On appeal from the Council on Affordable Housing.
Before Judges Kestin, Cuff and Lario.
The opinion of the court was delivered by: Kestin, P.J.A.D.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
These seven related appeals, with common issues, were scheduled for argument and consideration together. We consolidate them for the purposes of this opinion.
The Council on Affordable Housing (COAH) adopted interim procedural rules in N.J.A.C. 5:91-14, effective November 1, 1999, designed to address the anticipated time gap between the expiration of its second-round cycle of low-and moderate-income housing requirements and the promulgation of its third-round methodology and rules. Those regulations, their substantive counterparts, and their predecessor provisions have been designed to implement the Mount Laurel cases*fn1 and the provisions of the Fair Housing Act (FHA), N.J.S.A. 52:27D-301 to -329, adopted initially in 1985. These appeals concern only N.J.A.C. 5:91-14.3, which provides a mechanism for municipalities previously certified in the second round to receive an extension of their substantive certification status and, therefore, further protection from civil action remedies, for up to one year following the adoption of the third-round rules, well beyond the previously scheduled 1999 expiration of second-round standards and methodology.
Specifically, N.J.A.C. 5:91-14.3(a) allows COAH to grant such"extended substantive certification" if a municipality:
1. Requests the extension;
2. Commits to continuing to implement the certified second round plan; and
3. Commits to addressing its third round fair share obligation with a newly adopted housing element and fair share plan.
A second subsection, N.J.S.A. 5:91-14.3(b) establishes the mechanism for a municipality"[t]o remain under the jurisdiction of [COAH.]" The regulation does not specify when the third round rules will be promulgated.
In dealing with the issues advanced by the parties, we are mindful of the Supreme Court's order of April 27, 2004, recognizing COAH's"obligation... under N.J.A.C. 1:30-6.2(c) to promulgate its Third Round Fair Share Methodology regulations no later than October 6, 2004, or the proposal expires[.]" In re Failure of New Jersey Council on Affordable Housing to Adopt Third Round Fair Share Methodology and to Allocate Third Round Fair Share Obligations, 180 N.J. 148 (2004). We are also aware of COAH's recently announced reproposal of its third-round methodology rules with public hearings scheduled thereon during the month of September 2004. See 36 N.J.R. 3691-874 (Aug. 16, 2004).
Appellants in these seven appeals are the New Jersey Builders Association (NJBA), the Coalition of Affordable Housing and the Environment (Coalition), Toll Brothers, Inc. (Toll Brothers), Roxbury 80, L.L.C. (Roxbury 80), and Anthony Bailes, et al. (Bailes). They challenge COAH's adoption, readoption and implementation of N.J.A.C. 5:91-14.3. On the whole, appellants raise similar arguments. They contend that N.J.A.C. 5:91-14.3 on its face and as applied, is ultra vires, violates the State Constitution and the intent and goals of the FHA, and frustrates the essential holdings in the Mount Laurel cases and in Hills Dev. Co. v. Bernards Tp., 103 N.J. 1 (1986). Appellants also argue that the review process embodied in N.J.A.C. 5:91-14.3 violates the State Constitution and the FHA, and that the procedures provided in that regulation--specifically, the lack of any requirement for public notice, comment and hearing-- violate State and federal constitutional rights to procedural due process, principles of administrative fairness underlying the Administrative Procedure Act ("APA"), N.J.S.A. 52:14B-1 to -15, and the FHA. One appellant, Roxbury 80, argues that the regulation frustrates the jurisdiction of the Law Division in a pending case.
Respondents contend, inter alia, that NJBA and the Coalition lack standing to challenge the regulation, and that all of the appeals are time-barred. Respondents also argue that the challenge in one case, A-795-02T5, is moot, as it involves a now expired six-month extension of COAH's procedural rules in chapter 91 of Title 5 of the New Jersey Administrative Code.
These appeals have foundations in State constitutional law and legislative enactments. An elucidation of those bases, as well as the administrative background and procedural history of the matters, is essential to a full understanding of the issues.
COAH was established by the Legislature to provide an administrative mechanism for implementing the FHA, see N.J.S.A. 52:27D-305, with its underlying policy, in recognition of the Supreme Court's holdings in the Mount Laurel cases, that"every municipality in a growth area has a constitutional obligation 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."*fn2 N.J.S.A. 52:27D-302(a). The Legislature further illuminated its policies and purpose by declaring: that the State's preference for the resolution of existing and future disputes involving exclusionary zoning is the mediation and review process set forth in this act and not litigation, and that it is the intention of this act to provide various alternatives to the use of the builder's remedy*fn3 as a method of achieving fair share housing.
The constitutionality of the FHA was upheld by the Supreme Court in Hills Dev. Co., supra.
