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In re Township of Warren

Decided: April 1, 1993.

IN RE PETITION FOR SUBSTANTIVE CERTIFICATION FILED BY THE TOWNSHIP OF WARREN; IN RE PETITION FOR SUBSTANTIVE CERTIFICATION FILED BY THE TOWNSHIP OF DENVILLE; IN RE PETITION FOR SUBSTANTIVE CERTIFICATION FILED BY THE BOROUGH OF ROSELAND; IN RE PETITION FOR SUBSTANTIVE CERTIFICATION FILED BY THE TOWNSHIP OF HOLMDEL; IN RE PETITION FOR SUBSTANTIVE CERTIFICATION FILED BY THE TOWNSHIP OF HILLSBOROUGH; IN RE PETITION FOR SUBSTANTIVE CERTIFICATION FILED BY THE BOROUGH OF BLOOMINGDALE


On appeal from the Superior Court, Appellate Division, whose opinions are reported at 247 N.J. Super. 146 (1991) (In re Township of Warren); 247 N.J. Super. 186 (1991) (In re Township of Denville); and 247 N.J. Super. 203 (1991) (In re Borough of Roseland).

Stein, Wilentz, Clifford, Handler, O'Hern, Pollock, Garibaldi

Stein

The opinion of the court was delivered by

STEIN, J.

These appeals concern the validity of a regulation adopted by the Council on Affordable Housing (COAH) authorizing municipalities that seek substantive certification of regional fair-share plans for low- and moderate-income housing to make available an occupancy preference for fifty percent of such housing to income-eligible households that reside or work in the municipality.

Pursuant to N.J.S.A. 52:27D-314 of the Fair Housing Act (L. 1985, c. 222), COAH granted substantive certification to the housing-element and fair-share plans filed by the Townships of Denville, Hillsborough, Holmdel, and Warren, and the Boroughs of Bloomingdale and Roseland. The Public Advocate of New Jersey (Public Advocate) appealed all of COAH's orders, and the Appellate Division affirmed the grant of substantive certification to each of the six municipalities. Three of the Appellate Division decisions are reported: In re Petition for Substantive Certification Filed by the Township of Warren, 247 N.J. Super. 146 (1991); In re Petition for Substantive Certification Filed by the Township of Denville, 247 N.J. Super. 186 (1991); In re Petition for Substantive Certification Filed by the Borough of Roseland, 247 N.J. Super. 203 (1991). In each of the six appeals, Judge Shebell Dissented from that portion of the court's opinion upholding the validity of the fifty-percent-occupancy preference, which had been incorporated in each of the municipality's fair-share plans in accordance with COAH's authorizing regulation, N.J.A.C. 5:92-15.1. In all six cases the Public Advocate appeals to this Court as of right, Rule 2:2-1, as do the Morris County Fair Housing Council and the Morris County branch of the NAACP but only in respect of In re Township of Denville, supra, 247 N.J. Super. 186.

I

The six municipal parties to this appeal had been defendants in actions instituted in the Law Division, prior to adoption of the Fair Housing Act, N.J.S.A. 52:27D-301 to -329, in which their zoning ordinances were challenged as violative of the Mount Laurel doctrine for their failure to provide a reasonable opportunity for the construction of housing affordable to lower-income households. See Southern Burlington County NAACP v. Township of Mount Laurel, 67 N.J. 151 (Mount Laurel I), appeal dismissed and cert. denied, 423 U.S. 808, 96 S. Ct. 18, 46 L. Ed. 2d 28 (1975), and 92 N.J. 158 (1983) (Mount Laurel II). After adoption of the Fair Housing Act, the cases were transferred to COAH pursuant to N.J.S.A. 52:27D-316, and the municipalities filed housing elements and fair-share housing plans with COAH. See N.J.S.A. 52:27D-310, 311. The municipalities' requests to transfer the litigation to COAH from the Law Division were treated by COAH as equivalent to petitions for substantive certification. See Hills Dev. Co. v. Township of Bernards, 103 N.J. 1, 38 n.10 (1986). The Public Advocate and other parties filed objections to the municipal plans.*fn1 With respect to each of the six municipalities, the Public Advocate objected to the fifty-percent-occupancy preference for residents and workers, emphasizing that the percentage of minority residents in each of the municipalities was substantially smaller than the percentage of minority residents in their related housing regions. In support of that assertion, the Public Advocate presented to COAH the following percentage comparisons of minority (African-American and Hispanic) households for each of the municipalities and their respective fair-share regions, based on 1980 census data:

