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In Re Substantive Certification of Blairstown Township.

SUPERIOR COURT OF NEW JERSEY APPELLATE DIVISION


May 23, 2011

IN RE SUBSTANTIVE CERTIFICATION OF BLAIRSTOWN TOWNSHIP.

On appeal from the New Jersey Council on Affordable Housing.

Per curiam.

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

Argued March 22, 2011

Before Judges Carchman, Messano and St. John.

Fair Share Housing Center (Fair Share) appeals from the Council on Affordable Housing's (COAH) grant of third-round substantive certification to the housing plan submitted by Blairstown Township (Blairstown). Fair Share contends that COAH violated the Administrative Procedures Act, N.J.S.A. 52:14B-1 to -24 (APA), the Fair Housing Act, N.J.S.A. 52:27D-301 to -329 (FHA), and the Mount Laurel doctrine*fn1 establishing the constitutional obligation of New Jersey's municipalities to permit the development of affordable housing. We have considered the arguments raised in light of the record and applicable legal standards. We reverse and remand for further proceedings consistent with this opinion.

Before proceeding, we note that Fair Share and COAH have urged us to consider the issues at hand despite the ongoing litigation involving COAH's third-round certification regulations, and the introduction of legislation designed to significantly revamp the FHA.*fn2 See In re Adoption of N.J.A.C. 5:96 and 5:97, 416 N.J. Super. 462 (App. Div. 2010), certif. granted, 205 N.J. 317 (2011); N.J. Legislature Bills 2010-2011, S.1). We agree that pending developments before the Court and the Legislature do not affect our consideration of the issues presented on appeal, which are discrete and may be resolved on the record presented.

I.

On July 17, 2008, the FHA Amendments Act, L. 2008, c. 46, was enacted. Among other things, the law established a new standard for meeting the housing needs for very-low-income households. Section 7 of the law, codified at N.J.S.A. 52:27D-329.1, provides:

[COAH] shall coordinate and review the housing elements as filed pursuant to [N.J.S.A. 52:27D-311], and the housing activities under [N.J.S.A. 52:27D-320], at least once every three years, to ensure that at least 13 percent of the housing units made available for occupancy by low-income and moderate income households will be reserved for occupancy by very low income households, as that term is defined pursuant to [N.J.S.A. 52:27D-304]. Nothing in this section shall require that a specific percentage of the units in any specific project be reserved as very low income housing; . . . . The council shall coordinate all efforts to meet the goal of this section in a manner that will result in a balanced number of housing units being reserved for very low income households throughout all housing regions. [(Emphasis added).]

N.J.S.A. 52:27D-304(m) defines "'[v]ery low income housing'" as housing affordable to "households with a gross household income equal to 30% or less of the median gross household income for households of the same size within the housing region in which the housing is located." On July 24, 2008, COAH sent a letter to all municipalities summarizing the major provisions of the new law, explaining that it "provide[d] a comprehensive reform of New Jersey housing law" by, among other things, "promoting the creation of very low-income housing."

In another letter to the municipalities dated October 30, 2008, labeled "Guidance Document" (COAH's October 2008 letter), COAH referenced the prior letter and added:

We are now writing to provide you with further guidance on the implementation of[] L. 2008, c. 46, as it relates to fair share plans being submitted to meet COAH's December 31, 2008 deadline. COAH is in the process of preparing amendments to its regulations to comply with the new statute. Guidance is offered in the following areas:

The significance of the following first item is the crux of this appeal; it read as follows:

Very low income housing:

P.L. 2008, c. 46, creates a requirement that at least 13 percent of affordable housing units be reserved for occupancy by very low income households . . . .

Third Round Housing Elements and Fair Share Plans must address the 13% very low-income requirement of the growth share obligation. Pursuant to N.J.A.C. 5:97-3.3, at least 50% of the units addressing a municipality's fair share obligation must be affordable to low-income households. The 13% of the total obligation that must be deed restricted for occupancy by very low income households under the statute may be a part of this 50% low-income requirement.

In keeping with COAH's current rules at N.J.A.C. 5:97-3.9 requiring that 50 percent of the growth share obligation be addressed with family housing and the new statutory requirement for 13% very low income housing, your plan will need to provide at least 50 percent of the very-low income housing requirement through family housing. The balance could be met with age-restricted units or supportive and special needs housing. [(Emphasis added).]

N.J.A.C. 5:97-3.9, in turn, provides: "At least 50 percent of the units within the municipality addressing the growth share obligation shall be family housing units."

