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Repair Master, Inc. v. Borough of Paulsboro

June 3, 2002


On appeal from the Superior Court of New Jersey, Law Division, Gloucester County, L- 223-02.

Before Judges King, Cuff and Wecker.

The opinion of the court was delivered by: King, P.J.A.D.


Argued: May 8, 2002

This case involves the power of a municipality to place a moratorium on the issuance of licenses for residential rental properties. This moratorium is limited to single-family and non-owner-occupied duplex units. We conclude that the municipality has no power to regulate the nature of the occupancy of residential properties under either the general police power or the municipal land use regulatory power. The municipality's attempt to bar new tenancies in the Borough of Paulsboro for an indeterminate period is improper.


Paulsboro is located in Gloucester County on the Delaware River. The record reflects that in 2000 Paulsboro had a population of 6,160 people living in 2,353 households with an average household of 2.61 persons. Paulsboro has a high rate of renter-occupied housing units. Of the 2,353 occupied units in Paulsboro, 931 or 39.5% are renter-occupied, 16.9% higher than the national average. Paulsboro's per capita income for 2001 was estimated to be $13,992, 59.1% of the national average. The median household income in Paulsboro for 2001 was $29,412 or 65.3% of the national average. Paulboro's median household wealth was $68,871 for 2001, 73.5% of the national average.

On May 6, 1997 Paulsboro adopted Ordinance 02-997 authorizing licensing of residential real estate to insure "proper maintenance" and "to protect the lives and property of the Borough residents." Paulsboro has made extensive efforts in recent years to bolster its owner-occupied housing stock and to encourage home-ownership, according to its counsel. This effort included cooperation with the federal Department of Housing and Urban Development and state, county, private sector and faith- based initiatives. These efforts look to the rehabilitation of vacant, abandoned and substandard housing for return to the market for home-ownership. We do not doubt the Borough's alleged laudable motives to revitalize its owner-occupied housing stock. The legality of the means is the novel question here.

The moratorium was prompted by the perception that the increased number of rental units had a negative effect upon the real estate market, drove up municipal operating costs, negatively impacted tax rates, and placed additional strain upon the school system. This perception inspired Paulsboro to explore the economic and social justification for a moratorium on the conversion of owner-occupied housing into rental units. Paulsboro commissioned TRIAD Associates, Renwick and Associates, and Ernest Swiger, Ph.D., to conduct a study to analyze the socio-economic impacts, fiscal impacts, real estate market effects, and tax base implications of the conversion of single family owner-occupied dwellings to renter-occupied units throughout the community.

In a letter dated July 16, 2001 Michael Zumpino, President of TRIAD Associates, stated "[a]s a result of our initial research, it is somewhat apparent that the continued conversion of single-family homes to rental properties does not appear to be in the best interest of maintaining a balanced inventory of owner and renter occupied housing units. . . . To the extent that the Study may find that the unmanaged proliferation of rental units, brought on by the continued conversion of owner- occupied single-family homes to rental units, is detrimental, it may be appropriate for the Borough to, at this time, delay action on any further requests for issuance of rental licenses until the Study is complete."

Based on these initial findings, the Borough Council later in 2001 enacted Resolution 160.01 (undated), the initial moratorium resolution. This resolution established a moratorium on the issuance of new rental licenses for single-family detached and single-family attached residences, and for "any other rental property not having one or more units occupied by the owner."

The TRIAD Study was completed in January of 2002. The study reached this conclusion:

[T]he proportion of renter-to owner- occupied-tenure in the borough's housing units is well beyond the threshold level for balanced, healthy neighborhoods consisting of single-family housing. This excessive presence of rental tenure throughout the municipality has adversely impacted the socio-economic fabric of the community in a variety of areas, including the housing market, the commercial real estate market, the municipal tax base, demand for police services, incidence of code enforcement violations, and increased presence of children-at-risk throughout the local school system.

The community has, thus, exceeded the point of "balanced housing" and now faces the challenge of re-establishing that balance to ameliorate some of the socio-economic maladies that grow out of it.

The TRIAD study recommended maintaining the moratorium on the conversion of owner-occupied rental units.

As discussed, information relating to real estate property values and transaction activity, code enforcement violations, police calls for service, commercial ratable base development, and school services points to the conclusion that the ratio of renter- to-owner occupied housing in the borough, at four to six times the threshold level for healthy neighborhoods, is already too high to maintain stability throughout the borough. The range and weight of the evidence indicates that past and continued conversion to renter-occupied housing will be unhealthy for the borough, producing increased social costs in the form of decreases in real property values and market activity, increase in code enforcement violations and associated physical blight, increased demand for police services, and increased educational challenges for the school system. Specifically, we recommend the moratorium be maintained on each of the following rental unit types. Note that we would provide an exception only for the units within these classifications that contain the suffix O, i.e. those that are owner-occupied:

SFD (Single Family Detached) SFA (Single Family Attached) DPL (Duplex - 2 units)

TPL (Triplex - 3 units) QD (Quad - 4 units)

Following this recommendation, on February 5, 2002, the Borough Council adopted Resolution 53.02, the current moratorium, which maintained the ban on the issuance of new rental licenses, without an expiration date. The resolution states in pertinent part:

WHEREAS, the Borough of Paulsboro has enacted an ordinance governing the registration of rental properties and the issuance of licenses for the operation of such properties; and WHEREAS, the Borough, in accordance with §59B-10(B) of the Code of the Borough, may declare moratoria on the issuance of licenses of such classification or classifications of rental properties to ensure the health and welfare of the Borough and its residents; and WHEREAS, the Borough commissioned a study of the effect of rental housing activities in the Borough; and WHEREAS, the aforementioned study, conducted by Triad Associates in association with Renwick & Associates and Ernest Swiger, Ph.D., concludes that the proportion of the rental population has grown to a level that is imbalanced and unhealthy for the fabric of the community to the point of being severely adverse to the general welfare of the Borough and its residents;

NOW, THEREFORE, BE IT RESOLVED, by the Mayor and Borough Council of the Borough of Paulsboro, County of Gloucester and State of New Jersey, on this 5th day of February, 2002 that in order to impede the severely deleterious effects of the proliferation of rental properties in the Borough on the residents of the Borough as more specifically set forth in the Study of the Impact of the Rental Housing Industry in the Borough of Paulsboro, attached to this resolution, there is hereby maintained a moratorium on the issuance of any new license by the Borough for any rental property that would be classified under §59B-4(I) as "SFD," "SFA," "DPL," "TPL," "QD," and "RH" [Rooming House]. Based upon the findings of the aforementioned study, there shall be no limit on the issuance of licenses under Chapter 59B of the Borough Code for rental properties as follows: (a) these that would be classified as "CPL;" [Complex - 5 or more units] (b) for such properties that would be classified as "CM" [Commercial - unit is located in a commercial business structure] and that contain a viable commercial entity; and (c) any classification, including those set forth above, with an "O" suffix; provided, however, that the owner occupy the property as his, her or their primary residence.

Plaintiff Repair Master is the owner of five rental units in Paulsboro. Repair Master applied for rental licences and was refused. Its counsel wrote to the Borough solicitor requesting the issuance of rental licenses for the five properties but was informed that the moratorium would remain in place and no rental licenses would be issued for any new rental properties. ...

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