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In re Adoption of Uniform Housing Affordability Controls by the New Jersey Housing and Mortgage Finance Agency

January 25, 2007

IN RE ADOPTION OF UNIFORM HOUSING AFFORDABILITY CONTROLS BY THE NEW JERSEY HOUSING AND MORTGAGE FINANCE AGENCY


On appeal from the New Jersey Housing and Mortgage Finance Agency, R-2004-D475.

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

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

APPROVED FOR PUBLICATION

Argued October 25, 2006

Before Judges Cuff, Winkelstein and Baxter.

In this appeal, we address a challenge by plaintiff, Fair Share Housing Center (Fair Share), to the promulgation of N.J.A.C. 5:80-26, a regulation enacted by the New Jersey Housing and Mortgage Finance Agency (HMFA). The regulation establishes affordability ranges for the provision of housing pursuant to the Mount Laurel doctrine.*fn1 The HMFA implements the requirements of the New Jersey Fair Housing Act, N.J.S.A. 52:27D-301 to -329 (FHA), which was enacted to further the goals of the Mount Laurel decisions. See In re Twp. of Warren, 132 N.J. 1, 12 (1993). The FHA in turn created the New Jersey Council on Affordable Housing (COAH) to provide an administrative mechanism for implementing the Mount Laurel doctrine. In re Six Month Extension of N.J.A.C. 5:91-1 et seq., 372 N.J. Super. 61, 70 (App. Div. 2004), certif. denied, 182 N.J. 630 (2005). COAH incorporated the HMFA affordability ranges established in N.J.A.C. 5:80-26 into its third-round regulations.*fn2 N.J.A.C. 5:94-7.1.

The gravamen of Fair Share's argument is that the affordability ranges exclude housing opportunities for lower-income households. COAH has not joined in the appeal; it relies on HMFA's brief to support its decision to incorporate HMFA's affordability regulations into its own regulations.*fn3

Having reviewed the challenged regulation in light of the policies underlying the FHA and the Mount Laurel decisions, and according the challenged regulation a presumption of reasonableness and validity, we conclude that it is not inconsistent with the agency's legislative mandate, and is not arbitrary, capricious, or unreasonable. We therefore determine that the regulation is valid.

I. Background

The New Jersey Constitution requires every developing municipality, through its land use ordinances, to provide a realistic opportunity for the construction of its fair share of the region's low and moderate income housing needs. Mount Laurel I, supra, 67 N.J. at 174-75, 179-81, 187. Because the urban poor were disadvantaged by exclusionary zoning practices, the Court required every municipality, in its land use regulations, to provide a realistic opportunity for decent, affordable housing for the resident poor occupying dilapidated housing. Id. at 171-73, 214.

In Mount Laurel II, supra, the Court reaffirmed the Mount Laurel doctrine. See 92 N.J. at 199, 214-15. There, the Court also noted that municipalities were required to address not only the housing needs of their own citizens, but also the housing needs "of those residing outside of the municipality but within the region that contributes to the housing demand within the municipality." Id. at 208-09.

"The core of [Mount Laurel I and II] is that every municipality, not just developing municipalities, must provide a realistic, not just a theoretical, opportunity for the construction of lower-income housing." Holmdel Builders Ass'n v. Twp. of Holmdel, 121 N.J. 550, 562 (1990). "That Mount Laurel II contemplated that affordable housing would include units affordable by low income households is incontestable." Toll Bros., Inc. v. Twp. of W. Windsor, 173 N.J. 502, 571 (2002) (Stein, J., concurring in part and dissenting in part).

Following the Mount Laurel decisions, the Legislature acknowledged the constitutional obligation of growth area municipalities to provide realistic opportunities for the housing needs of low and moderate income families by enacting the FHA. See Twp. of Warren, supra, 132 N.J. at 12. To implement the Mount Laurel doctrine, the FHA directed COAH to divide the State into housing regions, estimate the present and prospective need for low- and moderate-income housing at both the state and regional levels, and adopt criteria and guidelines that would enable a municipality to determine its fair share of its region's present and prospective housing needs. N.J.S.A. 52:27D-307. The FHA also permitted municipalities to transfer up to fifty percent of their fair share obligations to other municipalities in the region by entering into a Regional Contribution Agreement (RCA) with the other municipality. N.J.S.A. 52:27D-312a; see also Hills Dev. Co. v. Twp. of Bernards, 103 N.J. 1, 47 n.13 (1986) (upholding validity of RCA's); In re Twp. of Warren, 247 N.J. Super. 146, 165 (App. Div. 1991) (same), rev'd on other grounds, 132 N.J. 1 (1993); Morris County Fair Hous. Council v. Boonton Twp., 209 N.J. Super. 393, 431-32 (Law Div. 1985) (same), aff'd. in part and rev'd in part sub. nom., Hills Dev. Co., supra, 103 N.J. 1.

