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In Re Grant Of Third Round Substantive Certification of Pennsville Township

2007 WL 177653 (N.J. Super. App. Div. 2007) (Unpublished)

AFFORDABLE HOUSING; COHA; THIRD ROUND REGULATIONS — Even though the Council on Affordable Housing’s methods might be sound and reasonable in the way it handles the Low Income Tax Credit program as a secondary source for reducing affordable housing needs, there is no exception to the established and mandated procedure for altering regulations and the Council must subject the regulations to the mandatory review process.

The Council on Affordable Housing (COAH) granted a substantive certification to a municipality. It was the first municipality to be granted such a certification under COAH’s newly adopted Third Round Regulations. The new regulations had been adopted suddenly, on the same day that the municipality applied for a certification.

A housing organization sued, contending the approach that was used in the substantive certification’s process for counting housing funding was invalid. The organization asserted that certain housing units would be double-counted because municipalities were being permitted to count housing funded by the Low Income Tax Credit program, as well as to count housing in the municipal’s master plans when showing how the municipality’s plans satisfied its affordable housing needs.

COAH defended its use of using the Low Income Tax Credit program as a secondary source for reducing its calculation of affordable housing needs because those program credits are calculated solely from housing activities in non-council-certified communities.

The organization asserted that including the housing that benefits from the program would contribute toward the municipality’s cap for affordable housing, thereby allowing the municipality to make fewer allowances to provide free housing outside of the program. Further, the organization asserted that the change in the certification was substantial and changed the expectations of municipalities and affordable housing developers. On that basis, the organization argued that the change in regulations was actually a disguised amendment adopted without complying with the applicable statute’s amendment requirements.

The Court observed that the sudden change in the regulations meant the different between approval and disapproval of the municipality’s substantive certification process. More importantly, however, and on a broader level, the change in regulations generally affected those in the regulated community. The Court held that municipalities and developers were entitled to notice of regulatory changes, and must be given an opportunity to comment on the proposed changes. The statute governing these regulations requires that at least 30 days’ notice be given, as well as calling for public distribution of the proposed changes.

While the Court acknowledged that COAH’s methods might have been sound and reasonable, this did not allow for an exception to the established and mandated procedure for altering regulations. Thus, it ruled that the Council had to suspend the revised regulation’s application under the Third Round Rules until the regulations had gone through the mandatory review process. The Court also remanded the municipality’s substantive certification to COAH to determine if it should be addressed using the previous round of rules or it should be held until the new set had gone through review.

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