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Property Owners Association of North Bergen v. Township of North Bergen

Decided: September 12, 1977.


For affirmance -- Chief Justice Hughes and Justices Mountain, Sullivan, Clifford, Schreiber and Handler. For reversal -- Justice Pashman. The opinion of the court was delivered by Schreiber, J. Pashman, J., dissenting.


[74 NJ Page 330] Twenty-five owners of apartment buildings filed a complaint in lieu of prerogative writ challenging the validity of amendments to a rent control ordinance passed by the Township of North Bergen. The provisions in question regulated rents for senior tenants who lived in the plaintiffs' buildings located within the Township. Each of

these structures contained between 7 and 400 dwelling units. On cross-motions for summary judgment, the trial judge declared the amendments invalid. The Appellate Division, in an unreported opinion, affirmed. We granted certification. 71 N.J. 521 (1976).

On December 16, 1971, the Township of North Bergen (North Bergen) adopted an ordinance to regulate residential rents in buildings which contained more than six apartments. The prefatory language of the ordinance recited that an acute shortage of apartment dwelling units existed which had resulted in excessive rent increases with attendant hardships to all rent payers, that a housing state of emergency existed, and that in adopting the ordinance North Bergen was exercising its inherent power to protect the welfare of its citizens. The ordinance limited rental increases to percentages reflected in changes in the Consumer Price Index and created an Emergency Rent Leveling Commission to resolve disputes between landlords and tenants.

The ordinance was amended in June 1973 and May 1974. Those amendments excluded only owner occupied dwellings containing four or less housing units. In addition to rental increases predicated on changes in the Consumer Price Index (limited to 5% in any one year), the amendments provided for landlord relief in the event municipal property taxes were increased, or the landlord was unable financially to satisfy mortgage payments and maintenance needs (not to exceed 10% of the tenant's rent), or expenditures for major capital improvements were to be incurred (not to exceed 10% of the tenant's rent). Rent increases for all causes were limited to 15% in any one year.

On January 16, 1975, the Township adopted the amendments (Amendments) in question, which were to be effective for a three-year period commencing January 11, 1973. The parties have not raised, briefed, or argued the validity of the retroactive aspect of the ordinance and, accordingly, we shall not consider that issue. Nor is the question projected by this appeal, the validity of the Amendments, moot,

for the disputed amount of rent increases has been held in escrow pending determination of this action.

The Amendments created a special class designated as Senior Tenant, defined as every person aged 65 or over whose income, including that of his spouse, did not exceed $5,000. Income excluded gifts, inheritances, Social Security, Railroad Retirement and federal pension benefits, and all state and local governmental pensions of those who were not receiving Social Security. Senior Tenants were treated specially. Their rents were frozen as of December 1, 1974. Landlords could not increase rents for Senior Tenants. If, after the rents for other tenants had been raised up to 15%, the landlord had been found entitled to additional funds by the Emergency Rent Leveling Commission because of one or more of the grounds stated in the ordinance (Consumer Price Index increase, mortgage and maintenance need, or a major capital improvement), the Township would pay a rent subsidy to the landlord up to 10% of the rents paid by the Senior Tenants. The ordinance contained no provision which granted the landlord an opportunity to obtain relief in the event that he could justify an increase in excess of the recovery from the Township.

Judge Larner, the trial judge, in his oral opinion, after noting that the Amendments contained no recitation of motive for their adoption, commented that a municipality's desire to care for needy senior citizens is unquestionably laudatory. Holding that the Amendments caused an unconstitutional deprivation of property without due process, he reasoned as follows:

