Calton Homes, Inc. v. Council on Affordable Housing

Page 438

244 N.J.Super. 438

582 A.2d 1024

CALTON HOMES, INC., Appellant, v. COUNCIL ON AFFORDABLE HOUSING, State of New Jersey, and the Township of Middletown, Respondents.

Superior Court of New Jersey Appellate Division.

Argued Oct. 17, 1990.

Decided Nov. 19, 1990.

Thomas Jay Hall, argued the cause for appellant (Hill, Wallack & Masanoff, attorneys; Henry A. Hill and Yvonne Marcuse, Princeton, on the brief).

Donald M. Palombi, Deputy Atty. Gen., argued the cause for respondent State of New Jersey, Council on Affordable Housing (Robert J. Del Tufo, Atty. Gen., attorney; Michael R. Clancy, Asst. Atty. Gen., of counsel; Donald M. Palombi and Geraldine Callahan, Deputy Atty. Gen., on the brief).

Respondent Tp. of Middletown did not file a brief but relied on the brief submitted by the Council on Affordable Housing.

Before Judges SHEBELL, HAVEY and SKILLMAN.

The opinion of the court was delivered by

SHEBELL, J.A.D.

In this appeal Calton Homes, Inc. (Calton) ¹ challenges the substantive rules adopted by the New Jersey Council on Affordable Housing (Council), N.J.A.C. 5:92-1.1 et seq., "on two grounds: (a) three of the rules are facially invalid because they conflict with the letter of the [Fair Housing] Act or the legislative intent, and (b) the Substantive Rules as a whole produce an excessive dilution of the municipal obligation that violates the constitutional requirements of Mount Laurel II."

The three targeted rules are: (1) N.J.A.C. 5:92-7.1(b) (the "1,000-unit cap rule"), which became effective August 4, 1987; (2) N.J.A.C. 5:92-16.1 et seq. (the "accessory apartment rule"), which became effective February 16, 1988, and (3) N.J.A.C. 5:92-14.4(d) (the "rental credit rule"), which became effective December 15, 1986. Calton alleges that these three rules directly affect its position as a landowner and as a Mount Laurel litigant against the Township of Middletown and substantially contribute to the statewide dilution of housing yield under the Fair Housing Act (Act), N.J.S.A. 52:27D-301 et seq.

On March 31, 1988, Calton filed a notice of appeal from the adoption of the 1,000-unit cap and the accessory apartment rules. Thereafter, Calton filed a motion for leave to amend its notice of appeal to include a challenge to the rental credit rule and a broad-based challenge to the alleged dilutionary effect that all of the Council's substantive rules had and would have upon "municipal lower income housing obligations." The motion was granted on August 11, 1988.

I. BACKGROUND

In Southern Burlington County NAACP v. Township of Mount Laurel, 67 N.J. 151, 336 A.2d 713 (1975), appeal dismissed and cert. denied, 423 U.S. 808, 96 S.Ct. 18, 46 L.Ed.2d 28 (1975) (Mount Laurel I ), our Supreme Court held that Mount Laurel's municipal zoning ordinances violated the "general welfare" provision implicit in Art. I, par. 1 of the state constitution and explicit in the "zoning enabling act," N.J.S.A. 40:55-32, by failing to "make realistically possible the opportunity for an appropriate variety and choice of housing for all categories of people who may desire to live there, of course including those of low and moderate income." Id. 67 N.J. at 187, 336 A.2d 713. Every municipality was declared to have an obligation to create a realistic opportunity for the construction of low and moderate income housing "at least to the extent of the municipality's fair share of the present and prospective regional need therefor." 67 N.J. at 174, 336 A.2d 713.

Eight years later Mount Laurel Township remained "afflicted with a blatantly exclusionary ordinance[;]" Southern Burlington County NAACP v. Township of Mt. Laurel, 92 N.J. 158, 198, 456 A.2d 390 (1983) (Mount Laurel II ). Therefore, the matter was again brought before the Supreme Court. Id. In Mount Laurel II, the Court defined in detail a variety of procedures and remedies to effectuate enforcement of each municipality's constitutional obligation. Id.

In response, the Legislature passed the Fair Housing Act in 1985. N.J.S.A. 52:27D-301 et seq. It declared that "every municipality in a growth area has a constitutional obligation to provide through its land use regulations a realistic opportunity for a fair share of its region's present and prospective needs for housing for low and moderate income families." N.J.S.A 52:27D-302(a). The "scheme" created by the Act was designed to satisfy that obligation. N.J.S.A. 52:27D-303.