Blairstown's submission undisputedly did not comply with the guidance provided in COAH's October 2008 letter. As noted in COAH's planning consultant's compliance report of June 19, 2009 (the compliance report), Blairstown had a projected growth share obligation of 118 affordable housing units. Because Blairstown's plans enabled it to take credit for 29 units of rental bonuses, its plan needed to accommodate 89 units of additional affordable housing. Of the 89 units of affordable housing to be provided, the compliance report calculated that at least 44 units (50%) must be family units, and 12 units (13%) must meet the very-low-income requirement. Blairstown planned to meet the very-low-income requirement through 14 units of supportive and special needs housing provided in group homes; none of the planned 45 family units were designated as very-low-income housing units.

On December 23, 2008, Blairstown filed its third-round petition for substantive certification with COAH. COAH published notice of the plan on January 27, 2009, and did not receive any objections to the petition. On April 27, 2009, Blairstown adopted an amendment to its housing element and fair share plan, and on May 4, Blairstown filed a motion with COAH for a minor revision that does not affect consideration of the issues presented by this appeal. The compliance report recommended that COAH grant substantive certification.

On July 7, 2009, Fair Share filed comments to the compliance report, criticizing the lack of family housing in Blairstown's plans, and its failure to meet the requirement to provide for very-low-income family housing. Fair Share asserted that "COAH effectively change[d] its regulations on the requirement for very-low-income homes without a notice and comment process." Referencing COAH's October 2008 letter, Fair Share charged that "COAH, in proposing to grant Blairstown substantive certification without requiring family very-low-income units, would be ignoring its existing rules."

Fair Share further commented that it had recently appealed two other substantive certification decisions in which COAH failed to enforce its very-low-income requirement in accordance with its October 2008 letter. Those two appeals, A-5285-08 (West Amwell) and A-5286-08 (Hardystown Township), were settled using the Civil Appeals Settlement Program with those municipalities each agreeing to provide very-low-income family housing units as was required. In the West Amwell matter, COAH provided a response regarding this issue, asserting that Fair Share "misinterpret[ed]" COAH's October 2008 letter. COAH explained:

The letter was not intended to advise municipalities that N.J.A.C. 5:97-3.9 applies to the new statutory requirement that municipalities provide 13% of the fair share obligation to very low income households. N.J.A.C. 5:97-3.9 provides that at least 50 percent of the units within the municipality addressing the growth share obligation shall be family units. This regulation applies to the growth share obligation as a whole and was adopted before A500 [the bill enacted as L. 2008, c. 46] was enacted. Thus, COAH did not contemplate its application to the recently adopted very low income housing requirement. Likewise, COAH did not intend the letter to act as an interpretation of N.J.A.C. 5:97-3.9. This regulation applies to the entire growth share obligation, not just the very low income units. It was not intended to require that 50 percent of the very low income units be provided through family housing in all cases, although COAH encourages municipalities to do so.

COAH did not intend the October 30, 2008 letter as an interpretation of its regulations so as to require municipalities to provide 50 percent of the very low income units as family units. Therefore, as discussed in the COAH Compliance Report, West Amwell's plan does comport with COAH regulations in this regard.

Fair Share's appellate appendix includes a table dated February 2, 2010, compiling information from COAH's resolutions granting substantive certification to petitions filed by fifty-seven municipalities in December 2008. For each of those municipalities, Fair Share's appendix also includes the relevant compliance report pages that indicated how each municipality planned to meet its very-low-income housing requirement.*fn3

Those records reveal that the municipalities that obtained substantive certification overwhelmingly adopted plans in which 50% or more of their very-low-income housing units were provided as family housing units. Forty-five of those municipalities provided at least half of their very-low-income units as family housing units; five others fulfilled their obligations prior to enactment of the FHA Amendments Act, so they did not have a very-low-income housing obligation. In short, the overwhelming majority of municipalities that submitted housing plans subsequent to COAH's October 2008 letter complied with the directive contained in that correspondence.

At COAH's July 8, 2009 hearing, Fair Share raised objections to Blairstown's plan. However, without discussion, COAH voted to grant the substantive certification and adopted resolution #24-09. This appeal followed.

II.

Fair Share contends that COAH erred by granting substantive certification despite Blairstown's noncompliance with COAH's family housing rule, N.J.A.C. 5:97-3.9. Fair Share asserts this amounted to error, both because COAH violated the APA by making a policy change without following the proper procedures for rulemaking, and because the policy reflected by adoption of resolution #24-09 itself violated the FHA and the Mount Laurel doctrine.

