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In re Six Month Extension of N.J.A.C. 5:91-1

372 N.J. Super. 61, 855 A.2d 582 (App. Div. 2004)

AFFORDABLE HOUSING; COAH—The Council on Affordable Housing’s interim procedural rules designed to address the anticipated time gap between the expiration of its second-round cycle of low- to moderate-income housing requirements and the promulgation of its third-round methodology and rules is stricken down by the court.

The Council on Affordable Housing (COAH) adopted interim procedural rules designed to address the anticipated time gap between the expiration of its second-round cycle of low- and moderate-income housing requirements and the promulgation of its third-round methodology and rules. N.J.A.C. 5:91-14.3(a) allows COAH to grant such extended substantive certification if a municipality requests the extension, commits to continuing to implement the certified second-round plan, and commits to addressing its third-round obligation with a newly adopted housing element and fair-share plan. N.J.A.C. 5:91-14.3(b) establishes the mechanism for a municipality to remain under the jurisdiction of COAH. The regulation does not, however, specify when the third-round rules would be promulgated.

A number of parties opposing the interim procedural rules argued that N.J.A.C. 5:91-14.3 on its face, and as applied, was ultra vires, and that it violated the state constitution as well as the intent and goals of the Fair Housing Act (FHA). They argued that it frustrated the essential holdings in the Mount Laurel cases. The opposition argued that the review process in the statute violated the state constitution and the FHA, and that the procedures provided in that regulation, specifically, the lack of any requirement for public notice, comment and hearing, violated state and federal constitutional rights. They also contended that the FHA did not authorize COAH to grant extended substantive certifications or confer implied authority to adopt such a regulation. Their claim was that by granting extended certifications and by not finalizing third-round numbers or releasing interim obligations that would quantify the municipalities’ continuing obligations during the gap period, COAH had effectively excused the state’s municipalities from meeting those obligations that continue to accrue in the intervening time period. The opposition further argued that the Mount Laurel doctrine’s fair-share requirement could not be phased in or satisfied after the fact; and they asserted that COAH’s second-round regulations clearly envisioned the release and adoption of third-round numbers and regulations by the end of the second round, which would not happen.

COAH and the affected municipalities contended that the regulation realistically recognized and dealt with the gap between the expiration of the second-round standards and COAH’s adoption of its third-round methodology and rules.

The Appellate Division held that the grant of extended certifications to municipalities did not exceed the authority granted COAH under the FHA. According to the Court, there was no clear flaw in COAH’s cumulative-requirement concept, resulting in the extended certifications to municipalities with expiring substantive certifications pending COAH’s promulgation of new standards governing successive phases. COAH has broad powers to promulgate flexible measures to implement the FHA. Although there is no express grant of authority to COAH to adopt a mechanism that permits years of litigation protection without specific housing obligations, the Court stated that the agency is obliged to assure that municipalities do not lose that protection while COAH, itself, is recreating those obligations in accordance with changing needs and circumstances. Thus, COAH must be seen to have constitutional and legislative authority to grant extended substantive certifications to municipalities with expiring second-round substantive certifications.
As to this particular interim regulation, the Court held that the manner by which COAH’s authority had been exercised was flawed. It pointed to the excessively extended time gap between the expiration of second-round standards and the promulgation of third-round standards; the lack of any ongoing substantive review criteria and procedures for acquiring the updated protections that are designed to assure that the state’s constitutional and legislative policies are being pursued; and the absence of any requirement for public notice of an application for extension or any opportunity for affected aprties to participate in the process.

The second-round standards expired in 1999, and COAH had only lately proposed and reproposed its third-round methodology. For nearly the equivalent of one full round of Mount Laurel administration (six years), no municipality had been held to updated standards reflecting its present and prospective fair share of the housing needs of its region. In response, the COAH and the municipalities contended that the delay was not indefinite and that the third-round methodology would be cumulative and capture any obligation. Although the Court noted that a great deal of time had passed, it still accepted COAH’s stated intention. According to the Court, at this point it was only speculative that real opportunities for affordable housing had been irretreviably lost.

The opposition also contended that the interim regulations were invalid and violated the FHA and the state constitution because they established no ascertainable standards or review process to govern COAH’s determination whether to grant a request for extended substantive certification. The Court agreed that the standards and principles discussed in the regulation were insufficient to inform the public and guide the agency. According to the statute, COAH is to grant extended certification if a municipality with an expiring substantive certification adopts a resolution that requests the extension; if it commits to continuing the implementation of its second-round obligations; and if it commits to addressing its third-round obligations with a new housing element and fair-share plan whenever the third-round standards become effective. Thus, the regulation on its face did not fail for a lack of standards. According to that regulation, COAH’s role at this stage is ministerial. However, the FHA expressly requires that COAH conduct an extensive review process when evaluating a request for substantive certification. COAH is required to conduct an interim review that is more than merely ministerial in nature when substantive certification is to be significantly extended. The Legislature expressly instructed COAH to establish procedures for a realistic opportunity review at the mid-point of the certification period and to provide for notice to the public.

The Appellate Division held that COAH bears the responsibility to employ a mechanism measurably more evaluative than the propsoed ministerial effort when considering extensions of substantive certification. While the process may not need to be a full review, it must be conducted in a way that is more than perfunctory, with appropriate notice to all interested parties and an opportunity to be heard. Thus, the Court held that N.J.A.C. 5:91-14 lacked proper standards and procedures under law and was therefore invalid.

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