Appellate Division Strikes Down Portions of COAH Third Round Regulations... Again.

October 13, 2010- Red Bank - On October 8, 2010, the Appellate Division yet again struck down key portions of COAH’s 2008 Third Round regulations. These were the new regulations that COAH adopted pursuant to the Appellate Division in January 2007, which struck down portions of COAH’s original Third Round regulations.

Most notably, the court again struck down COAH’s growth share methodology in determining municipal obligations. The court struck down this methodology for the same reason it previously struck down COAH’s original growth share regulations: municipalities could artificially reduce their obligation by choosing not to grow. The court declared that it was bound by Mount Laurel II, which specifically stated that municipalities should not be able to determine their own obligation. The court ordered COAH to come up with regulations similar to those used for determining obligations in the First and Second Round affordable housing cycles in effect from 1987 to 1999.

The court also addressed several other issues and invalidated other portions of COAH’s regulations which were tied to growth share. Other issues decided by the court are as follows:

Portions of the Third Round regulations were struck down for not providing sufficient incentives for developers to construct affordable housing. This related specifically to N.J.A.C. 5:97-6.4, which provided for presumptive minimum densities and maximum setasides for inclusionary development depending upon the planning area. The court noted that there was no data confirming that these minimum densities would provide enough incentive for developers to build affordable housing. Further, the court questioned the 25% setaside for for-sale developments and noted that prior COAH regulations and Mount Laurel jurisprudence consistently used 20% as an acceptable standard for a setaside.

The court upheld smart growth and redevelopment bonus credits.

The court upheld COAH’s determination of prior round obligations.

The court rejected the argument that the Third Round regulations improperly required expenditure of municipal funds to satisfy affordable housing obligations.

The court remanded the matter back to COAH to adopt new regulations in accordance with its decision within five months. The court believed that since it would be creating regulations in accordance with its prior round methodology, the five-month timeframe was achievable.

The court declined to place a blanket stay on proceedings before COAH or in the courts pending completion of COAH regulations. The court did, however, note any municipality or other interested party may apply for a stay to COAH or a court in which a Mount Laurel case is pending.

Based upon this decision and the recent actions of the Legislature, there is continued uncertainty for developments with an affordable housing component or aspect. The court acknowledged the pending legislation (Bill S-1) but believed such legislation would not make this decision moot. The decision, however, will likely spur action by the Legislature.

Any developer involved with a municipality concerning either inclusionary developments or developments with an affordable housing aspect to it, should seek counsel as to how this decision may impact the proposed development. As has been the historical practice of municipalities, most towns will likely seek to delay and further stall any action on affordable housing matters within its borders until the dust settles. However, based upon this decision and the current regulations, there is a basis to argue such delay is unwarranted and action should be taken.

For more information, please contact Craig M. Gianetti at cgianetti@ghclaw.com or (732) 741-3900. This is only a summary of the Appellate Division decision striking down COAH’s new Third Round regulations. This does not address every issue decided by the court, but highlights key aspects to the decision. This is not intended as legal advice.

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Tags: Craig M. Gianetti, Real Estate, Land Use & Development