Fair Share Housing Center, Inc. v. the Zoning Board Of

NOT FOR PUBLICATION WITHOUT THE

APPROVAL OF THE APPELLATE DIVISION

SUPERIOR COURT OF NEW JERSEY

APPELLATE DIVISION

DOCKET NO. A-1535-12T2

A-1537-12T2

A-1538-12T2

A-1731-12T2

A-1732-12T2

FAIR SHARE HOUSING CENTER,

INC.,

Plaintiff-Appellant,

APPROVED FOR PUBLICATION

v.

July 28, 2015

THE ZONING BOARD OF THE

APPELLATE DIVISION

CITY OF HOBOKEN,

Defendant-Respondent,

and

ADVANCE AT HOBOKEN, LLC,

Defendant/Third-Party

Plaintiff-Respondent,

v.

CITY OF HOBOKEN and THE

MAYOR AND COUNCIL OF THE

CITY OF HOBOKEN,

Third-Party Defendants-

Appellants.

FAIR SHARE HOUSING CENTER,

INC.,

Plaintiff-Appellant,

v.

THE ZONING BOARD OF THE

CITY OF HOBOKEN,

Defendant-Respondent,

and

1415 PARK AVENUE, LLC,

Defendant/Third-Party

Plaintiff-Respondent,

v.

CITY OF HOBOKEN and THE

MAYOR AND COUNCIL OF THE

CITY OF HOBOKEN,

Third-Party Defendants-

Appellants.

FAIR SHARE HOUSING CENTER,

INC.,

Plaintiff-Appellant,

v.

THE ZONING BOARD OF THE

CITY OF HOBOKEN,

Defendant-Respondent,

and

9TH MONROE, LLC,

Defendant/Third-Party

Plaintiff-Respondent,

v.

CITY OF HOBOKEN and THE

2 A-1535-12T2

MAYOR AND COUNCIL OF THE

CITY OF HOBOKEN,

Third-Party Defendants-

Appellants.

FAIR SHARE HOUSING CENTER,

INC.,

Plaintiff-Appellant,

v.

THE ZONING BOARD OF THE

CITY OF HOBOKEN and

NEW JERSEY CASKET COMPANY, INC.,

Defendants-Respondents.

Argued December 3, 2014 - Decided July 28, 2015

Before Judges Fuentes, Ashrafi and Kennedy.

On appeal from the Superior Court of New

Jersey, Law Division, Hudson County, Docket

Nos. L-3643-11, L-5052-11, L-733-12, and L-

1978-12.

Kevin D. Walsh argued the cause for

appellant Fair Share Housing Center.

Ronald D. Cucchiaro argued the cause for

appellants City of Hoboken and Mayor and

Council of the City of Hoboken (Weiner

Lesniak, LLP, attorneys; Mr. Cucchiaro and

Richard Brigliadoro, on the brief).

Jennifer Phillips Smith argued the cause for

respondent Advance at Hoboken, LLC (Gibbons

P.C., attorneys; Ms. Smith, on the brief).

Kevin J. Coakley argued the cause for

respondents 1415 Park Avenue, LLC, 9th

3 A-1535-12T2

Monroe, LLC, and New Jersey Casket Company,

Inc., (Connell Foley, LLP, attorneys; Mr.

Coakley, of counsel; Meghan B. Burke and

Genevieve L. Horvath, on the brief).

Dennis M. Galvin argued the cause for

respondent Zoning Board of the City of

Hoboken (Galvin Law Firm, attorneys; Mr.

Galvin, on the brief).

The opinion of the court was delivered by

FUENTES, P.J.A.D.

These are five consolidated appeals filed to determine the

enforceability of an affordable housing ordinance adopted by the

City of Hoboken. Plaintiff Fair Share Housing Center (Fair

Share) filed three of the appeals against four developers:

Advance at Hoboken, LLC (Advance) and 1415 Park Avenue, LLC

(1415 Park) (both respondents in A-1535-12); 9th Monroe, LLC

(9th Monroe) (A-1537-12); and New Jersey Casket Company, Inc.

(NJ Casket) (A-1538-12). The City and the City's Mayor and

Council (City appellants) filed the two additional appeals

against Advance and 1415 Park (A-1731-12), and against 9th

Monroe (A-1732-12).

Each of the four developers named as defendants in this

case received significant relief from the City's zoning laws in

the form of variances from the Zoning Board of Adjustment

(Zoning Board), conditioned upon the developers' compliance with

the City's affordable housing ordinance. The trial court held

4 A-1535-12T2

the ordinance was "null, void, and unenforceable" because it

violated statewide affordable housing policies. The court

invalidated the zoning approval conditions imposed by the Zoning

Board, relieved the developers from their obligation to comply

with the ordinance's provisions, and enjoined the City from

enforcing or imposing "any requirement against the parties to

construct affordable housing units and/or collect any monetary

contribution related to the affordable housing from the

parties[.]" Ultimately, the court dismissed with prejudice Fair

Share's complaints and denied its motion for reconsideration.

