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In re Petition for Substantive Certification Filed

Decided: March 26, 1991.


On appeal from Council on Affordable Housing.

Shebell, Havey and Skillman. The opinion of the court was delivered by Skillman, J.A.D. Shebell, J.A.D., concurring in part and dissenting in part.


[247 NJSuper Page 154] The Public Advocate appeals from a final decision of the Council on Affordable Housing (COAH) granting substantive certification pursuant to N.J.S.A. 52:27D-314 to the housing element and fair share plan of Warren Township (Warren).

This proceeding was initiated by a property owner filing an action in the Law Division alleging that Warren's zoning ordinances fail to provide a reasonable opportunity for the construction of housing affordable to lower income households and are therefore unconstitutional under the Mount Laurel doctrine. See Southern Burlington Cty. NAACP v. Township of Mount Laurel, 67 N.J. 151, 336 A.2d 713 (Mount Laurel I), appeal dismissed and cert. den., 423 U.S. 808, 96 S. Ct. 18, 46 L. Ed. 2d 28 (1975), and 92 N.J. 158, 456 A.2d 390 (1983) (Mount Laurel II). After enactment of the Fair Housing Act of 1985 (FHA), N.J.S.A. 52:27D-301 to -329, the Supreme Court held that Warren was entitled to transfer the case to COAH. Hills Dev. Co. v. Township of Bernards, 103 N.J. 1, 47-56, 67-68, 510 A.2d 621 (1986). COAH treated Warren's motion for transfer as a petition for substantive certification, see id. at 38 n. 10, 510 A.2d 621, and the Public Advocate filed objections to the petition. COAH rejected the Public Advocate's objections and granted substantive certification to Warren's fair share plan.

COAH determined that Warren's fair share of housing affordable to lower income households is 367 units. Warren's certified fair share plan provides for the satisfaction of this obligation through the rehabilitation of 34 indigenous substandard units, the construction of 145 new units, of which 88 will be set-aside units built in inclusionary developments and 57 will be lower income units built on land owned by Warren, the execution of a regional contribution agreement (RCA) under which Warren will pay $4,399,000 to the City of New Brunswick for the construction or rehabilitation of 166 lower income units in New Brunswick and a 22 unit rental bonus credit for 66 units which will be rented to lower income persons.*fn1 Warren's fair share plan further provides, as permitted by COAH's regulations,

that households which presently reside in Warren or which have a member who works in Warren shall be granted an occupancy preference with respect to the purchase or rental of new lower income housing constructed in the municipality.

The Public Advocate argues that Warren's RCA with New Brunswick and the occupancy preference violate the Mount Laurel doctrine by perpetuating exclusionary zoning and violate constitutional and statutory prohibitions against racial discrimination by perpetuating racial stratification within the housing region in which Warren is located.*fn2 The Public Advocate also argues that COAH's standards of affordability for Mount Laurel housing violate the Mount Laurel doctrine by not providing a realistic opportunity for the construction of housing affordable to households earning less than 40% of the median household income in the region. We reject these arguments and therefore affirm COAH's decision granting substantive certification to Warren's fair share plan.*fn3


Before discussing the Public Advocate's challenge to Warren's fair share plan, we must consider several preliminary procedural arguments presented by COAH and the Public Advocate.


COAH contends that the Public Advocate's appeal should be dismissed because it constitutes an untimely collateral attack upon regulations adopted in 1986. The Public Advocate responds that the appeal does not challenge the validity of COAH's regulations on their face but only as applied in Warren's fair share plan.

