the regional present and prospective need for housing low and moderate-income families.”[1] DiFrancesco Bateman[2] was deeply involved in Mt. Laurel litigation, which resulted in one of the leading trial court decisions on implementing the Mount Laurel doctrine, AMG Realty Company, et.al. v.Township of Warren (“AMG”).[3] In this decision, Judge Serpentelli conducted a detailed analysis of the law and the factors he considered to be essential to implementing the doctrine, and developed a methodology by which he determined the municipality’s “fair share” obligation for the period 1980-1990. After years of continued litigation between developers, fair housing advocates, and municipalities, the N.J. State Legislature enacted the FHA[4] which created COAH, an administrative agency charged with developing requirements to by which municipalities can comply with their fair share obligation. Municipalities that successfully completed the COAH process were given substantive certification by which COAH approved the town’s plan and provided a safe haven from builder remedy/exclusionary zoning lawsuits. The process, however, was complicated and was fraught with difficulties and challenges. COAH addressed these obligations through an evolving set of rules. The First and Second Round of Rules which covered compliance until 1999 largely followed the approach developed by Judge Serpentelli in AMG.[5] Thereafter COAH developed Third Round Rules, which were to address the period ending in 2014. There were, however, a number of controversial provisions of the Third Round Rules, many of which were rejected by the appellate courts on three occasions,[6] including a growth share model, presumptive incentives, and a form of rental bonus credits.[7] Although the courts approved other disputed aspects of the rules, the courts remanded the matter to COAH to develop rules that met the goals of the FHA and the Mount Laurel doctrine. Unfortunately, COAH was unable to develop compliant rules during the time period provided, so the challengers filed a motion with the New Jersey Supreme Court to enforce litigant’s rights.

Supreme Court Decision

On March 10, 2015, the New Jersey Supreme Court responded to the motion and issued an opinion declaring that COAH “is not capable of functioning as intended by the FHA.”[8] The Court ruled that parties seeking to enforce a municipality’s constitutional obligation, such as builders and the Fair Share Housing Center, no longer have to exhaust their administrative remedies under the FHA through COAH but may proceed directly to the courts to compel a municipality’s compliance with the Mount Laurel doctrine. The safe haven created by COAH compliance known as substantive certification, therefore, no longer protects a municipality; they are therefore open to legal challenges to their zoning and land use ordinances. The Supreme Court, however, recognized there are at least 374 municipalities that received either substantive certification under the Third Round Rules or were considered to have been participating in the COAH process by having adopted a resolution agreeing to participate, prior to the rules being invalidated.[9] The Supreme Court, therefore, provided a “stay” of its own order for 90 days commencing on March 10, 2015 (ending June 8, 2015).Those 374 municipalities will then have another thirty (30) days (by July 8, 2015) to apply to the Superior Court for a Declaratory Judgment to establish that they have complied with their constitutional obligation to provide for affordable housing before the courtroom doors are opened to allow builders and other interest groups to challenge a municipality’s affordable housing status.

The status of each municipality in this process is fact sensitive and the time limit to take advantage of the stay of builders remedy suits is very limited.[10] Municipalities need to act quickly to evaluate their affordable hosing status and to make informed decisions on how to proceed in this new process for achieving compliance. Significantly, municipalities which choose to participate in this round of pre-emptory Declaratory Judgment actions may also apply for and be granted temporary immunity from exclusionary zoning law suits. It is important to understand, however, that even municipalities that have received substantive certification under the Third Round Rules will need to evaluate their zoning since the approval was based upon rules that have been partially invalidated. If the approved plan placed reliance on the growth share formula, presumptive incentives or rental bonus credits that were contained in the Third Round Rules but were rejected by the courts, the plan will, likely need to be revised before it is presented to the trial court, where it will be subject to challenges in the trial court by interested parties, including the Fair Share Housing Center and builders. Once the window of opportunity to file a declaratory judgment action closes for those “complying” municipalities, the courts will be open to any appropriate party who wishes to challenge the constitutionality of a municipal housing plan as being exclusionary. Accordingly, municipalities that did not participate in COAH’s third round and do not to file a declaratory judgment action will then be subject to suit by any appropriate party and will be subject to a builder’s remedy, which provides significant benefits to those builders who bring suit to challenge the zoning of a municipality as being exclusionary.

Each vicinage will have one judge assigned to handle all affordable housing cases so there is an expectation that there will be a consistent approach. It has been generally agreed that AMG decision, which was handled by our office, will be the touchstone ruling to guide for the courts. The appellate courts have noted that COAH’s first and second round rules largely followed Judge Serpentelli’s analysis in AMG, and that decision has been cited favorably by the appellate courts. The Supreme Court made it clear that its decision does not preclude the Legislature and/or COAH from continuing to attempt to address affordable housing, provided any action is sufficiently protective of the constitutional obligation to provide for a fair share of affordable housing. It is highly unlikely that a “legislative fix” will be developed due to the current political climate, nor is it expected that COAH will be able to revise the Third Round Rules prior to the time for commencement of litigation.

