New Jersey Land Use Law

New Jersey, which is quickly becoming a pioneer in the world of renewable energy, has already enacted legislation that promises to significantly reduce greenhouse gases and provide 22.5% of its energy through renewable sources by 2020. The State is also set to construct the nation’s first offshore wind farm, which will provide alternative energy to approximately 110,000 homes from a series of turbines located some twenty miles off the coast of Avalon. The Legislature is currently considering additional bills that will, if enacted, further advance the implementation of alternative energy. Solar energy is at the forefront of this movement and examples of such bills include the requirement of solar energy systems in all new public schools (A-3208), green building standards in all new affordable housing (A-1626), solar panels on noise barriers erected on roads and highways (A-3347) and solar energy fields on preserved farm land (A-2859). However, the proposed legislation with the most teeth is aimed at new home building.

Solar Energy Mandatory?

Of particular interest to building professionals is the “Residential Development Solar Energy Systems Act” (A-1558), which was overwhelmingly passed in the Assembly and may pass in the Senate soon. This bill, as recently amended, requires that any developer of “25 or more dwelling units” offer to install, or provide for the installation of, a solar energy system at the point that the “prospective owner enters into negotiations with the developer to purchase the unit.” This obligation will, if enacted, have a significant impact on the planning and building stages of a residential development. Building professionals will be faced with new variables that will need to be addressed at the early stages of the development process. This bill would also require developers to “disclose in any advertising” 1) that a prospective owner may have a solar energy system installed in their unit; 2) the total cost of the system installation; and 3) an estimate of the potential savings associated with the solar energy system as opposed to the standard gas or electric system. The bill also offers some technical challenges, such as how to meet the bill’s requirements when a home does not have a southern exposure.

Another legislative initiative that may cause a change in the approach taken with regard to environmental building design is A-2994. That bill would amend the Municipal Land Use Law to authorize municipalities to require the use of solar energy as a condition of site plan or subdivision approval. Earlier this year, municipalities were given the authority to include a “green buildings and environmental sustainability plan element” in their master plans. Now, A-2994 proposes to go one step further by authorizing municipalities to condition approval of a site plan or subdivision upon compliance with those solar energy standards included in the master plan. This poses many new and previously unexplored issues to builders and developers who may not have planned for such conditions. Building professionals will have to prepare for municipalities that may implement such green elements into their master plans. If there is a green element, builders will also need to bring themselves up to speed on this emerging technology to prepare for the possibility that such conditions are imposed.

Overcoming Obstacles

Additional conditions and requirements imposed upon a project typically result in an increase in expenditures and a decrease in economic feasibility. One of the most significant obstacles facing the expansion of solar energy systems is the installation. Most residential solar systems begin with installation of solar panels to a roof with brackets. This type of installation typically punctures or alters the roof in a way that voids the roof manufacturer’s warranty. With roofs being one of the more expensive home replacement items, that possibility poses a substantial risk for homeowners.

The Legislature is working to provide assistance by proposing a bill that would establish a “Solar Roof Installation Warranty Fund” to provide money to pay claims against solar equipment installers for damage caused to roofs during installation that is not covered by the warranty. This fund would provide additional protection for homeowners against a potential loss from roof damage caused as a result of solar panel installation. It is important to note that the bill in its present form does not yet include residential buildings.

Tax Assistance

Solar energy systems are not exactly new, although they are catching on more and more with builders and property owners. One reason such systems have not become even more commonplace is the cost associated with their implementation. Congress and the New Jersey Legislature have acknowledged this additional burden and they have passed (or proposed) certain tax-based initiatives to ease the financial impact of going green with solar power.

For example, federal tax credits are now available to make green building, and particularly solar energy implementation, significantly more practical. The “Emergency Economic Stabilization Act of 2008”, signed into law on October 3, 2008 (and more commonly known as the “bailout bill”), includes an extension of the Section 25D residential solar investment tax credit. This 30% credit associated with residential solar energy systems used to heat property and generate electricity for use in a dwelling has been extended through December 31, 2016. In addition to the extension, the credit no longer has a $2,000 cap for solar electric property expenditures (the $2,000 cap is still in effect for solar water heating). These credits may now make solar energy an affordable alternative and a worthwhile investment for many homeowners.

While federal tax breaks are already in place, New Jersey is not far behind with proposed legislation that would provide additional tax relief to the environmentally conscious builder. Currently before the Legislature is the “Green Building Tax Credit Act,” which would allow certain tax credits toward the corporation business tax, gross income tax, and certain other specified taxes for builders and owners who design and construct buildings that meet certain "green building" criteria. These types of tax benefits will ease the burden on homeowners and reduce the time it takes to recoup the investment.

Other Bills in the Making

Two other pending bills are of interest. The first, S-1066, would allow developers to qualify for low-interest loans from the New Jersey Economic Development Authority when building a “high performance green building” (as defined according to “LEED” standards or other standards specified in the bill). Another bill of interest is S-702, a bill that would authorize modification of the Uniform Construction Code’s energy subcode and provide for down payment assistance for buyers of homes meeting certain energy subcode requirements.

Conclusion

Until now, certain renewable forms of energy, including solar power, were considered by many as nothing more than the “flavor of the month,” with little chance of sustainability due to the costs associated with their implementation. The State of New Jersey is trying to turn solar power into a legitimate and, in some cases, mandatory option for building professionals and property owners alike. The legislative proposals discussed above directly impact building professionals by creating new challenges that require a change in the thinking and approach from the purchase of the land through the closing of the units.

Legislators are taking an aggressive approach to ensuring that builders can seamlessly implement such technology. The creation of the roof warranty fund would be a step in the right direction. The tax credits provided by Congress, as well as those proposed by the State Legislature, may be just enough to sway those that previously would not have considered making the change. As the State continuously takes steps toward achieving a greener New Jersey, the prudent building professional should keep informed of such legal developments and be prepared to handle the challenge. Some of the above-referenced proposed bills will likely become law, and others will not. Others are already in effect. Moreover, municipalities are beginning to impose such “green” requirements through their ordinances. All such new laws must be carefully monitored in this dynamic area.