Municipal Percentage Regional Percentage

of Minority Residents of Minority Residents

Bloomingdale 1.5 20.9

Denville 1.1 52.0

Hillsborough 2.8 8.9

Holmdel 1.7 8.6

Roseland 1.0 52.0

Warren 1.3 8.9

The Public Advocate contended that the occupancy preference constituted a racially-discriminatory standard that perpetuated exclusionary zoning in violation of the New Jersey Constitution, article 1, section 5; the Fair Housing Act; the federal Fair Housing Act, Title VIII of the Civil Rights Act of 1968, 42 U.S.C.A. §§ 3601-3631 (federal Fair Housing Act or Title VIII); and the Law Against Discrimination (LAD), N.J.S.A. 10:5-1 to -42.

A mediation and review process ensued, see N.J.S.A. 52:27D-315, in the course of which some of the technical objections to the various fair-housing plans were resolved. The mediators uniformly declined to address the challenges to the occupancy preferences, viewing the Public Advocate's position as tantamount to an assertion that COAH's regulation authorizing the occupancy preference was invalid. On the basis that issues that had been submitted to mediation remained unresolved, the Public Advocate requested that the occupancy-preference issue be transferred to the Office of Administrative Law as a contested case. See N.J.S.A. 52:27D-315(c). COAH rejected the Public Advocate's request for an adjudicative hearing, and proceeded to adopt resolutions granting substantive certification to the housing elements and fair-share plans of each of the municipalities. In the course of its deliberations concerning the Holmdel petition, COAH issued an opinion that summarily addressed the various challenges to the validity of the occupancy preference:

To the extent that [the Public Advocate's] concerns [about the occupancy preference] arise out of alleged racial disparities between municipalities, such actions are beyond the Council's mandate as set forth in the Fair Housing Act, and the Council concludes that it is thus an inappropriate forum in which to seek to redress such grievances.

The Appellate Division comprehensively addressed the validity of the occupancy preference only in its Warren Township opinion, supra, 247 N.J. Super. 146. The court categorized the Public Advocate's contentions as constituting a facial challenge to the validity of N.J.A.C. 5:92-15.1, the occupancy-preference regulation. Id. at 157. That regulation provides:

For all low and moderate income housing units provided in inclusionary developments, municipalities shall establish occupancy such that initially, no more than 50 percent of the units are made available to income eligible households that reside in the municipality or work in the municipality and reside elsewhere.

The Appellate Division acknowledged that COAH had refused the requested referral of the occupancy preference's validity to the Office of Administrative Law, but observed that no adjudicative hearing was required because no material factual data were in dispute. Id. at 159-60. The court upheld the validity of the occupancy preference as an appropriate exercise of COAH's rulemaking power under the Fair Housing Act. Id. at 170-74. The court rejected the contention that the occupancy preference violated either the federal or state constitutions based on the absence of any allegation that the occupancy preference was intentionally discriminatory. Id. at 175. The Appellate Division also concluded that even if the occupancy preference had a disparate racial impact, it would not violate federal or state statutes because it furthered legitimate governmental interests. Id. at 176-77. The Dissenting member concluded that the occupancy preference violated the constitutionally-protected right to travel, id. at 183-86, also noting that the preference lacked statutory authority, id. at 183, and "disserved the purposes of our Mount Laurel holdings." Id. at 186.

