|
On March 20, 2024 Governor Phil Murphy signed new affordable housing legislation into law creating a framework and procedure for municipalities to comply with their Mount Laurel obligation for the upcoming Fourth Round and beyond.
At its core the law is intended to streamline the process by which a municipality determines its affordable housing obligation (the number of affordable units) and adopts a Housing Element and Fair Share Plan (“HEFSP”) and implementing ordinances and resolutions addressing the obligation. It endeavors to achieve prompt municipal compliance through imposing numerous deadlines for municipal action.
The legislation officially abolishes the Council on Affordable Housing (“COAH”), which ceased functioning years ago and was judicially declared defunct by the New Jersey Supreme Court’s 2015 Mount Laurel IV decision.
The DCA will Calculate the Fourth Round Affordable Housing Obligation
To kick off the process, the Department of Community Affairs (“DCA”) must calculate the regional need and municipal present and prospective obligations for the Fourth Round by October 20, 2024 (seven months after the effective date of the law) and will provide the resultant report to each municipality and make it publicly available on the DCA website.
The law sets forth the methodology for calculating the Fourth Round present and prospective need utilizing the methodology from the March 8, 2018 unpublished decision In re Application of Municipality of Princeton with some exceptions. The obligations calculated by DCA are not binding on the municipalities. (see below)
The Newly Created Affordable Housing Dispute Resolution Program
The law creates the Affordable Housing Dispute Resolution Program (the “Program”). The Program will consist of an odd number of members, of at least 3 and no more than 7 to lead its administration.
Within 60 days of the law’s enactment the Administrative Director of Courts will select members from designated current, retired and on recall Mount Laurel judges and may appoint other qualified experts as members if not enough judges are available. The Program may employ special masters to assist in rendering determinations and resolving disputes.
The Administrative Director of Courts will establish procedures for resolving disputes with municipalities and third parties in circumstances where the Program is unable to address the dispute within the time frames established by the new law.
The Chief Justice of the New Jersey Supreme Court will designate local level Mount Laurel judges in each vicinage to resolve disputes with respect to compliance and/or noncompliance with obligations created by the municipal housing plans.
The Program may terminate immunity from exclusionary zoning lawsuits (builder’s remedy) if it finds that the municipality has failed to come into constitutional compliance at any point in the process.
The Program’s determination as to the municipal obligation or certification are considered final decisions and subject to appellate review.
The law requires the development of a filing system available to the public free of charge.
Timeline for Municipal Action and Challenges within the Program
DCA Report. Calculating affordable housing obligations – October 20, 2024
Municipal Resolution Establishing the Obligation – January 31, 2025
Municipalities must determine their present and prospective affordable housing obligation and adopt a binding resolution no later than January 31, 2025. By meeting this deadline the obligation is established by default, and bears a presumption of validity beginning on March 1, 2025, unless challenged. (see below)
The municipality must also file the binding resolution with the Program within 48 hours of adoption and the resolution will be publicly available on the Program’s website and the municipality’s if it maintains one. A municipality’s failure to meet this deadline will result in the loss of immunity from exclusionary zoning litigation.[1]
Challenges to the Municipal Determination of the Obligation – February 28, 2025
An interested party may file a challenge on or before February 28, 2025, alleging the municipality’s determination of the obligation doesn’t comply with the law. The challenge must state with particularity how the calculation fails to comply with the law and must include the challenger’s own calculation of the municipality’s fair share obligation.
Resolution of Disputes Regarding the Obligation - March 31, 2025
The Program must resolve disputes and it may: (i) find the municipality’s determination failed to comply with the law, and immunity from exclusionary zoning suits is revoked; (ii) an adjustment of the obligation complies with the law, without revoking immunity, or (iii) reject of the challenge(s) and affirm the municipal determination. The Program’s decision must be provided no later than March 31, 2025 and be posted on its website.
Municipal Adoption of Housing Element & Fair Share Plan – June 30, 2025
A municipality must adopt a HEFSP and propose drafts of appropriate zoning ordinances and other ordinances and resolutions to implement this Plan on or before June 30, 2025. Within 48 hours of adoption or by June 30, 2025, whichever is sooner, these must be filed with the Program. Failure to meet the deadlines, including filing with the Program, results in a loss of immunity from exclusionary zoning lawsuits.