The FHA's"comprehensive planning and implementation response to [the] constitutional obligation," N.J.S.A. 52:27D- 302c, is to be effected by COAH. See N.J.S.A. 52:27D-305. Among the agency's express responsibilities under the FHA are: from time to time... to:
a. Determine housing regions of the State;
b. Estimate the present and prospective need for low and moderate income housing at the State and regional levels;
c. Adopt criteria and guidelines for:
(1) Municipal determination of its present and prospective fair share of the housing need in a given region[,] as well as any adjustments that are required. N.J.S.A. 52:27D-307.
The FHA directs COAH, upon voluntary petition by a municipality, to review a municipality's housing element and fair share plan and to grant or deny, with or without conditions, substantive certification. N.J.S.A. 52:27D-307 and -314. The process is accomplished with COAH applying criteria and guidelines the agency is authorized to adopt. N.J.S.A. 52:27D-307c.
Until 2002, the fair share obligation was computed for a six-year period. In January 2002, the Legislature modified the period, extending it to ten years. Ibid., as amended by L. 2002, c. 435. The Legislature directed that this change apply to the methodology employed by COAH"for the certification period beginning June 7, 2000 and thereafter." N.J.S.A. 52:27D-307.6. In that amendment, the Legislature also directed COAH to"establish procedures for a realistic opportunity review at the midpoint of the certification period and [to] provide for notice to the public." N.J.S.A. 52:27D-313b.
N.J.S.A. 52:27D-310 contains the standards for the contents of a municipality's fair share plan. Further,"the municipality may provide for its fair share of low and moderate income housing by means of any technique or combination of techniques which provide a realistic opportunity for the provision of the fair share." N.J.S.A. 52:27D-311a. Substantive certification is not to be granted, however, unless a"municipality's fair share plan is consistent with the rules and criteria adopted by... [COAH] and not inconsistent with achievement of the low and moderate income housing needs of the region[.]" N.J.S.A. 52:27D-314a.
Within a two-year period after perfecting its housing element, a municipality may file a petition with COAH for substantive certification. N.J.S.A. 52:27D-313a. The municipality's petition must contain its housing element and fair share plan demonstrating how it proposes to create realistic opportunities for sufficient low-and moderate-income housing to meet its fair share housing obligation. N.J.S.A. 52:27D-311a. The municipality must then publish notice of its petition and make information on its element and ordinances available to the public. N.J.S.A. 52:27D-313a.
If there is no objection from the public, COAH reviews the petition and grants substantive certification upon determining that the municipality's fair share plan is"not inconsistent with achievement of low and moderate income housing needs of the region," N.J.S.A. 52:27D-314a, and the housing element and implementation plan"make the achievement of the municipality's fair share of low and moderate income housing realistically possible[.]" N.J.S.A. 52:27D-314b. COAH is to"engage in a mediation and review process," on request or"if an objection... is filed[.]" N.J.S.A. 52:27D-315a.
When COAH grants substantive certification, the municipality receives various benefits, including effective immunity from exclusionary zoning litigation. That is, substantively certified municipalities are presumed to be constitutionally compliant and, in any exclusionary zoning challenge, this presumption may be overcome only by clear and convincing evidence that the municipality's housing element and implementing ordinances do not provide the realistic opportunity required by law. N.J.S.A. 52:27D-317a.
A municipality's participation in this statutory and regulatory scheme is optional, not mandatory. See Toll Bros., Inc. v. Township of West Windsor, 173 N.J. 502, 514 (2002); Hills Dev. Co., supra, 103 N.J. at 35. A municipality that has filed a housing element may, within two years of that filing, petition COAH for substantive certification or institute an action in the Superior Court for a declaratory judgment granting it repose. N.J.S.A. 52:27D-313a. If a municipality does not petition for substantive certification or seek repose, it is subject to Mount Laurel litigation, including suit for the imposition of a builder's remedy. See Toll Bros., supra, 173 N.J. at 513-14; Hills Dev. Co., supra, 103 N.J. at 35-36.
A prerequisite of the substantive certification process is COAH's determination of each municipality's indigenous housing need and its share of the present and prospective regional low and moderate-income housing need. See N.J.S.A. 52:27D-307. COAH has promulgated procedural and substantive rules setting forth its calculations for determining state and regional needs and municipal pre-credited needs, see N.J.A.C. 5:92,:93, and detailing the procedures governing its evaluation of the voluntarily submitted municipal housing elements and fair share plans, see N.J.A.C. 5:91.
Since the enactment of the FHA, COAH has provided those determinations for two periods of time. Commonly known as the"first-round" rules, the initial promulgation covered the period from 1987 to 1993. They were followed by criteria covering the cumulative period from 1987 to 1999, the"second-round" rules. See Fair Share Housing Ctr., Inc. v. Township of Cherry Hill, 173 N.J. 393, 403 (2002).