Since these appeals were filed and argued, our Supreme

Court decided In re N.J.A.C. 5:96 & 5:97, 221 N.J. 1, 6 (2015),

which effectively eliminated, "until further order," the

requirement to exhaust administrative remedies under the Fair

Housing Act (FHA), N.J.S.A. 52:27D-301 to -329.4, and directed

trial courts to resolve municipalities' constitutional

obligations under Mount Laurel.1 Thus, to the extent the trial

court's decision here depended upon the Council on Affordable

Housing's (COAH) availability as an administrative forum or its

obligation to perform the responsibilities imposed by the

1

S. Burlington Cnty. N.A.A.C.P. v. Twp. of Mount Laurel (Mt.

Laurel II), 92 N.J. 158 (1983); S. Burlington Cnty. N.A.A.C.P.

v. Twp. of Mount Laurel (Mt. Laurel I), 67 N.J. 151, appeal

dismissed and cert. denied, 423 U.S. 808, 96 S. Ct. 18, 46 L.

Ed. 2d 28 (1975).

5 A-1535-12T2

Legislature through the FHA, those issues are now moot.

Notwithstanding the current state of affairs with respect

to COAH, we are compelled to address the issues raised by Fair

Share in order to dispel any doubt concerning the enforceability

of the City's affordable housing ordinance. We now reverse the

trial court's order invalidating the City's affordable housing

ordinance decision. Consequently, we hold the trial court erred

in invalidating the zoning approval conditions related to

compliance with the ordinance's provisions as to all of the

developers named as defendants by Fair Share and remand for the

trial court to adjudicate the remaining legal issues raised by

the parties.

The trial court misconstrued the FHA and the case law

applying it. There is no provision in the FHA or regulations

promulgated by COAH requiring municipalities to submit all

ordinances that impact a municipality's affordable housing

obligation to COAH for approval. The "substantive

certification" provided by COAH to those municipalities seeking

its protection from builder's remedy suits2 is entirely

2

As Judge Cuff explained in In re Adoption of N.J.A.C. 5:94 &

5:95, 390 N.J. Super. 1, 17 (App. Div.), certif. denied, 192

N.J. 71 (2007), a "builder's remedy" suit was a scheme devised

by the Court in Mt. Laurel II "for the consistent and hopefully

expeditious resolution of litigation." (Citation omitted).

6 A-1535-12T2

voluntary. N.J.S.A. 52:27D-313(a). The Legislature enacted the

FHA and established COAH "to oversee the development of low and

moderate income housing throughout the state through a system of

voluntary participation by municipalities in the COAH process."

Toll Bros., Inc. v. Twp. of W. Windsor, 173 N.J. 502, 513 (2002)

(emphasis added).

In the interest of clarity, we also expressly reverse the

trial court's decision invalidating the section in the ordinance

that provides for voluntary payments by developers in lieu of

compliance with the ordinance's affordable housing requirements.

The trial court conflated development fees under N.J.A.C. 5:97-

8.3, with the payments in lieu, created "as an option to the on-

site construction of affordable housing otherwise required by

ordinance," authorized by N.J.A.C. 5:97-8.4 and sanctioned by

N.J.S.A. 52:27D-329.3.

Before we begin our analysis, we will briefly describe the

procedural trek these cases took before they ended up before us

in this consolidated appeal.

I

From July 7, 2011 to April 17, 2012, Fair Share filed four

individual actions in lieu of prerogative writs seeking

declaratory and injunctive relief against the Zoning Board and

the following private developers: Advance, 1415 Park, 9th

7 A-1535-12T2

Monroe, and NJ Casket. Fair Share sought compliance with the

City's affordable housing ordinance in the form of a judicial

declaration that any zoning approvals these developers received

be deemed void or enjoined, unless each one filed a "plan of

compliance" with the affordable housing ordinance.

All four developers named as defendants by Fair Share filed

answers asserting a variety of affirmative defenses including

challenges to Fair Share's standing to raise these issues,

attacking the timeliness of the actions in lieu of prerogative

writs pursuant to Rule 4:69-6, and challenging the validity,

enforceability, and constitutionality of the affordable housing

ordinance.

Three of the four developers also filed cross-claims

against the Zoning Board and third-party complaints against the

City and the Mayor and Council, asserting, inter alia, estoppel

based on the City's failure to enforce the affordable housing

ordinance and the Zoning Board's failure to condition prior

approvals upon compliance with the affordable housing ordinance.

