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New Jersey is an extremely expensive state to live in, and an especially expensive state to own property in if you’re making less than six figures a year. Since many people who live here make considerably less than that, something needed to be done to ensure that they could find homes and that New Jersey’s towns wouldn’t become enclaves of the wealthy. The Council on Affordable Housing, which was created by the Fair Housing Act in 1985, began with noble intentions. Recent changes to COAH’s rules, however, have provoked an outcry across the state, and not just from developers.

The most recent round of rules, the third round, were adopted in December 2004 and immediately faced a court battle. Lori Grifa, an attorney with Wolff & Samson who was involved with the case, recently described the case as “remarkable” when speaking at NJ Naiop’s annual regulatory update. What set this case apart, according to Grifa, was that it brought many disparate interests together. Developers, municipalities and individuals all objected to the new rules.

The third round rules introduced a growth share formula, which changed the way affordable housing numbers were produced, according to Grifa. Where once one housing unit had to be built for every 25 jobs created, now one unit was required for every 16 jobs. In addition, the new rules failed to provide a compensatory benefit for developers who built affordable housing units, and they also required developers, even those who were not residential builders, to construct housing units. Those who chose to pay a fee instead found that fee raised from 1% t o 3%. Municipalities objected to the new rules because they failed to ascertain whether or not a parcel of land slated for commercial development was suitable for homes. As David Stout, the mayor of Cranbury Township pointed out at the Naiop meeting, this would completely destroy towns’ master plans.

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

Among the proposed changes to the rules was a set payment-in-lieu amount that developers who were unwilling (or unable) to build housing would pay. In the past, this number varied widely across the state. It has now been capped at $145,000 to $185,000 per unit. Bonuses will be provided for municipalities that construct affordable housing units near transit or in redevelopment areas. In addition, the number of jobs generated by warehouse construction, which many developers had argued was too high when the state set it at 1.5 per 1,000 sf, was reduced to one job per 1,000 sf. Municipalities—some of whom had been found to be sitting on millions of dollars worth of development fees—are now required to spend those fees within four years as well or risk having the money put into a statewide fund.

For many of the municipalities and the development community, even the revised rules are somewhat punitive. For one thing, the one unit for every 16 jobs ratio stands and essentially imposes a job creation tax. Naiop estimates that a 100,000-sf office building that creates 280 jobs would generate a need for 17.5 affordable housing 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.

According to Ron Kasuba, an associate with Sills Cummis & Gross, developers are dissatisfied with the new rules. They believe the directive to build the housing in the same area as a commercial project is impractical and they don’t believe the compensatory benefit system will work. Many of them want the burden of affordable housing to be broadened—municipalities enter the COAH process voluntarily, and nearly half of New Jersey’s municipalities don’t participate. Therefore, developers building projects in those municipalities manage to sidestep the additional fees and construction that developers in COAH municipalities must deal with. Kasuba called for a fee to be assessed to all developers in the state, whether they’re in a COAH area or not. Lucy Voorhoeve, executive director of COAH, agreed that such a fee would be helpful, but pointed out that COAH doesn’t have the power to impose it. Legislation needs to be drafted in order to collect a fee.

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

“Affordable housing is available to anyone who earns up to 80% of the median income of the state,” she explained at the Naiop meeting. “We’re trying to address the full range of needs from low income to middle income. We’re trying to convey the diversity of what affordable housing is.”

Not every municipality objects to creating affordable housing.

“We understand our moral obligation to create affordable housing,” said Stout. He went on to explain that Cranbury was creating affordable rental housing that was integrated into the town long before COAH even existed. He’s worried that the new rules will cause the town to violate its master plan by requiring it to build affordable housing units in areas where they don’t belong. In addition, he pointed out that the rules might not be either economically or environmentally sustainable—small towns like Cranbury don’t have the infrastructure or the resources to deal with a large influx of new residents.

Clearly, there is no one-size-fits all solution to affordable housing. There’s no way to satisfy every group or answer every concern. The comment period for the revised rules begins on June 16, and doubtless COAH is bracing itself for a long and rough 60 days. Everyone else, meanwhile, seems to be preparing for a fight. Several municipalities are said to be preparing lawsuits against COAH, and Grifa said that “it seems inevitable that there will be another legal challenge.”

“There’s a good chance the legislation will be adopted, but there will be challenges,” Kasuba agreed. But affordable housing needs to be built, and the towns and the development community will have to work together to figure out the best way to integrate the new rules in order to avoid overloading the towns and to create housing that’s within everyone’s reach.

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