January 1, 1900

by Henry T. Chou

Although the Mount Laurel doctrine mandating affordable housing opportunities in every municipality in New Jersey has been in force for over 20 years, a number of municipalities in Bergen and Hudson Counties have, up until now, been able to avoid compliance with the doctrine because they have the peculiar distinction of being located within a special district controlled by the New Jersey Meadowlands Commission (NJMC). That may be about to change.

The NJMC District

The NJMC was created by the New Jersey Legislature in 1968 to oversee the protection of environmentally sensitive areas, and the promotion of economic development, within a 30.4 square mile area including portions of 14 municipalities (Carlstadt, East Rutherford, Little Ferry, Lyndhurst, Moonachie, North Arlington, Ridgefield, Rutherford, South Hackensack, Teterboro, Jersey City, Kearny, North Bergen and Secaucus). In contrast to the rest of the state, there has been almost no affordable housing built within the NJMC district since the mid 1980’s, when the New Jersey Supreme Court and Legislature implemented the Mount Laurel doctrine. In large part, the lack of affordable housing was attributable to the fact that zoning authority within the district rested with the NJMC, which had not adopted any regulations mandating the provision of affordable housing. Over the years, municipalities relied upon such NJMC control to avoid affirmatively complying with their affordable housing obligations, as determined by the New Jersey Council on Affordable Housing (COAH).

The Recent Litigation

In November 2005, the Law Division of the Superior Court found two municipalities within the NJMC district, Carlstadt and East Rutherford, liable for exclusionary zoning, and granted a “builder’s remedy” to a developer seeking to build a mixed use development on riverfront property in those municipalities. The builder’s remedy allowed for the development of 840 housing units, including 700 market rate units and 140 affordable units, as well as commercial and recreational facilities. In a strongly-worded ruling against the two municipalities, the court found that the NJMC had “aided and abetted” in the municipalities’ avoidance of affordable housing obligations and “must share in the blame” for the “baleful circumstances” regarding the lack of affordable housing within the NJMC district.

Despite the Law Division’s forceful decision, Carlstadt and East Rutherford remained recalcitrant and failed to fully implement the court’s judgment in the following months. Thus, in the spring of 2006, the court employed the drastic step of suspending all zoning ordinances in the two municipalities and appointing a special master to oversee all applications for new construction, with an eye towards providing affordable housing. While East Rutherford subsequently chose to cooperate with the court-appointed special master to begin the process of complying with its affordable housing obligations, Carlstadt refused to comply with the court’s decision and has filed an appeal.

NJMC’s Compliance Plan

In response to the Law Division’s decision and other critical comments, the NJMC claims to be implementing a plan to address the dearth of affordable housing in the Meadowlands. In late 2005, NJMC entered into an agreement with COAH outlining various measures ostensibly assisting municipalities in meeting their obligations. In early 2007, NJMC adopted affordable housing rules based on COAH’s “growth share” method­ology, which determines municipal housing obligations based on projections of housing and employment growth. The COAH rules required municipalities to provide one affordable housing unit for every eight market units constructed or twenty-five new jobs generated in town. The rules also established a fee schedule for payments to be made by developers in lieu of constructing actual affordable units. However, on January 25, 2007, the Appellate Division of the Superior Court invalidated the COAH rules on which the NJMC rules were based. In particular, the Appellate Division struck down COAH’s “growth share” methodology as unconstitutional because it did not require municipalities to satisfy actual housing needs, but instead encouraged them to reduce their housing obliga­tions by lowering growth projections and deterring development.

Because NJMC modeled its affordable housing rules after COAH’s “growth share” methodology, which has since been invalidated, it is unlikely that NJMC’s rules will be implemented in their current form. It may be that NJMC will not address its affordable housing issues again until COAH formulates a set of new, compliant rules that can serve as the basis for NJMC’s rules. It remains to be seen whether COAH and NJMC’s new rules, when ultimately proposed and adopted, will actually comply with the Mount Laurel doctrine.

Impact of NJMC’s Housing Policies

Whatever form NJMC’s affordable housing regulations ultimately take, it is clear that they will dictate whether inevitable future development in the NJMC district will include housing, including affordable housing.

A prime example of development that will generate a need for housing is the $2 billion “Xanadu” redevelopment project proposed by the New Jersey Sports and Exposition Authority and NJMC. Xanadu is a massive entertain­ment complex to be built on the land currently occupied by the Continental Airlines Arena and its parking facilities, located within East Rutherford. Although the original developer of the project, Mills Corporation, was unable to proceed due to financial difficulties, it now appears the project will move forward with Colony Capital, a real estate investment firm which has taken over all obligations to complete Xanadu.

It is estimated that Xanadu will generate approximately 20,000 permanent, full time jobs by 2012 through the construction of a sports district, entertainment district, fashion district, children’s education district, food and home district, a snow dome for indoor skiing, office space, and hotel and conference facilities. Despite this massive generation of jobs, which will create a need for affordable housing, thus far the NJMC has proposed no housing (affordable or otherwise) to go along with the Xanadu proposal. This deficiency is the subject of a pending lawsuit by the New Jersey Builders Association, which seeks to hold NJMC accountable for affordable housing obligations generated by large-scale projects such as Xanadu.

While NJMC continues to wrestle with the issue of affordable housing within the NJMC district, a handful of municipalities within its district remain non-compliant with their fair share housing obligations. Unless these municipalities adopt affordable housing plans and petition COAH or the courts for approval of such plans, they may continue to be vulnerable to exclusionary zoning litigation and builder’s remedies.