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In Re Council on Affordable Housing’s Grant of Substantive Certif. to Twp. of Southampton

2006 WL 2033141 (N.J. Super. App. Div. 2006) (Unpublished)

COAH; AFFORDABLE HOUSING — The Council on Affordable Housing, as an administrative agency, must adhere to its own rules in determining waivers from the low-income housing designated center requirement for a proposed inclusionary development and aid the development by working with other state agencies.

A municipality sought to fulfill its Mount Laurel doctrine obligations to provide low income housing by developing properties located in two different zones. One of these zones did not yet have access to sewer service and was not in a designated center. Nevertheless, this zone was slotted to receive 68 units of affordable housing out of the municipality’s first round fair share of 114 units. No development occurred in this zone from 1989 until 1998, when a developer proposed a 324 unit development that would include 66 units of affordable housing. The municipality requested a center designation waiver from the Council on Affordable Housing (COAH) despite the lack of sewer infrastructure. The other zone was in a designated center and received access to a sewer system in 1998, however, the cost of demolishing existing buildings made affordable housing difficult to achieve.

In response to a challenge to a second round substantive certification, a court held that the COAH should have independently reviewed the viability of the municipality’s plan for the two zones. The agency completed this review in 2002, finding that the first zone could not be counted in the fair share plan because it lacked sewer connections and the second zone remained too costly to develop for affordable housing. The municipality and the developer had extensive correspondence with the COAH seeking to justify their position that these zones were appropriate. They contacted the New Jersey Department of Environmental Protection (DEP) to resolve the sewer issue but were unable to do so. Both the municipality and the developer requested COAH’s assistance in working with the DEP to amend the wastewater plan so that the first zone could be developed to include affordable housing. The municipality also requested help in resolving the center designation waiver with the Office of Smart Growth. The COAH failed to provide assistance on either of these issues. Despite the work to remedy the shortcomings of the zone, the COAH refused to award a reduction in its fair share because it was not within a designated center and did not have sewer service. As a result, the COAH determined that there was no a realistic chance of developing affordable housing in this zone.

COAH gave substantive certification to the municipality without a reduction for this zone and the developer objected. COAH refused to reconsider its decision, asserting that the prior court opinion regarding this zone indicated that the agency was obligated to carefully review the site because of its serious deficiencies. Since there was no sewer service and the agency found no basis for waiving the center designation, the COAH refused to grant a reduction.

On appeal, the developer argued that the COAH abused its discretion in refusing to waive the center designation requirement and that this refusal to grant a reduction was violative of the policy underlying Mount Laurel and its regulations. The COAH asserted that a lower court had already determined that inclusion of the disputed site in the fair share plan violated the COAH rules.

The Court noted that its review of the agency decision was limited to whether the decision was arbitrary or capricious. It reasoned that one of the primary roles of the COAH is to ensure municipal compliance with regulations and a realistic chance for affordable housing. These rules allow for credits for previously zoned sites such as the one at issue, however, to qualify, a zone must comply with other COAH rules. The Court found that the subject site was suitable for affordable housing development as defined by the regulations. Another rule requires a site to have access to sewer service under a water management plan approved by the DEP. The Court found substantial evidence to support the finding that the site was not included in the amendment to the water quality plan.

The Court held that the COAH erred in failing to specifically consider its waiver regulation in deciding that issue. A waiver will be granted where it creates affordable housing, fosters the intent of the policy underlying the rules, or where strict application of the rule causes unnecessary hardship. The developer argued that all three of these were applicable and therefore, the COAH violated its own rule. The Court observed that there was evidence to suggest that a waiver might be found and remanded this issue stating that the COAH must make specific findings of fact on the relevant criteria.

The Court also held that the COAH, in violation of its stated policies and regulations, failed to assist the municipality and the developer in working with other state agencies. The Court criticized the agency for interpreting the court opinion as holding that the site could never preset a realistic opportunity for affordable housing. Instead, the Court asserted that this prior case turned on the lack of effort to implement a sewer system. On the facts before the Court, the parties attempted to proceed with this process, however, they struggled, in part due to lack of support from the COAH. Consequently, the Court held that, on remand, the COAH would have to explain its failure to assist the municipality.

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