We agree with COAH that this appeal is in essence a collateral attack upon its regulations, because the practical effect of a decision in the Public Advocate's favor would be to invalidate COAH's regulations or at least to severely limit their scope of operation. Thus, the Public Advocate's argument that Warren's plan fails to provide housing affordable to households with income below 40% of the median income in the region is a direct challenge to N.J.A.C. 5:92-14.2, which requires a municipality to insure that lower income units are affordable to households with income ranging from 40% to 80% of regional median income. Similarly, the Public Advocate's argument that the occupancy preference authorized by N.J.A.C. 5:92-15.1 is exclusionary and racially discriminatory would appear equally applicable to most suburban municipalities that adopt fair share plans which include an occupancy preference. And the Public Advocate's argument that the RCA between Warren and New Brunswick is exclusionary and racially discriminatory, because it results in a shift of lower income housing from a municipality with a small number of lower income households and few minority residents to a municipality with a high percentage of lower income households and minorities, would be equally applicable to almost any other agreement likely to be entered into pursuant to COAH's regulations.*fn4 [247 NJSuper Page 158] But while we agree with COAH's characterization of this appeal as a collateral attack on the validity of the agency's regulations, it does not follow that the appeal should be dismissed as untimely. Generally, the 45-day limit on appeals from final decisions of state agencies imposed by R. 2:4-1(b) does not apply to challenges to the validity of regulations. Bergen Pines County Hosp. v. New Jersey Dep't of Human Servs., 96 N.J. 456, 471 n. 10, 476 A.2d 784 (1984). We recognize that an appeal challenging the validity of a regulation may be dismissed if the appellant fails to participate in the proceeding resulting in its adoption or fails to file a timely notice of appeal, and the regulation is subsequently relied upon by affected parties. Id. at 474-76, 476 A.2d 784. We also recognize that the Public Advocate did not object to COAH's regulations at the time they were proposed and did not file a prompt appeal challenging their validity. Furthermore, Warren and other affected municipalities have relied upon the regulations in developing their fair share plans. In fact, the Public Advocate did not move for a stay of COAH's grant of substantive certification to Warren, and we were advised at oral argument that Warren has now substantially implemented its fair share plan by, among other things, distributing several million dollars to New Brunswick in accordance with the terms of the RCA. Nevertheless, the Public Advocate's appeal raises the kind of important public questions of general applicability which the courts are reluctant to dismiss on the ground of untimeliness. See Township of Franklin v. Board of Educ. of N. Hunterdon Reg. High School, 74 N.J. 345, 347-48, 378 A.2d 218 (1977), cert. den., 435 U.S. 950, 98 S. Ct. 1576, 55 L. Ed. 2d 800 (1978). In addition, to a limited extent the Public Advocate's arguments go beyond simply challenging COAH's regulations. Moreover, any possible prejudice to Warren or New Brunswick from the Public Advocate's untimely challenges to COAH's regulations could be obviated by appropriate limitations on the scope of relief in the event the Public Advocate

were to prevail. Consequently, we conclude that this appeal should not be dismissed as untimely.


The Public Advocate argues that Warren's petition for substantive certification should have been referred to the Office of Administrative Law (OAL), because N.J.S.A. 52:27D-315(c) requires referral if mediation is unsuccessful, regardless of whether there is a contested factual issue. However, we rejected this same argument in Hills Dev. Co. v. Township of Bernards, 229 N.J. Super. 318, 340-41, 551 A.2d 547 (App.Div.1988) and the Public Advocate has not presented any persuasive reason for us to reconsider that conclusion. Although N.J.S.A. 52:27D-315(c) describes the obligation to refer to the OAL in mandatory terms, it does so by express incorporation of the Administrative Procedure Act. In our view, this incorporation encompasses N.J.S.A. 52:14F-7, which authorizes the agency with ultimate decision making authority "to determine whether a case is contested."

This conclusion is supported by the legislative history of the FHA. The fair housing bill originally passed by the Legislature expressly provided that COAH's review process should not be considered a "contested case." The bill went on to state: "Any appeal of a council decision granting or denying substantive certification shall be to a trial court, which shall conduct an adjudicatory hearing." However, this bill was conditionally vetoed by Governor Kean in part because:

The bill as currently drafted creates a novel mediation and review process and specifically provides that the review process should not be considered a contested case under the Administrative Procedure Act, subject to the procedures of that act and a hearing by an administrative law judge. If mediation and review by the housing council is unsuccessful, the matter will be heard in the trial court of the Superior Court.

I recommend, in place of the special procedures set forth in this bill, the regular administrative law procedure. Under this approach, if the mediation by the council is unsuccessful, the dispute will be transferred to the Office of Administrative Law as a contested case for a hearing pursuant to its rules.

[Governor's Conditional Veto Message Regarding Senate Committee Substitute for Senate Bill 2046 and Senate Bill 2334, p. 7 (April 26, 1985)].

