In 1975 the Supreme Court ruled (in a decision commonly referred to as Mt. Laurel I) that municipalities have a constitutional obligation to enact zoning regulations that create a realistic opportunity for the development of the municipality’s fair share of affordable housing.  The “Mt. Laurel Doctrine” essentially states that a community cannot zone in such a way to exclude low- and moderate-income households (i.e. have exclusionary zoning).  

Examples of such “exclusionary zoning” include:

Single-family zoning with large minimum lot size requirements.

Minimum house size requirements which drive up the cost of housing construction and consequently, housing prices.

Prohibition of multi-family housing.

Limitation on number of bedrooms in multi-family dwellings to limit household sizes.

Prohibition of mobile homes.

Over-zoning for non-residential uses.

COAH is the Council on Affordable Housing which was established under the Fair Housing Act of 1985, the legislative response to the Mt. Laurel II decision.  COAH created rules and procedures for communities to follow to satisfy their constitutional obligation to build affordable housing.  The regulations that have been issued by COAH have been divided into “rounds.”  Round One covered the time period from 1987 to 1993.  Round Two covered the period from 1993 through 1999.  Round Three was originally intended to pick up more or less where Round Two left off.  Under all of these regulations, towns were given the option of either: 

1) filing affordable housing plans with COAH (who would review for compliance), or 

2) doing nothing and risking a “builder’s remedy lawsuit” (which is explained later).  

If a community filed an affordable housing plan with COAH that was deemed complete and satisfactory, the municipality would receive what is called “Substantive Certification.”  Substantive Certification provided towns with a period of immunity from builder’s remedy lawsuits.  Montvale filed an affordable housing plan in 2000 for Round Two and received Substantive Certification in 2004.  Montvale filed its Round Three plan in 2008, and that application was deemed complete; however, through no fault of the Borough’s, COAH stopped issuing Substantive Certifications in 2010.  The agency ceased issuing certifications as they had failed to approve constitutionally-compliant regulations for Round Three.  Now, due to a variety of executive and judicial decisions, COAH is no longer reviewing affordable housing plans.  As a result, Montvale has not received Substantive Certification for Round Three.

COAH – a State agency – has for years failed to establish legally valid rules and numeric obligations for affordable housing since the Round Two regulations expired in 1999.  There have been years of court battles between the competing interests, including affordable housing advocates, the real estate developers’ lobby, municipalities and COAH itself, over how the rules should be formulated and the methodology by which the local obligations should be established.  However, in March of 2015, the Supreme Court, after ordering COAH numerous times to establish legally acceptable rules, determined, in essence, that COAH had stopped doing its job.  The March 2015 Order therefore stripped COAH of any of its administrative powers and returned to the trial courts the responsibility of determining the methods, affordable housing obligations, and each municipality’s compliance with its constitutional obligation to provide for the development of affordable housing.

As a result of the March 2015 Order, towns are now required to individually petition the Superior Court for approval of their housing plans, which proceedings are known as declaratory judgment actions.  Right now, Montvale is one of 280+/- communities with pending declaratory judgement actions in the State.  Builders, developers and other interested parties (“Intervenors”) may intervene in these proceedings.  Intervenors typically take the position: 1) that the municipality has failed to zone for the creation of enough affordable housing, and/or 2) that the intervenor owns a specific site that the town should allow for development of affordable housing. This is what has happened in Montvale.  It is important to note that the only reason Montvale has been permitted to file its declaratory judgment action is because Montvale was pro-active in seeking Substantive Certification from COAH for Rounds Two and Three.  The court process is ongoing, and Montvale currently has immunity against builder’s remedy lawsuits.  This immunity should be extended as long as Montvale continues working in good faith with the Special Master, negotiating and/or mediating with Fair Share Housing Center and other intervenors (including developers and property owners), and ultimately drafting and approving a compliant Housing Element and Fair Share Plan.  Had Montvale not participated in the COAH process in prior years and demonstrated good faith in meeting or exceeding its affordable housing obligations, it would have been precluded from filing a declaratory judgment action and would already be at the mercy of builder’s remedy lawsuits.

In 2008, when COAH was still functioning, Montvale’s affordable housing obligation, as calculated by COAH, was:

Rehabilitation – 5 units

Round Two – 255 units (adjusted to 188 due to a vacant land adjustment)

Round Three – 265 units (2008-2018) 

Since the Supreme Court decision in 2015, numerous new sets of numbers for affordable housing have been promulgated for every town in the State of New Jersey.  The Fair Share Housing Center (“FSHC”), a group that advocates for the construction of affordable units and who is also an intervening party in the Borough’s pending Declaratory Judgment action, has determined that Montvale has an obligation of 586 units for the Round Three, which they calculate to include the 15-year “Gap” period from 1999 through 2014, as well as the 10-year “prospective” period of 2015-2025.  Econsult, who represents the municipalities, calculated the Borough’s Round Three obligation to be 349 units (2015-2025), and has taken the position that there is no “Gap” period obligation.  There is also a third set of numbers being developed by Richard Reading, who has been appointed as a “Numbers Master” for multiple counties (although not yet Bergen).  The battle over whose numbers will be accepted by the courts is presently being fought before both the Appellate Division and the New Jersey Supreme Court and maybe resolved in mid- to late-2017.  

