Issue #134, March/April 2004


The Betrayal of Mount Laurel

Will New Jersey get away with gutting its landmark fair housing legislation?


Ever since the state Supreme Court’s pioneering Mount Laurel decisions in 1975 and 1983, New Jersey has been seen as a leader across the nation for its efforts to create suburban affordable housing opportunities. Although the state’s track record has been uneven, and the effect of the decision was eroded somewhat by political pressure and bureaucratic machinations, for the past two decades New Jersey has lived up to much of the court’s commitment to ensure that each municipality met its "fair share of the regional need for low- and moderate-income housing." That may now be coming to an end. Plans now underway, actively pushed by the state’s Democratic governor, are likely to effectively abolish any principle of fair share obligation, barring the door to the suburbs for thousands of low-income families.

The first Mount Laurel decision established the basic principle that municipalities had an obligation to provide low- and moderate-income housing. But finding that towns had done little or nothing since 1975 to carry out the intent of the court’s initial decision, Chief Justice Robert Wilentz wrote Mount Laurel II in 1983. This far-reaching decision instructed the lower courts to come up with firm targets for every town and village in the state. Mount Laurel II also made it clear that, if a town did not have a realistic plan to meet its fair share, the courts could override local actions and grant approvals or a "builder’s remedy" to developers who propose to incorporate a "substantial number" of affordable housing units in their projects. In a memorable footnote, the court suggested that 20 percent affordable housing was a "reasonable minimum."

Faced with a flood of lawsuits from developers seeking a builder’s remedy and an outcry from the state’s suburban townships, the state legislature enacted the Fair Housing Act in 1985, creating a new state agency, the Council on Affordable Housing (COAH), empowered to
• establish a formula for municipal fair share obligations, and update it every six years;
• establish standards for municipal fair share plans, and review plans submitted by municipalities;and
• in response to municipal petitions, approve fair share plans meeting COAH’s standards.
Any municipality whose plan was approved by COAH – as long as it carried out the elements of the plan in good faith – received six years of immunity from builder’s remedy lawsuits.

With some tinkering, the system established by the legislature in 1985 worked relatively well through 2000. COAH adopted numbers for two fair share "rounds" in 1987 and 1993, established review procedures and approved a substantial number of plans. By mid-2001, 271 municipalities, including nearly all of the state’s fast-growing suburban townships, had submitted plans to COAH. Under the law, if an aggrieved builder sues a municipality that has not filed a plan with COAH, jurisdiction over the matter – and over the manner in which the municipality meets its fair share obligation – remains with the court.

Those municipalities, along with an additional 68 that were under court jurisdiction, had completed or put under construction nearly 29,000 low- and moderate-income housing units and brought 11,000 units occupied by low-income households up to code. Half of all of these units were affordable to households earning less than 50 percent of the Area Median Income (AMI), with the balance affordable to households earning between 50 and 80 percent of AMI. In addition, under a controversial provision in the Fair Housing Act for Regional Contribution Agreements (RCA), under which municipalities may transfer up to 50 percent of their fair share obligation to another municipality by writing a check to the receiving municipality, an additional 7,400 affordable housing units were built or rehabilitated in New Jersey’s central cities and inner ring suburbs. These totals fell far short of the total need for low-income housing but were still substantial. Indeed, adjusted for population, New Jersey’s record was markedly better than that of any other state in the country during the same period.

However, serious thunderclouds were gathering over COAH. While few builders’ remedies were ever actually awarded by the courts, the threat was more widely used by builders to compel towns to grant approvals and make unwanted zoning changes for a variety of projects, with or without affordable housing. As municipal anger over the abuse of the Mount Laurel process grew, affordable housing became a convenient scapegoat for those concerned that sprawl was overtaking what was left of rural New Jersey. Housing advocates were equally frustrated by an agency that appeared to have become more concerned with bureaucratic procedure than meeting the housing needs of the poor. COAH seemed largely indifferent to their issues of concern, such as the failure of the process to reach families earning less than 40 percent of AMI, or to address the evidence that low-income housing built in the suburbs was reaching few people other than white suburbanites.

