New Mount Laurel Rules: Close the Gap!

I emailed the letter below to the Bernards Township Committee on January 28, submitted it officially at the regular meeting on January 29, and summarized the key points during the second public comment period.

Bill Allen    01-29-19

To:                  Mayor and Members of Bernards Township Committee                   

Subject:           New Mount Laurel Rules:  Close the Gap

Introduction:  In 2018 your committee revised zoning at Dewy Meadow and Mountainview Corporate Center (MVCC)  pursuant to litigation and an agreement with the Fair Share Housing Center (FSHC). These actions will produce new units of market priced and affordable housing.

“Affordable housing” is defined as housing affordable for low and moderate income households.  Its construction requires subsidy.  The obligation to provide this housing originated in the Mount Laurel I decision of the NJ Supreme Court.

Many residents opposed the rezoning actions, particularly the one for MVCC.  There is discussion in the community of what should be done to avoid future actions of this kind.

I joined the discussion with a letter published in the Bernardsville News on January 24.  This letter builds on that one.  It contains a new proposal.  If implemented, it will greatly simplify the task of determining and assigning responsibility for the provision of affordable housing, and make the outcomes more reasonable and fair.

I focus here on future housing needs, what the courts call “prospective” needs.  Satisfying unmet past needs is more complicated and I will leave that challenge for another day.

The Bernards/FSHC agreement grew from litigation involving Bernards and some other towns. Presiding was Judge Thomas C. Miller.  I have never seen any analysis that explains the number of housing units in the Bernards/FSHC agreement.  An OPRA request to Denise Szabo produced no analysis last year.  When David Banisch proposed to the Planning Board that it change the Bernards Master Plan to accommodate the proposed zoning changes, he explained how the township would satisfy the agreement numbers, but not how these numbers were derived.

Therefore, I have relied on a 2017 decision by Judge Mary C. Jacobson in a case involving Princeton and West Windsor Townships in Mercer County.  And also on a 2017 analysis by planner Dr. David N. Kinsey, who works for FSHC and who advised the courts in the Mercer County and Bernards cases.  I understand that the Jacobson decision was the model used by Judge Miller.

What I propose will require new state legislation and approval of it by the courts, and a new COAH to guide and monitor what is happening.

You and many others will have to lobby our state representatives to get it approved.  This will be a long and tedious process.  It will be worth the effort.      

Mount Laurel I and II:  What we call “Mount Laurel I” was a decision of the NJ Supreme Court in 1975.  The court ruled that developing municipalities must in their land use regulations provide for their fair share of housing that would be affordable for households with low and moderate income.  The court left the municipalities to figure out how to implement its ruling.

Bernards Township did.  We designed an algorithm for determining our fair share of  housing affordable for low and moderate income households and a land use mechanism for producing it.  We incorporated these in an ordinance and enacted it in 1976.  We saw our work approved by Judge B. Thomas Leahy in 1978.

There was little progress state-wide.  The Supreme Court handed down its Mount Laurel II decision in 1983.  It ruled that municipalities could not change its regulations and then just wait for the private sector to build affordable dwelling units (DU).  Towns must incentivize builders to put price and rent controls on a fraction of new DU and make them affordable.  The incentive could be a “builder’s remedy”–permission to build more DU than the regular zoning allowed.

I was happy to see Mount Laurel II, because it resolved several questions left open by Mount Laurel I.  Example:  Towns may zone some land for DU on large lots, so long as it satisfies its affordable DU obligation elsewhere.  I did not see the builder’s remedy as the threat it has become.    

Thirty-Five Years Later: The Affordable Gap:  The common builder’s remedy today is a 5-to-1 ratio of total DU to affordable DU;  20% of new DU are affordable.  Bernards agreed last year to rezone the south most lot in MVCC from office to 280 total DU with 62 (22%) to be affordable.

