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In re Application of the Township of Jackson

350 N.J. Super. 369, 795 A.2d 318 (App. Div. 2002)

MOUNT LAUREL; COAH— The Court explains how a municipality’s “fair share” obligation is to be calculated in the second cycle.

This appeal concerned the interpretation by the Council on Affordable Housing (COAH) of a section of the Fair Housing Act (FHA) that capped “a municipality’s ‘fair share’ obligation at 1,000 units ‘within six years from the grant of substantive certification, unless it is demonstrated, following ... an evidentiary hearing ... that it is likely that the municipality through its zoning powers could create a realistic opportunity for more than 1,000 low and moderate income units within that six-year period.’” Here, the municipality was seeking approval of its second cycle fair-share obligation. The Master appointed by a lower court in a declaratory judgment action “asked COAH for a written explanation as to how the 1,000 unit cap would be applied to [the municipality’s] second cycle fair-share obligation, which had been fixed at 1,323.” The municipality had devised a plan for 1,165 units. COAH responded “that the 1,000 unit cap applied to a municipality’s ‘calculated need,’ not its pre-credited need; that is, if, after applying applicable credits and reductions, [the municipality’s] fair-share numbers more than 1,000, ‘it is capped at 1,000.’” The Appellate Division took note that the term “fair-share” is undefined by the FHA and COAH regulations, despite the fact that it is central to the Mount Laurel doctrine. In response to the New Jersey Supreme Court’s stress “that the Mount Laurel doctrine was not intended to ‘sweep away all land use regulations or leave out open spaces and natural resources prey to speculators,” the Legislature responded with the FHA which authorized COAH to place a limit on the number of units allocated to a municipality based on a percentage of existing housing stock and other criteria.” Nonetheless, according to the Appellate Division, “the Legislature could not have intended to convey unbridled discretion to select an absolute cap on the number of units to be built without first considering the burden imposed on the petitioning municipality and its relationship to other municipalities sharing the burden of providing regional and statewide housing needs.” That is why the Legislature adopted that part of the statute “which adds criteria correlating to a 1,000 unit cap with the municipality’s capacity to absorb a substantial amount of affordable housing.” Here, the municipality claimed that “fair-share” under the applicable statute equates to “pre-credited need.” That term is defined as “the municipal low and moderate income housing obligation resulting from subtracting filtering, residential conversion and spontaneous rehabilitation from the sum of indigenous need, reallocated present need, prior cycle prospective, prospective need and demolitions.” In other words, “COAH calculates pre-credited need by adding and deducting ‘secondary sources of demand and supply,’ such as demolitions, filtering, residential conversions and spontaneous rehabilitation.” The major difference “between the first cycle and second cycle regulations is that the second cycle formula factors in ‘prior-cycle prospective need,’ ..., which is defined as ‘that portion of the 1987-1993 prospective need included in the 1987-1999 low and moderate income housing need calculations.’” COAH used this method because the 1990 census data showed a significant drop in the overall state-wide need for affordable housing, “based in large part on growth that did not occur. ... As noted, in this case, COAH interpreted the 1,000 unit cap as applying to calculate, not pre-credited need. A municipality’s ‘calculated need’ is the number determined by ‘subtracting adjustments, reductions, credits, bonuses, prior cycle credits and the 20 percent cap from the precredited need.’” In ruling that the 1,000 cap “applied to calculated need, not pre-credited need, COAH emphasized two factors.” First, it noted that prior court decisions had “equated a municipality’s ‘fair share number’ with pre-credited need minus ‘a variety of credits, caps and adjustment… .’” Second, “COAH relied on its own 1989 determination that the number of units that could be transferred pursuant to a regional contribution agreement was based on calculated need, not pre-credited need.” In doing so, “COAH reasoned that it would be inconsistent with its own past practice and with the court’s calculations in Calton Homes to equate ‘fair share’ with ‘pre-credited need.’” The Court pointed out a decision by COAH must stand unless arbitrary or capricious. COAH has broad power to establish standards and procedures “for how many affordable units are required to meet a municipality’s fair share.” Based on the record before the Appellate Division, it could not conclude “that COAH’s ruling [was] arbitrary, capricious or unreasonable, or inconsistent with the statutory guidelines under the FHA.” The Court was satisfied that COAH had “consistently equated fair share with calculated need.” The Legislature, when amending the FHA in 1993 to put in the 1,000 unit cap, was presumed to have been aware of the Calton Homes decision, “the then extant COAH rule and COAH’s own interpretation of the legislation.” Nonetheless, the municipality argued that the statute authorized COAH, “in its discretion, to place a limit ‘upon the aggregate number of units which may be allocated to a municipality as its fair share… .’” The Court understood the municipality’s argument “to mean that the word ‘aggregate’ [was] equivalent to pre-credited need. Unfortunately for the municipality, the word “aggregate” was not added to the amendment that added the 1,000 unit cap; “it was part of the FHA when originally enacted.” Lastly, the Court took the municipality’s argument to be, in essence, “a facial challenge to the validity of the rule,” and the Court would not consider such a challenge. In doing so, the Court pointed out that COAH or a court may always invoke COAH’s waiver rule “so as to avoid the prospect of a municipality having to dramatically alter its character if it [was] required to construct more than 1,000 units within a six-year period. The Court also rejected the municipality’s argument that COAH’s interpretation regarding the 1,000 unit cap require[d] formal rule making.

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