Citing 42 U.S.C.A. § 1983 and the New Jersey Civil Rights Act,

N.J.S.A. 10:6-2, the developers also asserted violations of

their constitutional right to due process, private property

rights, and inverse condemnation. They all sought counsel fees

under 42 U.S.C.A. § 1988 and N.J.S.A. 10:6-2(e).

8 A-1535-12T2

The Zoning Board and City appellants all responded to the

cross-claims and third-party actions.

Common Core of Operative Facts

The record before us includes the minutes from three 1988

City Council meetings regarding the adoption of the City's

affordable housing ordinance. Included as part of this record

are minutes from a special session of the City Council held on

May 4, 1988. The subject for discussion at this special meeting

was denoted, "[t]o meet and discuss Hoboken's Affordable Housing

with representatives from [COAH]." In attendance were the

City's Law Director, CDA3 Director, and Arthur Bernard on behalf

of COAH. Two weeks later, at the meeting held on May 18, 1988,

the City Council unanimously adopted the affordable housing

ordinance. The Mayor signed the ordinance into law on May 19,

1988.

The Ordinance

The ordinance titled, "An Ordinance Requiring the Provision

of Affordable Housing Units and Providing for Voluntary

Contributions in Lieu of Such Housing as a Part of New

Construction and Substantial Rehabilitation of Existing

Buildings in the City of Hoboken," contains five "Whereas"

clauses setting forth the factual basis and public policy goals

3

"CDA" stands for "Community Development Agency."

9 A-1535-12T2

driving its passage:

WHEREAS, the City of Hoboken has

determined that an emergency exists in the

city with respect to availability of

affordable housing for household[s] of low

and moderate income; and

WHEREAS, the New Jersey Council on

Affordable Housing has found that the City

of Hoboken has a responsibility to provide

additional low and moderate income housing,

and whereas such obligation has been

affirmed by the Supreme Court in [S.

Burlington Cnty. N.A.A.C.P. v. Twp. of Mount

Laurel], 92 N.J. 158 ("Mt. Laurel II"), and

WHEREAS, the absence of federal housing

subsidies renders it impossible for the City

of Hoboken to provide affordable housing

with available public resources commensurate

with the need for such housing or the legal

obligation of the City of Hoboken; and

WHEREAS, the limited availability of

vacant land in the City of Hoboken, coupled

with the high cost of that land and the

strength of the market demand for luxury

housing, has resulted in a situation where

the need for affordable housing cannot

realistically be met through the efforts of

private developers acting voluntarily to

provide affordable housing through their own

resources; and

WHEREAS, the use of an inclusionary or

mandatory set aside ordinance as a means of

bringing about the production of affordable

housing is not only urged in Mt. Laurel II

and in the New Jersey Fair Housing Act,

c.222, P.L. 1985, but has been demonstrated

to be an effective means of producing

affordable housing without placing

unreasonable burdens on private developers.

10 A-1535-12T2

NOW, THEREFORE, BE IT ORDAINED by the

Mayor and City Council of the City of

Hoboken, New Jersey, as follows . . . .

What "followed" is a comprehensive plan to encourage and

bring about the development of affordable housing in Hoboken.

In a case-specific context, the ordinance sets "General

Standards" for the construction of new housing and the

rehabilitation of existing stock, with mandatory set-asides

based on the scope of the projects. It includes a provision

requiring affordable units in a particular development where it

is "especially suited for senior citizen housing by virtue of

physical character and location." It also provides developers

with the option of making a "voluntary cash contribution to the

Trust Fund created by this Ordinance, or a voluntary

contribution of land and improvements to the City of Hoboken in

lieu of constructing all or part of the affordable housing units

required by this Ordinance." The ordinance is codified under

Article XVII of the City Code, §§ 196-68 to -81.

As it relates to this case, the key provisions of the

ordinance are:

A. All development of residential property

in the City of Hoboken, taking place either

through the construction of new structures

on vacant land or through the substantial

rehabilitation of existing structures except

as herein provided below, shall include low

and moderate income housing in the

proportions specified below and consistent

11 A-1535-12T2

with the standards and conditions of this

Article.

. . . .

C. Each development subject to this

Article shall contain the following

percentage of units to be provided for

affordable housing.

(1) Where all affordable units

provided pursuant to this Article are

located on site, ten percent (10%) of the

total number of units.

. . . .

(4) Pursuant to § 196-73 below, the

city may enter into an agreement with a

developer to allow the developer to make a

voluntary cash contribution in lieu of

providing the affordable units required by

this subsection.

[Hoboken, N.J., Code § 196-69(A), (C)

(1988).]

