New Jersey Adopts Significant, Long-Needed Reforms to Its Affordable Housing Regime
On March 20th, Governor Murphy signed into law significant and long-needed reforms to the State’s affordable housing regime to streamline and accelerate the creation of affordable housing in the State. The legislation (A-4/S-50 (Lopez, Coughlin, Wimberly, Reynolds-Jackson/Singleton, Scutari, Ruiz) revises the Fair Housing Act and establishes a new process for the determination of municipal affordable housing obligations and enactment of implementing ordinances and resolutions for the 10-year period constituting the “Fourth Round”, which begins on July 1, 2025.
New Jersey municipalities, uniquely, have a constitutional requirement to provide their “fair share” of affordable housing since the New Jersey Supreme Court’s decision in Southern Burlington County NAACP v. Mt. Laurel Township, 67 N.J. 151, 336 A.2d 713 (1975), appeal dismissed and cert. denied, 423 U.S. 808 (1975). The new legislation is the State’s most comprehensive approach to implementing the requirements of Mt. Laurel since the creation of the Council on Affordable Housing (“COAH”) in 1985. COAH had difficulties since inception and was officially declared “moribund” by the New Jersey Supreme Court in 2015, after it failed to adopt updated regulations for over 15 years. In 2015, the courts took control of determining municipalities’ fair share obligations.
Determining Fair Share Obligations
Here are the key takeaways for how municipalities will now determine their fair share obligations under the new legislation:
- Formally disbands the Council on Affordable Housing.
- The Administrative Office of the Courts will create and supervise a streamlined dispute resolution process, called the Affordable Housing Dispute Resolution Program (the “Program”).
- The Department of Community Affairs will calculate regional need and municipalities’ fair share obligations by October 20, 2024.
- DCA’s calculation is to be based on the formula adopted by Judge Mary C. Jacobson A.J.S.C. in her March 8, 2018 Opinion in the consolidated cases MER-L-1550-15 and MER-L-1561-15.
- Each municipality will determine its present and prospective obligations in accordance with the formulas established in the new law and may take into account the regional and municipal calculations published by DCA.
- Municipalities can challenge the DCA's calculations, but their alternative must comply with the formula laid out in Judge Jacobson’s ruling.
- Municipalities must adopt their obligations by binding resolution by January 31, 2025 and file an action regarding it with the Program within 48 hours after adoption.
- Any challenge to the municipally-adopted obligations must be made by February 28, 2025.
- Municipalities must adopt their housing element and fair share plan and propose drafts of the appropriate zoning and other ordinances and resolutions to implement its present and prospective obligation and file them with the Program on or before June 30, 2025.
- Any challenge to the municipally-adopted housing element and fair share plan must be made by August 31, 2025.
- Municipalities must adopt changes to their ordinances by March 15, 2026.
- Following the expiration of the third round of affordable housing obligations on July 1, 2025, a municipality shall have immunity from exclusionary zoning litigation (including builder’s remedy lawsuits) if the municipality complies with the above deadlines established in the new law for both determining present and prospective obligations, and for adopting a housing element and fair share plan to meet those obligations.
- Municipalities are eligible to receive credits for preserved units as long as the original and extended term total at least 60 years.
Ensuring and Preserving Affordability
Additionally, the legislation also imposes the following requirements to ensure and preserve affordability:
- The law creates limitations on when and how municipalities can use affordable housing trust fund money, including not allowing those funds to be used on administrative costs, attorney fees or court costs associated with prosecuting or defending Mt. Laurel litigation.
- New rental units will have a 40-year minimum deed restriction, and for-sale units will have a 30-year minimum deed restriction. Affordability controls may be extended for an additional 30 years (a minimum extension term of no less than 20 years is permitted, provided that the original and extended period total at least 60 years).
- The DCA must maintain certain information regarding affordable housing projects publicly available on its website, including:
- the start and expiration dates of deed restrictions;
- residential and non-residential development fees collected and expended by municipalities (including the purposes and amounts of such expenditures); and
- the current balance in each municipality’s affordable housing trust fund.
- Establishes a cap on bonus credits in two ways:
- No more than 25% of a municipality’s obligation can be satisfied with bonus credits, and
- Units may not double-dip bonus categories, e.g., a special needs unit close to mass transit can only get bonus credit under one of those two bonus categories.
- No more than 30% of a municipality’s obligation can be satisfied with age-restricted housing.
- No more than 10% of a municipality’s obligation can be satisfied with transitional housing.
- At least 50% of a municipality’s obligation must be satisfied with affordable housing units for families with children.
- At least 25% of a municipality’s obligation must be satisfied with rental housing
- At least 13% of a municipality’s obligation must be satisfied with units for very low-income households (i.e., households earning less than 30% of the area median income), and municipalities earn a one-half bonus credit for each very low-income unit built above the 13% minimum.
Facilitating Affordable Housing Development
Finally, several companion bills were enacted that are designed to facilitate the development of affordable housing:
- ACS for A-2267/SCS for S-1415 (Lopez, Quijano/Singleton, Stack) (requires the New Jersey Housing Mortgage and Finance Agency to establish a pilot program to support insurance premiums for eligible affordable housing projects constructed by for-profit affordable housing developers),
- S-1422/A-3365 (Singleton, Turner/Lopez, Speight, Calabrese) (allows taxpayers to accelerate depreciation of eligible property expenditures in connection with construction of new affordable housing developments in order to realize cost savings)
- A-2296/S-2309 (Lopez, Wimberly/McKnight, Stack) (allows a municipal governing body to delegate to the municipal clerk the authority to issue certain approvals to facilitate development of affordable housing projects)
- A-3337/S-2312 (Wimberly, Reynolds-Jackson, Quijano/Stack, Singleton) (permits “payment in lieu of taxation” (PILOT) agreements between municipalities and sponsors of affordable housing projects that receive funding through the State Affordable Housing Trust Fund or municipal affordable housing trust funds; this PILOT is distinct from the tax exemption available under the Long Term Tax Exemption Law)
- A-1495/S-1484 (Karabinchak, Lopez, Swain/Lagana, Diegnan) (exempts receipts from sales made to contractors or repairmen of materials, supplies, or services related to the construction of 100%-affordable housing projects to help reduce costs for the construction of such projects)
Contact
For questions regarding New Jersey's affordable housing reforms, please contact Charles B. Liebling or Sandy L. Galacio, Jr., or your Windels Marx relationship lawyer.
Disclaimer
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