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Toll Brothers, Inc. v. Township of West Windsor

173 N.J. 502, 803 A.2d 53 (2002)

MOUNT LAUREL— To meet its obligation to provide a realistic opportunity for affordable housing under the Mount Laurel doctrine, a municipality must take into account the market desirability of different types of housing and can’t require multi-family housing when market forces demand single family housing.

The developer of a large tract of land alleged that the municipality had engaged in exclusionary zoning in violation of the New Jersey Constitution and the Fair Housing Act of New Jersey (FHA), and “sought a builder’s remedy from the trial court.” Following a bench trial, the lower court concluded that the municipality was “not in compliance with the Mount Laurel mandate and thus ... [had] violat[ed] ... the New Jersey Constitution and the New Jersey Fair Housing Act.” The Appellate Division affirmed. On appeal, the New Jersey Supreme Court considered whether the municipality’s “ordinances, regulations and site factors prevented a realistic opportunity for development of affordable housing, whether market demand for a particular housing type should have been considered in making that determination; and whether [the developer] was entitled to a builder’s remedy.” Under New Jersey law, “developing municipalities are obligated” under the New Jersey Constitution “to provide a realistic opportunity for the development of low and moderate income housing.” To enforce that principle, the Supreme Court created the “builder’s remedy” as an “incentive for the institution of socially beneficial but costly litigation… .” A builder’s remedy permits builders “to seek court approval for construction of the housing project they propose to the [municipality] prior to or during the pendency of the action, pursuant to plans which, as they originally represented, will guarantee of the allocation of at least 20% of the units to low or moderate income families.” In the series of Mount Laurel cases, the Supreme Court “also clarified the conditions under which a builder’s remedy may be granted.” It began “by acknowledging that ‘[b]uilder’s remedies have been one of the many controversial aspects of the Mount Laurel doctrine.’ ... Notwithstanding that controversy, however [the Supreme Court] found that ‘[e]xperience ... has demonstrated to us that builder’s remedies must be made more readily available to achieve compliance with Mount Laurel.’” On the other hand, lower courts were cautioned to guard the public interest “carefully to be sure that plaintiff-developers do not abuse the Mount Laurel Doctrine.” Eventually, the Legislature codified the Mount Laurel Doctrine by enacting the FHA. The FHA created an administrative agency, the Council on Affordable Housing (COAH), “to oversee the development of low and moderate income housing throughout the state through a system of voluntary participation by municipalities in the COAH process.” Under the FHA, COAH serves as an alternative form for the resolution of Mount Laurel disputes.

This was the second time that this developer had initiated suit against the same municipality. The earlier litigation resulted in a judgment establishing the developer’s fair share of a particular number of low and moderate income units. Later, that number was reduced and then again it was further modified with a significant additional reduction. To meet its original obligation, the municipality adopted a housing plan and various conforming zoning amendments. Its entire compliance plan was eventually memorialized in a 1985 Judgment of Compliance and Repose which was to remain effective for six years. Eight years after the memorialization of that judgment, the developer filed suit “alleging that [the municipality] had engaged in a pattern of exclusionary zoning. The six year period of effectiveness for the original judgment expired without the municipality applying to COAH for interim certification. If it had been granted interim certification, the municipality “would have been required to continue implementing the terms of the 1985 judgment and would have continued to enjoy the same measure of protection from litigation that was provided by that judgment. Even though it did not apply to COAH, the municipality continued to implement the 1985 court-approved plan. As the municipality pursued its plan, the number of low and moderate income housing units that were developed remained relatively small and the municipality was becoming populated with “high-priced, large-lot, single-family houses.”

The developer argued that the municipality’s “poor” development rate “for the construction of affordable housing was due to a variety of factors,” including environmental constraints within the municipality, the municipality’s excessive cost-generative public sewer policies, public resistence to, and application processing delays regarding, development of affordable housing sites, the failure of the municipality to include conventional single-family houses on small lots within its zoning, and the municipality’s other restrictive zoning standards and cost-generative ordinances, “such as the requirement that 175 senior citizen affordable units be built on [this particular developer’s] site ‘without regard to the number of market units built,’ ..., as well as ordinances establishing the set-aside of an ‘unreasonable amount of common open and recreational space.’” The lower court summarized that argument by saying that the defendant was asking the court “to look beyond the face of [the municipality’s] assertedly inclusionary zoning. It asks for consideration of numerous factors – environment, infrastructure, market demand, municipal policy and other zoning related factors – for finding that [the municipality] is deficient in its affirmative duty under Mount Laurel cases.”

The builder’s remedy sought by the developer would have necessitated rezoning of its site. Rezoning would have allowed it to construct a substantial number of market-rate, single-family detached houses on small lots with a significant portion being affordable rental housing. The existing zoning required a mix of townhouses, garden apartments, patio homes, two-family rentals, maisonettes and zero lot-line single family units.

The Court examined, in detail, site by site, each of the alleged impediments that the developer alleged were the result of the municipality’ actions or inactions. It also looked at the development potential of the developer’s sites and the market demand for housing within the municipality. It carefully examined the sewer policies of the municipality and the environmental considerations which impacted the ability to assemble developable properties. Then, it endorsed the Appellate Division’s view that the developer had met the three requirements for a builder’s remedy: “(1) it succeed[ed] in Mount Laurel litigation, (2) it propose[d] a project with a substantial amount of affordable housing, and (3) [its] site [was] suitable, i.e., the municipality fail[ed] to meet its burden of proving that the site [was] environmentally constrained or [that] construction of the project would represent bad planning.” Further, it endorsed the Appellate Division’s view that the developer acted in good faith and therefore was entitled to a builder’s remedy. In upholding the Appellate Division, the Supreme Court rejected the municipality’s argument that the developer should first have applied for variances before the planning board. It felt that the developer’s site “was not a good candidate for variances because of the ‘size of the property, its importance in the township’s compliance plan and the number of variances needed to build conventional single-family dwellings… .”

The Supreme Court also rejected the municipality’s claim “that it was already compliant and had instituted amendments to its fair share plan at the time [the developer] initiated its law suit.” The Court felt that the municipality was ignoring the critical point, that it was this very developer “that served as the catalyst for change and successfully demonstrated [the municipality’s] non-compliance with its constitutional obligation.”

In summary, the Court pointed out that the municipality “chose not to submit to COAH’s jurisdiction when its period of repose expired after the first round of Mount Laurel litigation. ... [It] chose again not to pass a resolution of participation after [the developer] filed its second round of litigation in 1993. The matter therefore remained in the Superior Court and was adjudicated there. When a municipality like [this particular one] does not avail itself of the COAH process and protections, that municipality remains vulnerable to a Mount Laurel challenge. If municipalities believe, as the League of Municipalities contends, that the builder’s remedy has become a developer’s weapon, it is the municipalities that possess the shield of COAH-afforded protection to ward off builder’s remedy litigation. Until practically all municipalities with a significant Mount Laurel obligation use the COAH process, however, the builder’s remedy remains a necessary mechanism for the enforcement of constitutional values. Experience demonstrates that absent adequate enforcement, the Mount Laurel doctrine can deliver little more than a vague and hollow promise that a reasonable opportunity for the development of affordable housing will be provided.”

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