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In Re Adoption of Moderate-Income Assisted Living Regulations, N.J.A.C. 5:93-5.16

A-5310-01T5 (N.J. Super. App. Div. 2004) (Unpublished)

MOUNT LAUREL—The Council of Affordable Housing’s regulations promulgated in N.J.A.C 5:93-5.16 are valid.

An organization appealed from the Council on Affordable Housing’s (COAH) regulations, promulgated in N.J.A.C. 5:93-5.16, concerning affordable housing credits for assisted living residences. It claimed that the regulations were inconsistent with the obligations established in S. Burlington Cty. N.A.A.C.P. v. Tp. of Mount Laurel (Mount Laurel II), and the New Jersey Fair Housing Act of 1985 (FHA), and were not supported by the regulatory record.

N.J.A.C. 5:93-5.16(b) provides that at least half of the affordable units in an assisted living facility must be affordable to a low income household or, in the alternative, all of the affordable units may be affordable to households at sixty-percent of median income. The organization argued that this sixty-percent alternative ignored the needs of low-income households below fifty-percent of median income, contrary to Mount Laurel II. In response, the COAH responded that the Internal Revenue Code permits development projects where the rents of all the affordable units are priced to be affordable to households earning sixty-percent of median income. The COAH’s rule reflected the related Internal Revenue Service regulations. In addition, the COAH argued that a majority of assisted living providers set rents at a point where half of their affordable units are affordable to those persons below fifty-percent of the median income.

The opposition also asserted that the COAH should require assisted living projects to provide opportunities for the full range of poor persons. The COAH responded by noting that N.J.S.A. 26:2H-12.16 to12.21 requires at least ten percent of residents in newly licensed assisted living facilities to be Medicaid-eligible. It argued that this requirement would open the doors of assisted living residences to assetless persons with very low incomes.

In addition, the opposition contended that the COAH’s new regulations awarded fair share credits to municipalities without requiring them to give low-income seniors an opportunity to obtain an assisted living unit. According to the opposition, this violated both the Mount Laurel doctrine and the Fair Housing Act (FHA). It claimed that low-income seniors were likely to be excluded from assisted living residences unless they were among the few who obtain Medicaid waivers. Furthermore, it argued that the law requiring a ten percent set aside for Medicaid-eligible residents would not suffice to meet the obligation to serve low-income seniors because Medicaid waivers were available only in limited numbers and were unlikely to endure for the entire thirty years of the required deed restriction. Finally, the opposition claimed that the award of rental credits under N.J.A.C. 5:93-5.16(f) was unnecessary, because assisted living units are already rental units, and to award such rental credits was contrary to the FHA and Mount Laurel.

The Appellate Division upheld the COAH’s new regulations. It noted that the FHA vested the COAH with primary jurisdiction over the administration of housing obligations, and that the COAH’s power is extremely broad. Specifically, the FHA gave the COAH the power to decide whether proposed ordinances and related planning will satisfy a particular community’s Mount Laurel obligations. Courts are required to give great deference to COAH decisions. Here, the Appellate Division first addressed the organization’s concern that the “sixty-percent option” would become the norm. In response to the Court’s concern, the COAH argued that it had relied upon New Jersey Housing and Mortgage Financing Agency’s assertion that the majority of assisted living providers actually set rents such that half of the affordable units would be affordable to low income households. It also argued that 70 out of 100 licensed assisted living residences currently accepted Medicaid reimbursement, and that there were approximately 1,500 Medicaid waivers available, representing a little more than ten percent of the 13,000 beds in assisted living residences. The opposition failed to submit contrary data. Accordingly, the Court found no reason not to defer to COAH’s decision.

While the Appellate Division accepted, as reasonable, the organization’s argument that the viability of Medicaid waivers as a form of insuring affordable low income units might be somewhat questionable, it felt obligated to defer to COAH. A court should not invalidate COAH regulations where the only opposition is based on speculative bad results.

The opposition also contended that an award of a rental bonus credit for assisted living residences was contrary to the FHA and the Mount Laurel doctrine. In the past, however, courts have upheld COAH’s rental bonus credits plan as part of a scheme to encourage municipalities and developers to build affordable rental units in the future. The bonus had been upheld with the recognition that COAH was granted wide discretion to determine how to carry out the purposes of the Act. One such purpose is the creation of a variety of affordable housing, including rental housing. Here, COAH reasonably could conclude that the incentives were needed to encourage development.

Finally, the opposition argued that the COAH failed to create a proper administrative record to support adoption of the assisted living regulation. The Court disagreed. New Jersey’s Administrative Procedure Act requires the giving of a timely opportunity to submit data and opposing arguments, but does not require a formal public evidentiary hearing as part of the rule-making process. All that is required is that the record contains the notice of proposed rulemaking, the statement of the proposed rule’s basis and purpose, and the written or oral comments that were received. The COAH complied with these requirements.

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