The most recent round of rules, the third round, were adopted inDecember 2004 and immediately faced a court battle. Lori Grifa, anattorney with Wolff & Samson who was involved with the case,recently described the case as "remarkable" when speaking at NJNaiop's annual regulatory update. What set this case apart,according to Grifa, was that it brought many disparate intereststogether. Developers, municipalities and individuals all objectedto the new rules.

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The third round rules introduced a growth share formula, whichchanged the way affordable housing numbers were produced, accordingto Grifa. Where once one housing unit had to be built for every 25jobs created, now one unit was required for every 16 jobs. Inaddition, the new rules failed to provide a compensatory benefitfor developers who built affordable housing units, and they alsorequired developers, even those who were not residential builders,to construct housing units. Those who chose to pay a fee insteadfound that fee raised from 1% t o 3%. Municipalities objected tothe new rules because they failed to ascertain whether or not aparcel of land slated for commercial development was suitable forhomes. As David Stout, the mayor of Cranbury Township pointed outat the Naiop meeting, this would completely destroy towns' masterplans.

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The courts agreed, and COAH was told to rewrite the rules. Therevised rules were presented on January 25, 2007, and commentspoured in from around the state in record numbers—more than 4,800comments came from over 600 individuals and organizations. COAHvoted to adopt the rules on May 6, 2008 and they were published inthe New Jersey Register on June 2.

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Among the proposed changes to the rules was a setpayment-in-lieu amount that developers who were unwilling (orunable) to build housing would pay. In the past, this number variedwidely across the state. It has now been capped at $145,000 to$185,000 per unit. Bonuses will be provided for municipalities thatconstruct affordable housing units near transit or in redevelopmentareas. In addition, the number of jobs generated by warehouseconstruction, which many developers had argued was too high whenthe state set it at 1.5 per 1,000 sf, was reduced to one job per1,000 sf. Municipalities—some of whom had been found to be sittingon millions of dollars worth of development fees—are now requiredto spend those fees within four years as well or risk having themoney put into a statewide fund.

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For many of the municipalities and the development community,even the revised rules are somewhat punitive. For one thing, theone unit for every 16 jobs ratio stands and essentially imposes ajob creation tax. Naiop estimates that a 100,000-sf office buildingthat creates 280 jobs would generate a need for 17.5 affordablehousing units and a tax on each new job that could range from$9,119 to $11,428, depending on what region the project is in.

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According to Ron Kasuba, an associate with Sills Cummis &Gross, developers are dissatisfied with the new rules. They believethe directive to build the housing in the same area as a commercialproject is impractical and they don't believe the compensatorybenefit system will work. Many of them want the burden ofaffordable housing to be broadened—municipalities enter the COAHprocess voluntarily, and nearly half of New Jersey's municipalitiesdon't participate. Therefore, developers building projects in thosemunicipalities manage to sidestep the additional fees andconstruction that developers in COAH municipalities must deal with.Kasuba called for a fee to be assessed to all developers in thestate, whether they're in a COAH area or not. Lucy Voorhoeve,executive director of COAH, agreed that such a fee would behelpful, but pointed out that COAH doesn't have the power to imposeit. Legislation needs to be drafted in order to collect a fee.

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Municipalities are resisting the rules for a couple of reasons.Some labor under the impression that affordable housing meanshousing projects for the very poor, an image Voorhoeve is hoping todispel.

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"Affordable housing is available to anyone who earns up to 80%of the median income of the state," she explained at the Naiopmeeting. "We're trying to address the full range of needs from lowincome to middle income. We're trying to convey the diversity ofwhat affordable housing is."

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Not every municipality objects to creating affordablehousing.

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"We understand our moral obligation to create affordablehousing," said Stout. He went on to explain that Cranbury wascreating affordable rental housing that was integrated into thetown long before COAH even existed. He's worried that the new ruleswill cause the town to violate its master plan by requiring it tobuild affordable housing units in areas where they don't belong. Inaddition, he pointed out that the rules might not be eithereconomically or environmentally sustainable—small towns likeCranbury don't have the infrastructure or the resources to dealwith a large influx of new residents.

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Clearly, there is no one-size-fits all solution to affordablehousing. There's no way to satisfy every group or answer everyconcern. The comment period for the revised rules begins on June16, and doubtless COAH is bracing itself for a long and rough 60days. Everyone else, meanwhile, seems to be preparing for a fight.Several municipalities are said to be preparing lawsuits againstCOAH, and Grifa said that "it seems inevitable that there will beanother legal challenge."

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"There's a good chance the legislation will be adopted, butthere will be challenges," Kasuba agreed. But affordable housingneeds to be built, and the towns and the development community willhave to work together to figure out the best way to integrate thenew rules in order to avoid overloading the towns and to createhousing that's within everyone's reach.

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