Now, more importantly, however, the Ordinance is unconstitutional as a deprivation of property without due process of law. By this Ordinance the Municipality seeks to establish a special subsidy for those who the fathers, the Legislative fathers of the Municipality think should get a break in connection with rent increases. This is a fine reason and something to be applauded. However, this can be constitutionally done only on the basis of an overall use of public funds which then is distributed among all the taxpayers by virtue of taxation. And so we have that in [m]any types of legislation

which counsel has cited where the burden rests upon the entire community, in which event special treatment of people in need is fully justified and constitutional. We have it from welfare up. We have senior citizen housing. We have other types of legislation which are properly protective of the rights where need appears [f]or special categories of persons. However, in every one of these instances the burden of supporting these people partially, of granting them a subsidy, is a public burden and should be borne by the entire community. Here, however, the Municipality undertakes to attempt to shift its burden, that is the burden of all the citizens and taxpayers of the Municipality, to a particular class of individuals, namely, persons who own property, and demand that those persons take care of the needs of the community as a whole. That to my mind constitutes a clear-cut taking of property without due process. Selecting a particular class of people in the community to subsidize another class of people in the community is hardly constitutional in its approach.

Now, in this area of discrimination I didn't mention during our colloquy one facet, namely, not only discrimination against the landlord, but I can see a potential of discrimination against other tenants in a building under the pattern of the Rent Control Ordinance of the Municipality. And it arises in this way: If a landlord is burdened with a reduction in his income by virtue of the failure and inability to increase the rents of senior tenants in his building because of this amendment and he is thereby compelled to apply for an overall hardship increase within the additional ten percent permitted in the legislation, and such increase is granted, then, in effect, the other tenants in the building who are not sixty-five and who have an income over $5,000 will ultimately be paying more rent because of the lack of contribution by these other tenants towards the overall income of the landlord. This is another form of discrimination which is a practical result of this kind of legislation by the Municipality.

So that all in all I find that there is no basis for supporting this legislation and that the purpose of helping elderly, although excellent in concept, cannot be done at the expense of an individual property owner.

The Appellate Division agreed with Judge Larner's analysis, pointing out that the landlord may never be compensated for each Senior Tenant's pro rata share above the 10% subsidy. It concluded that to the extent that the landlord will not be compensated for what is justly due him, the landlord would be called upon to subsidize the Senior Tenant or Tenants residing in the apartment house.

The Appellate Division also found that the stated objective of the ordinance, the alleviation of all tenants' hardships due to a housing shortage and excessive rents, was not reasonably related to the classification of Senior Tenants -- for the evil was equally applicable to many under age 65, whose incomes do not exceed $5,000 and whose needs may be equal to or greater than those of a Senior Tenant. Lastly, it condemned the definition of net income which, for example, excluded, inter alia, state and other local governmental pensions of persons who were not receiving Social Security, and which did not consider assets, gifts or inheritances, so that, in some cases, Senior Tenants with more spendable cash than others with less funds received the benefits of the Amendments.

We are in full accord with Judge Larner that subsidization of housing for the elderly may well be an appropriate subject for legislation in furtherance of the public welfare. Justice Pashman in his comprehensive opinion in Taxpayers Ass'n of Weymouth Tp. v. Weymouth Tp., 71 N.J. 249 (1976), graphically described the economic problems which face many of our older citizens. He wrote for the Court:

In part the need of the elderly for specialized housing results from the fixed and limited incomes upon which many older persons are dependent. In 1970, 82.3% of households in New Jersey with persons over the age of 65 had incomes of less than $10,000 and 62.1% had incomes of less than $5,000. N.J. Office on Aging, Detailed Housing and Income Information on the Elderly of New Jersey 2 (1973). By comparison, the median income for all families in New Jersey at that time was $11,407. Because many of the elderly derive their incomes from pensions, social security or other government benefit programs, or from interest on savings or income-producing securities, they are among those hardest hit by inflation and the current statewide housing shortage. N.J. Dep't of Community Affairs, The Housing Crisis in New Jersey 1970 (1970). Consequently, many of the elderly cannot afford housing specifically designed for their needs, and in many cases are actually obliged to live in substandard housing. Housing New Jersey's Elderly, supra at 3. Many others must devote a disproportionate amount of their available resources to housing costs. N.J. Office on Aging, Detailed

Housing and Income Information on the Elderly of New Jersey, supra at 4. Moreover, those who are homeowners must often forego proper maintenance and upkeep of their homes. ...

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