The key point of this conditional veto message was the Governor's insistence that COAH's certification proceedings follow "regular administrative law procedure," which includes a discretionary determination by the agency head, here COAH, whether a matter involves contested material issues of fact requiring an evidentiary hearing. See In re Uniform Admin. Procedure Rules, 90 N.J. 85, 105, 447 A.2d 151 (1982).

We also agree with COAH's conclusion that the Public Advocate's objections to Warren's fair share plan do not present any contested material factual issue. Those objections are based on 1980 census data which show, among other things, that a smaller percentage of lower income households reside in Warren than the average in the region, that little affordable housing currently exists in Warren, that New Brunswick has a disproportionately large percentage of lower income households, that Warren has a smaller percentage of blacks and hispanics than the average in the region and that the percentage of these minorities residing in New Brunswick exceeds the regional average. None of this factual data is disputed by respondents. Consequently, the Public Advocate's various challenges to COAH's regulations and Warren's fair share plan adopted in conformity with those regulations rest on uncontested facts. Under these circumstances, an evidentiary hearing is unnecessary. See In re Solid Waste Util. Customer Lists, 106 N.J. 508, 517, 524 A.2d 386 (1987) ("It is only when the proposed administrative action is based on disputed adjudicative facts that an evidentiary hearing is mandated"); see also Van Dalen v. Washington Tp., 120 N.J. 234, 245, 576 A.2d 819 (1990).


For substantially the same reasons, we reject the Public Advocate's argument that COAH failed to make adequate findings of fact and did not give sufficient reasons for overruling the Public Advocate's objections to Warren's fair

share plan. An administrative agency is required to provide an adequate explanation of the basis of its decision. Riverside Gen. Hosp. v. New Jersey Hosp. Rate Setting Comm'n, 98 N.J. 458, 468-69, 487 A.2d 714 (1985). But where there are no contested material issues of fact, an agency is not required to repeat or even summarize evidential data. "It is sufficient if it can be determined from the [agency's decision] without question or doubt what facts and factors led to the ultimate conclusions reached." Id. at 469, 487 A.2d 714 (quoting In re Howard Sav. Inst. of Newark, 32 N.J. 29, 53, 159 A.2d 113 (1960)).

Although COAH did not respond directly to the Public Advocate's objections to Warren's fair share plan, it adequately responded to substantially the same objections in an opinion dated March 21, 1988 issued in connection with Holmdel Township's fair share plan.*fn5 That opinion notes that RCAs and occupancy preferences are sanctioned by law and are likely to create affordable housing where it did not exist previously. The opinion further notes that the FHA only permits a sending municipality to transfer a maximum of 50% of its obligation to a receiving municipality. The opinion also notes that the occupancy preference is limited to 50% of lower income units constructed within a municipality and includes individuals who work in the municipality and presently reside elsewhere. Thus, COAH clearly explained its reasons for rejecting the Public Advocate's objections to Holmdel's fair share plan, which are essentially the same as his objections to Warren's plan. Most importantly, the Public Advocate's objections are essentially legal in nature and therefore can be passed upon by this court

without requiring COAH to make additional findings of fact and conclusions of law.


Regional contribution agreements (RCAs) are expressly authorized by the FHA, which provides in pertinent part that "[a] municipality may propose the transfer of up to 50% of its fair share to another municipality within its housing region by means of a contractual agreement into which two municipalities voluntarily enter." N.J.S.A. 52:27D-312(a). COAH is required to approve an RCA if it finds that "the agreement provides a realistic opportunity for low and moderate income housing within convenient access to employment opportunities, and that the agreement is consistent with sound, comprehensive regional planning." N.J.S.A. 52:27D-312(c). These requirements are mirrored in COAH's regulations. N.J.A.C. 5:91-12.3(c).

The Public Advocate challenges the RCA between Warren and New Brunswick on two grounds: first, that it violates the Mount Laurel doctrine because it will shift the location of proposed Mount Laurel housing from a municipality which has virtually no lower income housing to a municipality which already has a disproportionate share of the region's lower income households, and second, that it violates constitutional and statutory prohibitions against racial discrimination because it will result in the construction of new lower income housing in a municipality which has a disproportionately large number of minorities rather than one which has virtually no minority population.


