On appeal to Review the Validity of Rules Promulgated by the New Jersey Council on Affordable Housing.
Dreier, Havey and Brochin. The opinion of the court was delivered by Dreier, J.A.D.
The Township of Bernards [Bernards] and the Township of Cherry Hill [Cherry Hill] appeal from the promulgation of rules by the New Jersey Council on Affordable Housing [COAH]. See N.J.A.C. 5:92-1 thru 17.3. Both Bernards and Cherry Hill contest the validity of N.J.A.C. 5:92-6.1. Bernards also contests sections 8.4(c) and 8.5(f), but asserts that the objectionable portions of the rules may be deleted without detriment to the remaining rules. Cherry Hill argues against sections 8.3(a) and (b) as well as factors employed in the formula for determining a municipality's fair share of its region's low and moderate income housing. It further claims that those two rules and factors were adopted in violation of the Open Public Meetings Act, N.J.S.A. 10:4-6 et seq. As the two townships are contesting the same body of rules, we consolidated the oral argument in these cases, and further consolidate the appeals for the purpose of this opinion.
In 1975 and 1983 the New Jersey Supreme Court issued two landmark opinions in the area of low and moderate income housing: Southern Burlington Cty. N.A.A.C.P. v. Mount Laurel Tp., 67 N.J. 151 (1975), app. dism. and cert. den. 423 U.S. 808, 96 S. Ct. 18, 46 L. Ed. 2d 28 (1975) [ Mt. Laurel I ], and Southern Burlington Cty. N.A.A.C.P. v. Mount Laurel Tp., 92 N.J. 158 (1983) [ Mt. Laurel II ]. In Mt. Laurel I the Court held that a developing municipality has a constitutional obligation to provide, by means of its land use ordinances, its "fair share" of housing for the low and moderate income citizens of its region. Mt. Laurel I, 67 N.J. at 174. Mt. Laurel II expanded the Mt. Laurel I decision, stating that this constitutional obligation meant not only that each municipality had to provide for the present need for such housing in its region, but also that all municipalities had to provide for the region's future need as well. Mt. Laurel II, 92 N.J. at 218-219. Remedies, including the "builder's" remedy, were established. Id. at 278-292. Mt. Laurel II also instituted a procedure by which
claims against municipalities could be adjudicated before specially designated judges. Id. at 292-293.
In response to this judicial treatment, and at the direct invitation of the Court, 92 N.J. at 213, on July 2, 1985 the New Jersey Legislature adopted the Fair Housing Act [Act]. N.J.S.A. 52:27D-301 et seq. The Legislature's response explicitly acknowledged the court's deference to legislative treatment, N.J.S.A. 52:27D-302b. The Act's constitutionality was upheld in Hills Development Co. v. Bernards Tp., 103 N.J. 1, 25 (1986).
The Act established a Council on Affordable Housing to administer its provisions. N.J.S.A. 52:27D-305. COAH's purpose was, inter alia, to determine what constituted a municipality's "fair share" of low and moderate income housing. N.J.S.A. 52:27D-307. To that end COAH promulgated administrative regulations, codified at N.J.A.C. 5:92-1 et seq. These regulations define each region's total low and moderate income housing needs and the methodology for allocating this housing among the communities of the region. Plaintiffs in these two appeals are contesting the validity of some of those rules pursuant to R. 2:2-3(a)(2).
All the issues in these cases require us to review COAH's exercise of its rule-making power. The standards for review of such rule-making are three-fold. First, if the rule is not arbitrary, capricious, unreasonable or irrational, it will be upheld. Bergen Pines v. New Jersey Dept. of Human Services, 96 N.J. 456, 477 (1984); In re Medicaid Long-Term Care Services Bulletin 84-2, 212 N.J. Super. 48, 57-58 (App.Div.1986), certif. den. 107 N.J. 31 (1986). Second, the rule must carry out the will of the legislature. Hotel Suburban System, Inc. v. Holderman, 42 N.J. Super. 84, 91 (App.Div.1956). The regulation must fall within the express or implied grant of power to the agency in the enabling legislation. A.A. Mastrangelo, Inc. v. Comm'r. Dept. of Envir. Protect., 90 N.J. 666, 683-684 (1982); Hills Development v. Bernards Tp., 229 N.J. Super. 318, 340
(App.Div.1988). However, a specific grant of authority is to be liberally construed, In re Cable Television, 132 N.J. Super. 45, 48-49 (App.Div.1974), certif. den. 67 N.J. 95 (1975), unless there is reasonable doubt that the Legislature has vested the particular power in the administrative body. In re Jamesburg High School Closing, 83 N.J. 540, 549 (1980); Hills Development v. Bernards, supra, 229 N.J. Super. at 341.*fn1 Third, the rule must be adopted as required by law. See N.J.S.A. 52:14B-4 (Administrative Procedure Act); 10:4-6 et seq. (Open Public Meetings Act).
