New Jersey Urban Transit Hub Tax Credits – Going, Going, Gone?

by:  Katharine A. Muscalino

The Urban Transit Hub Tax Credit program was introduced in 2008 to provide financial incentive to developers, property owners, and tenants to make substantial capital investments in Urban Transit Hubs. Originally endowed with $1.5 billion, the program has evolved considerably since its inception and is nearing exhaustion.

Of the $1.5 billion dedicated to the Urban Transit Hub Tax Credit program, $250 million has been earmarked for residential projects. As of February 14, 2012, New Jersey’s Economic Development Authority (“EDA”) has already allocated $219.6 million to individual residential applicants, and just extended an additional $17.7 million to Pennrose, a developer proposing to demolish Trenton’s Miller Homes public housing project with low-rise residences. Because so few tax credits remain for residential projects, the EDA has announced it is no longer accepting applications for residential Urban Transit Hut Tax Credits. The remaining unassigned residential tax credits will be allocated to previously approved “ready-to-go” residential projects that have applied for amendments to their Urban Transit Hub Tax Credit applications to increase their credits to up to 35% of their project financing. The Pennrose project, originally approved for tax credits equaling 25% of its project financing and now approved for credits for 35% financing, is one such “ready-to-go” project whose tax credits have been increased by the EDA.

Of the $1.3 billion of tax credits that have not been set aside for residential projects, $100 million has been dedicated to Offshore Wind projects by the Offshore Wine Economic Development Act (expiring January 2013) and $200 million has been set aside for the Grow NJ program (expiring July 2014). An additional $696.5 million has been allocated to individual commercial projects, leaving just $253.5 million available for commercial projects in Urban Transit Hubs. Developers, owners, and tenants of commercial property in an Urban Transit Hub should submit their tax credit applications as soon as possible to insure they don’t miss out.

Residential projects in the Urban Transit Hubs need not abandon hope altogether yet. The EDA has directed that in September 2012, the agency will undertake an evaluation of the commercial projects in its “pipeline,” meaning those that have already submitted an application and are waiting to be approved, as well as the progress of approved projects. Depending on its conclusions following this review, the EDA may recommend that any remaining commercial allocations, as well as the $100 million earmarked for the Offshore Wind project, be reallocated to new residential projects in Urban Transit Hubs and to Grow NJ projects. The EDA will make its final determination as to the reallocation of the Offshore Wind $100 million following the program’s January 2013 sunset, and may introduce a competitive process for the award of any remaining tax credits.

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.

Who Says Babies Don’t Play Bocce? Law Division Rules On Age Restricted Housing Conversion

by: Gregory S. Ricciardi

With the continuing strain on residential development projects, some developers may seek relief in the form of a recent New Jersey law, which allows for the conversion of age-restricted projects to non age-restricted projects.  A recent opinion from the Law Division may serve as a helpful tool to developers seeking to take advantage of the law.

Heritage at Towne Lake, LLC v. Planning Board of Sayreville interprets and applies N.J.S.A. 45:45:22A-46.3 (the “Conversion Statute”), which regulates the conversion of age restricted units to non-age restricted units in development projects.  In this case, the Sayreville Planning Board (the “Board”) denied a developer’s application to convert a one hundred eighty-four (184) unit, age restricted community to a non-age restricted community, containing the same number of units, but configured differently. 

Pursuant to the Conversion Statute, the approving board has broad discretion to require the applicant to prove that the conversion can be granted  without substantial determinant  to the public good and will not substantially impair the intent and purpose of the zone plan and zoning ordinance.  The Conversion Statute establishes a set of criteria that applicants must prove, which include: (1) that the site meets RSIS standards; (2) recreation improvements and other amenities are revised, as needed, to meet the needs of the converted development; (3) water and sewer systems are adequately designed;  and (4) sufficient parking is available to accommodate the converted development. 

In addition to arguing that the applicant failed to meet the burden of proof as to the conditions of the Conversion Statute, the Board claimed that approving the conversion application would create a density violation.  Since the applicant received a density bonus for age-restricted development, if the conversion were approved, the Board argued that the project would require a (d) variance for density pursuant to N.J.S.A. 40:55D-70d(5).  The court dismissed this argument, citing the plain meaning of the Conversion Statute, which states:

“No application for an amended approval seeking the authority to construct a converted development shall be considered a “use variance” or other “d variance” application pursuant to subsection d.  of section 57 of P.L.  1975, c 291 (C:4055D-70).”

The court ultimately concluded that the applicant had met its burden of proof and that the denial of the conversion application by the board was unreasonable.  The court remanded the matter back to the Board an ordered that the conversion be approved subject to the conversion of the originally proposed bocce courts to a “tot lot” for children.  

The Conversion Statute remains an attractive option for distressed, age-restricted development projects, provided the projects and the application for conversion can meet the statutory requirements, including a 20% set aside for affordable housing.    The publication of this decision helps shed light on the conversion process and eliminate confusion as to its application. 

Moratorium Extended On COAH Non-Residential Development Fees

by:  Lawrence A. Calli

On August 24, 2011, Lt. Governor Guadagno signed legislation extending relief to developers from the previously implemented COAH 2.5% non-residential development fee requirement.  The relief places an additional 2-year moratorium on the non-residential development fee requirement, and will apply retroactively to approvals obtained as of July 2010.  Developers who obtain land development approvals prior to July 1, 2013 (and obtain building permits by December 31, 2015) will receive protection under the fee moratorium.  A mechanism is also in place by which developers who previously paid a development fee may be entitled to a refund.  Click here for additional information.

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.