407 West State Street, Trenton, NJ 08618  (609)695-3481
 NJLM logo 

William G. Dressel Jr, Executive Director - Michael J. Darcey, CAE, Asst Executive Director

COAH
Making Sense of the New Regulations


Edward J. Buzak
League Associate Counsel


Photo - new construction
New construction is just one way that towns can satisfy their Affordable Housing Requirements.

Since the Fair Housing Act was enacted in July of 1985, the Council on Affordable Housing (COAH) has adopted three sets of regulations. The "First Round Regulations" covered the period 1987 to 1993. The six year period is tied to the requirement under the Municipal Land Use Law ("MLUL") that planning boards re-examine their master plans at least every six years. Moreover, the six year period was tied to the then useful life of a "Judgment of Compliance" which was the term coined by the New Jersey Supreme Court in Mount Laurel II which served to protect a municipality that adopted ordinances to implement its Mount Laurel obligation to the satisfaction of the Court.

The "Second Round Regulations" covered the period 1993 through 1999. The "Third Round Regulations" effective December 20, 2004 cover the fifteen year period 1999 to 2014. Why not six years? Good question. The answer lies with two factors. First, the Legislature modified the FHA to allow for a ten year substantive certification protection as opposed to a six year substantive certification protection. Second, because of delays caused for both political reasons and for the purposes of incorporating the 2000 census data into the regulations, Third Round Regulations, although proposed in 2003, were not finally adopted and effective until December 20, 2004 and thus the ten year substantive certification would run at least to 2014. The regulations, however, do not ignore the five year gap from 1999 to 2004 in terms of establishing the obligation. Instead, they compress that fifteen year obligation period into a ten year delivery period from 2004 to 2014.

The purpose of this article is to briefly explain these new regulations in a simplified way. While there is no substitute for reading the actual regulations when confronting any particular problem that arises related to them, it is also useful to have a broad general overview. Thus, at times, this article will ignore minor nuances in favor of getting the point across in a simple understandable form.

The Primary Differences The primary difference between the new regulations and previous versions is that the future obligation of a municipality to accommodate its affordable housing obligation is determined by the municipality instead of COAH. Previously, the future obligation of a municipality was determined by COAH based upon a complicated formula of population growth, economic factors and employment growth. These numbers were allocated to each municipality in the state based upon land availability, employment growth, development growth, and income.

Under the Third Round Regulations, a municipality is responsible for its past obligations as determined by COAH, which have been adjusted to take into account new information resulting primarily from the year 2000 census. In addition, the second component of a municipality's obligation consists of its rehabilitation obligation (its responsibility to rehabilitate substandard units within the municipality occupied by low and moderate income families).

The third and final component of the formula is the new methodology known as "growth share" which is determined by the municipality and confirmed by COAH when application is made for substantive certification. That growth share obligation is established as a ratio of affordable housing unit obligations created for all conventional residential and nonresidential growth in a municipality. More specifically, for every 8 units of market housing for which certificates of occupancy are issued after January 1, 2004, one affordable housing unit obligation is created.

Likewise, for every 25 jobs created by virtue of nonresidential growth for which certificates of occupancy were issued on and after January 1, 2004, one affordable housing unit obligation is created. The number of jobs created by nonresidential growth is determined by applying a table contained in the Appendix of the Third Round Rules which equates the type of nonresidential development with the number of jobs created based upon square footage. For example, an office building will create three jobs for every 1,000 square feet or one affordable housing unit for every 8,333 square feet of office space.

A municipality, in its housing element and fair share plan, must address all three components but it has significant control over the third component since its master plan and zoning will dictate the magnitude of development which occurs in the municipality over the next ten years.

The second difference as mentioned earlier is the fact that substantive certification will be for a period of ten years and not six but it will not expire beyond December 20, 2015, ten years after the Third Round Regulations go into effect.