For each development subject to the ordinance, the

developer is required to provide a plan of compliance with

certain described features, and no preliminary site plan

approval (or if none is needed, then no construction permit)

shall be granted unless and until the compliance plan has been

approved by the City's planning board. § 196-69(D)(1)-(2). Any

development plan that is artificially subdivided to evade the

ordinance's provisions shall be disapproved. § 196-69(D)(4)-

(5). There are criteria for the board to permit affordable

housing units to be provided off site, § 196-71, or for the

12 A-1535-12T2

developer to make a payment in lieu of constructing affordable

housing, § 196-73.

The payment in lieu provision includes the following:

A. Projects subject to the provisions of

this Article may elect, with the approval of

the Board, to make a voluntary cash

contribution to the trust fund created by

this Article or a voluntary contribution of

land and improvements to the City of Hoboken

in lieu of constructing all or part of the

affordable housing units required by this

Article.

B. The Board is authorized to approve a

voluntary cash contribution under this

section only upon written findings,

supported by the record, that such a

contribution will further the housing

policies of the City of Hoboken more than

the construction of affordable units at the

time in question. In making such findings,

the Board shall consider and report on the

following factors:

(1) The number of units that can be

built or low/moderate income households

preserved with the cash contribution vs. the

number of new units required to be built.

(2) The availability and stage of

readiness of affordable housing projects on

which the trust funds can be expended.

(3) The reasons which make the

provision of actual units impractical.

C. The opportunity to make a voluntary

cash contribution in lieu of providing

affordable housing is not intended to be and

should not be construed as a right available

to developers at their sole option. The

policy of this Article favors provision of

actual affordable units.

13 A-1535-12T2

[§ 196-73.]

This provision describes, in great detail, the calculations for

the amount of contribution permitted. § 196-73(D).

The section captioned, "Construal of contribution

provisions," reads as follows:

The provisions of this Article

regarding contributions in lieu of providing

affordable housing units are to be construed

an alternative that may be voluntarily

chosen by developers, which alternative has

not generally been offered in inclusionary

ordinances adopted by other municipalities

and which is not required by any statutory

provision, administrative regulation or

court decision to be offered by the City of

Hoboken and, therefore, rather than imposing

a burden on developers, has the effect of

mitigating any potential economic costs on

developers created by the imposition of the

inclusionary affordable housing requirements

of this Article.

[§ 196-78.]

Finally, there is a severability clause intended to

insulate the legally viable sections of the ordinance from any

taint created by a provision a court may find unenforceable: "If

any provision of this Ordinance is declared invalid, such

invalidity shall no [sic] affect any other provision of this

Ordinance which can be given effect, and to this end the

provisions of this Ordinance are declared to be severable."

The Hoboken Master Plan

Part of the record Advance submitted to the trial court is

14 A-1535-12T2

a copy of the housing element from the City's April 2004 Master

Plan, which contained overview information about the City's

housing stock and affordable housing needs. It describes the

City as "a mature urban community with a diverse residential

population with respect to race, income level and age, and in

the housing opportunities it provides for its residents."

According to the 2004 master plan, the City's "wide array of

housing types rang[ed] from public housing projects to million-

dollar condominiums" and included "some one- and two-family

homes, most of which [were] constructed as row-houses,

apartments above stores, and numerous low-rise, mid-rise, and

high-rise residential buildings."

The plan showed a number of differences between the City's

housing characteristics and the rest of Hudson County. Census

figures compiled from 1990 to 2000 show the City experienced a

higher percentage in growth in the number of housing units than

did Hudson County, fourteen percent as compared to five percent.

The City's median dwelling unit value was nearly three times the

county-wide median value, and the City's median contract rent

was more than forty percent higher than the county-wide level,

"indicating the expensive housing stock value in [the City]."

The City's rents were also significantly higher than the rent

paid by the rest of the residents of Hudson County. The median

15 A-1535-12T2

gross rent in the City in 2000 was $1002, compared to $703 for

Hudson County. However, in Hoboken, the median rent increased

from $511 in 1990 to $1002 in 2000. The master plan noted this

was "a jump of just under 50 percent when adjusted for

inflation."

The City had a development moratorium from 1992 to 1997,

due to a lack of sewer capacity. A construction boom followed

after the regionalization of sewer services via the North Hudson

Sewerage Authority.4 Nearly all new residential construction

that followed involved multi-family units. The master plan's

authors considered it "unlikely that new affordable housing will

be constructed without government action or other intervention

in the real estate market. In fact, some existing affordable

units may lose their affordability controls when their

restrictions mandating below-market rents expire."