Guidance from the N.J. Supreme Court

The Supreme Court did provide the following guidance to the trial courts for evaluating the cases. The Court stated that the methodologies employed in the First and Second Round Rules promulgated by COAH “should be used to establish present and prospective statewide and regional affordable housing need.”[11] These methods can be used to present to the trial court the computation of housing need and municipal obligation. Further, the Court stated that since many aspects of the “two earlier versions of the Third Round Rules were found to be valid, and the appellate courts approved of COAH’s discretion in the rule making process, the judges are given similar discretion “when assessing a town’s plan, if persuaded that the techniques proposed by a town will promote” the constitutional goals for the town and the region. The Court indicated that the trial judges should certainly give consideration to the good faith efforts of a town to comply with its constitutional obligation. The principles that to be followed were as follows:

1) Municipalities are expected to fulfill prior round obligations. Those “prior unfulfilled housing obligations should be the starting point for a determination of a municipality’s fair share responsibility.”[12]

2) The elimination of the reallocation of excess present need is permissible.[13]

3) Bonus credits are also acceptable, such as the “new construction credit,” for example, a plan under which a municipality is provided a credit “for each low or moderate income for-sale housing unit that [wa]s subject to the affordability controls that [we]re scheduled to expire…if the affordability controls [we]re extended in accordance with N.J.A.C. 5:80-26,[14] or a bonus credit “for each unit that is affordable to the very poor…”[15] Again, the Court was emphatic that the trial judges should exercise some discretion.

4) The “Smart Growth” and “Redevelopment” bonuses proposed in the second iteration of the Third Round Rules was noted as having been approved by the appellate court.[16] The “Smart Growth” bonus awarded a municipality “1.33 units of credit for each affordable housing unit addressing its growth share obligation…that [wa]s included in a Transit Oriented Development in Planning Area 1,2 or a designated center.”[17] The “Redevelopment Bonus” also awarded 1.33 units of credit “for each affordable housing unit addressing its growth share obligation…that [wa]s included in a designated redevelopment area or rehabilitation area pursuant to the Local Redevelopment Housing Law.”[18] In essence, those bonuses that were “reasonably designed to further important state policies” were considered valid.[19]

5) The Court also approved the exclusion of the “cost-burdened poor from the present need or rehabilitation share calculation” found in the first iteration of the Third Round Rules.[20] This had been allowed by the court in AMG, and was considered a permissible exercise of discretion.

6) Finally, the Court noted that it was acceptable for COAH to have reduced the number of indicators to approximate the number of deficient or dilapidated housing units.[21] Although the Second Round Rules had seven indicators, the earlier adopted Third Round Rules had only three. Since the reduction was reasonably based in changes in United States Census data, the appellate court found that they did not abuse their discretion in reducing the number of factors. [22] Once again the Court noted that judges should use similar discretion in considering the plans submitted for review.

It is evident that the Supreme Court intends that the trial judges will use their discretion in reviewing and approving plans. The Court specifically stated that the courts should “employ flexibility in assessing a town’s compliance and should exercise caution to avoid sanctioning any expressly disapproving practice from COAH’s invalidated Third Round Rules.”[23] The courts are to attempt to get voluntary compliance from the towns, and only when the goals cannot be accomplished “with good faith and reasonable speed” and the town is “determined to be constitutionally non-compliant” will the court allow a builder’s remedy.


[1] In The Matter of the Adoption of N.J.A.C. 5:96 and 5:97 by The New Jersey Council On Affordable Housing , ___N.J. ____ 2015 (M-392-14) (067126), slip op. at 2.
[2] Then known as Kunzman, Coley, Yospin & Bernstein, P.A.
[3] 207 N.J Super 388 (Sup. Ct. 1984)
[4] N.J.S.A. 52:27D-301-329
[5] In re Adoption of N.J.A.C. 5:96, 215 N.J. 578, 593 (2013)
[6] In re Adoption of N.J.A.C. 5:94 and 5:95, 390 N.J. Super. 1 (App. Div. 2007), In re Adoption of N.J.A.C. 5:96 and 5:97, 416 N.J. Super. 462 (App. Div., 2010) and In re Adoption of N.J.A.C. 5:96, 215 N.J. 578, 593 (2013)
[7] In re Adoption of N.J.A.C. 5:96, 215 N.J. 578, 595-6 (2013)
[8] Slip op. at 25.
[9] Slip op. at 28-29.
[10] A 30 day window was created for these filings after the expiration of the 90 day stay. See, March 10, 2015 Order of the Court.
[11] Citing, In re Adoption of N.J.A.C. 5:96, 215 N.J. at 620
[12] Slip. Op. at 42 [Citations Omitted]
[13] Id. Noting that this was decided by the appellate courts on two occasions and was “substantially affirmed” by the N.J. Supreme Court in In re Adoption of N.J.A.C. 5:96, 215 N.J. at 619.  
[14] Id., citing, 390 N.J. Super at 81-84.
[15] Id.
[16] Id, citing, In re Adoption of N.J.A.C. 5:96 and 5:97, 416 N.J. Super. At 495-97
[17] Slip. Op. qt 44, citing N.J.A.C. 5:97-3.18
[18] Id. Citing, N.J.A.C. 5:97-3.19
[19] Id. at 45, citing, 416 N.J. Super at 497.
[20] In re Adoption of N.J.A.C. 5:94 and 5:95, 390 N.J. Super. at 36.
[21] Slip Op. at 35, citing 390 N.J. Super at 35.
[22] Id. at 45-46, citing , 390 N.J. Super at 40.
[23] Id. at 46.



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