The major feature of the statutory scheme was the creation of the Council on Affordable Housing. N.J.S.A. 52:27D-305(a). In addition to other duties, the Council was charged with (1) "[d]etermin[ing] housing regions of the State," (2) "[e]stimat[ing] the present and prospective need for low and moderate income housing at the State and regional levels," and (3) adopting criteria for the determination of each municipality's fair share of that need and for the determination of any adjustments to that share based on environmental and other legitimate planning concerns. N.J.S.A. 52:27D-307(a)-(c). Upon execution of these duties, municipalities were to begin the process of petitioning for the Council's "substantive certification." N.J.S.A. 52:27D-313. Substantive certification would then be granted if the petitioning municipality's fair share plan and housing element made "the achievement of the municipality's fair share of low and moderate income housing realistically possible." N.J.S.A. 52:27D-314(b). A grant of substantive certification protects an approved municipality from any further exclusionary zoning lawsuits for a period of six years. See N.J.S.A. 52:27D-313, -317 and -322. In Hills Development Co. v. Bernards Township, 103 N.J. 1, 510 A.2d 621 (1986), the Supreme Court upheld the Act's constitutionality. Id. 103 N.J. at 25, 510 A.2d 621.

On May 18, 1987, the Council proposed the adoption of the current N.J.A.C. 5:92-7.1(b) (the "1,000-unit cap"). 19 N.J.R. 806(a). The proposal was adopted on July 6, 1987, to be effective August 3, 1987. 19 N.J.R. 1431(a). On November 16, 1987, the Council proposed the adoption of the current N.J.A.C. 5:92-16.1 et seq. (the "accessory apartment rule"). 19 N.J.R. 2089(b). It adopted that rule on January 19, 1988, effective February 16, 1988. 20 N.J.R. 385(b). On November 7, 1988, the Council limited the availability of the accessory apartment rule to municipalities that had petitioned for substantive certification prior to December 19, 1988. N.J.A.C. 5:92-16.6(b); 20 N.J.R. 3123(c). On December 15, 1986, the Council adopted the current N.J.A.C. 5:92-14.4(d) ("the rental bonus rule").

In order to receive substantive certification, a municipality's housing element and fair share plan must address its "pre-credited need." As demonstrated below, a municipality's pre-credited need represents its allocated share of the region's need for low and moderate income housing after adjustments for the operation of normal market forces and before adjustments for circumstances unique to the municipality. A municipality's pre-credited need is based upon a statistical model and is calculated essentially as follows:

Indigenous Need   The number of substandard housing units occupied by low and
                    moderate income households, but capped in such a way that
                    no municipality's indigenous need shall exceed the region's
                    average.  N.J.A.C. 5:92"5.2
   k (add)
Reallocated       The municipality's share of the excess need of the region
  Present Need      N.J.A.C. 5:92"5.4.
   = (equals)
Present Need      The sum of indigenous need and reallocated present need.
                    N.J.A.C. 5:92"5.5.
    k (add)
Prospective Need  The municipality's share of the number of low and moderate
                    income households that the region is estimated to need.
                    N.J.A.C. 5:92"5.6.
   = (equals)
Total Need        The sum of present and prospective need.  N.J.A.C. 5:92"5.7.
    k (add)
Demolitions       Number of units of affordable housing expected to be
                    demolished.  N.J.A.C. 5:92"5.8.
   - (deduct)
Filtering         Number of housing units occupied by middle to upper income
                    households that will become available to low and moderate
                    income households.  N.J.A.C. 5:92"5.9.
   - (deduct)
Residential       Number of affordable housing units that will be created by
  Conversions       the conversion of non-residential structures or the
                    subdivision of residential structures.  N.J.A.C. 5:92"5.6.
   - (deduct)
Spontaneous       Number of affordable housing units that the operation of the
  Rehabilitation    market will create by rehabilitating substandard units.
                    N.J.A.C. 5:92"5.11.
   = (equals)
Pre-credited      The sum of total need and demolitions minus reductions for
  Need              filtering, conversion and spontaneous rehabilitation.
                    N.J.A.C. 5:92"5.12.
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Once a municipality's pre-credited need has been calculated, that number is subjected to a variety of credits, caps, and adjustments to arrive at the municipality's fair share number. This fair share number represents the units that a municipality must establish as reasonably likely to be created by its fair share plan. Credits are granted for the number of low and moderate income housing units created between April 1, 1980 and the time of the petition. N.J.A.C. 5:92-6.1. Next, a variety of downward adjustments are available to that portion of each municipality's pre-credited need which represents its prospective need and its reallocated present need. N.J.A.C. 5:92-8.1. These adjustments are designed to recognize that some municipalities lack developable land sufficient to satisfy their pre-credited need. Adjustments may be granted, for example, for the presence of historically significant sites, N.J.A.C. 5:92-8.2(b)(1), environmentally sensitive lands, N.J.A.C. 5:92-8.2(b)(3), and land...