January 1, 1900

by Stephen M. Eisdorfer

Under the newly-adopted State Development and Redevelopment Plan (State Plan), approximately 60 percent of New Jersey's remaining vacant land is mapped into Planning Areas 4 and 5. What does this mean in practical terms for home builders? What can you build in Planning Areas 4 and 5?

The Regulatory Effect of the State Plan

The State Plan is not a zoning regulation. It is merely a planning document. It does not have the force of law in and of itself, and does not prohibit any form of development. Indeed, in a recent case entitled New Jersey Builders Association v. DEP, the Appellate Division of the Superior Court specifically held that the State Planning Act, standing alone, does not empower any governmental entity to enforce the State Plan against private property owners or builders.

Even as a planning document, the State Plan does not envision that development will cease in Planning Areas 4 and 5. To the contrary, it envisions that tens of thousands of additional homes will be constructed in these planning areas over the next 20 years. Nonetheless, mapping land into Planning Areas 4 or 5 does create potential legal obstacles to residential development and may create even more legal obstacles in the future.

First, the State Plan envisions that much of the development in Planning Areas 4 and 5 will take place in "centers" nominated by municipalities and approved by the State Planning Commission. The State Planning Commission originally envisioned that approximately 600 such centers would be designated. In fact, since 1992, only about 30 centers have been designated. There is no reason to expect the pace to accelerate.

Second, although the State Plan does not itself have the force of law, state and local governments may, under some circumstances, incorporate its policies into their own regulations. For example, the DEP has incorporated the State Plan planning area designations into its most recent CAFRA regulations governing development in the coastal zone. Land in Planning Areas 4 and 5 in the coastal zone can be developed for residential uses only at extremely low densities.

Similarly, municipalities can rely on the State Plan as justification for reducing residential densities in Planning Areas 4 and 5. In two recent cases, Sod Farm v. Springfield and Kirby v. Bedminster, the Appellate Division has upheld downzoning of areas zoned for single family houses to three and ten acre lots on the grounds that such zoning would implement Planning Area 4 or 5 designation. Since municipalities can rezone properties even while development applications are pending, right up to the time that subdivision or site plan approval is granted, properties in Planning Areas 4 and 5 are at risk for downzoning.

Third, the State Plan is intended to guide capital expenditures by state agencies. It guides, but does not dictate, decision making by the Department of Transportation as to where highways and highway interchanges should be located. It similarly guides decision making by state agencies, such as the New Jersey Economic Development Authority, the New Jersey Housing and Mortgage Finance Agency, and the DEP, that provide loans or grants for housing or infrastructure development. Location in Planning Areas 4 and 5 makes it less likely that a builder (or municipality) will obtain state loans or grants, or other favorable treatment for projects that require the expenditure of state funds.

Fourth, the Council on Affordable Housing is required by statute to give some weight to the determinations of the State Planning Commission. It has adopted regulations that restrict the award of site-specific builder's remedies in Planning Areas 4 and 5. The courts are likely to honor these regulations. It is therefore likely to be relatively difficult to secure a site-specific builder's remedy in exclusionary zoning litigation for a property in Planning Area 4 or 5 if the town can devise a way to meet its fair share housing obligation without utilizing sites in Planning Areas 4 and 5.

Legal Status of the State Plan

Fifth, at present, the DEP cannot lawfully consider consistency with the State Plan when it decides whether to grant or deny applications for permits and approvals. In connection with the New Jersey Builders Association v. DEP case, the Attorney General's office filed an affidavit asserting that the DEP was not utilizing consistency of the proposed development with the State Plan as a factor in determining whether to grant or deny permits or approvals. The Appellate Division ruled that the DEP had no power under the State Planning Act to utilize the State Plan in that manner.

Nonetheless, it was clear at the time that the DEP was, in fact, requiring applicants for water quality management plan amendments to demonstrate consistency with the State Plan. Evidence brought to light in a subsequent suit brought by the New Jersey Builders Association (concerning conditions imposed by the DEP on a water quality management plan amendment sought by Hopewell Township) indicates that the DEP continues to do so, despite the decision by the court in New Jersey Builders Association v. DEP. So far, however, whenever the New Jersey Builders Association has actually challenged the DEP on this practice, the DEP has backed off.

The Proposed DEP Regulations

In July 2000, the DEP proposed new water quality regulations that would expressly link approvals for expansion of sewage treatment plants or collector systems, expansion of the boundaries of sewer service areas, or development of six or more residential units on septic systems, to a showing of consistency with the State Plan. This would have the effect of sharply restricting residential development in Planning Areas 4 and 5 outside of "centers." The DEP declared that this regulation would require municipalities to downzone properties in Planning Areas 4 and 5 currently zoned for residential development. In February 2001, the DEP withdrew its massive regulatory proposal. It did so, however, with a declaration that it intended to repropose the regulations at some point in the future. As discussed elsewhere in this issue, the DEP has already adopted new septic regulations.

The State Planning Commission has announced that it will entertain applications by property owners and builders to amend planning area designations. It is unclear whether the Commission will also entertain applications by parties other than municipalities for designation of centers. For the foreseeable future, builders who wish to construct residential developments in Planning Areas 4 and 5 can still do so, but they face risks of uncertain magnitude.

Things Builders Can Do

Prudent builders must seek to reduce their risks. They can do so in several ways. They can write land purchase contracts that shift the risks back to the property owner. They can, through "due diligence" investigations, assure that they do not need state, county, or local permits that might be affected by the State Plan designation. They can also seek to have their lands redesignated into centers or into planning areas other than Planning Areas 4 and 5. Finally, they can seek to line up their state, county and local approvals as early as possible, since the passage of time is likely to make the State Plan more problematic.

In short, while the State Plan remains merely a "planning document" with no regulatory impact of its own, it is being utilized by other agencies more and more as time marches on, and builders interested in lands located within Planning Areas 4 and 5 would be well-advised to focus on these issues immediately.

Stephen M. Eisdorfer is also a partner within the Land Use Division of Hill Wallack. A Member of the Board of Directors of the New Jersey State Bar Association's Land Use Section, he concentrates his practice in land use litigation, including Mount Laurel litigation and litigation involving the civil rights statutes.