4

The North Hudson Sewerage Authority was established in 1988 as

part of a Consent Order in a regulatory enforcement action

brought by the United States Environmental Protection Agency

(EPA), compelling local communities to relinquish control of

their sewer service. The Authority services the sewerage

disposal needs of the residents of Hoboken, Union City,

Weehawken, and West New York. The EPA and the New Jersey

Department of Environmental Protection lifted a ten-year ban on

sewer connections in these four municipalities in 1994. This

sparked the reclamation and development of the Hudson River

waterfront in Hoboken and Weehawken. N. Hudson Sewerage Auth.,

Authority History, N. Hudson Sewerage Auth.,

http://www.nhudsonsa.com/About/history.html (last visited July

13, 2015).

16 A-1535-12T2

Between 1990 and 2000, the City's population increased

sixteen percent, from 33,397 to 38,577 residents. Just above

half of the City's population was in the twenty-five to forty-

four-year-old age bracket; growth in that age group increased

36.8 percent from 1990 to 2000. The largest population group

decline over that time period was in children aged five to

seventeen, decreasing by 29.9 percent. The City's median age in

2000 was 30.4 years old, far below the statewide average of

thirty-seven.

The residents of Hoboken also enjoyed a higher standard of

living than the rest of Hudson County. As reported in the 2000

census, over 75 percent of Hoboken's residents over the age of

fifteen were "in the labor force[.]" Nearly two-thirds of the

City's residents had managerial or professional occupations

during this same time period. However, although Hoboken's

median household income was $62,550, there was a wide range of

annual income levels; 43 percent of households earned more than

$75,000, while about 22 percent earned less than $25,000.

The 2004 Master Plan listed approximately 5000 affordable

housing units in the City. These affordable housing units were

established under various programs; approximately 1000 of these

units were restricted to senior citizens or residents with

disabilities. The Master Plan also included this cautionary

17 A-1535-12T2

note: "It is difficult to determine exactly how many units in

the City have controls on rents that classify them as

affordable. . . . It is noted that the affordability controls

governing these units are at varying stages of their lifespans,

and some are set to expire."

The plan concluded with fifteen recommendations to protect

and increase the City's existing affordable housing stock. The

plan recommended updating and enforcing the existing affordable

housing regulations in the Zoning Ordinance, and providing

additional affordable housing units in new residential

developments. Of particular relevance here, the plan

specifically noted: "the City currently requires the provision

of affordable units, or payment in lieu of creation, for most

residential new construction or substantial rehabilitation.

These regulations should be enforced, particularly for larger

developments." The plan suggested that the City's regulations

"should be reviewed for compliance with COAH's Substantive

Regulations and other applicable requirements." Fair Share

included in the appellate record the third round housing element

and fair share plan document adopted by the Hoboken Planning

Board on December 19, 2005. With some variations, this document

showed statistics similar to those described in the City's 2004

Master Plan.

18 A-1535-12T2

COAH's Jurisdiction

On December 30, 2008, the City submitted to COAH a petition

for third round substantive certification and a draft housing

element and fair share plan. The cover letter explained these

documents remained in draft form because "[t]he City's finances

have been taken over by the State[.]" This further delayed

bringing the matter to a hearing for final adoption. Those

matters were expected to be finalized "early in 2009."

On February 3, 2009, COAH's then-Executive Director Lucy

Vandenberg informed the City's Mayor that the submission "[did]

not meet the criteria for a petition." Thus, "[b]ecause Hoboken

City did not submit a petition for third round substantive

certification by December 31, 2008, it is no longer under the

jurisdiction of COAH." Despite this, Vandenberg made clear the

City was "still required to impose non-residential development

fees pursuant to . . . [N.J.S.A. 40:55D-8.1 through -8.7]."

According to Vandenberg, developers were required to deposit

those fees into the statewide New Jersey Affordable Housing

Trust Fund, rather than the City's affordable housing trust

fund. Vandenberg concluded the letter by encouraging the City

"to once again participate in the COAH process" which could

provide protection from builder's remedy litigation and permit

the City to retain development fees locally.

19 A-1535-12T2

On April 12, 2011, responding to correspondence from an

attorney representing a developer who is not a party in this

appeal, COAH's Acting Executive Director Sean Thompson confirmed

that Hoboken was "not currently under COAH's jurisdiction."

Thompson specified two requirements the City was still bound to

fulfill: (1) the imposition of non-residential development fees

pursuant to N.J.S.A. 40:55D-8.1 to -8.7, to be deposited in the

statewide New Jersey Affordable Housing Trust Fund, and (2)

continue to provide monitoring and oversight of monies

transferred to the City pursuant to certain specified regional

contribution agreements.5 We note Thompson did not address or

opine regarding the City's negotiations on a redevelopment plan

through which it sought to impose a twenty percent affordable

housing set-aside obligation. The record includes

correspondence from the attorneys representing the developers in

this case and the Acting Executive Director of COAH as well as

5

Both of these requirements are now moot. The Legislature

amended the FHA and abolished "regional contributions

agreements" effective July 17, 2008. N.J.S.A. 52:27D-312.