There is a "strong" presumption, however, that a regulation is not arbitrary, and that it is legal and valid. Cooper River Convalescent Center v. Dougherty, 133 N.J. Super. 226, 232 (App.Div.1975). There is a further presumption that the regulation falls within the agency's specifically granted powers. In re New Jersey Bd. of Public Utilities, 200 N.J. Super. 544, 557 (App.Div.1985). It is the plaintiff's burden to overcome these presumptions. Furthermore, this court must defer to a choice of procedures by an administrative agency to implement legislative policy "so long as the selection is responsive to the purpose and function of the agency." Radiological Soc. of New Jersey v. New Jersey Dept. of Health, 208 N.J. Super. 548, 560 (App.Div.1986), certif. den. 104 N.J. 444 (1986). With these principles in mind, we will examine the disputed sections.
N.J.A.C. 5:92-6.1 states that a municipality's present and future fair share of such housing will be determined "after crediting, on a one to one basis, [only] those housing units
created or rehabilitated after April 1, 1980." N.J.A.C. 5:92-6.1(a). Both Bernards and Cherry Hill contend that section 6.1 of the COAH rules violates the express provision in the Fair Housing Act that the agency give each municipality a "credit[ ] on a one to one basis [for] each current unit of low and moderate income housing. . . ." N.J.S.A. 52:27D-307(c)(1). The restriction to pre-April 1, 1980 units thus appears ultra vires on its face; but we must look beyond the language to the purpose of both the statute and regulation.
COAH claims that if units existing prior to April 1, 1980 are included in those for which credit is given, then those living units would be "double counted." COAH explains that by its method of determining the present need for low and moderate income housing, "present" need was determined by the figures in the 1980 census. If a low or moderate income family lived in a standard, conforming, housing unit at the time of the census, the family was not included in the "need" figures, nor was the pre-1980 housing unit counted as a resource to satisfy such a need. As those homes have already been counted by giving credit against the total number of low and moderate income families in the community, COAH argues, to count them again will falsely double their number.
The municipalities assert that the Legislature determined that it was important to "maximize the number of low and moderate income units" in New Jersey, and that a "timely achievement of an appropriate fair share of the regional need for law and moderate income housing" was desired. N.J.S.A. 52:27D-302f. Although the Legislature left to COAH the job of "[a]dopt[ing] criteria and guidelines" for determining a municipality's present and future fair share of the housing need, it gave COAH a specific direction concerning how such a determination must be made. N.J.S.A. 52:27D-307c. According to the Legislature, a municipal fair share "shall be determined after crediting on a one-to-one basis each current unit of low and moderate income housing of adequate standard. . . ." N.J.S.A. 52:27D-307c(1) (emphasis added).
The municipalities reason that if at a time subsequent to 1980 the pre-1980 home becomes vacant through the relocation of the family who formerly resided in it, the unit is as available to satisfy the housing need of a current low or moderate income resident as any unit constructed or rehabilitated after the 1980 date. We are specifically asked to consider numerous units of senior citizen housing which become available after the death or relocation of the residents. We are further told that if we do not consider these units as available to satisfy the fair share of such communities, then the newly constructed housing would absorb the share determined by COAH, and the vacancies in the older housing would absorb low and moderate income families from other communities in excess of any indigenous and regional needs assessed by COAH. If such were the fact, the regulations would indeed violate the evident plan of the Legislature.
But the municipalities' model does not comport with reality. The COAH standard focused on the 1980 census and determined from 1980 forward how many low and moderate income families not then living in standard units required housing at that time in each of the communities in each region. It is true that the pre-1980 units would at some point become vacant through a variety of factors: death of the tenant, the ability of the tenant to afford more expensive housing, relocation of the tenant out of the municipality or region, or any other factor resulting in a vacancy. But since the situation is not static, competing factors remain in the housing market. For every dwelling vacated by death, another is filled by a newly formed family unit when a person, couple or family of low or moderate income first sets up housekeeping. For every unit vacated by a family moving from the municipality, another may move into the community. For every family whose affluence permits it to move to more expensive housing, another, because of reduced circumstances, will first fit the definition of low or moderate income and be seeking the vacated living unit. By excluding the pre-1980 units, COAH's model balanced these factors and
just dealt with families housed in substandard housing or no housing at all; COAH then projected the growth of these figures and the need to have each municipality absorb its fair share of the required new housing.