Setting the Stage
By 2000, it was time for COAH to come up with new numbers for the third round. A recent amendment to the Fair Housing Act meant that this time the numbers would cover 10 rather than six years. As a result, they could be expected to be much larger than the previous numbers, and that much more controversial. Governor Christine Whitman, on her way to Washington, dawdled, while her replacement, Acting Governor Donald DiFrancesco, saw no reason to act before the November 2001 gubernatorial election, in which he expected to be the Republican candidate. He was not, and the new Democratic governor, James McGreevey, found the hot potato squarely in his lap.

Whitman was no great friend of suburban affordable housing, but she also displayed no visceral hostility to Mount Laurel and could even be said to have had some vague, quasi-aristocratic sympathy for the needs of the poor. McGreevey was a different matter. As mayor of Woodbridge, a large sprawling middle-class township in central New Jersey, he had rebuffed efforts to build low-income housing in his community. COAH’s 2001 annual report lists Woodbridge’s fair share obligation as 1,351 units, and notes that by 2001 the township had produced exactly zero housing units toward that goal.

Matters got even worse when the governor named Susan Bass Levin the commissioner of the Department of Community Affairs, where she would also chair COAH and supervise its staff. Levin had been the longtime mayor of Cherry Hill, a large south Jersey township just outside Camden and had fought bitterly against proposals to develop low-income housing. Cherry Hill shows up in the COAH annual report with a fair share of 1,851, one of the largest targets in the state, and like Woodbridge, zero production.

Meanwhile, even though by the beginning of 2003 the state was already four years into the third round of fair share obligations, no new numbers or rules were forthcoming from COAH. Indeed, in an ominous development, despite opposition from housing advocates, COAH began to award "interim certifications" to municipalities whose previous fair share approvals were running out, without requiring that they produce any more affordable housing. In essence, what had been a de facto moratorium on new affordable housing obligations for three years, had been placed on an official footing.

Growth Share
COAH’s fair share methodology is a highly formulaic procedure that attempts to weave together fiscal capacity, wealth, employment trends and vacant land availability. Over the years it has been criticized as overly complex and arbitrary, as likely to allocate excessively large targets to small, fully developed communities as to assign small numbers to large, fast-growing townships. By the late 1990s some advocates began to propose an alternative approach, known as growth share. The principle of growth share was simple – if you grow, you provide affordable housing in direct proportion to your growth. If you don’t grow, you have no obligation, except to address the housing needs of the poor already living within the community.

The Coalition on Affordable Housing and the Environment (CAHE), a public interest group of environmental, planning and urban advocates, circulated a proposal for a growth share approach to New Jersey’s fair share process. For every five housing units or five jobs added to a municipality, the municipality would have to provide one affordable housing unit. Jobs would be determined by straightforward ratios of jobs per square feet of floor space, which would be set for each different category – office, retail, warehousing and so forth. Not only was this approach expected to produce more housing, but it meant that no municipality would be forced to grow against its desires in order to meet its Mount Laurel obligations, thus appealing to many suburban and rural smart growth advocates. Its logic and simplicity gained the proposal considerable attention. CAHE and its allies promoted growth share in the belief that it would actually produce more affordable housing. It turned out, however, to be the tool that Levin and COAH would use to accomplish precisely the opposite.

The Numbers Game
When COAH finally presented third round rules in August 2003, few expected them to be an improvement. But few also imagined they would be as bad as they turned out to be. Brandishing the smart growth flag, Levin’s office announced that "the new affordable housing rules encourage sound local planning, promote Smart Growth and create affordable housing opportunities for our state’s citizens."

It is unlikely that they will do any of the above. What they actually do is reduce the numbers as much as possible; encourage suburban municipalities to transfer as many units as possible to the state’s inner cities; and encourage those municipalities to exclude low-income families with children from the few units they still have to build. How this is to be accomplished is an object lesson in how numbers can be manipulated to prevent the outcomes they ostensibly are designed to achieve.