In addition, the issue of whether a “Gap” obligation exists was recently argued before the New Jersey Supreme Court.  Based on the opinions expressed by the Justices during oral argument, however, municipal representatives have generally been pessimistic about the outcome.  Inclusion of a “Gap” period obligation could add approximately 25%-35% to the numbers developed by Econsult and Reading.  

It should be noted that these obligations cited above are for affordable units only.  Based upon an 80%/20% market/affordable ratio for inclusionary development, as the Borough typically insists on for affordable housing inclusionary development, these numbers could mean that the Borough would have to zone for the creation of between 1,745 and 2,930 more total units in the community in a best case scenario.  If the ratio was instead 85%/15% (which is more typical statewide), the range could be between 2,327 and 3,907 units, if all of the units were constructed as part of inclusionary developments.  This is the primary reason why the Borough is being pro-active in seeking proposals from developers that will have the smallest overall impact on the Borough, through higher affordable set-asides, 100% affordable developments, group homes, and other compliance mechanisms that will hopefully limit the number of market-rate units that will need to be approved to satisfy the Borough’s obligation.

As of now, there is no obligation that the Borough rezone the Mercedes Benz property; however, that site has been identified by the Special Master appointed in the Borough’s declaratory judgment action as a potential site for residential development that generates and/or produces affordable housing.  It is a near certainty that the Borough will have to rezone some parcels in the Borough in order to satisfy its affordable housing obligations, and rezoning Mercedes is an option that has to be considered.  Obviously, the Borough has no control over who Mercedes Benz sells the property to, just like the Borough has no control over who you sell your property to.  The Hekemian group has approached the Borough about rezoning the property for a mixed-use development, including residential, retail, office and hotel uses.  It is possible that a different developer would seek to develop the property solely for high-density, rental apartments.  Right now, the property is zoned for commercial use; however, it appears that there is not currently any significant interest in continuing to utilize the property as an office complex.  Rezoning Mercedes to accommodate a plan that the Borough is comfortable with may give the Borough more discretion to refuse to rezone other parcels that developers would like to use for residential development that may be located on properties that are either less suitable or which would have a greater impact on surrounding residential neighborhoods.

When COAH had jurisdiction to review municipal affordable housing plans, a town would be immune from builder’s remedy litigation if it availed itself of the administrative review process established by COAH for review of the town’s affordable housing plan.  Montvale filed affordable housing plans in both Round Two (2000) and Three (2008).  However, COAH did not complete its review of the 2008 plan.  When Montvale’s Round Two plan was approved by COAH, the Borough received immunity from builder’s remedy lawsuits.  Thus, developers could not file builder’s remedy lawsuits, but would instead have to approach the Borough to seek approval for development, which could include a rezoning request or a variance application.

Once a court determines that a municipality has not satisfied its constitutional obligations concerning the development of affordable housing, it is nearly impossible to “win” a subsequent builder’s remedy lawsuit.  At that point in time, the municipality is really looking only at damage control.  The municipality loses the presumption of validity of its zoning ordinances, and as a practical matter, the case proceeds with the underlying premise that the municipality is improperly trying to prevent the development of affordable housing.  As a result, courts are almost always willing to grant the developer the right to construct multi-family housing that will almost certainly be worse for the municipality in terms of density, height, bulk standards, setbacks, etc.  In addition, that development will almost certainly include an inclusionary set-aside of between 15% and 20%.  Furthermore, these decisions will be made by a judge and a court-appointed master, who has no vested interest in Montvale or its residents’ local concerns.  In addition, the town will likely have to pay for the special master, as well as the developer’s attorney’s fees.  The Borough wants to be in control of the community’s destiny, so negotiation with builders or developers that we can work with to create reasonable housing developments is often a better alternative than having a court-appointed master tell us what we have to do, where it will be built and how many units a property will be developed with.

Many of our neighboring communities of all economic and political compositions have lived through builder’s remedy lawsuits, including Montvale.  Prior to the Fair Housing Act of 1985, the courts were the ones who took the actions; not a single reported case was dismissed without the municipality taking some action to rezone property or otherwise provide for multi-family housing.  In Bergen County alone, the municipalities that have had builder’s remedy suits include Alpine, Demarest, Fairlawn, Fort Lee, Little Ferry, Mahwah, New Milford, River Vale and Upper Saddle River.  These municipalities either voluntarily or pursuant to court order were forced to take actions to allow for higher-density inclusionary zoning.  Montvale was also subject to litigation from two developers who filed builder’s remedy lawsuits in 1989.  This resulted in the Borough rezoning seven sites to satisfy the Court’s requirements.