Retroactivity Rule As mentioned earlier, the growth share obligation is determined by


Part of every municipality's COAH obligation is the rehabilitation obligation, which is its responsibility to rehabilitate substandard units within the municipality occupied by low and moderate income families.

certificates of occupancy issued as of January 1, 2004 not January 1, 2005. Those certificates of occupancy have likely resulted from approvals granted by the planning boards or zoning boards of adjustment anytime for the period between 1999 and January 1, 2004. Except for perhaps a development fee that was imposed on these developments (assuming that the municipality participated in the COAH process previously), it is likely that little thought was given to having those "interim" developers accommodate the growth share obligation which their development creates for a municipality if the certificates of occupancy are issued after January 1, 2004. While the League of Municipalities argued strenuously to exempt all development which received planning board approvals prior to January 1, 2004, COAH was not inclined to accommodate their request. Thus, while you are reading this article, your affordable housing obligation is being created.

Calculation of Your Obligation The affordable housing obligation of a municipality consists of three components. The combination of the regulations as adopted on December 20, 2005 with one appendix in the proposed regulations on October 6, 2003 provide a municipality the ability to quickly estimate the first and second of the three components that will establish your number.

More specifically, Appendix C of the new regulations sets forth the rehabilitation share for each municipality in the State of New Jersey. In addition, the last column of Appendix C establishes the unadjusted obligation of the municipality for the first and second rounds. The number in that column needs to be adjusted by the amount of credits to which the municipality is entitled based upon its past affordable housing activities. This is where a municipality must resort to the October 6, 2003 proposed rules in which COAH estimated that credit. More specifically, in Appendix D of their October 6, 2003 proposal, COAH not only calculated the total obligation from prior rounds, but estimated credits, reductions and adjustments for prior housing activity and then set forth in the last column a "net" number representing the municipality's obligation, if any, for the first and second rounds. It must be emphasized that those credits will ultimately have to be proven to COAH in any submission but the use of the proposed Appendix D from October 6, 2003 will at least give each municipality an estimate of where it stands in satisfying its prior first and second round obligations.

The third and final component, growth share, is a combination of actual and estimated numbers. Since the growth share obligation has already begun to accrue based upon certificates of occupancy issued from January 1, 2004, a municipality needs to merely go to its construction official to obtain that information. To the extent that nonresidential development certificates of occupancy were issued, the type of use and the square footage needs to be obtained in order to use the conversion table to establish the number of jobs resulting from that development. The conversion table is contained in Appendix E of the regulations adopted on December 20, 2004.

The continued future accrual of the growth share obligation will have to be projected based upon development applications that have been approved and have not as yet been built and on those applications in the process of being considered and approved. Moreover, a municipality will have to examine its master plan and its zoning ordinances to predict how it anticipates future growth to take place, the type of growth and the magnitude of it. Applying the ratios will then produce an estimate of its growth share obligation through 2014.

Transitional Rules

If a municipality has never participated in the COAH process and desires to do so, it needs to develop a housing element and fair share plan. The housing element is part of the master plan adopted by the planning board and represents an amendment to the master plan. Once that is done, the governing body must approve the fair share plan and submit a petition to COAH for substantive certification. A municipality can submit a housing element and fair share plan without petitioning COAH for substantive certification but must petition within two years of the date of the filing with COAH. The substantive certification runs from the date of the filing irrespective of when the municipality petitions for substantive certification. The substantive certification runs a maximum of ten years from the date of initial filing but cannot extend beyond December 20, 2015 in any event.

If a municipality has already received second round substantive certification and it expires prior to December 20, 2005, it must make a motion to extend the protections of COAH until December 20, 2005. That motion must be filed prior to the expiration of its current substantive certification and the municipality must commit itself to filing its third round petition. If a municipality's substantive certification expired prior to the December 20, 2004, it should have filed a motion with COAH by December 13, 2004 to extend that substantive certification to December 20, 2005.

Finally, if substantive certification expires at any time after December 20, 2005, a municipality must submit its third round housing element and fair share plan prior to the expiration of its current certification.

Retroactivity

In submitting its housing element and fair share plan, to the extent that the same satisfies the 1987 through 1999 obligation, the rules existing during that particular time period would be applicable with the following exceptions:

1. all rehabilitation is based upon the 2000 census data in the new regulations; and

2. the minimum subsidies will be those in the new rules even for obligations being satisfied for years 1987 through 1999 for accessory apartments ($20,000), Buy Down program ($25,000), and Regional Contribution Agreements (RCA) ($35,000).