(A)

We generally will not disturb an administrative agency's action unless it is arbitrary, capricious, or unreasonable. In re Warren, 117 N.J. 295, 296 (1989). We "can intervene only in those rare circumstances in which an agency action is clearly inconsistent with its statutory mission or with other State policy." George Harms Constr. v. Tpk. Auth., 137 N.J. 8, 27 (1994).

An agency's regulations enacted pursuant to legislative authority and to implement legislative policy enjoy a presumption of validity. In re Substantive Certification Filed by the Twp. of Warren, 132 N.J. 1, 26 (1993). We therefore "place[] great weight on the interpretation of legislation by the administrative agency to whom its enforcement is entrusted." Peper v. Princeton Univ. Bd. of Trs., 77 N.J. 55, 69-70 (1978). The "principle of judicial deference to agency action is particularly well-suited to our review of administrative regulations adopted by COAH to implement the [FHA]." Twp. of Warren, supra, 132 N.J. at 27. Yet, we have also noted:

COAH's regulations must be consistent with the central purpose of the FHA to provide affordable housing on a regional basis consistent with both sound planning principles and the Mount Laurel doctrine, and COAH may not adopt any regulation that undermines its methodology for calculating or allocating regional fair share obligations. [In re the Adoption of N.J.A.C. 5:94 & 5:95 by the N.J. Council on Affordable Hous., 390 N.J. Super. 1, 32 (App. Div.) (citing Twp. of Warren, supra, 1, 32 N.J. at 28 certif. denied, 192 N.J. 72 (2007); Non-Profit Affordable Hous. Network v. N.J. Council on Affordable Hous., 265 N.J. Super. 475, 479 (App. Div. 1993))].

"An agency determination that is intended to be applied as a general standard and with widespread coverage and continuing effect can also be considered an administrative rule if it is not otherwise expressly authorized by or obviously inferable from the specific language of the enabling statute." Metromedia, Inc. v. Dir., Div. of Taxation, 97 N.J. 313, 329 (1984). If "the . . . agency determination constitute[s] a rule, . . . its adoption require[s] compliance with [the] statutory rule-making procedures" of the APA. Id. at 334.

With these general concepts in mind, we turn to the arguments raised by Fair Share.

(B)

Fair Share contends that COAH was required to follow the APA's notice and comment procedures because COAH made a significant policy change in an established and generally applicable policy when it certified Blairstown's plan. Fair Share acknowledges that agencies may apply an existing rule to new legislation or previously unanticipated situations, without notice and comment. In re Hosps.' Petitions for Adjustment of Rates, 383 N.J. Super. 219, 249 (App. Div.), certif. denied, 187 N.J. 81, 187 N.J. 82 (2006). Fair Share argues, however, that if COAH seeks to "reverse course from an adopted regulation," even to adopt a position that might have been reasonable without additional rulemaking if it had been the initial interpretation, it must always use a notice and comment process, see Glaser v. Downes, 126 N.J. Super. 10, 18 (App. Div. 1973), certif. denied, 64 N.J. 513 (1974) and Am. Emp'rs Ins. Co. v. Comm'r of Ins., 236 N.J. Super. 428, 433-34 (App. Div. 1989). Fair Share contends that it reasonably relied upon COAH's October 2008 letter interpreting N.J.A.C. 5:97-3.9, as did municipalities and the public, and, since none of the established exceptions from notice and comment rulemaking apply, COAH violated the APA. We agree.

"'An agency may not use its power to interpret its own regulations as a means of amending those regulations or adopting new regulations.'" In re Hosps.' Petitions, supra, 383 N.J. Super. at 247 (quoting Besler & Co. v. Bradley, 361 N.J. Super. 168, 173 (App. Div. 2003) (in turn quoting Venuti v. Cape May Cnty. Constr. Bd. of Appeals, 231 N.J. Super. 546, 554 (App. Div. 1989)). Such a procedure violates "proper rulemaking under the standards set in Metromedia, supra, 97 N.J. at 328-37." Ibid. However, if "[t]he amendment was a clarification of the original rule, not a material change[,] . . . it did not require compliance with APA new rule-making procedures." Cobo v. Mkt. Transition Facility, 293 N.J. Super. 374, 394 (App. Div. 1996).

