Dear Mayor:

On Monday, the Council on Affordable Housing (COAH) proposed its revised third round regulations.  The new regulations will be published in the January 22, 2008 New Jersey Register, which then commences a 60-day comment period.    The agency intends to reply to the public comments in a 30-45 day period, republish any changes, and implement effective in June.    If this timeframe holds up, municipalities who voluntarily enter the COAH process will need to submit plans by the end of 2008.

The Council also indicated that it will conduct five public hearings during the comment period, but the dates and locations of those meetings are forthcoming.  The regulations, and most of the accompanying information, are available online at: http://www.nj.gov/dca/coah/dec07proposal.shtml

Unfortunately, the actual municipal projections, which are to be part of Exhibit F, were not available yesterday.    The projections are being reviewed for consistency with regulations of the Department of Environmental Protection, and we were informed that they will be available by the time the regulations are published in the New Jersey Register.

Based on the presentation yesterday, here is a summary of the significant changes proposed:

1. COAH has expanded the period for which they are extrapolating need figures from 2014 through 2018.

2. The new statewide need figure will increase from approximately 53,000 to 115,666 units.

3. The ratios have changed. The proposed regulations increase the residential obligation to 1 for every 4 residential units (20%) and 1 for every 16 jobs created.  (The earlier ratios were 1 for 8 for residential and 1 for every 25 jobs created.)  The new ratios will be applied retroactively to January 1, 2004. 

4. The age restriction limitation on in town construction for the growth share component of the fair share has been reduced from 50% to 25%.

5. Expanded compliance options for municipalities, including bonus credits for supportive and special needs housing, new credit for affordable housing in redevelopment areas, and optional plan implementation phasing based on economic feasibility are proposed.

6. In order to address the Appellate Division’s concern with a density bonus, municipalities must provide one additional market unit for each affordable unit they require. The following example was used to demonstrate: if a developer had the right to construct 100 market units, the municipality could require the developer make 20 of the units affordable, if it increased the total number of units the developer could construct to 120 units, provided this was done on-site.

7. COAH published figures for the internal rate of subsidization. The average rate was roughly $160,000 and that all in lieu money must be spent within the municipality.
   

8. COAH will set the minimal cost for “regional contribution agreements” (RCA) by region. The new minimums will be from $67,000 to $80,000, depending upon the region. (Please note that there is legislation to eliminate RCA agreements, but this new provision is distinct from any legislative changes and would be in effect until any such legislation passed.   For more on that legislation, please see our letters of December 11, November 21 and June 7, 2007.)   We anticipate that the sponsors of this legislation will push this early in the New Year.)

9. The new regulations will require the expenditure of developer fees trust fund money within 4 years from the approval of the municipality’s spending plan. The Commissioner indicated that COAH encourages municipalities to come in and secure the right to spend that money sooner and thereby create affordable housing without further delays.

10. Development fees for new construction will increase from 1% of equalized assessed value (EAV) for residential to 1 ½% of EAV and from 2% of EAV to 3% of EAV for non-residential. 

11. The Commissioner indicated that COAH would work with the Legislature to secure the right to impose a statewide developer fee on all non-residential developers—even if they were not involved in a COAH or Court process. It is anticipated this will generate $60,000,000 to $80,000,000 in revenue to facilitate the production of affordable housing.   Since this requires legislative authorization, municipalities may continue to require in lieu payments on non-residential development until such legislation is effective.

12. COAH’s expert indicated that prior cycle obligations would also be adjusted. COAH will be relying upon the projections published in 1993 under which municipalities received second round substantive certification

We are currently reviewing these regulations, and will submit comments to the agency in a timely fashion.  The League plans on holding a series of regional meetings to brief our member municipalities on these regulations, and strongly encourages all municipalities impacted by this proposal to thoroughly review these regulations, as well as our forthcoming comments and submit your own comments to the agency.    We will advise you of the time and place of the League meetings.

                                                                         Very truly yours,

                                                                        William G. Dressel, Jr.
                                                                        Executive Director