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In re Approval of Amended Second Round Plan

July 7, 2008


On appeal from the New Jersey Council on Affordable Housing, Resolution No. 07-1902.

Per curiam.


Argued: May 29, 2008

Before Judges Cuff, Lisa and Lihotz.

In this appeal, we review the final decision of the Council on Affordable Housing (COAH) approving the regional contribution agreement (RCA) between the Township of Galloway (Galloway) and the City of Bridgeton (Bridgeton). We reverse and remand for findings of fact in support of the agency conclusions and approval of this agreement.

On March 23, 2006, the Galloway Planning Board (the Galloway Board) adopted an amendment to its certified plan, and on March 28, 2006, the Galloway governing body adopted a resolution endorsing the plan and requested COAH review and approve the amendment that included an RCA between Galloway and Bridgeton. After review by the New Jersey Housing and Mortgage Finance Agency (HMFA), the Cumberland County Planning Board (Cumberland Board), and COAH staff, COAH adopted two resolutions on October 11, 2006: one approved the amended plan, the other determined that the RCA "is feasible and provides a realistic opportunity for the provision of low- and moderate-income housing." As to the latter resolution, COAH reported that it had reviewed and accepted the recommendations of HMFA and the Cumberland Board. In its appeal from the resolution approving the RCA, Fair Share Housing Center (FSHC) argues that the review by COAH of such agreements fails to provide due process by not articulating standards to guide COAH's review and acceptance of such plans. It seeks a ruling by this court that requires COAH to adopt regulations to guide its review of RCAs. FSHC also contends that the absence of standards frustrates the implementation of the stated purpose of the Fair Housing Act (FHA), N.J.S.A. 52:27D-301 to -329.

In addition, FSHC argues that the RCA, as approved, does not provide a realistic opportunity for the provision of affordable housing, it is inconsistent with sound, comprehensive regional planning, and the receiving town is not convenient to employment opportunities due to its high rate of job loss and unemployment. Finally, FSHC contends that the regulations do not comply with the FHA because they do not require consideration of an alternative within the town as required by N.J.S.A. 52:27D-311c and -312a.

The background of the Galloway affordable housing plan, its amendment, and the RCA at issue provides context to our consideration of this appeal. Galloway encompasses ninety-six square miles in the northeast section of Atlantic County near the border of Ocean County. It is located a few miles to the west across a bay from Atlantic City and Brigantine. The Garden State Parkway divides the township almost in half. The western half is under the jurisdiction of the Pinelands Commission, which designated Galloway as "one of three [regional] growth municipalities in Atlantic County." The eastern half is under the jurisdiction of the State Planning Commission and is subject to the State Development and Redevelopment Plan and the Coastal Area Facility Review Act (CAFRA), N.J.S.A. 13:19-1 to -21.

The State Planning Commission designated three centers in Galloway. One of those centers, the Smithville Town Center, contained the Smithville Planned Unit Development (Smithville PUD or PUD). Construction of the PUD began in 1980, and 6732 units and retail uses were preliminarily approved. A 1979 CAFRA permit required sixty-one units to be set aside in the PUD for low- or moderate-income households.

Over the years, the Smithville PUD was reduced to 4857 proposed units. By 1996, with many of the units still unbuilt, respondent K. Hovnanian at Smithville, Inc. (Hovnanian) took over construction, agreeing to build only 2400 new units with a minimum of thirty percent, or 720 homes, designated as age-restricted units. Thus, the PUD was reduced to 3942 proposed units.

By January 2004, Hovnanian had constructed only 842 new units, of which 793 were age-restricted, single-family homes. The sixty-one-unit CAFRA obligation still remained. Although it had the right to build 1558 more units, Hovnanian only had approvals to build 1500 units, and 600 units had yet to be constructed. Thus, the total of the PUD would be 3100 units.

On December 15, 2004, Galloway received second round substantive certification from COAH of its 2000 housing element and fair share plan. The plan satisfied Galloway's cumulative 1987-1999 affordable housing obligation of 409 units, comprised of 328 units of new construction and eighty-one rehabilitation units. After credits and reductions were taken into account, the plan resulted in a surplus of eleven units and an excess of eighteen age-restricted units, all of which could be carried forward to satisfy any future affordable housing obligation. Galloway's plan also included the sixty-one affordable units in the Smithville PUD, and it specified that those units would be zoned as family rental units.

