NJ Supreme Court Issues Affordable Housing “Gap” Ruling

by Patrick J. McNamara on February 3, 2017

The New Jersey Supreme Court recently issued its much-anticipated decision regarding whether municipalities must satisfy the affordable housing need which arose from the end of the second-round housing cycle in 1999 to the present, referred to as the “gap period.” In In Re Declaratory Judgment Actions Filed By Various Municipalities, County Of Ocean, Pursuant To The Supreme Court’s Decision In In re Adoption of N.J.A.C. 5:96, 221 N.J. 1 (2015), the state’s highest court redefined “present need” to account for the gap period.

NJ Supreme Court Issues Affordable Housing “Gap” Ruling

Legal Background

As we have previously discussed on this blog, the Supreme Court of New Jersey transferred the administration of affordable housing rules back to the courts, effectively stripping the Council on Affordable Housing (COAH) of any power after failing to promulgate affordable housing rules.

In the wake of the decision, the trial courts have been asked to determine how municipalities should determine their housing quotas. A series of expert reports by EConsult Solutions, on behalf of the municipalities, projects a significantly lower obligation, while the experts used by the Fair Share Housing Center project a significantly higher obligation. The difference is attributable, in part, to whether the 15-year gap period from the end of the second round housing cycle in 1999 to the present is taken into consideration.

Ocean County Judge Mark Troncone held that municipalities must consider the so-called “gap period.” He reasoned that “New Jersey’s affordable housing need is cumulative and there can be no gaps in time left unaddressed.” The Appellate Division reversed, rejecting the trial court’s position that municipalities must make a “separate and discrete” gap-period calculation. The court maintained that its holding did not ignore the affordable housing need that arose from 1999 to 2015. Rather, to the extent that “[low- and moderate-income] households formed during the gap period” might be living in overcrowded or deficient housing, the need that arose during the gap would be “partially included” in the calculation of present need. The Fair Share Housing Center appealed.

NJ Supreme Court’s Decision

The Supreme Court of New Jersey affirmed the Appellate Division decision, albeit with significant modifications. “Towns are constitutionally obligated to provide a realistic opportunity for their fair share of affordable housing for low- and moderate-income households formed during the gap period and presently existing in New Jersey,” the court held.

The court held that there “could be no hiatus in the constitutional obligation” to address the need of low- and moderate-income households. In support of its decision, the court stated that “[t]he modification of the previous definition of a present-need analysis is essential in order to address the failure of COAH to perform its required mission, in connection with a constitutional obligation, for a period of time affecting almost a generation of New Jersey citizens.” It further noted that “[t]here is no fair reading of the Court’s prior decisions that supports disregarding the constitutional obligation to address pent-up affordable housing need for low- and moderate-income households that formed during the years in which COAH was unable to promulgate valid Third Round rules.”

As for how to account for need arising during the gap period, the New Jersey Supreme Court effectively crafted its own solution. As detailed in the court’s opinion:

The trial courts must employ an expanded definition of present need. The present-need analysis must include, in addition to a calculation of overcrowded and deficient housing units, an analytic component that addresses the affordable housing need of presently existing New Jersey low-and-moderate income households, which formed during the gap period and are entitled to their delayed opportunity to seek affordable housing.  

The court further added:

The trial court must take care to ensure that the present need is not calculated in a way that includes persons who are deceased, who are income-ineligible or otherwise are no longer eligible for affordable housing, or whose households may be already captured through the historic practice of surveying for deficient housing units within the municipality. 

As New Jersey Supreme Court’s decision makes clear, the process for determining municipal affordable housing obligations is riddled with complex questions. This now provides an opportunity for both municipalities and developers to be flexible in crafting plans that are both economically feasible and demonstrate the use of sound planning principles. Municipalities are encouraged to discuss the potential impact of the court’s decision with experienced counsel.

For more information about the affordable housing case or the legal issues involved, we encourage you to contact a member of Scarinci Hollenbeck’s Government Law Group.

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