In enacting the FHA in 1985, the Legislature initially established a retroactive moratorium on builders' remedy lawsuits as of January 20, 1983, to afford COAH an opportunity to organize and to promulgate its first set of guidelines. N.J.S.A. 52:27D-328. The Supreme Court, in Hills Dev. Co., supra, 103 N.J. at 36, referred to this as an"inevitable start up delay."
In 1986, COAH promulgated the first set of substantive rules, N.J.A.C. 5:92, which included its allocation formulas and calculations of municipal affordable housing obligations for the first round, 1987 (the base year for determining"present need") to 1993. See 18 N.J.R. 1527-60 (Aug. 4. 1986). That year, COAH also promulgated its corresponding procedural rules, N.J.A.C. 5:91. See 18 N.J.R. 1267-72 (June 16, 1986). In February 1991, COAH readopted N.J.A.C. 5:91 and 5:92 without change, to expire in February 1996. See 23 N.J.R. 688 (Mar. 4, 1991).
In 1994, after proposal, public hearings, reproposal, and further public hearings, COAH promulgated a set of substantive rules for the second round, which covered the cumulative period from 1987 to 1999. These standards were due to expire in June 1999. See N.J.A.C. 5:93; 26 N.J.R. 2300-412 (June 6, 1994). At the same time, COAH also promulgated and repromulgated new procedural rules. See N.J.A.C. 5:91.
In May 1999, COAH readopted N.J.A.C. 5:93 without change, providing for expiration in May 2004. See 31 N.J.R. 1479-1482 (June 7, 1999).
On October 6, 2003, after the notices of appeal in these cases had been filed, COAH proposed new regulations for the third round: substantive rules for adoption as N.J.A.C. 5:94 and procedural rules for adoption as N.J.A.C. 5:95. See 35 N.J.R. 4636-710 (Oct. 6, 2003). Under the substantive standards of the third-round methodology, a municipality's fair share is to be computed by three components: (1) the rehabilitation share; (2) any remaining prior round obligation for 1987-1999; and (3) a completely new component,"growth share," which is"generated by Statewide residential and non-residential growth during the period from 1999 through 2014." 35 N.J.R. 4638. The proposed procedural rules contain standards for amending a substantive certification, but no interim procedures similar to those in N.J.A.C. 5:91-14.3, before us in these appeals.
In December 2003, COAH proposed readopting the second-round substantive rules, N.J.A.C. 5:93, before their expiration. See 35 N.J.R. 5467-68 (Dec. 15, 2003). In its published proposal, COAH stated that
[o]f the 566 municipalities in the State, 288 municipalities are currently in the COAH process and approximately 70 other towns have been sued for exclusionary zoning and are under the jurisdiction of the Superior Court of New Jersey. Also, there are 43 urban aid municipalities that have active affordable housing programs and chose to be receivers of regional contribution agreement (RCA) dollars.
These appeals bear upon COAH's latest promulgation of subchapter 14 of its procedural rules in N.J.A.C. 5:91, particularly N.J.A.C. 5:91-14.3, readopted effective April 2, 2003 for expiration on April 2, 2008. See 35 N.J.R. 1957 (May 5, 2003). The historical background of the rule will further illuminate the issues.
COAH first promulgated subchapter 14, effective January 1989, during the period of its first-round methodology, to provide a mechanism for amending the terms of a housing element and fair share plan after a municipality had received substantive certification. See 20 N.J.R. 2613(c)-2614 (November 7, 1988)(proposal); 21 N.J.R. 161-62 (Jan. 17, 1989)(adoption). The section was originally entitled"Amendment of Substantive Certification" and was due to expire in June 1991. Ibid. In February 1991, COAH readopted the 1989 version of subchapter 14 without change, and set it to expire in February 1996. See 23 N.J.R. 688 (Mar. 4, 1991).
During the drafting phase of the second-round substantive rules, COAH repealed subchapter 14 and promulgated a new rule effective December 1992. See 24 N.J.R. 2671-81 (August 3, 1992)(proposal); 24 N.J.R. 4344-61 (Dec. 7, 1992)(adoption).
COAH also retitled subchapter 14 as"Interim Substantive Certification," and provided for expiration in December 1997. The new rule established a procedure for granting an"interim substantive certification" to municipalities that had received a substantive certification scheduled to expire prior to July 1, 1993. See Id. at 4356. Upon motion by such a municipality, COAH could issue an interim certification if it found that the municipality had complied with the terms of its substantive certification. The regulation provided for the imposition of conditions to insure continued compliance. The municipality was also required to provide notice to any objector or litigant that had participated in the original certification process or court settlement. The ...