If no challenges are filed by August 31, 2025 the Program will conduct a limited review of the HEFSP to determine compliance with the Fair Housing Act (“FHA”) and the Mount Laurel doctrine and issue a compliance certification unless the standards are not met. Any compliance certification issued shall be accompanied by a written report that sets forth the basis of the certification in a format to be developed and approved by the Administrative Director of the Courts.
Challenges and Objections to Adopted Housing Element & Fair Share Plan – August 31, 2025
An interested party may file responses with the Program on or before August 31, 2025 alleging that the HEFSP is not in compliance with the FHA or the Mount Laurel doctrine. Any challenge filed must state with particularity which sites or elements of the HEFSP do not comply with the law and the basis for alleging noncompliance. A challenge cannot be based on claims that the challenger’s site is better than sites proposed within the HEFSP.
Resolution of Disputes – December 31, 2025
The Program must facilitate communication between the parties relating to the challenge and provides the municipality until December 31, 2025 to commit to revising its HEFSP in response to the challenge, or provide an explanation as to why it will not make the requested changes. The Program must issue compliance certification, conditioned on the municipality’s commitment, as may be necessary, to revise its HEFSP in accordance with the resolution of the challenge.
Municipal Implementation of the Fourth Round HEFSP – March 15, 2026
All zoning ordinances, other ordinances, and resolutions proposed by the municipality must be adopted on or before March 15, 2026. However, a municipality that is involved in a continuing dispute over its HEFSP may adopt a binding resolution by this date to commit to adopting the implementing ordinances and resolutions following resolution of the dispute, so that it does not have to adopt and readopt amended versions.
Resolution of Remaining Disputes
The Program may permit a municipality that has a remaining dispute with interested parties to retain immunity from exclusionary zoning lawsuits into 2026 if the Program or the designated Mount Laurel judge determines the municipality has been unable to resolve the dispute despite the municipality’s efforts and commitment to be constitutionally compliant.
Availability of Documents to the Public
The law requires that documents filed with the Program be made freely available to the public via the internet. Once a municipality receives a compliance certification, or a judgment of compliance and repose, it is obligated to make the HEFSP, ordinances, and resolutions available to the DCA and Program for publication on their respective websites.
Midpoint Review
A municipality or interested party may file an action through the Program seeking a review at the midpoint of the 10-year compliance period (for the Fourth Round the midpoint is July 1, 2030), including a realistic opportunity for review of any inclusionary development site in the HEFSP that has not yet received preliminary site plan approval.
If initiated by the municipality, the municipality may propose one or more alternative replacement sites to provide for the same number of affordable units proposed for removal, unless the particular facts of the case demonstrate that the municipality and its land use boards have hindered or prevented the site to be removed from receiving approval.
Vacant Land Adjustments
The FHA and prior round COAH Regulations permitted municipalities to seek a temporary downward adjustment of its affordable housing obligation based on lack of vacant land, known as a “vacant land adjustment”. In extreme cases the municipal obligation could be reduced to almost nothing, leaving the full obligation unmet. The new law requires vacant land adjustment municipalities to create more opportunities by identifying properties likely to redevelop during the 10 year-round to address at least 25% of the prospective need obligation, and to adopt realistic zoning.
Bonus Credits
The new law eliminates the rental bonus credit, which previously provided municipalities a 1-unit bonus credit for each rental unit up to 25% of the prospective need.
The following 1 credit bonuses are made available under the new law:
(1) one unit of credit and one bonus credit for each affordable housing unit for individuals with special needs or permanent supportive housing.
(2) one unit of credit and one bonus credit for each affordable housing unit in a 100 % affordable housing project for which the municipality contributes toward the costs of the project.
(3) one unit of credit and one bonus credit for each unit of low- or moderate-income housing created by transforming an existing rental or ownership unit from a market rate unit to an affordable housing unit. A municipality must demonstrate that a commitment to follow through with this market to affordable agreement has been made and signed by the property owner; or that the municipality acquired the property.
