On Wednesday, March 20, 2024, Governor Murphy signed an array of affordable housing bills into law. The legislation creates a new system for affordable housing in Round Four, replacing the current process which has been administered through the courts.
This memo provides a basic summary of the legislation.
Most importantly, the new legislation requires the municipal affordable housing obligation to be calculated using the methodology established by Judge Jacobson in her 2017 court ruling regarding Princeton and West Windsor. The legislation also streamlines the process for adoption of municipal fair share and affordable housing plans, and abolishes the Council on Affordable Housing (COAH).
Since COAH will no longer exist, the New Jersey Department of Community Affairs (DCA) will split the oversight of affordable housing with the Administrative Office of the Courts (AOC). DCA will be responsible for the numbers methodology that will need to be established for each town for the next round, while the AOC will be responsible for establishing an affordable housing dispute resolution program, to handle disputes between developers, nonprofits, the Fair Share Housing Corporation, and municipalities. Specifically, the law requires DCA to calculate regional need, as well as municipal present and prospective obligations pursuant to the Jacobson methodology. The number that is determined by DCA will be advisory and each municipality will need to set its own obligation number pursuant to the DCA calculation.
The DCA will produce a report determining regional need and municipal obligation for each region of the state. This will be due on December 1, 2024. Municipalities will then have to adopt a binding resolution setting their number by January 31, 2025. If the municipality fails to adopt a resolution, the municipality will lose its immunity from builder’s remedy litigation. Interested parties will have until February 28, 2025 to challenge a municipality’s adopted obligation, and if there are no challenges, then on March 1, 2025 the municipality’s number will be established. Any challenge must establish how the municipality's calculations fail. There is a presumption of validity for the municipality's determination. If there is a challenge, the AOC program can make findings and determinations and adjust the number accordingly. This determination must be made by April 1, 2025. Following this process will establish the numbers for the fourth round.
Municipalities must adopt their new housing element and fair share plans along with appropriate zoning by June 30, 2025. Interested parties have until August 31, 2025 to file an action in the AOC program, to object. If no objection is made, the AOC program will make a finding of compliance. The deadline to challenge a municipality's fair share plan will be December 31, 2025. The deadline for municipality to amend its fair share plan to adopt implementing ordinances with amended numbers is March 15, 2026.
These new legislative deadlines are tight. It is too early to know if the timeline will stand or if DCA or AOC will ultimately seek to expand the early compliance schedule.
The legislation also modifies and caps certain obligations. For example, bonus credits are limited to one per unit, and bonus credits cannot satisfy more than 25% of a municipality’s perspective need. The fair share plan must include a spending plan for the municipal affordable housing trust fund, and must also address any prior round’s unfulfilled obligations. A municipality cannot satisfy its obligations with more than 30% of age restricted housing. At least 50% of a town’s affordable units must be for families with children. At least 25% of the units must be rental housing and 13% for very low income units. Transitional housing cannot be used for more than 10% of the total credit. There is also a 1000 unit cap on required prospective need. Affordability controls will be extended to 40 years for rental units and 30 years for sale units.
The legislation allows municipalities to delegate to its municipal clerk the authority to provide a written statement in support of one or more affordable housing programs or projects. This municipal statement of support can help put a municipally-sponsored project in a better position to secure affordable housing tax credits.
Municipalities can exempt affordable housing projects that are funded through an Affordable Housing Trust Fund, or municipal development fee trust funds, from real property taxation. Municipalities can also enter into payment in lieu of taxes (PILOT) agreements.
Finally, in an effort to encourage developers to build more affordable housing, the legislation gives developers new methods for depreciating eligible property expenditures that contractors incur while constructing new affordable housing. It also exempts materials, supplies, and services made to contractors for affordable housing projects from the state’s sales and use taxes.
Clearly, the landscape for determining a municipality’s affordable housing obligation has changed. We will keep you advised as we continue to study the new legislation and continue to observe how DCA and the AOC react to their important new roles in helping to determine how and where affordable housing gets built in Round Four.