Following the Supreme Court's decision in In re N.J.A.C. 5:96 &

5:97, supra, 221 N.J. at 6, this court in In re Failure Of The

Council On Affordable Hous. To Adopt Trust Fund Commitment

Regulations, 440 N.J. Super. 220, 227-28 (App. Div. 2015),

enjoined "COAH or any other part of the executive branch from

engaging in any further attempt to seize affordable housing

trust funds" under N.J.S.A. 52:27D-329.2. We further directed

that "[t]he use and disposition of those funds will hereafter be

decided, in the first instance, by Mount Laurel-designated trial

judges." Id. at 228.

20 A-1535-12T2

affidavits from other interested parties. We have opted not to

describe these exhibits at length because they are not relevant

to our legal determinations.

Advance

Advance owned property at 1316-1330 Willow Avenue. In

2006, the City's Zoning Board granted the property's prior owner

preliminary site plan approval and bulk variance relief to

construct a mixed-use development project that included 104

residential units, 7500 square feet of retail space, and 126

parking spaces. Advance sought and received a total of eight

variances: maximum lot coverage from 60 percent to 97 percent;

minimum rear yard from 30 feet to 0 feet; maximum permitted

distance from front property line to rear wall from 70 feet to

195 feet; number of building stories above one level of parking

from three to four, and a partial fifth story above two levels

of parking; maximum building height from 40 feet to about 68

feet for the main level, with a penthouse and tower at 80 and

100 feet, respectively; residential density from 54 units to 104

units; increased amount permitted of non-masonry façade

material; and increased maximum customer service area from 1000

square feet to 7500 square feet.

The 2006 Zoning Board resolution did not mention affordable

housing. Condition 3 noted the application "must comply with

21 A-1535-12T2

the necessary requirements" of the City's zoning ordinance and

the Municipal Land Use Law (MLUL), N.J.S.A. 40:55D-1 to -163.

Condition 4 further stated:

The Applicant shall develop, prepare and

improve the subject premises so as to

conform with all of the details shown on the

aforementioned plans and submissions, as

presented to the Board and in accordance

with the zoning ordinances, building codes

and all other standards and ordinances

unless expressly stated to the contrary

within the approvals granted.

This approved project was never built. In January 2010,

after Advance became the contract purchaser, the Zoning Board

granted Advance an amended preliminary site plan approval,

conditional use approval, and further variance relief. The

Zoning Board granted Advance the following additional variance

relief: increase the number of building stories from four to

seven, plus a penthouse; increase the maximum building height

from 40 feet to 84 feet for the main level, with a penthouse and

tower at 91 feet and 9 inches, and 98 feet and 9 inches,

respectively; increase the maximum retail area from 1000 square

feet to 21,725 square feet; allow retail use on a block front

which does not presently include two other retail uses; increase

rooftop coverage for appurtenances from 10 percent to 19

percent; decrease minimum Willow Street setback from 5 feet to

0 feet; eliminate front yard fencing requirement; increase

22 A-1535-12T2

residential density from 61 units to 140 units; and allow

various parking garage rule changes.

The approval resolution described significant efforts

Advance was expected to undertake to clean up the prior owners'

environmental contamination on the site. This resolution again

did not directly mention affordable housing as a condition of

approval. Condition 9 stated the applicant "must comply with

the necessary requirements" of the City's zoning ordinance and

the MLUL.

Condition number 8 of the resolution also stated:

The application for Final Site Plan Approval

shall conform with all of the details shown

on the aforementioned Preliminary Site Plan

Approval "Resolution Drawing Set" and

submissions, as presented to the Board or as

amended as required to comply with the

conditions of this resolution and in

accordance with the zoning ordinances,

building codes and all other standards and

ordinances unless expressly stated to the

contrary within the approvals granted.

In January 2011, the Zoning Board granted Advance what it

characterized as a "de minimus change" regarding the widening of

the sidewalk as "dictated" by the County Planning Board. This

resolution again failed to include any reference to the City's

affordable housing ordinance.

In April 2011, the Zoning Board reviewed and approved

Advance's Amended Preliminary and Final Site Plan Approval to

23 A-1535-12T2

address egress and ingress to the parking garage and changes to

the loading dock facilities. The record includes the following

colloquy between a Hoboken resident and Robert Bloch, Advance's

architect, which occurred when the application was open for

public comment:

RESIDENT: I just have one question. Are the

plans that you presented tonight in

accordance with the affordable housing

ordinance [of] the City of Hoboken?