In Hills Dev. Co. v. Township of Bernards, supra, the Supreme Court held that RCAs are consistent with the Mount Laurel doctrine. The Court noted that the provisions of the FHA authorizing RCAs

seem intended to allow suburban municipalities to transfer a portion of their obligation to urban areas (see § 2g, evincing a legislative intent to encourage

construction, conversion, or rehabilitation of housing in urban areas), thereby aiding in the construction of decent lower income housing in the area where most lower income households are found, provided, however, that such areas are "within convenient access to employment opportunities," and conform to "sound comprehensive regional planning." § 12c. [103 N.J. at 38, 510 A.2d 621].

The Court also noted its general agreement with the reasoning of the lower court's opinion, id., at 47 n. 13, 510 A.2d 621, which stated:

There are three reasons why this attack upon the validity of the act must be rejected. First, the transfer provision is limited to a maximum of 50% of a municipality's fair share obligation. Therefore, it does not permit a municipality to remain solely an enclave for the rich and middle class. Second, the Court has never said that a municipality's fair share obligation may not be transferred to another municipality. Indeed, it intimated in Mount Laurel I that such a transfer might be appropriate:

Frequently it might be sounder to have more of such housing, like some specialized land uses, in one municipality in a region than in another, because of greater availability of suitable land, location of employment, accessibility of public transportation or some other significant reason. But, under present New Jersey legislation, zoning must be on an individual municipal basis, rather than regionally. So long as that situation persists under the present tax structure, or in the absence of some kind of binding agreement among all the municipalities of a region, we feel that every municipality therein must bear its fair share of the regional burden. [67 N.J. at 189, 336 A.2d 713]

This view of the Mount Laurel doctrine was cited with apparent approval in Mount Laurel II. 92 N.J. at 237-238 [456 A.2d 390]. Therefore, the transfer provisions of the act may be considered an authorization for "binding agreements" between municipalities which may result in a regional zoning plan for lower income housing which is "sounder" than such zoning "on an individual municipal basis." Third, any proposal to transfer part of a municipality's Mount Laurel obligation to another municipality must be approved by the council, which must determine that "the agreement provides a realistic opportunity for low and moderate income housing within convenient access to employment opportunities, and . . . is consistent with sound comprehensive regional planning." L. 1985, c. 222, § 12(c). It must be assumed that the council will exercise this approval power in a manner which appropriately implements the objectives of the Mount Laurel doctrine. [ Morris Cty. Fair Hous. Council v. Boonton Tp., 209 N.J. Super. 393, 431-32, 507 A.2d 768 (Law Div.1985)].

Despite the Court's unequivocal holding in Hills that the statutory authorization for RCAs is constitutional, the Public Advocate contends that "[a] regional contribution agreement between a municipality that has few housing opportunities for poor people and one that already has an over-concentration of

poor people thus fosters and perpetuates a destructive pattern of economic segregation that the constitutional prohibition on exclusionary zoning seeks to undo." The Public Advocate disclaims any intent to attack the constitutionality of N.J.S.A. 52:27D-312. Instead, he rests his argument upon the requirement of N.J.S.A. 52:27D-312(c) that an RCA must be "in accordance with sound, comprehensive regional planning," and the finding set forth in N.J.S.A. 52:27D-302(g) that "the provision of housing in urban areas must be balanced with the need to provide housing throughout the State for the free mobility of citizens."

However, the express legislative authorization for a municipality to satisfy up to 50% of its fair share housing obligation through an RCA clearly indicates that the Legislature considered such an agreement to be consistent with "sound, comprehensive regional planning" and the appropriate balance between the public need to construct and rehabilitate housing in urban areas and the need to provide affordable housing in suburban areas. Furthermore, it is clear that both the Legislature and the Court in Hills contemplated that RCAs would involve the transfer of lower income housing units from relatively wealthy suburban municipalities to urban municipalities with high concentrations of lower income households. Indeed, the essential purpose of RCAs is to promote the rehabilitation of the housing stock of urban areas occupied by lower income households.

Moreover, the record reveals that the particular RCA between Warren and New Brunswick makes good planning sense. Warren is a sprawling suburban municipality with no public transportation and with employment opportunities limited to an area along Route 78. On the other hand, New Brunswick is well served by bus and rail transit which ...

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