In its Warren Township opinion, the Appellate Division also addressed and sustained the validity of Regional Contribution Agreements (RCAs), expressly authorized by the Fair Housing Act, N.J.S.A. 52:27D-312a, permitting two municipalities to contract for the transfer by one to the other of up to fifty percent of the transferor's regional fair share of low- and moderate-income housing. The court concluded that such agreements violated neither the Mount Laurel doctrine nor constitutional and statutory prohibitions against racial discrimination. Id. at 162-70. The court also rejected the Public Advocate's contention that COAH's regulations authorizing municipal fair-share plans violate the Mount Laurel doctrine because of their failure to provide housing units affordable to households earning less than forty percent of the region's median income. Id. at 179-83. The Public Advocate filed petitions for certification in all six cases seeking review of the Appellate Division's determinations concerning the validity of the RCAs and the validity of COAH's regulations that omit any requirement for housing affordable to households earning less than forty percent of the region's median income. We denied the petitions for certification, 127 N.J. 557 (1992).

II

A. The Mount Laurel Doctrine and the Fair Housing Act.

On an intuitive level, the arguments offered to support the occupancy preference appear to be as plausible as those presented against it. Proponents contend that municipalities that satisfy their regional fair-share obligation to provide affordable housing should be permitted to make available some of that housing to eligible residents and workers in that municipality, thereby addressing the needs of households with an existing connection to the community and increasing local support for the governing body's decision to seek COAH certification for a fair-housing plan that satisfies the municipality's regional fair share of low- and moderate-income housing. Opponents assert that the exclusionary aspects of the occupancy preference could not conceivably be compatible with the statutory scheme of the Fair Housing Act and the methodology of its implementing regulations adopted, in part, to ameliorate the effects of decades of exclusionary zoning. Although intuition may enlighten our analysis of the validity of the occupancy preference, we gain deeper and more reliable insight from the origins and evolution of the Mount Laurel doctrine and the passage of the Fair Housing Act.

In Mount Laurel I, Justice Hall pointedly framed the legal issue before the Court:

Whether a developing municipality like Mount Laurel may validly, by a system of land use regulation, make it physically and economically impossible to provide low and moderate income housing in the municipality for the various categories of persons who need and want it and thereby * * * exclude such people from living within its confines because of the limited extent of their income and resources.

[67 N.J. at 173.]

The Court observed that "the effect of Mount Laurel's land use regulation has been to prevent various categories of persons from living in the township because of the limited extent of their income and resources." Id. at 159. The Court noted that plaintiffs, representing poor minorities not currently residing in Mount Laurel, were not the only category of citizens excluded because of restrictive zoning:

We have reference to young and elderly couples, single persons and large, growing families not in the poverty class, but who still cannot afford the only kinds of housing realistically permitted in most places -- relatively high-priced, single-family detached dwellings on sizeable lots and, in some municipalities, expensive apartments.

[Ibid.]

The Court also acknowledged and accepted the representation of counsel for Mount Laurel that the Township was not motivated by "any desire or intent to exclude prospective residents on the obviously illegal basis of race, origin, or believed social incompatibility." Ibid. As the trial court had noted, paraphrasing the then-Mayor of the Township, "when a Discussion arose as to low income housing * * * it was the intention of the township committee to take care of the people of Mount Laurel Township but not make any area of Mount Laurel a home for the county." Southern Burlington County NAACP v. Township of Mount Laurel, 119 N.J. Super. 164, 169 (Law Div. 1972). This Court rejected the view that Mount Laurel could discharge its zoning responsibility by providing housing for its own poor only, without addressing the housing needs of low- and moderate- income families within the region who might wish to reside there:

The universal and constant need for such housing is so important and of such broad public interest that the general welfare which developing municipalities like Mount Laurel must consider extends beyond their boundaries and cannot be parochially confined to the claimed good of the particular municipality. It has to follow that, broadly speaking, the presumptive obligation arises for each such municipality affirmatively to plan and provide, by its land use regulations, the reasonable opportunity for an appropriate variety and choice of housing, including, of course, low and moderate cost housing, to meet the needs, desires and resources of all categories of people who may desire to live within its boundaries.

[67 N.J. at 179.]

[A] developing municipality's obligation to afford the opportunity for decent and adequate low and moderate income housing extends at least to "* * * the municipality's fair share of the present and prospective regional need therefor."

[Id. at 188.]