ARCHITECT: Yes, they will be.

RESIDENT: Meaning what?

ARCHITECT: Well, I would say I am not

completely familiar with that document.

RESIDENT: Well, then, how could you tell me

it is in conformance? You are saying they

intend to do that?

ARCHITECT: Maybe [Advance's attorney] could

answer.

ADVANCE'S ATTORNEY: I think the Board is

going to impose a condition on the approval

relating to affordable housing[.]

The Resolution of Approval adopted by the Zoning Board on

May 17, 2011, describes in detail the evidence presented in

support of the application and the variances requested, mentions

the various revisions made to the original application, and

lists the developer's witnesses who testified before the Board

and their particular area of expertise. The resolution also

specifically mentions the exchange between the "resident" and

24 A-1535-12T2

Advance's architect and its attorney, as quoted above, and

notes, "[the Resident][6] was informed that the Board will impose

a condition on the approval relating to the applicant's

affordable housing obligation." (Emphasis added). As further

evidence that approval of the application was expressly

conditioned on Advance's compliance with the City's affordable

housing ordinance, the May 17, 2011 Approval Resolution also

includes the following provision:

The applicant shall be responsible for

obtaining any other approvals or permits

from other governmental agencies, as may be

required by law, including but not limited

to the Municipality's and State's affordable

housing regulations; and the applicant shall

comply with any requirements or conditions

of such approvals or permits.

[(Emphasis added).]

Advance has never requested any relief from this

obligation. The record also does not contain a statement by the

Zoning Board regarding how it expected Advance to comply with

the affordable housing ordinance. See Hoboken, N.J., Code §

196-69D (requiring each development to submit to the Planning

Board a plan of compliance with the terms and conditions of the

ordinance).

6

The Approval Resolution includes the name and address of the

"resident." We have opted not to include this information in

the opinion to protect the person's privacy.

25 A-1535-12T2

1415 Park

1415 Park owned property at 1415 Park Avenue in Hoboken.

In February 2007, the Zoning Board granted preliminary site plan

approval and variance relief for 1415 Park to demolish an

existing parking garage and construct a twelve-story mixed-use

development project that included 180 residential units,

30,000 square feet of retail space, 46,055 square feet for an

elementary charter school, and 371 parking spaces. The second

application submitted in 2011 is the one challenged by Fair

Share in this appeal. In this second application, 1415 Park

sought to construct a twelve-story residential building that

would accommodate 212 apartments, retail space, a significantly

smaller school (reducing its proposed school facility from

46,055 square feet in 2007 to 30,000 square feet in 2011), and

thirty more parking spaces, resulting in a total of 401 parking

spaces.

The transcription reflecting verbatim the discussions of

the members of the Zoning Board during the June 28, 2011 meeting

approving the 1415 Park application indicates the Board's

preoccupation with including in the resolution the "standard

language pertaining to the [C]ity's affordable housing

ordinance." The following colloquy also makes clear that the

Board expected that mandate to be carried out as a "percentage"

26 A-1535-12T2

of the dwelling units:

BOARD CHAIRMAN: We're doing that.

BOARD MEMBER: What's the percentage, sir? I

forgot.

BOARD COUNSEL: I don't have it in front of

me right this second, I apologize.

BOARD MEMBER: Are we doing that on every

application?

BOARD COUNSEL: This Board is doing it.

BOARD CHAIRMAN: Just in case, just in case.

BOARD MEMBER: Thank you. That's a biggie.

BOARD COUNSEL: We always have certain

standardized conditions and that's one of

them[.]

Condition number 3 of the resolution also stated:

The Applicant shall develop, prepare and

improve the subject premises so as to

conform with all of the details shown on the

aforementioned plans and submissions, as

presented to the Board and in accordance

with the zoning ordinances, building codes

and all other standards and ordinances

unless expressly stated to the contrary

within the approvals granted.

Several variances were granted: increasing maximum lot

coverage from 65 percent to 81 percent; increasing number of

building stories from eight to twelve; increasing maximum

building height from 80 feet to 138 feet; decreasing minimum

front yard and rear yard setbacks from 10 feet and 20 feet,

respectively, to 0 feet in both yards; increasing maximum

27 A-1535-12T2

permitted signage from 200 square feet to 345 square feet; and

allowing parking variances for a "robotic" parking garage that

did not use parking "spaces" or aisles.

The resolution states, in granting the approval:

4. The applicant shall be responsible for

obtaining any other approvals or permits

from other governmental agencies, as may be

required by law, including but not limited

to the Municipality's and State's affordable

housing regulations; and the applicant shall

comply with any requirements or conditions

of such approvals or permits.

