United States: A Year Goes By Without COAH — For Better Or For Worse?

Last Updated: December 13 2016
Article by Lori Grifa

In a decision published March 10, 2015, the New Jersey Supreme Court declared the Council on Affordable Housing "moribund" and stripped it of its legal authority to act. The decision was a bold pronouncement of COAH's failures, but no one involved in the COAH process was terribly surprised. In the two years before the court's decision, COAH's only meetings were scheduled in response to earlier court orders.

The anniversary date of the decision requires a reckoning: Is the state of affordable housing better or worse off since then?

Over 300 municipalities have participated in the court-ordered procedures set forth in the March 2015 decision, filing motions seeking a declaration of constitutional compliance. Scores of developers, who had been for years forced into mediation with COAH rather than resolving disputes by way of litigation, have filed motions to intervene challenging municipal compliance. One developer claims to have set aside a budget of $250,000 to underwrite its efforts. Another developer is rumored to have filed 67 separate motions alleging noncompliance, one for each property in the development company's portfolio.

As an institution, COAH was far from perfect. The substantive certification process was painfully slow; the mediation process moved even more slowly. Absent the ability to reach a legislative fix, one that seemed at least remotely possible in January 2010 with the introduction of a bill by Sen. Raymond Lesniak and the months that immediately followed, the governor introduced an Executive Reorganization Plan to dismantle COAH. That plan was struck down by the court in 2012.

For all of its warts and pimples, the COAH staff had a depth of knowledge and resources that were an asset to the development and advocacy communities. However, with the staff having been judicially benched a year ago, those parties have been denied the opportunity for any assistance or guidance. Make no mistake, the former COAH staff is willing to meet upon request; however, they cannot advise, direct, or opine in any formal way. This leaves the development and advocacy communities at a loss, the municipalities too. Anything left undone before the Supreme Court acted remains undone -- there was no action taken to address rent and income levels, last adjusted in 2014, before the March 2015 decision. Those levels will remain frozen at 2014 levels, unless perhaps the court intervenes. Given how busy the court's dockets are, this seems unlikely. Some of the constitutional compliance cases are beginning to move to trial, but there is a serious risk of disparate results as judges from one county decide one way, and those in another county decide the other.

The obligation to provide a reasonable opportunity for people of all income levels to live within their communities is 40 years old. It is not going away. In recognizing the need for and the right to safe and decent opportunities for housing and ordering municipalities to create opportunities for it, the court failed to recognize local government does not create housing, the development community does. The development process is governed by the balance sheet; and it requires certainty. Despite the necessary, symbiotic relationship between local government and the development community on this issue, the methodology for calculating municipal affordable housing obligations has been disputed continuously since December 2004. COAH lost virtually every court fight.

The people most in need of affordable housing: single parents, the frail elderly, disabled veterans, and financially strapped working families are the casualties of these court battles. The opportunity to find a safe, decent and affordable place to live is more elusive than ever. The perpetual COAH fight also tends to obscure another harsh reality -- New Jersey is estimated to hold one of the largest inventories of foreclosed properties in the nation.

Since the recession has eased, federal housing agencies such as Fannie Mae and Freddie Mac, are now selling distressed mortgages in bulk to private-equity firms and hedge funds. Indeed, in just the past five months, more than 10,000 troubled mortgages in the United States were sold at a discount. The Blackstone Group, one of the world's largest private-equity firms, is now also the single largest owner of single-family rental properties in the country. There are no affordability controls on these sales, and residents that are down, may find themselves literally out.

From every perspective, the state and the affordable-housing stakeholders are far worse off since the March 2015 court decision. It is unfortunate that it took the state 15 years to adopt appropriate rules and that the methodology it proposed in 2004 and thereafter did not survive judicial scrutiny. Unfortunately, litigation is a blunt instrument -- like surgery with a machete. Only lawyers and consultants have profited from this ongoing litigation streak. A legislative solution is needed and it is needed right now.

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.

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