01/25/2017

Client Alert

Written by: Thomas F. Carroll, III

On January 18, 2017, the New Jersey Supreme Court released its opinion in the “gap year” appeal. The author argued the Supreme Court appeal on behalf of the New Jersey Builders Association.

The new opinion resolves the question of whether fair share need numbers must be calculated for the gap years. The gap years, the years 1999-2015, are the years in which the Council on Affordable Housing (COAH) failed to adopt lawful regulations and fair share numbers. The Supreme Court’s opinion goes a long way toward eliminating uncertainty as to municipalities’ fair share obligations under the Mount Laurel doctrine.

THE SUPREME COURT’S RULINGS

The opinion holds that fair share need numbers must be calculated for the gap years. Thus, municipalities will face higher fair share obligations than they were anticipating, and they must adopt fair share plans accordingly, rezoning more properties for affordable housing.

Municipalities had argued that the gap year need should simply be ignored. The Court rejected that position, confirming that the need for affordable housing accumulated year-by-year during the gap years. The Court then addressed the question of how the gap year need should be calculated. The opinion directs that trial courts calculate gap year need as an expanded version of “present need,” as opposed to including gap year need within the category of “prospective need.” Gap year need numbers when calculated as prospective need are slightly higher than gap year need numbers when calculated as expanded present need, but the latter are still substantial. Further, gap year need will be added to the other components of fair share obligations that municipalities must meet, including “prior round” need (need numbers calculated by COAH in the past), and prospective need for the period 2015-2025.

Experts for the Fair Share Housing Center and the New Jersey Builders Association have already done reports calculating gap year need as an expanded version of present need. It is anticipated that revised reports addressing gap year need in that fashion will now be filed, with the trial courts to hear testimony on the opinions and fair share numbers provided in those reports.

THE OPINION’S EFFECT ON PENDING CASES

Trial courts throughout the State are now guided by the Supreme Court’s opinion. There is an ongoing fair share methodology trial involving Mercer County Mount Laurel cases, and that is likely to be the first case in which the Supreme Court’s opinion is applied.

That trial, being conducted by Judge Mary Jacobson in the Mercer County Mount Laurel cases, began on January 10, 2017, and trial dates are currently scheduled through early March. Because the gap year issue was before the Supreme Court when the trial commenced, Judge Jacobson has thus far limited the testimony in the trial to fair share numbers for the period 2015-2025. 

Now that the Supreme Court has decided that gap year fair share numbers must be added, Judge Jacobson will be directing the parties shortly as to how the gap year need issues will be addressed at trial. 

SETTLEMENT ISSUES

Many Mount Laurel declaratory judgment (DJ) cases throughout the State have already settled, with municipalities having received “settlement discounts” toward their fair share obligations. Some of those settlements have been concluded, with municipalities having received final judgments declaring their compliance with their Mount Laurel obligations. It is doubtful that the gap year opinion will have any effect on already-concluded settlements, but that remains to be seen.

Other settlements are only proposed at this stage. To be accepted by the trial courts, fair share plans proposed through settlements must be publicly noticed and then undergo a “fairness hearing” in court, with the trial court judges ruling upon whether the settlements should be accepted. Some proposed settlements are being challenged by builders who contend that the settlements are deficient, and that municipalities proposing the settlements have wrongfully failed to propose a rezoning of the objecting builders’ sites. The Supreme Court’s gap year opinion should boost the prospects of builders in that category.

Even when builders do not have a current interest in providing affordable housing in given municipalities, proposed settlements should still be reviewed in towns in which builders have an interest in properties. Certain settlements are proposing terms that are unfavorable to property owners generally, such as “growth share” type ordinances that impose affordable housing obligations on all properties without providing any density bonuses or other compensatory benefits. Such terms may be unlawful. Public notices of proposed settlements must be carefully reviewed, and vigilance is required to guard against the application of such ordinances to properties of interest.

CONCLUSION

The Supreme Court’s gap year opinion provides good news to builders and other affordable housing advocates. It removes a significant element of uncertainty that has plagued the process for well over a year. The trial courts must still manage the Mount Laurel cases to conclusion, but the gap year opinion will no doubt bring about more settlements and speedier resolution of the cases involving towns that choose not to settle.

About the Author: The author, partner-in-charge of the Land Use Division of Hill Wallack LLP, and Land Use Counsel to the New Jersey Builders Association (NJBA), argued the Supreme Court gap year appeal on behalf of the NJBA. Hill Wallack LLP, based in Princeton, also served as counsel to the NJBA when playing a lead role in the COAH regulation litigation, and has also represented the NJBA and individual builders in many of the Mount Laurel actions discussed in this article. Hill Wallack LLP keeps records on the filings and status of all New Jersey towns. Please contact the author should you have questions about the status of any particular towns, or any other questions.