In re Twp. of Readington

1

IN THE MATTER OF THE APPLICATION OF THE TOWNSHIP OF READINGTON, COUNTY OF HUNTERDON.

No. A-2756-21

Superior Court of New Jersey, Appellate Division

November 8, 2023

This opinion shall not "constitute precedent or be binding upon any court ." Although it is posted on the internet this opinion is binding only on the parties in the case and its use in other cases is limited. R. 1:36-3.

Submitted September 20, 2023

On appeal from the Superior Court of New Jersey, Law Division Hunterdon County, Docket No. L-0301-15.

Berger & Bornstein, LLC, attorneys for appellant United States Land Resources, LP (Lawrence S. Berger, on the briefs).

Surenian, Edwards &Nolan LLC, attorneys for respondent The Township of Readington (Michael J. Edwards, of counsel and on the brief; William E. Olson, on the brief).

Bisgaier Hoff, LLC, attorneys for respondent K-Land No. 71, LLC (Richard J. Hoff, Jr., and Danielle N. Kinback, on the brief).

Joshua D. Bauers, Senior Staff Attorney, attorney for respondent Fair Share Housing Center (Ashley J. Lee, Staff Attorney, of counsel and on the brief).

Before Judges Vernoia, Gummer, and Walcott-Henderson.

PER CURIAM

Municipalities have constitutional obligations to provide for their fair share of the regional need for affordable housing. See In re Adoption of N.J.A.C. 5:96 &5:97 (Mount Laurel IV), 221 N.J. 1 (2015); the Fair Housing Act (FHA) N.J.S.A. 52:27D-301 to -329.4. On March 28, 2022, the trial court approved as amended the Housing Element and Fair Share Plan (HEFSP) of the Township of Readington (the Township) and granted the Township a final judgment of compliance and repose. The decision to grant that relief was based in part on affordable-housing units to be built in proposed developments pursuant to settlement agreements the Township had entered in 2018 and the court had approved after duly-noticed fairness hearings in 2019.

Intervenor United States Land Resources, LP (USLR), appeals from the final judgment, contending the settlement agreements did not provide a realistic opportunity for the production of a sufficient number of affordable-housing units and, thus, the court erred in approving the Township's HEFSP and granting a final judgment of compliance and repose.^[1] We disagree and affirm.

I.

In 1975, our Supreme Court held that developing municipalities are under a constitutional obligation to provide a realistic opportunity for the creation of affordable housing. S. Burlington Cnty. N.A.A.C.P. v. Mount Laurel Twp., 67 N.J. 151, 174 (1975). The Court clarified and reaffirmed that constitutional requirement in South Burlington County N.A.A.C.P. v. Mount Laurel Township (Mount Laurel II), 92 N.J. 158 (1983).

In 1985, following Mount Laurel II, the Legislature codified the constitutional obligation of municipalities "to use their zoning power in a manner that creates a 'realistic opportunity for the construction of [their] fair share' of the region's low- and moderate-income housing "by "enacting the [FHA] and creating [the Council on Affordable Housing (COAH)] to facilitate and monitor municipal compliance with the constitutional mandate." In re Declaratory Judgment Actions, 227 N.J. 508, 514 (2017). "In COAH, the Legislature vested responsibility for determining and assigning municipal affordable housing obligations, which would be accomplished through promulgation of procedural and substantive rules for successive housing cycles." Ibid. COAH adopted rules to govern its first and second cycles, "but when the Second Round rules expired in 1999, COAH had not proposed new regulations . . . to govern the third housing cycle (Third Round)." Ibid.

"Because COAH had failed to . . . take specific administrative steps culminating in the adoption of Third Round rules, [the Court in Mount Laurel IV] declared COAH defunct and . . . 'provide[d] a substitute for [COAH's] substantive certification process,'" whereby "municipalities that had already obtained, or were in the process of obtaining, substantive certification from COAH could file declaratory judgment actions to confirm that their plans comported with their Mount Laurel obligations." Id. at 515 (quoting Mount Laurel IV, 221 N.J. at 24). A municipality seeking "an affirmative declaration of constitutional compliance . . . [must] do so on notice and opportunity to be heard to [the Fair Share Housing Center (FSHC)] and interested parties." Mount Laurel IV, 221 N.J. at 23.^[2] "To guide the . . . judges who would be evaluating compliance with Mount Laurel obligations, [the Court] instructed the courts to follow certain guidelines 'gleaned from the past.'" In re Declaratory Judgment Actions, 227 N.J. at 515 (quoting Mount Laurel IV, 221 N.J. at 29-30). The Court "authorized judges to evaluate municipal compliance using discretion similar to that afforded to COAH in the rulemaking process." Id. at 516.

