Unaddressed in the New Jersey Supreme Court's March 10, 2015, decision in In re Adoption of NJAC 5:96 & 5:97, __ N.J. __ (2015) was the open and, therefore, unresolved question as to whether, and to what extent, the state through the Council on Affordable Housing (COAH), could seize the unspent and/or uncommitted balances left in the affordable housing trust funds of municipalities that failed to expend or commit to expend such funds for eligible affordable purposes by the July 17, 2012, deadline established by the 2008 amendments to the Fair Housing Act, N.J.S.A. 52:27D-329.2(a) and N.J.S.A. 52:27D-329.2(d).
In a significant, 11-page decision approved for publication and issued on April 9, 2015, in the matter of In re Failure of the Council on Affordable Housing to Adopt Trust Fund Commitment Regulations, Dkt. Nos. A-5257-11T4 and A-0122-13T3, a three-judge panel of the Appellate Division definitively answered the question. The court held:
"In light of the [Supreme] Court's determination [of March 10, 2015] and COAH's abject failure to adopt regulations required by the 2008 amendments, we now enjoin the seizure of any trust funds by COAH or the executive branch; the future disposition of the trust funds will be directed by our courts on a case-by-case basis." (Emphasis added).
The Appellate Division's decision and order takes effect immediately. Prior orders the Appellate Division issued on an interim basis in this matter on July 13, 2012, and June 6, 2013, dealing with the problems caused by the absence of regulations and the threat of state seizure of such funds, have been vacated by the court and superseded by the April 9, 2015, decision and order.
As a result, the April 9, 2015, order safeguards and prevents upwards of $200 million of unspent and/or uncommitted municipal affordable housing trust funds from being seized by the state and deposited - as had been intended and as the 2102 state budget bill signed into law explicitly stated it would be - into the General Fund as state revenue, not to be utilized in connection with affordable housing purposes for which such funds were exacted from builder-developers and property owners, and collected (and in some cases, hoarded) by municipalities, in the first place.
Similar to the Supreme Court's directive in In re Adoption of NJAC 5:96 & 5:97, issues concerning the commitment, use and/or expenditure of municipal affordable housing trust funds will be now determined, in the first instance, by the Mt. Laurel-designated trial judges in each of New Jersey's Superior Court vicinages. On this score, as the Appellate Division lamented:
In adhering to the Supreme Court's recent determination, we conclude that interpretation and construction of the 2008 amendments[to the Fair Housing Act] and the application or disposition of the funds in question must also now be adjudicated in our courts. To be sure, this is not the most ideal circumstance; the parties' concern that inconsistent determinations may be made by different Mount Laurel-designated judges in different locales is by no means illusory. Ultimately, however, erroneous or inconsistent rulings can be addressed by this court or the Supreme Court through the parties' resort to the appellate process; this process may be slower and less efficient than the administrative process . . . . [citation omitted], but now, in light of the recent action taken by our Supreme Court – and barring a change in the status quo – the courts are the only available forum for addressing these matters. The issues raised in this appeal can no longer by left in COAH's moribund hands. (Emphasis added).
Consideration and disposition of affordable housing trust fund issues will be subject to "the same timelines and parameters contained in the Supreme Court's March 10, 2015, order." Therefore, within the 90-day clock, now ticking since March 10, 2015, a necessary adjunct to such efforts is for towns to ascertain - or, in some cases, revisit - how and to what extent they may have committed to expend as of yet unspent affordable housing trust fund balances on account. Implicit in that exercise is the need of the public and "interested parties" for updated and, preferably, independent forensic audits to be performed of municipal affordable housing trust funds on account. Such audits must necessarily include reconciliation of what a municipality has reportedly collected in development fees that are on account in their COAH-approved Mt. Laurel affordable housing trust fund depositories; what, where and how what is reportedly on account has been derived; what interest has been earned on such trust fund accounts; and verification and certification that what has been expended to date from a municipality's affordable housing trust fund has been for lawful, eligible affordable housing purposes as established under COAH regulations.
Any issue or question that arises as to whether a municipality previously "committed to expend" its affordable housing trust fund in either certified spending plans, spending plans that had been awaiting review and approval or other disposition by COAH, as well as for any new spending plan that may be proposed, will now also be determined and resolved by the trial courts.
Municipalities having "Class 1" status under the Supreme Court's decision of March 10, 2015, (i.e., those with COAH-certified Third Round plans that were predicated upon COAH's Third Round Rules that have since been invalidated by the Supreme Court), as well as "Class 2" towns (i.e., those that are deemed to have had "participating" status before COAH until the March 10, 2015 decision of the High Court) are – as they should be - hurriedly attempting to recalculate affordable housing need within their borders, re-examine their overall master plans, and revise housing elements in their zoning ordinances and fair share plans under the "temporary immunity" the Supreme Court granted from "builder's remedy" action during the 90-day transitional period that will expire come June 8, 2015.
Upon expiration of the 90-day temporary immunity period come June 8, 2015, should towns determine to subject themselves voluntarily to court jurisdiction and thus commit to seek court review and approval of any new, updated or re-calibrated housing element in their zoning ordinances and accompanying Third Round affordable housing plans, they will have a limited 30-day window – until July 8, 2015 – by which to file declaratory judgment actions in the trial courts, on notice to "interested parties," in order to seek continued temporary immunity from "builder's remedy" actions abiding judicial supervision, review and approval of their newly proposed Third Round affordable housing plans.
Any municipality that is neither a "Class 1" nor "Class 2" town is subject to possible "builder's remedy" litigation NOW. All Mt. Laurel and related affordable housing litigation will now include judicial review and disposition of issues and claims over unspent and/or uncommitted affordable housing trust funds such towns have on account.
Once again, property owners, builders and developers – as well as municipalities – should take heed immediately and are thus advised to consult with experienced land use and Mt. Laurel litigation counsel as soon as possible in order to evaluate the array of rights and remedies that may be available to them. Municipal engagement and dialogue with property owners and builder-developers, and the respective planning and design professionals for each, should begin in earnest NOW, if they have not already begun. Such collaborative efforts may very well be the least costly and most productive path forward to solve these thorny issues, short of inevitable and time-consuming litigation that, for certain, will come.
To quote Tulane University's President, Scott Cowen, when asked for advice he would give to New Jersey – given his experiences with Hurricane Katrina - on rebuilding/reinventing efforts post-Superstorm Sandy, and equally applicable in the affordable housing context now presented:
Where there's political will and alignment of purpose, there's a way.
A copy of the Superior Court of New Jersey, Appellate Division's decision issued on April 9, 2015, can be accessed here.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