The only way any community can be protected from a Builder’s Remedy lawsuit is to submit a Housing Element and Fair Share Plan to the Court that complies with the required obligations and receives a Judgment of Compliance/Repose from the Court.  This replaces the previously granted Substantive Certification, which was issued by COAH.  In addition, as part of this process, it may be beneficial for the Borough to “lock up” settlements with certain property owners (including specifically any intervenors), with the approval of the Special Master.  Negotiating and reaching settlements with intervenors and other prospective developers will help to insulate these properties from development plans with high densities far beyond those previously approved in Montvale.  Once the Borough receives approval of its Housing Element, a Judgement of Compliance/Repose should be granted through 2025, during which the Borough would be “immune” from any Builder’s Remedy lawsuits so long as Montvale continues to comply with its Housing Plan.

Currently, the Borough only has one actual “intervenor.”  Hornrock Properties, the developer who is proposing to develop the former Sony property, intervened in the Borough’s Declaratory Judgment Action soon after it was filed.  As an intervenor, Hornrock has special status in the context of the Borough’s Declaratory Judgment Action, and the Special Master has advised that the Borough is required to negotiate with them concerning potential development on that site.  Fair Share Housing Center, while not an intervenor, also has special status in the context of negotiations, and reaching a settlement on the Borough’s affordable housing obligation and its housing element and fair share plan will likely require mediation and negotiation with FSHC.  It is also possible that other property owners and/or developers who have presented formal or informal development proposals to the Borough may eventually seek to intervene in the Declaratory Judgment Action, including the owners of the Mack-Cali and A&P buildings, two properties that have been identified by the Special Master as potentially being appropriate for development/redevelopment.  Eventually, the plan is to reach a global settlement that can be recommended by the Special Master and approved by the Court.

Yes and no.  Courts do not consider the economic impact to a municipality whether the impact is on schools or other municipal services, such as police and fire.  However, the municipality’s infrastructure capacity, as well as its vacant and developable land, are often considered at one point or another in the process.

School officials have advised that there has been a nearly 20% decline in enrollment over the past 15 years.  They believe that there is presently room for additional students.  In addition, current projections anticipate that there will be room for additional students in the future as well.  However, the impact of any development proposals on these projections will be given appropriate scrutiny to help ensure that the schools will not be negatively impacted moving forward.

Something else to keep in mind is that the United States Department of Housing and Urban Development in 2015 adopted a rule entitled “Affirmatively Furthering Fair Housing.”  The enforcement of this rule, which is tied to certain grants and other programs operated by HUD (including CDBG grants), will require municipalities to analyze historical housing discrimination in the municipality, develop a plan to ameliorate the effects of such discrimination, and to provide continuing reporting to HUD concerning the municipality’s efforts to diversify its housing on such factors as race, color, religion, sex, disability, familial status or national origin.  Failure to comply with the AFFH rules may result in Federal oversight of local ordinances and rules and regulations – a prospect that may make State-mandated affordable housing rules seem tame by comparison.

The Court decisions, legislation and regulations discussed above are the unfortunate reality that the Borough has to live with.  Absent a Constitutional Amendment or other dramatic legislative change, the Borough is forced to operate within the confines of the Mt. Laurel Doctrine as it has been interpreted by the Courts and implemented by the Legislature.  The Borough’s affordable housing obligations are not going to just go away.  This is why it is critically important for Borough officials, with productive input from residents, to pro-actively seek to: 

1) foster responsible residential development in the community; 

2) protect the Borough from builder’s remedy lawsuits and other penalties; and

3) support the retention and growth of the commercial sector where possible.

As the Mayor and Council have previously stated, the Borough is evaluating all available options to preserve the character of Montvale.  This includes seeking a vacant land adjustment due to a lack of vacant and developable land in the Borough.  Borough officials have been meeting with various property owners, especially those with vacant or underutilized buildings, concerning potential development proposals to find solutions that will responsibly guide future development in town.  

The Borough is also investigating a variety of mechanisms to create affordable units that will help satisfy the Borough’s constitutional obligation to provide for affordable housing, while responsibly limiting the total number of new residential units that are required.  Building or approving assisted living facilities and group homes, extending existing deed restrictions, and sponsoring/subsidizing 100% affordable developments are but a few of the mechanisms available to the Borough.  All of these options are on the table and are being actively pursued to the extent that they are in the best interests of Montvale.  

Montvale, like the majority of suburban New Jersey municipalities, is confronted with the practical reality of having to find appropriate locations and plan for affordable housing.  The courts have ruled that it is Montvale’s responsibility to provide a realistic opportunity for the construction of housing for low- and moderate-income households.  With this obligation comes the requirement to permit residential development beyond what we may have ideally envisioned for our community.  It is the goal of the Mayor and Council, with active public input and cooperation, to satisfy the Borough’s obligations in a way that will ultimately enhance and improve our community.