COAH’s new rules were based on the growth share approach, but with a difference. For every 10 new houses in a municipality, one would have to be affordable to low-income households, and for every 30 jobs, one affordable housing unit would have to be built. COAH justified these absurdly low ratios by blatantly low-balling the extent of New Jersey’s housing need through an egregious misuse of statistics. Their effect was compounded by a series of other provisions.

Credits for good intentions, not housing units. COAH announced that towns would get credit against future growth share obligations for "overproducing" affordable housing since 1987. Although COAH’s 2001 annual report found that actual production, including RCAs, was roughly 42,000 units, COAH awarded over 78,000 credits. Cherry Hill, Levin’s home town, which COAH had reported in 2001 as having produced zero units, received 700 credits over and above its 1987-1999 fair share obligation – few or none reflecting actual units built – to offset future obligations. This meant that Cherry Hill would be able to approve 7,000 new expensive housing units before it would have to build a single affordable unit. Over 150 separate towns received a total of 16,117 net credits to offset future growth share obligations.

Increasing RCAs. Although the Fair Housing Act permits a town to transfer up to half of its fair share obligation through an RCA, since 1987 towns have transferred "only" about 20 percent. To increase the use of RCAs – and reduce the number of affordable units built in the growing suburbs – the new rules will permit municipalities to double the amount they can collect from developers as in-lieu fees to pay for RCAs and to deposit their money in a statewide RCA "bank." This would eliminate the need for them to find a partner and execute an inter-municipal agreement.

More senior housing. Finally, COAH announced that municipalities could now build up to 50 percent of their total fair share obligation as senior citizen housing – limited to people aged 55 and over – rather than the 25 percent previously permitted. Based on another egregious misuse of statistics, this change was heralded by Levin as "increasing the supply of affordable housing for New Jersey’s low- and moderate-income seniors, providing property tax relief and enabling seniors to stay in New Jersey"(author’s emphasis).

The overall effect of the COAH plan was clear. Few new units, more RCAs, more senior housing. No poor families. What minimal number of affordable units a town might have to provide after counting its credits would be met by sending half to the inner city and building senior citizen housing for the other half. For all the rhetoric about ending sprawl and fostering smart growth, nothing in the rules addressed sound planning or environmental protection.

The Advocates React
The COAH proposal landed like a bombshell. While the New Jersey League of Municipalities, dominated by suburban mayors, immediately came out in favor of the proposal, no one else joined them. The AARP, which Levin had counted on for support because of the increase in senior housing, chose to stay out of the fight. Homebuilders, housing advocates, environmental advocates, inner city ministers and civic leaders joined in opposition. Over 100 groups quickly signed onto a letter circulated by CAHE. The state’s newspapers were overwhelmingly negative, with Bergen Record columnist Herb Jackson writing that "if Republican Bret Schundler had won two years ago and proposed the affordable housing regulations that the McGreevey administration published last week, it’s easy to imagine a stampede of Democratic politicians denouncing him as a racist." Not long after, the Rev. Reginald Jackson, head of the state Black Ministers Council, denounced McGreevey as a racist on the steps of the state capitol building.

By early December, when the period for comment on the proposed rules ended, COAH had received 200 separate sets of comments, adding up to over 2,500 pages. Other than letters from local officials, reputedly solicited by the commissioner’s office, they were overwhelmingly negative. Attorneys representing various organizations made clear that adoption of the rules would trigger a blizzard of lawsuits.

Meanwhile, dissent rocked the 11-member COAH board. One member resigned abruptly, allegedly to avoid having to vote on the matter. Three members were vocal in their opposition to the proposed rules at the January meeting. Still, four COAH board members represent local government, and two – including Levin – represent state government and there is little doubt that eventually she will be able to force the rules through the board. No one expects her to back off on her own, and few expect Governor McGreevey to press her to do so. McGreevey may well believe that his anti-affordable housing stance will play well in a heavily suburban state.