In Glaser, supra, 126 N.J. Super. at 14, the Director of the Division of Taxation sent a written notice to all licensed retail motor fuels dealers in New Jersey that pursuant to an injunction issued in Chancery Division litigation, it was "illegal and violative of N.J.S.A. 56:6-2(e)" for any of the dealers to issue certain trading stamps or giveaways, whether or not conditioned on the purchase of motor fuel. The litigation involved one service station litigant and an issue regarding trading stamps, but the discussion in that case evolved to include other giveaways and motor fuels retailers statewide. Id. at 15-17. We concluded that the action taken by the Director was invalid, explaining:

The order was in effect a rule or regulation. N.J.S.A. 52:14B-2(e) defines an administrative rule as an "agency statement of general applicability and continuing effect that implements or interprets law or policy . . . . The term includes the amendment or repeal or any rule . . . ." The October 2 notice was precisely such an "agency statement," and since it offered an interpretation of N.J.S.A. 56:6-2(e) different from that embodied in the existing regulation, N.J.A.C. 18:19-2(a), it also constituted a repeal or amendment of that rule. It was a directive of universal application, for it was mailed to all licensed motor fuels dealers in New Jersey.

What the Director did violated every requirement of N.J.S.A. 52:14B-4(a), which deals with notice and hearing prior to the adoption, amendment or repeal of any rule. That section requires at least 20 days' notice of the intended action; an opportunity afforded all interested persons to submit data, views or arguments, orally or in writing, and agency consideration of all such submissions. [Id. at 18-19 (emphasis added).]

See also Am. Emp'rs Ins. Co., supra, 236 N.J. Super. at 433-34 (holding that modification of existing regulations needed to be achieved through the APA).

This case presents an unusual factual complex. As enacted, N.J.S.A. 52:27D-329.1 required only that "13 percent of the housing units made available for occupancy by low-income and moderate income households . . . be reserved for occupancy by very low income households." Fair Share concedes that the legislation did not explicitly provide that the set-aside for "very low income households" be designated for family housing. However, COAH concluded that to implement the legislative command, N.J.A.C. 5:97-3.9, its family-housing regulation, now required that "at least 50 percent of the very-low[-]income housing requirement [be satisfied] through family housing." COAH's October 2008 letter to all municipalities expressly cited the regulation and the need to conform the regulation to the newly-enacted FHA amendments.

COAH's October 2008 letter was clearly an "agency statement of general applicability and continuing effect that implement[ed] or interpret[ed] law or policy." N.J.S.A. 52:14B-2(e); Glaser, supra, 126 N.J. Super. at 18. Perhaps COAH's conclusion in this regard was not compelled by the express language of N.J.S.A. 52:27D-329.1. But the agency's decision to construe the existing regulation in this manner was not an unreasonable decision. See Am. Emp'rs Ins. Co., supra, 236 N.J. Super. at 433. And, having done so, COAH's October 2008 letter effectively amended N.J.A.C. 5:97-3.9.

That conclusion, therefore, inevitably compels reversal. Having interpreted its own regulation to require municipalities to submit plans that proposed 50% of their very-low-income housing be set aside for very-low-income families, COAH's certification of Blairstown's submission violated the regulatory framework. We note that in approving Blairstown's plan, COAH offered no explanation or excuse for permitting non-compliance. The explanation it offered in the East Amwell appeal has been essentially reiterated before us.

It is acknowledged that N.J.A.C. 5:97-3.9 existed before the FHA was amended, that, on its face, the regulation does not address the very-low income requirement, and that the regulation was not amended through invocation of the APA's procedures. But those facts do not help us attribute significance to COAH's October 2008 letter.

COAH's after-the-fact explanation of its intention in issuing the directive -- it was a suggestion to encourage municipalities to provide very low income family housing but not a mandatory directive -- contradicts the express language of the guidance letter. We reject the assertion that the October 2008 letter was not intended to interpret N.J.A.C. 5:97-3.9 in light of the statutory amendments, because the letter specifically referenced the regulation and set forth COAH's interpretation. Nor can it be alleged that the guidance letter was not intended to advise municipalities of their obligations under the FHA amendments because that is precisely what it did.

Moreover, the explanation proffered by COAH ignores the consequences of what actually ensued as a result of the issuance of the October 2008 letter. An overwhelming percentage of municipalities complied with the letter's directive in submitting their plans for certification.

Therefore, COAH's certification of Blairstown's plan reflects a change in its interpretation of N.J.A.C. 5:97-3.9, achieved without utilizing the APA's rule-making procedures. In re Hosps.' Petitions, supra, 383 N.J. Super. at 247. As a result, we are compelled to reverse and remand the matter to COAH for further proceedings that are consistent with this opinion.

In light of our holding, we need not consider the other arguments raised by Fair Share on appeal.

Reversed and remanded. We do not retain jurisdiction.


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