Conclusion

As cautioned at the outset, the purpose of this article was to give a broad overview of the new regulations. When confronting a particular situation, the reader is encouraged to examine the applicable regulations and seek the advice of competent counsel and planning consultants. While COAH has expressed its desire to work closely with the municipality, there is no substitute for directed advice from professionals retained by the municipality.

COAH Two to Three: Significant changes

There are several significant changes in the new COAH regulations, some of which are beneficial to municipalities and some of which are not. The changes include the following:

There are several significant changes in the new COAH regulations, some of which are beneficial to municipalities and some of which are not. The changes include the following:

1. Residential development fees have been increased from 1/2 percent to a maximum 1 percent.

2. Nonresidential development fees have been increased to a maximum of 2 percent.

3. The minimum Regional Contribution Agreement (RCA) obligation is now established at $35,000.

4. No more than 50 percent of an RCA can be age restricted.

5. The RCA is limited to 50 percent of the growth share obligation.

6. Not more than 50 percent of the growth share obligation can be age restricted (up from 25 percent).

7. A bonus rental credit of 2 units for every 1 is applied only after a municipality has achieved the minimum 25 percent rental component.

8. Rental housing, if accommodated through an RCA, is credited on a 1 to 1 basis.

9. A bonus credit of 2 units for every 1 rental unit is available for the first 25 percent of the units if they are affordable to persons of very low income.

10. Elder Cottage Housing Opportunities ("ECHO") have been reintroduced into the menu of compliance mechanisms for municipalities.

11. Payments in lieu of construction are completely negotiable but the funds must be utilized within the municipality and must be distinguished from development fees (1 percent and 2 percent) which can be used for any purposes including the funding of RCAs.

12. Substantive certification is tied to the State Development and Redevelopment Plan ("SDRP"). A municipality receiving substantive certification must obtain Initial Plan Endorsement with three years of substantive certification. Rehabilitation is a minimum of $10,000 with not to exceed $2,000 of the $10,000 in "soft" costs.

13. COAH will re-examine the substantive certification in the third, fifth and eighth years particularly to match the growth share obli NJLM - Changes to the Whistleblower Act

407 West State Street, Trenton, NJ 08618  (609)695-3481
 NJLM logo 

William G. Dressel Jr, Executive Director - Michael J. Darcey, CAE, Asst Executive Director

COAH
Making Sense of the New Regulations


Edward J. Buzak
League Associate Counsel


Photo - new construction
New construction is just one way that towns can satisfy their Affordable Housing Requirements.

Since the Fair Housing Act was enacted in July of 1985, the Council on Affordable Housing (COAH) has adopted three sets of regulations. The "First Round Regulations" covered the period 1987 to 1993. The six year period is tied to the requirement under the Municipal Land Use Law ("MLUL") that planning boards re-examine their master plans at least every six years. Moreover, the six year period was tied to the then useful life of a "Judgment of Compliance" which was the term coined by the New Jersey Supreme Court in Mount Laurel II which served to protect a municipality that adopted ordinances to implement its Mount Laurel obligation to the satisfaction of the Court.

The "Second Round Regulations" covered the period 1993 through 1999. The "Third Round Regulations" effective December 20, 2004 cover the fifteen year period 1999 to 2014. Why not six years? Good question. The answer lies with two factors. First, the Legislature modified the FHA to allow for a ten year substantive certification protection as opposed to a six year substantive certification protection. Second, because of delays caused for both political reasons and for the purposes of incorporating the 2000 census data into the regulations, Third Round Regulations, although proposed in 2003, were not finally adopted and effective until December 20, 2004 and thus the ten year substantive certification would run at least to 2014. The regulations, however, do not ignore the five year gap from 1999 to 2004 in terms of establishing the obligation. Instead, they compress that fifteen year obligation period into a ten year delivery period from 2004 to 2014.

The purpose of this article is to briefly explain these new regulations in a simplified way. While there is no substitute for reading the actual regulations when confronting any particular problem that arises related to them, it is also useful to have a broad general overview. Thus, at times, this article will ignore minor nuances in favor of getting the point across in a simple understandable form.

The Primary Differences The primary difference between the new regulations and previous versions is that the future obligation of a municipality to accommodate its affordable housing obligation is determined by the municipality instead of COAH. Previously, the future obligation of a municipality was determined by COAH based upon a complicated formula of population growth, economic factors and employment growth. These numbers were allocated to each municipality in the state based upon land availability, employment growth, development growth, and income.