COAH has said it will take until the summer of 2004 to respond to all the comments, as state law requires, before either adopting the rules as proposed, or re-proposing and re-publishing them with modifications. Few expect COAH to hurry, because further delay simply extends the de facto moratorium that has been in place since the end of 1999. Indeed, cynics have suggested that perhaps Levin’s goal is to bring about a wave of litigation, certain to delay matters even further.

Mount Laurel has withstood open legal and legislative challenges over the years, even a proposed constitutional amendment designed to undo the court decision. No one, however, has ever before tried to gut Mount Laurel by using the very administrative process designed for its implementation as part of the Fair Housing Act. Over the course of 2004, we are likely to find out whether they will succeed.

Alan Mallach is research director of the National Housing Institute.


Playing with the Numbers I: Housing Need
COAH justified its numbers on the basis of an "analysis" that found the total need for new affordable housing in New Jersey through 2014 was 48,637 units. This number started with a figure for low-income household growth through 2014 that COAH reduced by assuming that two-thirds of that growth would be accommodated in the existing housing stock through filtering, conversions and the like. Filtering is the process, much beloved by free market economists, by which older housing gradually becomes more affordable as affluent households move out to newer, more desirable housing. But filtering does not work well in a high-demand, constrained-supply environment like most of New Jersey. Moreover, when units do filter down, it tends to be because either the units themselves or their surroundings have seriously deteriorated.

The COAH analysis ignored the 112,000 low-income households living in overcrowded conditions and the 335,000 low-income renter households spending over 30 percent of their income for shelter. A realistic assessment of the need for affordable housing in New Jersey is roughly 650,000 units.

Playing with the Numbers II: Jobs and Housing
For COAH to show that its formula would actually meet the 48,637 target it set for itself, it had to show that job-related growth share would result in roughly 22,600 units of affordable housing (according to COAH, the rest would be met by the housing growth share). The projection they came up with assumed that total job growth between 2004 and 2014 would be over 450,000 jobs, or 50 percent higher than the job growth between 1989 and 2000, a generally strong growth period in New Jersey. Second, they assumed that "positive job growth" would be nearly 700,000! On top of this, they assumed that all job growth takes place in newly constructed non-residential buildings, a patently unrealistic assumption, but even more so in a state with over 45 million square feet of vacant office space in mid-2003. For their projections to come true, the rate of new non-residential construction would have to be nearly double that of 1995-2002, real estate boom years in New Jersey. An independent analysis concluded that the affordable housing likely to be produced as a result of job growth under the COAH third round methodology was actually likely to be no more than 2,000 to 3,000 units, not 22,600.

Playing with the Numbers III: Senior Citizen Housing Need
COAH had a particularly hard time figuring out how to justify increasing the senior citizen set-aside of affordable housing to 50 percent. Indicators of housing need suggest that senior citizens make up at most 25 percent of the total. COAH found a way by projecting the total increase in the number of households from 1999 through 2014, and then comparing the total by age of household head in 1999 and in 2014 – and, lo and behold, found that the increase in households headed by an individual over 55 represented half of the total increase. To the extent this is correct, it merely reflects the aging in place of the baby boom generation. These people are already housed – for the most part adequately – and are not likely to move to new housing, unless it’s in Florida. Statistics on the age distribution of households moving into new housing in New Jersey in recent years show that only 11 percent are headed by an individual over 55.


Resources
Our Town: Race, Housing, and the Soul of Suburbia, by David L. Kirp, John P. Dwyer and Larry A. Rosenthal. Rutgers University Press, 1995.

Suburbs under Siege: Race, Space and Audacious Judges, by Charles M. Haar. Princeton University Press, 1996.

The Zoning Game Revisited, by Richard F. Babcock and Charles L. Siemon. Lincoln Institute of Land Policy, 1985. www.lincolninst.edu.

Housing and Community
Development Network of NJ
145 W. Hanover St.
Trenton, NJ 08618
609-393-3752 
www.hcdnnj.org

Council on Affordable Housing
www.state.nj.us/dca/coah