On March 23, 2006, the Galloway Board adopted an amendment to its certified plan, proposing to replace the sixty-one affordable rental units in the Smithville PUD with a sixty-one-unit RCA with Bridgeton.*fn1 Galloway proposed to pay Bridgeton $35,000 per unit, totaling $2.135 million for housing rehabilitation activities in Bridgeton.

The Galloway Board explained that rental units at the Smithville PUD were "not necessary," because Galloway's certified plan had exceeded its rental obligation with group homes and age-restricted rentals. It asserted that "rental units were never obligated to be provided on this site," and it declared that "[t]he RCA units [would] not be replaced by market rate units" at the PUD. The Board also reported that since the Smithville PUD was "under the jurisdiction of CAFRA, a letter was sought from and provided by CAFRA that permit[ted] the meeting of the affordable housing obligation [on that site] with an RCA." In a letter dated September 30, 2004, the New Jersey Department of Environmental Protection indicated that it would recognize the RCA as satisfaction of its original CAFRA-permit condition.

Nevertheless, the proposed RCA would result in a four-unit shortfall in Galloway's obligation of age-restricted units. The Galloway Board proposed to replace that shortfall with four Habitat for Humanity homes. It reported that Galloway had already donated two lots to the charity and construction was "almost complete," and it would donate two additional township-owned lots.

On March 28, 2006, Galloway's governing body endorsed the amendment, including the RCA, and sent it to COAH for review and approval. Meanwhile, Bridgeton's governing body also endorsed the RCA and forwarded it and its own project plan to HMFA, to the Cumberland Board, and to COAH for their review and approval.

Bridgeton had proposed a sixty-one-unit scattered site rehabilitation program to provide a zero percent deferred payment loan to sixty-one low- and moderate-income households to rehabilitate substandard one-to-four family housing structures; that is, owner- or renter-occupied units requiring replacement of at least one major system costing about $12,000 and having an average total rehabilitation cost of $29,750. If additional funds were required to complete a unit, Bridgeton "will be required to provide the additional funding."

In September 2005, HMFA recommended that COAH approve the RCA and Bridgeton's project plan subject to three conditions:

1. Annual submission to HMFA of documentation acceptable to HMFA staff evidencing that there exists sufficient number of eligible applicants, project, and/or units to demonstrate continued project plan feasibility.

2. Any change in the project plan subsequent to this feasibility approval must be reviewed by the Executive Director of the HMFA, when requested by COAH, to determine if a new feasibility analysis is required.

3. The receiving municipality's submission of their municipal audit showing the disbursement of RCA funds, signed by the Mayor of the municipality, to HMFA and COAH on an annual basis.

In its project plan report, the HMFA stated that: (1) the community development consultant selected to administer Bridgeton's RCA program was administering other RCAs and would work "in conjunction with [Bridgeton]'s Building Code and Finance Departments"; (2) the "work write-ups" submitted with the application "meet program requirements"; and (3) Bridgeton had complied with COAH's requirement that fifty-percent "of the units are affordable to low-income households" and "ha[d] agreed to impose all applicable rules regarding affordability controls."

Also that month, the Cumberland Board adopted a resolution recommending that COAH approve the RCA. In addition to the proposed RCA and Bridgeton's proposed project plan, the Cumberland Board and its staff "examined the Master Plan and Zoning Ordinances of the City of Bridgeton, Plans of the County of Cumberland including the Lower Cohansey River Basin Wastewater Management Plan, and the State Development and Redevelopment Plans," and "found" the RCA "to promote and be in accordance with sound, comprehensive regional planning."

COAH received Galloway's proposed amendment, including a draft RCA, in April 2006. In May 2006, during COAH's objection period, FSHC filed its objections to Galloway's amendment, and requested that the matter be transferred to the Office of Administrative Law (OAL) for its review. In addition, by letter to COAH dated May 22, 2006, Bridgeton's mayor said that "[t]he majority" of the city's residents who met the income requirements to ...

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