Consistent with Mount Laurel IV, the Township filed a declaratory judgment action on July 2, 2015, seeking approval of the Township's HEFSP and entry of a judgment of compliance and repose. Three years later, the Township reached agreements with intervenors SAR I, LLC (SAR)^[3] and Readington Commons II (RCII) regarding the construction of inclusionary developments^[4] with rental residential units, twenty-five percent of which would be set aside for very low, low, and moderate-income housing.

In a July 11, 2018 settlement agreement, the Township and SAR agreed on a plan for the development of 192 residential units, including forty-eight affordable-housing units, on property owned by SAR located in Readington at Block 36, Lots 5, 5.02, and 5.04. The purpose of the agreement was to "settle the SAR [i]ntervention," "to create a realistic opportunity for the construction of the [i] nclusionary [d]evelopment" proposed for the SAR site, and "to generate affordable housing credits for the Township to apply to any Round [Three] obligation assigned to it." The SAR agreement included concept site plans and a proposed zoning ordinance, which created an inclusionary housing zone at the SAR site and was ultimately adopted by the Township. The ordinance required the development at the SAR site to "include affordable housing as a component," with at least twenty-five percent of the units being affordable to low- and moderate-income households and forty-eight of the units being "affordable family rental apartment dwellings." The agreement also provided for the submission of "a phasing plan" as part of the preliminary plan "[f]or developments to be constructed over a period of years."

The Township and SAR amended the agreement on August 8, 2018, to "ensure that the [i]nclusionary [d]evelopment generates affordable housing credits to be applied to the Township's Round [Three] affordable housing obligations." Specifically, the Township and SAR agreed that "the affordability controls . . . shall be governed by Uniform Housing Affordability Controls, N.J.A.C. 5:80-26.1 [to -26.26] ('UHAC')." That amendment did not change the number of affordable-housing units to be constructed.

On May 30, 2019, the court conducted a duly-noticed fairness hearing regarding the SAR agreement. See E./W. Venture v. Borough of Fort Lee, 286 N.J.Super. 311, 328 (App. Div. 1996) (finding "a trial judge may approve a settlement of Mount Laurel litigation after a 'fairness' hearing to the extent the judge is satisfied that the settlement adequately protects the interests of lower-income persons on whose behalf the affordable units proposed by the settlement are to be built"). During the hearing, the court heard testimony from the Township's former planner, Kendra Lelie, who testified the SAR site was "developable for the proposed inclusionary development" of 192 units, of which forty-eight would be affordable units.

Francis Banisch III, who was the court's special master overseeing the Township's Mount Laurel compliance, also testified. Banisch represented that, since the Court's Mount Laurel IV decision, he has seen more projects move into the twenty-five-percent set-aside range because of the increase in competition among developers to be included in municipalities' fair-share plans. Banisch believed the twenty-five-percent set aside would not be offered if it was not possible and that "in a robust housing market like Readington where units like this will be in high demand, "the twenty-five-percent set aside would "not be an impediment to the development of this project." Instead of being an impediment, Banisch found the twenty-five-percent set-aside as "clearly . . . advancing the [Township's] attempt to [achieve] constitutional compliance." Applying the five-factor fairness analysis of East/West Venture, 286 N.J.Super. at 328, Banisch concluded the SAR agreement was fair and recommended the court approve it.^[5]

Finding credible Lelie's and Banisch's testimony and having conducted its own East/West Venture analysis, the court approved the SAR agreement in an eight-page opinion dated June 4, 2019, and a July 8, 2019 order. The court acknowledged certain "interested parties" had "questioned various aspects of the feasibility of the development that is contemplated in the [a]greement," including "whether the Township 'negotiated too good of a deal' in that the requirement to provide [twenty-five percent] affordable housing is in excess of the norm and may make the project not feasible and therefore not realistic." The court rejected that concern, explaining:

The [c]ourt is satisfied, however, that the project as proposed in the [a]greement is feasible and developable. Mr Banisch testified that although his expertise is in the "zoning and planning["] areas as opposed to "economics of the projects," in his experience he has seen 25% projects that have

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