When determining the need for affordable DU, planners usually begin with a 50-yearold guideline from the Dept. of Housing and Urban Development.  It is that households should pay no more than 30% of their incomes for housing.  The planners then look at household incomes for a region and estimate the fraction of the total that should have subsidized affordable DU.  This typically works out to about 40%.

Example:  Judge Jacobson, after hearing the testimony of two planners in the Mercer County case, ruled that 41% of new DU units constructed in the period to 2025 should be affordable.

For planning purposes, the state is divided into six regions.  Mercer County is in Region 4.  Hunterdon, Middlesex, and Somerset are in Region 3.  Suppose that economic projections show a need for 1,000 new DU each year thru 2025 in Region 3.  By the 40% affordable rule 400 DU should be affordable for families of low and moderate income.

Case A:  Suppose the economic projections are correct and that the towns in Region 3 actually approve construction of a total of 1,000 DU in a year.  And suppose also that they all invoke the 20% rule of the standard builder’s remedy and require the builders to set aside 200 DU that will be affordable.

At the end of the year, Region 3 will have approved the projected 1,000 DU and these will include 200 affordable DU.  But by the 40% affordable rule the need was for 400 affordable DU.  There will be a deficit of 200 affordable DU.  Who will pay the subsidy for these 200 DU?  If no one does, will Region 3 start the next year with a deficit of 200 affordable DU that it has to make up?

Case B:  Suppose towns in Region 3 are directed to satisfy the 40% rule and approve construction of 400 affordable DU in the year.  If they all use the builder’s remedy, at the end of the year they will have approved a total of 2,000 DU, two times the need projected in the plan.  This would be an absurd outcome, but recent rulings push in that direction.

Look again at the MVCC agreement.  By the 40% affordable rule, the 280 new DU should include 112 affordable DU.  But the agreement is for only 62.  There will be a deficit of 50 affordable DU.  If the numbers game played in 2018 is played again in 2025, Bernards or others in Region 3 will have to make up the 50 affordable DU deficit.

Every time we approve construction of 100 DU and use the 20% builder’s remedy, we will by the affordable 40% rule create a deficit of 20 affordable DU.  There are many words that one might use to describe this system.  I will say here only that it fails the tests of logic and common sense, and it is unworkable over the long term.

Proposal:  Close the Gap:  I propose that the affordable deficit gap for new developments be reduced to zero by one or more of the actions that follow:

1. State legislature with approval of the governor and courts will revise the affordable rule down from 40%.
2. State legislature with approval of the governor and courts will revise the builder’s remedy rule up from 20%.
3. State legislature with approval of the governor will set up an Affordable Housing Fund to close any remaining gap. It will receive funds from some builders and pay out funds to other builders.  (Something like the Affordable Housing Fund may already exist.  I didn’t check.)  Examples of this action are in the cases below.

Allow the towns to use these revised rules and approve development applications in the regular way as they appear.  There will be huge benefits:

1. The affordable DU books will be balanced when each development project is approved.
2. There will be no need for forward looking projections and mandates.
3. There will be no need for forward looking assignments of affordable DU quotas to towns. (This may be the most huge of the huge benefits.  More on this below.)
4. Towns will no longer have to worry about meeting some affordable DU obligation. They will use the revised rules and respond to development applications in the regular way as they are submitted.  They will not have to push development to satisfy someone’s estimate of need.  (Remember I am writing here only about future needs, not unmet past needs.)
5. There will be much less time and money spent on planning and litigation.

Assume that the affordable rule is lowered to 30% and the builder’s remedy rule is raised to 30%, leaving no affordable gap

Case C:  Suppose a builder proposes a development with 100 DU.  The town asks for 30 affordable DU, but the builder wants to provide only 20.  He will get approval from COAH to make a deposit in the Affordable Housing Fund sufficient to subsidize 10 affordable units somewhere else.  The town will approve the development conditioned upon COAH approval.

Note that the town will not become a banker and handle the funds.  Its responsibility will be limited to what is delegated to it in the municipal land use law.