Eight years later in Mount Laurel II, this Court reaffirmed the constitutional underpinning of the Mount Laurel doctrine, and emphasized that the lawful exercise of the zoning power compels municipalities to address not only their own needs but regional needs as well:

When the exercise of that power by a municipality affects something as fundamental as housing, the general welfare includes more than the welfare of that municipality and its citizens: it also includes the general welfare--in this case the housing needs--of those residing outside of the municipality but within the region that contributes to the housing demand within the municipality. Municipal land use regulations that conflict with the general welfare thus defined abuse the police power and are unconstitutional. In particular, those regulations that do not provide the requisite opportunity for a fair share of the region's need for low and moderate income housing conflict with the general welfare and violate the state constitutional requirements of substantive due process and equal protection.

[92 N.J. at 208-09.]

In Mount Laurel II, we also considered and rejected the adequacy of the zoning-ordinance amendment that had been adopted by Mount Laurel Township in response to our 1975 decision. We noted that the Township had calculated its indigenous need, based on the number of deteriorated or dilapidated housing units in the Township, to be 103 units, and had calculated its fair share of the prospective regional housing need to be 515 units. The zoning-ordinance amendments adopted by the Township would have permitted construction of 131 units of low- and moderate-income housing, only twenty-eight units more than the number required to meet the Township's indigenous needs. Id. at 299-300. We concluded that the Township's revised ordinance "fails completely to comply with the mandate of Mount Laurel I," id. at 302, that even if the entire 131 units of low- and moderate-income housing were to be built, that number "would fall far short of Mount Laurel's fair share of the prospective regional low income housing need * * * ." Id. at 302-03.

In the Fair Housing Act, the Legislature expressly acknowledged the constitutional obligation of every growth-area municipality "to provide through its land use regulations a realistic opportunity for a fair share of its region's present and prospective needs for housing for low and moderate income families," N.J.S.A. 52:27D-302a, and declared the statutory scheme of the Act to be one that "comprehends a low and moderate income housing planning and financing mechanism in accordance with regional considerations and sound planning concepts which satisfies the constitutional obligation enunciated by the Supreme Court." N.J.S.A. 52:27D-303. The clear and recurring theme of the Fair Housing Act is its recognition and implementation of the requirement that municipalities must provide through their zoning ordinance a realistic opportunity to satisfy their fair share of their region's present and prospective need for low- and moderate-income housing. N.J.S.A. 52:27D-302a, d, e; -311a, -314a, b. Although the Fair Housing Act recognizes the relevance of sound planning concepts, N.J.S.A. 52:27D-303, and acknowledges the importance of encouraging housing construction in urban areas, specifically authorizing Regional Contribution Agreements that permit municipalities to transfer up to fifty percent of their fair share obligation to another municipality "in accordance with sound, comprehensive regional planning," N.J.S.A. 52:27D-312a, c, the Legislature nevertheless determined 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." N.J.S.A. 52:27D-302g.

B. Calculation of Municipal Fair Share of Present and Prospective Need.

The Fair Housing Act itself is silent with respect to how and to what extent a municipality may address needs relating to its own residents. The Act does not expressly authorize municipalities to establish occupancy preferences for their own residents and workers in respect of low- and moderate-income housing constructed to meet its fair share of the region's needs. The Public Advocate stresses that under the regulations implementing the Fair Housing Act, COAH's basic methodology for calculating each municipality's fair share of its region's need for low- and moderate-income housing cannot be reconciled with an occupancy preference for residents and workers.

The Public Advocate emphasizes that the data from which those municipalities' fair shares were derived are primarily regional rather than local and, as a result, the occupancy preference provides low- and moderate-income housing on a preferential basis to households that did not comprise the data base from which municipal fair share was calculated. That contention invites a searching examination and explanation of COAH's methodology for calculating regional need and municipal fair share.

COAH's methodology is substantially similar to that used by Judge Serpentelli in AMG Realty Co. v. Township of Warren, 207 N.J. Super. 388, 398-410 (Law Div. 1984). Regional need is composed of a combination of present need and prospective need. COAH uses a four-factor formula to allocate the fair share of prospective regional need among municipalities in the region and applies three of those ...


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