It is true that COAH did not follow the literal language of the statute. It could have determined the total number of existing low and moderate income families (not just those who had no housing or were housed in substandard units), and also the total number of existing conforming low and moderate income dwelling units. If all of the existing conforming units were then subtracted, as specifically stated in the statute, the resulting figures should be the same as those reached by COAH. The pre-1980 conforming unit would cancel out the pre-1980 families housed in them. We cannot say, therefore, that this regulation "alter[ed] the terms of a legislative enactment or frustrate[d] the policy embodied in the statute." N.J. Chamber of Commerce v. N.J. Elect. Law Enforc. Comm., 82 N.J. 57, 82 (1980).*fn2
COAH not only restricts credits to those units built after April 1, 1980, it also requires that credits are only available if "a unit's occupancy is restricted to low or moderate income
households . . ." unless it fits one of two exceptions not here applicable. N.J.A.C. 5:92-6.1(a) (emphasis supplied). The Fair Housing Act contains no language restricting its application to dwelling units legally limited to residents with low household incomes. Under the statute it is only the actual income of the occupants, not the legal restriction on the housing, that is crucial. The Act states specifically that "[m]unicipal fair share shall be determined after crediting . . . each current unit of low and moderate income housing . . . including any such housing constructed or acquired as part of a housing program specifically intended to provide housing for low and moderate income households." N.J.S.A. 52:27D-307c(1), (emphasis supplied). The very use of the word "including" indicates that the Legislature intended that a municipality's fair share be comprised of more than such legally or contractually limited housing.
Here COAH has overstepped its authority; it has created a provision that is both facially invalid and can be shown to create a vast practical difference if implemented. COAH has not merely established a model conforming to the broad dictates of the enabling legislation. If a well-maintained apartment house had been built in 1981 in an area of the community inhabited predominately by those of low and moderate income, and over the years the history of the occupancy showed that a given percentage of its units are actually occupied only by families satisfying this income requirement, COAH would nevertheless exclude these apartments from its calculations because the units were not "restricted to low or moderate income households." Theoretically, a municipality whose citizens were farsighted and civic-minded enough to see that conforming housing was voluntarily built to satisfy its entire present and future need for low and moderate income housing could be ordered by COAH to build double the number of units that its fair share would indicate, if the community did not place either ordinance or contract restrictions on the units. The half already built would be occupied by the number of families
required to satisfy the community's indigenous and regional obligation, and the other half either would remain unoccupied or would be occupied by families from adjoining communities which had failed to act with equal foresight.
We cannot imagine that the Legislature would have wished to penalize communities that had acted without compulsion or in which housing had been built unencumbered by contractual or legal restriction to low income families. Here the administrative regulation did alter the terms of the legislative enactment, and in this respect the section frustrates the "policy embodied in the statute," N.J. Chamber of Commerce v. N.J. Elect. Law Enforc. Comm., supra, 82 N.J. at 82. This provision therefore must be stricken from the rules. COAH may, however, otherwise insure that housing which qualifies for credits be more than temporarily available for low and moderate income families.
In N.J.A.C. 5:92-8.4(c), COAH states that it "require[s] a 20 percent maximum set-aside and a minimum gross density of six units per acre on vacant and developable sites." That minimum can be modified should certain factors arise (affecting appraised land values, improvement costs, site conditions, etc.). Bernards Township argues that requiring six units per acre is "arbitrary" and states that even COAH's Chairman recognized it as such. The Township also argues that any fixed number is arbitrary, capricious and unreasonable, and that no specific number of units per acre should be required.
Unlike the previous issue, this COAH regulation is not facially invalid. The Act does not specify how many homes should be built per acre, nor does it even state that COAH should establish a presumptive number of homes per acre. N.J.S.A. 52:27D-305. This six unit minimum, however, is the agency's interpretation of the legislative directive. It can only be overturned by us if it is found to be "[un]responsive to the purpose
and formation of the agency." Radiological Soc. of New Jersey, supra, ...