Under the Third Round Regulations, a municipality is responsible for its past obligations as determined by COAH, which have been adjusted to take into account new information resulting primarily from the year 2000 census. In addition, the second component of a municipality's obligation consists of its rehabilitation obligation (its responsibility to rehabilitate substandard units within the municipality occupied by low and moderate income families).

The third and final component of the formula is the new methodology known as "growth share" which is determined by the municipality and confirmed by COAH when application is made for substantive certification. That growth share obligation is established as a ratio of affordable housing unit obligations created for all conventional residential and nonresidential growth in a municipality. More specifically, for every 8 units of market housing for which certificates of occupancy are issued after January 1, 2004, one affordable housing unit obligation is created.

Likewise, for every 25 jobs created by virtue of nonresidential growth for which certificates of occupancy were issued on and after January 1, 2004, one affordable housing unit obligation is created. The number of jobs created by nonresidential growth is determined by applying a table contained in the Appendix of the Third Round Rules which equates the type of nonresidential development with the number of jobs created based upon square footage. For example, an office building will create three jobs for every 1,000 square feet or one affordable housing unit for every 8,333 square feet of office space.

A municipality, in its housing element and fair share plan, must address all three components but it has significant control over the third component since its master plan and zoning will dictate the magnitude of development which occurs in the municipality over the next ten years.

The second difference as mentioned earlier is the fact that substantive certification will be for a period of ten years and not six but it will not expire beyond December 20, 2015, ten years after the Third Round Regulations go into effect.

Retroactivity Rule As mentioned earlier, the growth share obligation is determined by


Part of every municipality's COAH obligation is the rehabilitation obligation, which is its responsibility to rehabilitate substandard units within the municipality occupied by low and moderate income families.

certificates of occupancy issued as of January 1, 2004 not January 1, 2005. Those certificates of occupancy have likely resulted from approvals granted by the planning boards or zoning boards of adjustment anytime for the period between 1999 and January 1, 2004. Except for perhaps a development fee that was imposed on these developments (assuming that the municipality participated in the COAH process previously), it is likely that little thought was given to having those "interim" developers accommodate the growth share obligation which their development creates for a municipality if the certificates of occupancy are issued after January 1, 2004. While the League of Municipalities argued strenuously to exempt all development which received planning board approvals prior to January 1, 2004, COAH was not inclined to accommodate their request. Thus, while you are reading this article, your affordable housing obligation is being created.

Calculation of Your Obligation The affordable housing obligation of a municipality consists of three components. The combination of the regulations as adopted on December 20, 2005 with one appendix in the proposed regulations on October 6, 2003 provide a municipality the ability to quickly estimate the first and second of the three components that will establish your number.

More specifically, Appendix C of the new regulations sets forth the rehabilitation share for each municipality in the State of New Jersey. In addition, the last column of Appendix C establishes the unadjusted obligation of the municipality for the first and second rounds. The number in that column needs to be adjusted by the amount of credits to which the municipality is entitled based upon its past affordable housing activities. This is where a municipality must resort to the October 6, 2003 proposed rules in which COAH estimated that credit. More specifically, in Appendix D of their October 6, 2003 proposal, COAH not only calculated the total obligation from prior rounds, but estimated credits, reductions and adjustments for prior housing activity and then set forth in the last column a "net" number representing the municipality's obligation, if any, for the first and second rounds. It must be emphasized that those credits will ultimately have to be proven to COAH in any submission but the use of the proposed Appendix D from October 6, 2003 will at least give each municipality an estimate of where it stands in satisfying its prior first and second round obligations.

The third and final component, growth share, is a combination of actual and estimated numbers. Since the growth share obligation has already begun to accrue based upon certificates of occupancy issued from January 1, 2004, a municipality needs to merely go to its construction official to obtain that information. To the extent that nonresidential development certificates of occupancy were issued, the type of use and the square footage needs to be obtained in order to use the conversion table to establish the number of jobs resulting from that development. The conversion table is contained in Appendix E of the regulations adopted on December 20, 2004.

