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March 22, 2024
Governor Murphy Signs New Affordable Housing Legislation
On March 20, 2024, Governor Murphy signed new legislation, known as A4/S50 (“A4”), designed to implement the “fourth round” of the affordable housing obligations imposed by the Mount Laurel doctrine. The fourth round of Mount Laurel compliance begins on July 1, 2025, but the legislation is designed to accomplish many tasks between now and then, so no time is wasted.
The new legislation: (1) sets up a process for calculating fair share obligations and seeking approval of fair share plans meeting those obligations; (2) provides formulas for deriving the regional need for low and moderate income housing, and the manner in which the regional obligations will be allocated to specific municipalities; (3) addresses a number of compliance issues, including the circumstances under which municipalities may seek “bonuses” for certain types of lower income units; and (4) establishes mechanisms for resolving disputes concerning fair share obligations and fair share plans.
Overall, A4 proposes a process that will be quite analogous to the familiar process we have all lived with since 2015, when the New Jersey Supreme Court declared the Council on Affordable Housing (“COAH”) “moribund” and allowed for Mount Laurel compliance to be achieved through “third round” declaratory judgment cases brought in the Superior Court and/or builder’s remedy cases. The A4 legislation takes that a step further and completely abolishes COAH and substitutes new procedures, as further described below.
Fair Share Calculations
Perhaps the most challenging aspect of the third round Mount Laurel cases was ascertaining the fair share obligations that the participating towns had to meet. In the first and second rounds (between 1987 and 1999) COAH calculated the fair share obligations and allocated them to the individual municipalities. However, COAH failed to do its duties for 16 years, and these tasks were therefore left to the courts. In this regard, a 42-day trial was held by Judge Mary Jacobson in Mercer County, during which fair share experts testified on behalf of builders, the Fair Share Housing Center (“FSHC”) and municipalities. As a result of that trial, regional fair share obligations were established by Judge Jacobson, and those fair share obligations were then allocated to the State’s municipalities.
Since it is now envisioned that the courts will not be establishing fair share obligations for the fourth round, A4 provides for a formula, based upon known Census data, and guidance from the Department of Community Affairs (“DCA”) to be provided by December 1, 2024, that results in the calculation of regional fair share obligations for the six regions identified by A4. Further, the new legislation will allocate prospective fair share obligations to the various towns (other than urban aid municipalities) pursuant to the three allocation factors identified in A4, guided by the factors that were described in Judge Jacobson’s opinion. A4 also sets forth a precise definition for ascertaining present need obligations. Thus, the most challenging part of implementing the Mount Laurel doctrine – deriving fair share obligations – should now be a rather straightforward exercise, although municipalities will be able to assert that their numbers should be different than the numbers to be set forth in a fair share numbers report to be released by the DCA.
As in the past, municipalities will be able to assert that they do not have sufficient vacant, developable land to meet their “gross” fair share obligations and can therefore seek vacant land adjustments decreasing their “net” obligations. However, one positive change provided by A4 is its language requiring towns obtaining a vacant land adjustment to identify parcels for redevelopment to address at least 25% of the prospective need that is to be adjusted downward. This provision should be quite useful to those seeking to redevelop lands, especially lands occupied by vacant office buildings and other nonproductive uses.
Up to 30% of a town’s obligation may be satisfied through age restricted housing, and at least 50% of each town’s obligation must be housing available to families with children. As to “bonus” credits for specified housing types, the new law first provides that no more than 25% of a town’s obligation may be met through bonus credits. A wide variety of potential bonus credits are described in the bill, with more notable examples including specified types of “transit” housing, units constructed on certain land previously used for retail, office, or commercial space, certain 100% affordable housing projects where there are municipal contributions of property or funding, and more. As to the length of affordability controls, the legislation provides that most lower income rental units must have affordability controls lasting at least 40 years, subject to exceptions, with the affordability controls period for most for-sale lower income units being 30 years. The law also includes provisions for the extension of existing affordability controls.
The New Process – “The Program”
As noted above, third round compliance took place within the courts. While there will still be a role for the courts, A4 envisions that most compliance activities will take place within an entity to be known as the Affordable Housing Dispute Resolution Program (“the Program”). The Program will consist of an odd number of members (between 3 and 7), overseen by the Administrative Director of the Courts, with Program members to be active judges or judges who are retired but on recall (or other qualified experts).
Applying the fair share calculation parameters set forth in the new legislation, municipalities are to propose their fair share obligations by no later than January 31, 2025, with any deviations from the upcoming DCA numbers report to be justified, if possible. Challenges to towns’ fair share calculations can then be lodged with the Program by February 28, 2025. The Program is to resolve challenges to the numbers by April 1, 2025. Municipalities will then be obligated to file fair share plans with the Program satisfying their obligations by no later than June 30, 2025. Again, objections to the fair share plans can be lodged, with the deadline for same being August 31, 2025. Such challenges are to be resolved by the Program, one way or the other, by December 31, 2025. Disputes that cannot be resolved are to be forwarded to the “County level housing judges” described in the legislation. The ultimate goal for municipalities will be acquisition of a “compliance certification,” the new legislative way to describe an approved housing element and fair share plan.
The Roles of the Builders
As was the case during the third round, when the courts had the principal responsibility for enforcing the Mount Laurel mandate, builders and public interest groups such as the FSHC are to play a critical role in advancing properties for rezonings and ensuring that municipalities are “playing by the rules.” Moreover, the new legislation provides that, when towns do not meet their obligations and deadlines under the law, such towns may be exposed to builder’s remedy suits brought to compel rezonings providing lower income housing, such as inclusionary developments providing for both market rate housing and lower income housing. In short, A4 should provide interested builders with many rezoning opportunities throughout the State, including redevelopment and asset conversion opportunities. A4 also has language offering considerable protections to sites that have been previously rezoned for affordable housing, as well as general language governing densities.
Conclusion
The new legislation consists of 75 pages of detailed provisions, and this article can only scratch the surface. The process will play out between now and July 1, 2025, and beyond, as fourth round Mount Laurel compliance unfolds. Among other things to watch, the DCA and the New Jersey Housing and Mortgage Finance Agency will be adopting regulations to implement A4. Another positive aspect of A4 is its requirement that most information of interest must be posted on the Program and DCA websites.
No legislation is perfect, and only time will tell whether A4 is fairly and expeditiously implemented in the many months to come. Nevertheless, A4 promises to get fourth round compliance moving promptly, avoiding delays like the unconscionable “16 year gap” that delayed the onset of third round compliance. It should be interesting. Stay tuned.