Case D:  Suppose a non-profit organization like Ridge Oak Senior Housing wants to add 10 affordable DU.  It may go to COAH and ask that it subsidize the DU with funds from the Affordable Housing Fund.  If COAH likes the proposal and there are sufficient funds, then it will provide them.

Now assume that the affordable rule is lowered to 35% and the builder’s remedy rule is raised to 25%.  This will leave a 10% affordable gap.

Case E:  Suppose the towns use these revised affordable and builder’s remedy rules that do not close the affordable DU gap.  Mount Laurel I and II dealt with municipal land use regulations.  There is nothing in them that mandates that towns use their own general funds to subsidize affordable housing.  And I doubt that some future Mount Laurel decision will find this mandate in the state constitution.

If the state does not grant the towns sufficient land use authority to close the affordable DU gap, then it must provide the necessary funds from other sources.

Case F:  There are proposals to build single DU and small groups of DU where affordable set asides won’t work.  In these cases, the builder will make a deposit to the Affordable Housing Fund sufficient for subsidizing one-fifth of the DU he will build.  This is similar to Case C.

Case G:  A fundamental holding in Mount Laurel I was that employment growth in a region generates growth in demand for housing in the region.  Those who build new or expand facilities that employ people should share the responsibility to subsidize the related affordable DU.  COAH will determine, and the legislature will approve appropriate fees for this purpose for new construction.  As in Case C above, payment of these fees to COAH will be a condition for municipal approval of a project.  Something like this was done in the past, but I don’t know its current status.     

Objectors:  There will, of course, be persons who object to this proposal:

1. If the affordable rule is reduced from 40%, liberals will say we are not meeting our responsibilities to households with low and moderate income.
2. If the builder’s remedy rule is raised from 20%, builders will say we are killing their business and raising prices for non-subsidized DU.
3. If the state raises taxes to pay subsidies and fill the affordable gap, almost everyone will complain.

There is a simple and appropriate response to all of these objectors:  “You have valid concerns, but we are trying to resolve a real problem in a reasonable and fair way.  Do you have a better suggestion?”

Allocation of Quotas for Affordable DU:  Here I rely on a narrative report and a large Excel Workbook produced by FSHC planner Kinsey.  To review them go to

http://fairsharehousing.org/blog/entry/updated-fair-share-calculations-show-housing-need-remain-great-in-new-jerse/

In the current system a regional need is determined first.  Then the towns are allocated quotas of affordable DU for them to provide.  Dr. Kinsey computes these by averaging ratings for three factors for each town:  commercial ratables, developable land, and household income.  I see problems with each factor, but will limit my comments here to developable land.

It is reasonable to consider land in assigning responsibility for building DU.  But defining and measuring developable land are problematic.  Dr. Kinsey assembled lots of data, made many calculations, and produced an estimate of the developable land in each town.  In my opinion, the results do not pass two tests:

1. Analysis: It is not possible to follow the computational path from the total land area in a town to the estimate of developable land area in the town.  There are gaps.  It should be possible to point to any place on a municipal map and know whether it is judged to be developable or not developable and why.  One cannot do this.
2. Common sense: Below is a table with land areas for Bernards and three townships to the west.  Kinsey relied on aerial mapping, and overlays of regions defined in the State Development and Redevelopment Plan, Highlands Plan, and Pinelands plan.   He did not use tax maps or assessor data.  I am familiar with these towns because I grew up in Hunterdon and have lived 55 years in Somerset.  Use of these plans at first seems reasonable, but viewed together, the results don’t make sense.

With implementation of the Close the Gap proposal, there will be no further need to allocate quotas to meet future housing needs. 

Wrapup:  The Close the Gap proposal is new.  I think it makes sense, will work, and will make life easier all around.  But I may have missed something.  I ask that you consider it.  And I welcome comments, criticisms, and questions from everyone.

Bill Allen