The continued future accrual of the growth share obligation will have to be projected based upon development applications that have been approved and have not as yet been built and on those applications in the process of being considered and approved. Moreover, a municipality will have to examine its master plan and its zoning ordinances to predict how it anticipates future growth to take place, the type of growth and the magnitude of it. Applying the ratios will then produce an estimate of its growth share obligation through 2014.

Transitional Rules

If a municipality has never participated in the COAH process and desires to do so, it needs to develop a housing element and fair share plan. The housing element is part of the master plan adopted by the planning board and represents an amendment to the master plan. Once that is done, the governing body must approve the fair share plan and submit a petition to COAH for substantive certification. A municipality can submit a housing element and fair share plan without petitioning COAH for substantive certification but must petition within two years of the date of the filing with COAH. The substantive certification runs from the date of the filing irrespective of when the municipality petitions for substantive certification. The substantive certification runs a maximum of ten years from the date of initial filing but cannot extend beyond December 20, 2015 in any event.

If a municipality has already received second round substantive certification and it expires prior to December 20, 2005, it must make a motion to extend the protections of COAH until December 20, 2005. That motion must be filed prior to the expiration of its current substantive certification and the municipality must commit itself to filing its third round petition. If a municipality's substantive certification expired prior to the December 20, 2004, it should have filed a motion with COAH by December 13, 2004 to extend that substantive certification to December 20, 2005.

Finally, if substantive certification expires at any time after December 20, 2005, a municipality must submit its third round housing element and fair share plan prior to the expiration of its current certification.

Retroactivity

In submitting its housing element and fair share plan, to the extent that the same satisfies the 1987 through 1999 obligation, the rules existing during that particular time period would be applicable with the following exceptions:

1. all rehabilitation is based upon the 2000 census data in the new regulations; and

2. the minimum subsidies will be those in the new rules even for obligations being satisfied for years 1987 through 1999 for accessory apartments ($20,000), Buy Down program ($25,000), and Regional Contribution Agreements (RCA) ($35,000).

Conclusion

As cautioned at the outset, the purpose of this article was to give a broad overview of the new regulations. When confronting a particular situation, the reader is encouraged to examine the applicable regulations and seek the advice of competent counsel and planning consultants. While COAH has expressed its desire to work closely with the municipality, there is no substitute for directed advice from professionals retained by the municipality.

COAH Two to Three: Significant changes

There are several significant changes in the new COAH regulations, some of which are beneficial to municipalities and some of which are not. The changes include the following:

There are several significant changes in the new COAH regulations, some of which are beneficial to municipalities and some of which are not. The changes include the following:

1. Residential development fees have been increased from 1/2 percent to a maximum 1 percent.

2. Nonresidential development fees have been increased to a maximum of 2 percent.

3. The minimum Regional Contribution Agreement (RCA) obligation is now established at $35,000.

4. No more than 50 percent of an RCA can be age restricted.

5. The RCA is limited to 50 percent of the growth share obligation.

6. Not more than 50 percent of the growth share obligation can be age restricted (up from 25 percent).

7. A bonus rental credit of 2 units for every 1 is applied only after a municipality has achieved the minimum 25 percent rental component.

8. Rental housing, if accommodated through an RCA, is credited on a 1 to 1 basis.

9. A bonus credit of 2 units for every 1 rental unit is available for the first 25 percent of the units if they are affordable to persons of very low income.

10. Elder Cottage Housing Opportunities ("ECHO") have been reintroduced into the menu of compliance mechanisms for municipalities.

11. Payments in lieu of construction are completely negotiable but the funds must be utilized within the municipality and must be distinguished from development fees (1 percent and 2 percent) which can be used for any purposes including the funding of RCAs.

12. Substantive certification is tied to the State Development and Redevelopment Plan ("SDRP"). A municipality receiving substantive certification must obtain Initial Plan Endorsement with three years of substantive certification. Rehabilitation is a minimum of $10,000 with not to exceed $2,000 of the $10,000 in "soft" costs.

13. COAH will re-examine the substantive certification in the third, fifth and eighth years particularly to match the growth share obligation to the production of housing.

14. A presumption of validity of growth share projections is given to a municipality whose population projections match those in the SDRP.

 

Article published in April 2005, New Jersey Municipalities