The following 1/2 credit bonuses are made available under the new law:
(1) one unit of credit and one-half bonus credit for each affordable housing ownership unit created in partnering sponsorship with a non-profit housing developer.
(2) one unit of credit and one-half bonus credit for each affordable housing unit located within a one-half mile radius, or one-mile radius for projects located in a Garden State Growth Zone, surrounding a New Jersey Transit Corporation, Port Authority Transit Corporation, or Port Authority Trans-Hudson Corporation rail, bus, or ferry station, including all light rail stations.
(3) one unit of credit and one-half bonus credit for a unit of age-restricted housing, provided that a bonus credit for age-restricted housing shall not be applied to more than 10% of the units of age-restricted housing constructed in compliance with the UHAC in a municipality that count towards the municipality’s affordable housing obligation for any single 10-year round.
(4) one unit of credit and one-half bonus credit for each affordable housing unit for family housing with at least 3 bedrooms above the minimum number required by the bedroom distribution. This bonus credit is calculated by taking into account the full municipal fair share plan and housing element, and the number of units with at least 3 bedrooms required for projects satisfying the minimum 50 % family housing requirements. A municipality will receive the bonus credit pursuant to this paragraph for each unit with at least 3 bedrooms that are above the minimum number required for the bedroom distribution determined by UHAC.
(5) one unit of credit and one-half bonus credit for affordable housing unit constructed on land that is or was previously developed and utilized for retail, office, or commercial space.
(6) one unit of credit and one-half bonus credit for each existing low- or moderate-income rental housing unit for which affordability controls are extended for a new term of affordability, in compliance with the UHAC, and the municipality contributes funding towards the costs necessary for this preservation.
(7) one unit of credit and one-half bonus credit for each unit of very low-income housing for families above the 13 % of units required to be reserved for very low-income housing.
Requirements and Limits of Certain Unit Types within a HEFSP
Age restricted units. No more than 30% of the affordable housing units, exclusive of any bonus credits, to address the prospective need may be age restricted.
Families with children. At least 50% of the actual affordable housing units, exclusive of any bonus credits, to address the prospective need must be available to families with children.
Rental housing. At least 25% of the actual affordable housing units, exclusive of any bonus credits, to address the prospective need, must be rental units. Additionally, at least half of these rentals must be available to families with children.
Deed Restrictions
The New Jersey Housing and Mortgage Finance Agency (“HMFA”) in consultation with the DCA, must establish requirements and controls to ensure the maintenance of affordable housing for a period:
- not less than 40 years for newly created rental units.
- not less than 30 years for for-sale units.
- 30 years for housing units for which affordability controls are extended for a new term, provided that the minimum extension term may be not less than 20 years and as long as the original and extended term, in combination, total at least 60 years.
Any 100% affordable rental property will have the right to extinguish a deed restriction regardless of original length, beginning 30 years following the start of the deed restriction, provided a refinancing or rehabilitation, or both, for the purpose of preservation is commenced and that a new deed restriction of at least 30 years is provided. A municipality will be eligible to receive credits for all preserved units pursuant to this subsection, as long as the original and extended term total at least 60 years, and this credit may be obtained at the time of preservation.
Significantly, the new law further requires the HMFA to promulgate updated regulations within 9 months.
Conclusion
In conclusion, this overview provides a snapshot of this comprehensive legislation highlighting issues important to developers, property owners, and real estate professionals, and is not intended to be a complete summary of the 77-page law. Although the Fourth Round begins in July of 2025, the process implemented by this new law commences much sooner and includes many deadlines for municipalities and interested parties alike in an effort to streamline an historically lengthy process. Giordano, Halleran and Ciesla will continue to monitor the implementation of the law.
[1] Notably, the law also provides an exception to the hard deadlines. If the municipality fails to materially adhere to any deadline due to circumstances beyond its control, including but not limited to extreme weather events, then the Program or the Mount Laurel judge, may permit the municipality to have a grace period to come into compliance on a case-by-case basis.
| 
