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Troy Hills Village v. Township Council of Township of Parsippany-Troy Hills

Decided: December 11, 1975.

TROY HILLS VILLAGE, A PARTNERSHIP, ET AL., PLAINTIFFS-APPELLANTS,
v.
TOWNSHIP COUNCIL OF THE TOWNSHIP OF PARSIPPANY-TROY HILLS AND TOWNSHIP OF PARSIPPANY-TROY HILLS, A MUNICIPAL CORP., DEFENDANTS-RESPONDENTS



For affirmance -- Chief Justice Hughes, Justices Mountain, Sullivan, Pashman, Clifford and Schreiber and Judge Conford. For reversal -- None. The opinion of the Court was delivered by Pashman, J. Conford, P.J.A.D., Temporarily Assigned. (concurring). Justice Clifford joins in this concurring opinion. Clifford, J., and Conford, P.J.A.D., concurring in the result.

Pashman

This appeal, which involves issues closely related to those decided today in Hutton Park Gardens v. West Orange Town Council, 68 N.J. 543 (1975) (Hutton Park) and Brunetti v. New Milford, 68 N.J. 576 (1975), concerns the constitutionality of the Parsippany-Troy Hills Township rent control ordinance. Plaintiffs, owners of virtually all the rental dwelling units in the municipality, attack the ordinance both as facially unconstitutional and as unconstitutional as applied.

In Morris County, a region of the State in which single family owner-occupied dwellings overwhelmingly predominate, Parsippany-Troy Hills is unique. It contains 7300 rental units in multifamily buildings, half the total number of rental units in the entire county. More than 45% of the

dwelling units in the municipality are garden apartments. Parsippany-Troy Hills experienced an enormous burst of apartment construction between 1962 and 1967, during which most of the present apartment stock was erected. There has been little new construction since 1967, and only two acres presently zoned for multifamily housing within the municipality remain undeveloped.

The municipality adopted a rent control ordinance, Ordinance No. 73.449, in April 1973. No public hearings or expert study of the local rental housing market preceded this action. That ordinance has since been amended three times (Ordinances Nos. 73.464, 73.472, 74.483), most recently in May 1974. In its present form, the ordinance declares the existence of a housing emergency, establishes rent charges in effect as of April 1973 as base rents, and limits rent increases over those rents to a fraction of the percentage increase in the Consumer Price Index (CPI)*fn1 during the preceding year calculated by applying to the increase in the CPI a formula set out in the ordinance*fn2 which gives earlier price [68 NJ Page 614] fluctuations greater weight than later ones. The ordinance permits landlords, in addition, to pass tax increases through to tenants as rent surcharges but limits such surcharges to a percentage of the tax increase equal to the ratio of the square footage occupied by the tenant to the total square footage in the building and permits the tenant to pay such surcharges in 12 monthly installments. The ordinance also permits a landlord, in addition to the foregoing increases, to apply to the municipal rent leveling board for rent increases if he has made major capital improvements or improvements in services or for "hardship" increases if he cannot meet his mortgage payments and maintenance costs. By its terms the ordinance

terminates after July 1975 unless extended beyond that date.*fn3

Plaintiffs filed a complaint in lieu of prerogative writ in the Superior Court, Law Division in Morris County, challenging the ordinance on the grounds that the limitations upon rent increases were arbitrary, unreasonable and confiscatory, that the ordinance denied plaintiffs equal protection of the laws in that it imposed the same limitations on rent increases upon properties previously subject to multi-year leases as it did upon properties previously subject to single-year leases, and that no critical housing shortage existed in the municipality to justify such an ordinance. After hearing extensive testimony, the trial judge ruled for the defendant municipality on all issues except one.*fn4 Plaintiffs appealed and we granted certification on our own motion while the case was pending unheard in the Appellate Division. 67 N.J. 103 (1975).

I

Substantive Due Process -- Recital of Emergency

We first consider plaintiffs' contention that no housing shortage that would justify municipal regulation of rents exists in the municipality.

The burden is on the parties attacking the validity of a rent control ordinance to show that the legislative body could not have had any set of facts within its contemplation which would have permitted it to rationally conclude that the competitive rental housing market was not operating in the public interest. Hutton Park, supra, 68 N.J. at 564-565. Absent a specific statutory or constitutional requirement to the contrary, there is no obligation upon the municipality to hold special public hearings, or make any special study of the local rental housing market prior to adopting rent control ordinances. Barry Gardens v. Passaic, 130 N.J. Super. 369, 378 (Law Div. 1974); cf. Ufheil Construction Co. v. Oradell, 123 N.J. Super. 268, 269 (App. Div. 1973); see generally, 5 McQuillan, Municipal Corporations (3d ed. 1969), ยง 16.10 at 145.

