Actions Speak Louder than Words: Appellate Division Will Not Disturb Third Round Substantive Certification Where Municipality has Taken Action to Create Affordable Housing

by: Katharine A. Muscalino

The Appellate Division issued an opinion on March 14, 2012 where it declined to revoke COAH’s third round substantive certification of Readington’s Fair Share Plan.  In In re Grant of Substantive Certification to Readington Township, Hunterdon County by the New Jersey Council on Affordable Housing, Valley National Bank sued to have the substantive certification granted to Readington revoked because the fair share plan certified by COAH included a 100% municipally-owned project on a to-be-determined site.  The Appellate Division reiterated its disdain for “municipally-sponsored 100% affordable housing projects ‘ without any specifics or supporting documentation, such as the location of the project, evidence the municipality controls the site, suitability of the site, source of funds to construct and operate the project, or the identity of the entities that will construct and operate the project.’”  However, the Court ultimately declined to revoke the substantive certification granted Readington because “Readington has taken substantial and concrete steps to implement the plan approved by COAH.”  These substantial steps included Readington’s submission of information designating a site for its project following substantive certification.  In declining to revoke the substantive certification, the Court emphasized that its focus is on the actions taken by a municipality to accomplish the creation of affordable housing, rather than the words contained in its Third Round Fair Share Plan.

The Appellate Division also acknowledged the lag in affordable housing development caused by the Supreme Court’s pending review of the Third Round Rules and observed that “there is no ‘present law’ to apply in place of the rules invalidated [by the Appellate Division].”  The Appellate Division stated “in the face of this void, doing nothing is simply not an option.  We cannot see how the goals of the FHA are advanced by declining to reevaluate certification decisions made by COAH under rules subsequently deemed antithetical to those goals.  This is not a mere academic conundrum.  The protections afforded a township by a grant of certification – “insulation to a substantial extent from exclusionary zoning litigation” – can significantly affect those in need of affordable housing opportunities for a substantial period of time.”  This direction by the Appellate Division is instructive to the municipalities who have delayed approval of inclusionary and affordable housing projects while waiting to see if the Third Round rules are upheld by the New Jersey Supreme Court and, if not, how they will be reformed.  The message from the Appellate Division is clear:  compliance on paper is not enough.  The New Jersey Supreme Court’s pending review of the Third Round rules is no excuse for failing to create realistic opportunities for affordable housing now. 

Victory For Commercial Affordable Housing

by:  Katharine A. Muscalino

Private commercial developers have struggled to install affordable housing in New Jersey’s municipalities for decades, facing opposition from communities, local governments, and the municipal zoning boards.  The Appellate Division has just eased the burden of private developers by holding, for the first time explicitly, that affordable housing built by a commercial developer (as opposed to a non-profit or public entity) qualifies as an “inherently beneficial use” in Conifer Realty LLC v. Township of Middle Zoning Board of Adjustment (September 9, 2011).  By being categorized as an inherently beneficial use, commercial affordable housing is subject to a less stringent standard for obtaining use variance relief.  In support of this holding, the Appellate division noted that the courts have previously recognized that affordable housing is an inherently beneficial use in a “variety of circumstances” and that housing needs are “clearly related to the general welfare under the zoning laws.”

The Appellate Division found that the zoning board construed previous opinions holding that affordable housing is an inherently beneficial use too narrowly.  The board had maintained that because all existing caselaw had addressed affordable housing constructed by public of non-profit entities, a commercial developer’s affordable housing could not qualify as an inherently beneficial use.  The Court directed that in analyzing whether a proposed use is inherently beneficial, “the focus of the inquiry is whether the proposal furthers the general welfare, not whether the undertaking is one that is not-for-profit or a commercial enterprise.”

In addition to remanding the application to the Board for consideration under the less stringent inherently beneficial use standard (the Sica test), the Appellate Division found the Board’s concerns regarding the negative criteria to be arbitrary, capricious, and unreasonable.  The Appellate Division noted that the Board’s rejection of the application, base on density and environmental concerns, was contradicted by the Township’s Fair Share plan, which included the project, minimized the environmental impact, and promised to amend the zoning and density for the project.

COAH Developer’s Fee Repeal Bill Introduced

by:  Jonathan M. Prince

With the current legislative session scheduled to end soon, both the New Jersey Assembly and Senate introduced bills (S-2974 and A-4221) to repeal the Statewide Non-Residential Development Fee Act (N.J.S.A. 40:55D-8.1).    The Act imposed development fees on builders of non-residential properties of 2.5% of the equalized assessed value of the land and improvements, for all new non-residential construction on an unimproved lot or lots. 

Enacted to provide municipalities with what was supposed to be a fair and balanced funding method to address the State’s affordable housing needs, the Act has been criticized by many, including developers, trade groups and labor.  As drafted, the new bill would repeal the development fees retroactive to July 2010.