The State Planning Act, N.J.S.A. 52:18A-196 to -207, charged the State Planning Commission with the task of adopting a plan for the growth, renewal, development and conservation of the State and with identifying areas for growth, conservation, agriculture, open space and other appropriate designations. N.J.S.A. 52:18A-199(a). The State Plan is designed to be used as a tool for assessing appropriate locations for infrastructure, housing and conservation, but it is not binding on municipalities and is not intended to validate or invalidate specific ordinances. See Bailes v. Twp. of E. Brunswick, 380 N.J. Super. 336, 358-59 (App. Div.), certif. denied, 185 N.J. 596 (2005); Mount Olive Complex v. Twp. of Mount Olive, 340 N.J. Super. 511, 543-44 (App. Div. 2001), remanded on other grounds, 174 N.J. 359 (2002).

Under the FHA, it is COAH's responsibility to adopt criteria and guidelines for municipal adjustment of the present and prospective fair share, based on available vacant and developable land, as well as infrastructure considerations or environmental factors, and to see that the pattern of development is not inconsistent with the planning designations in the State Plan, supra, N.J.S.A. 52:18A-196 to -207. N.J.S.A. 52:27D-307c(2)(e). The State Planning Commission must provide COAH with annual economic growth and development projections for each housing region, and COAH must develop procedures for periodically adjusting regional need calculations based upon the amount of affordable housing generated through any federal, state, municipal or private housing program. N.J.S.A. 52:27D-307e.

To implement its mandate, COAH developed regulations. Its first-round regulations extended from 1987 through 1993, and its second round regulations covered a cumulative period from 1987 through 1999. See In re Six Month Extension, supra, 372 N.J. Super. at 74. In May 1999, COAH readopted the second-round substantive regulations, establishing an expiration date of May 2004. Ibid.

COAH first proposed third-round substantive and procedural regulations in October 2003. 35 N.J.R. 4636(a) (October 6, 2003) (substantive regulations); 35 N.J.R. 4700(a) (October 6, 2003) (procedural regulations). On April 27, 2004, the Supreme Court denied a petition for certification of a challenge to the absence of final third-round substantive regulations, taking judicial notice that COAH's proposed regulations would expire if not adopted by October 6, 2004. In re Failure of N.J. Council on Affordable Hous., 180 N.J. 148 (2004).*fn4

In response to extensive comments, COAH re-proposed both the substantive regulations (N.J.A.C. 5:94) and the procedural regulations (N.J.A.C. 5:95) in August 2004. 36 N.J.R. 3691(a) (August 16, 2004) (substantive rules); 36 N.J.R. 3851(a) (August 16, 2004) (procedural rules). Following the receipt of many additional comments, COAH adopted the substantive and the procedural rules on December 20, 2004. 36 N.J.R. 5748(a) (December 20, 2004) (substantive rules); 36 N.J.R. 5895(a) (December 20, 2004) (procedural rules). As noted, as part of its third-round regulations, COAH incorporated the HMFA regulation that is being challenged in this appeal.

Three agencies, COAH, the Department of Community Affairs (DCA), and the HMFA each adopted distinct sets of rules establishing controls on the continuing affordability of housing constructed pursuant to the FHA. See N.J.A.C. 5:93-9.1 to -9.17; N.J.A.C. 5:43-4.1 to -4.10; N.J.A.C. 5:80-26.1 to -26.26; 36 N.J.R. 3655, 3659 (August 16, 2004). To remedy inconsistent and overlapping aspects of those regulations, in 2001, the HMFA repealed its rules and replaced them with the Uniform Housing Affordability Controls (UHAC), N.J.A.C. 5:80-26.1 to -26.26, 33 N.J.R. 230(a) (January 16, 2001), 33 N.J.R. 3432(b) (October 1, 2001), which were also adopted by COAH, N.J.A.C. 5:93-9.17, and by the DCA for its Balanced Housing program, N.J.A.C. 5:43-4.10.

36 N.J.R. 3655, 3659 (August 16, 2004).

The HMFA proposed amendments to its UHAC regulations, N.J.A.C. 5:80-26, in August 2004, 36 N.J.R. 3655-91 (August 16, 2004), and adopted those changes in December 2004. 36 N.J.R. 5713-47 (December 20, 2004). These amendments, which included the regulation challenged here, were intended to transform UHAC into a single regulatory scheme for COAH, Balanced Housing, UHORP and MONI [the HMFA's Urban Homeownership Recovery Program and Market Oriented Neighborhood Investment program] units that will be available to both State and municipal affordable housing administrators.

The rule proposal also presents an array of new enforcement tools that assist State and municipal officials in monitoring and ensuring compliance with UHAC. The rule proposal also permits municipalities to preserve affordable housing beyond the 30-year and 10-year control periods currently in effect under UHAC.

The social impact of the adoption of the Uniform Controls, therefore, will be to more effectively preserve housing units created for low- and moderate-income families in New Jersey. [36 N.J.R. 3659 (August 16, 2004).]

The HMFA's UHAC rules aimed to ensure that affordable housing units restricted to persons with low or moderate incomes (restricted units) would remain occupied by persons meeting those income levels. 36 N.J.R. 3655, 3660 (August 16, 2004). The rules established purchasers' income eligibility standards and maximum sales prices for purchase of restricted units, and tenants' income eligibility standards and maximum rental charges for rental of restricted units. 36 N.J.R. 3661 (August 16, 2004). The 2004 amendments introduced the term "affordability average," which was defined to mean the ...


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