New Jersey Supreme Court Issues Decision on “The Gap Period”

January 18, 2017Alerts Real Estate Alert

The New Jersey Supreme Court has ruled that a municipality’s affordable housing obligation did not take a “hiatus” between 1999 and 2015 (the Gap Period) In re Barnegat, County of Ocean, Regarding Fair Share Obligations during the period of 1999-2015.

The decision rejects the argument lodged by the municipalities, in an effort to reduce their fair share calculations, that the Gap Period obligation simply disappeared.

The Supreme Court spared little time in dismissing the Municipal Consortium’s argument, stating “[t]here is no fair reading of this Court’s prior decisions that supports disregarding the constitutional obligation to address pent-up affordable housing need for low- and moderate-income households that formed during the years in which COAH was unable to promulgate Third Round rules.”

The central focus of the unanimous decision shifted primarily to how to account for the need within the statutory confines of the Fair Housing Act (FHA). The difference between Prospective Need and Present Need analysis is merely a function of the timing of the data source. The underlying Appellate Division decision held that the FHA defines Prospective Need as a “projection of growth” in the future so that a retroactive look back was not authorized by the FHA.

The Court agreed with the Appellate Division that the Gap Period was to be calculated as a function of Present Need, rather than Prospective Need. Present Need is not defined by the FHA. Thus, the Court held that “[t]he term is malleable and can address the circumstances presented now in order for the constitutional obligation to be fulfilled, not skirted.” (emphasis added).

The Supreme Court further indicated that it intended to provide trial courts with considerable flexibility for the sake of streamlining and ensuring prompt voluntary compliance by municipalities. Reaffirming the broad discretion granted to trial courts, the Supreme Court provided the following guidance regarding the Gap Period:

  • The need formed during the Gap Period can be captured in a municipality’s calculation of present need.
  • The need should encompass presently existing New Jersey low- and moderate income households that have been created since 1999.
  • The calculation should factor in changes in circumstances since 1999, such as death, changes in income, retirement and relocation outside New Jersey.

Statewide, the only trial regarding a municipal fair share calculation tried to completion was before Judge Wolfson in South Brunswick, in which Fox Rothschild actively participated. Judge Wolfson’s trial court opinion has been approved for publication and will provide clear guidance to other trial courts as to how to calculate affordable housing need. Judge Wolfson also conducted supplemental proceedings to determine “adjusted Present Need” to capture the Gap Period obligation in virtually the same fashion as endorsed by the Appellate Division.

Prospectively speaking, the result of the Supreme Court decision is that municipal fair share obligations will increase over the estimated need calculated by the municipal experts, since many municipalities and their experts failed to account for the Gap Period. In fact, municipalities have argued that their expert was unable to calculate an identified present need with any reasonable reliability or certainty. It is anticipated that many trial courts will commence scheduling trials. That, together with many municipalities with unmet housing needs, opens the door to additional development opportunities and potential settlements.

For questions or more information, please contact Henry L. Kent-Smith at 609.896.4584 or [email protected], Irina B. Elgart at 609.895.6632 or [email protected] or any member of the firm’s Real Estate Department.