The principal evidence offered by plaintiffs to carry this burden was 1) a survey of 10 apartment complexes in the municipality containing 3,956 rental units which showed that 539 units, approximately 39%, turned over in 1973 and projected a similar turnover rate for 1974, and 2) the testimony of the rental agent for Knoll Gardens, a garden apartment complex containing 1,108 units, to the effect that, despite a vigorous advertising program including daily advertisements in New York and Newark newspapers and large roadside billboards, the complex always had an average of 20 vacancies.

We note initially that the annual turnover rate, that is, the percentage of rental units that change hands per year, is principally a measure of the mobility of the population and is, at best, only an oblique indication of the state of the housing market. Thus the manager of Partridge Run Apartments, a complex with 247 units, testified on behalf of plaintiffs to the existence of a substantial turnover rate in his buildings but stated that his vacancy rate was near zero. Isolated evidence of the vacancy rates in particular apartment complexes likewise is of limited value in demonstrating

the absence of a housing shortage. Helmsley v. Fort Lee, 362 F. Supp. 581, 594 (D.N.J. 1973). A high vacancy rate in a particular complex may indicate absence of a housing shortage; but it also may indicate poor management, substandard construction, undesirable location, or grossly excessive rent levels. Cf. Parkview Village Associates v. Collingswood, 62 N.J. 21 (1972). In general, proof of the absence of a housing shortage requires careful analysis of the housing needs and income levels of the various categories of persons who actively desire to live in the community and evaluation of the availability of rental units within the municipality suitable to the needs and financial capacity of those potential tenants. Albigese v. Jersey City, 127 N.J. Super. 101, 110-11 (Law Div. 1974), modified on other grounds, 129 N.J. Super. 567 (App. Div. 1974). Hence, even without more detailed evaluation of plaintiffs' evidence or consideration of the counter proofs tendered by the municipality, it is clear that plaintiffs have not borne their heavy burden of proof.

In actuality, the municipality has strongly supported the existence of conditions of housing shortage. John T. Chadwick, the municipality's expert, whom the trial judge found highly credible, testified that a vacancy rate of less than 3% is indicative of a serious housing shortage. In the 1970 census of housing, the federal government found the vacancy rate among rental units in Parsippany-Troy Hills to be 1.5%. Since then the population of the municipality has increased without any corresponding construction of new rental units. Two of plaintiffs' witnesses who testified as to the vacancy rates of particular apartment complexes reported vacancy rates of zero and 1.9%. Such evidence would surely have permitted the township council to rationally conclude that the competitive rental housing market is not operating in the public interest.

Plaintiffs urge in the alternative that any housing shortage that does exist is solely the consequence of the zoning policy of the municipality, which sharply restricts new construction

of multifamily dwellings. A shortage of this origin, they contend, should not be deemed a legitimate ground for imposition of rent regulation.

Given the unusual receptiveness of the municipality toward development of multifamily housing during the 1960's, it is somewhat difficult to credit the factual assertion that the present housing shortage is the consequence of restrictive zoning practices. Nevertheless, assuming the accuracy of this as a factual matter, the legal conclusion drawn by plaintiffs does not follow. Zoning is concerned with long-range housing problems; rent control with immediate ones. How a municipality has chosen to grapple with its long-term housing needs is irrelevant to the validity of its efforts to cope with its short-term problems. If plaintiffs believe that the Parsippany-Troy Hills zoning ordinance is illegally exclusionary and thereby contributes to the condition of housing shortage, they are free to attack that ordinance directly. They will not be permitted to employ the asserted illegality of the zoning ordinance to obstruct a municipality's otherwise legitimate efforts to cope with the immediate problems which the present state of the housing market poses for local tenants.

Finally, we note that although the existence of a serious housing shortage provides the most common factual basis for justifying the regulation of rents, there are other sets of facts from which a legislative body may rationally conclude that free operation of the housing market is not in the public interest. Hutton Park, supra, 68 N.J. at 564. Therefore, to sustain their burden of proof, plaintiffs must establish that there is no factual basis for the finding that rent control regulation is in the public interest.

II

Substantive Due Process -- ...


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