5. The applicant must comply with the

Development Fee Ordinance of the City of

Hoboken, if applicable, which Ordinance is

intended to generate revenue to facilitate

the provision of affordable housing.

Nothing in the record before us indicates 1415 Park ever

objected to or opposed any of these conditions at the time of

the approval.

9th Monroe

9th Monroe owns property at 900 Monroe Street in Hoboken

which consists of several lots as determined by the municipal

tax assessor. In June 2007, under a prior owner (900 Monroe

Development, LLC), the City's Zoning Board granted final site

plan approval (preliminary site plan approval having been

granted in October 2005) and variance relief for construction on

this site, which previously had industrial uses. As amended in

the final approval, the site was approved for construction of a

28 A-1535-12T2

mixed-use development project that included 112 residential

units, 7608 square feet of retail space, 10 townhouses, and 151

parking spaces. 9th Monroe received variances regarding the

following: permitted use; maximum number of stories; minimum lot

width; maximum lot coverage; and minimum side yard. The

approval resolution did not mention affordable housing, but

stated, as condition 3, that the application "must comply with

the necessary requirements" of the City's zoning ordinances and

of the MLUL.

Condition number 4 of the resolution also stated:

The Applicant shall develop, prepare and

improve the subject premises so as to

conform with all of the details shown on the

aforementioned plans and submissions, as

presented to the Board and in accordance

with the zoning ordinances, building codes

and all other standards and ordinances

unless expressly stated to the contrary

within the approvals granted.

This approved project was never built. As the new owner of

900 Monroe Street, 9th Monroe applied in 2011 to amend the 2007

approvals. The Zoning Board approved 9th Monroe's amended

preliminary site plan, which included the following variance

relief: a use variance to allow residential uses; an increase of

maximum building height from 80 feet to 126.5 feet, and eleven

stories where the zoning ordinance permitted a maximum of four

stories; residential density of 135 units, beyond the previously

29 A-1535-12T2

approved 112 units; an automated garage of 188 spaces, with ten

at grade; and a decrease of the minimum amount of masonry façade

material from 75 percent to 34 percent.

The approval resolution conditions included the following:

4. The applicant shall be responsible for

obtaining any other approvals or permits

from other governmental agencies, as may be

required by law, including but not limited

to the Municipality's and State's affordable

housing regulations; and the applicant shall

comply with any requirements or conditions

of such approvals or permits.

5. The applicant must comply with the

Development Fee Ordinance of the City of

Hoboken, if applicable, which Ordinance is

intended to generate revenue to facilitate

the provision of affordable housing.

Nothing in the record before us indicates 9th Monroe objected to

or opposed any of these conditions at the time of the approval.

NJ Casket

NJ Casket owns property at 1400-1404 Clinton Street in

Hoboken. The property covers several lots as determined by the

municipal tax assessor. In August 2007, the City's Zoning Board

granted preliminary site plan approval and variance relief for

construction of a "mixed-use live-work loft building" on this

site. As noted in the approval resolution, NJ Casket received

the following variances: allowing residential uses in a district

zoned for manufacturing and office uses; increasing maximum lot

coverage from 65 percent to 100 percent on the ground floor and

30 A-1535-12T2

76 percent on the higher floors; increasing the number of

building stories from four to six; and decreasing minimum front

yard, side yard, and rear yard setbacks from 10 feet, 10 feet,

and 20 feet, respectively, to 0 feet in all three yards. The

approval resolution did not mention the affordable housing

ordinance. Condition 2 included a generalized statement

requiring the applicant to "comply with the necessary

requirements" of the City's zoning ordinances and of the MLUL.

The original 2007 proposal was for a seven-story building

with a mix of "live/work studios" and traditional residential

units, in an area zoned for manufacturing and office uses. The

studio/regular unit mix was initially proposed as 10/54, but was

changed to 20/30 in the original preliminary site plan approval.

In August 2010, NJ Casket sought and obtained approval to change

the ratio again, to 10/49. That approval also noted some

additional variances requested and approved, including for

twenty-five percent roof coverage, where the zoned maximum was

ten percent. In that approval resolution, adopted in January

2011, the Zoning Board included among the terms and conditions

the following:

4. The applicant shall be responsible for

the obtaining of any other approvals or

permits from other governmental agencies, as

may be required by law, and the applicant

shall comply with any requirements or

conditions of such approvals or permits.

31 A-1535-12T2

5. The applicant shall be responsible for

the obtaining of any other approvals or

permits from other governmental agencies, as

may be required by law, and the applicant

shall comply with any requirements or

conditions of such approvals or permits,

including compliance with COAH regulations.

6. An essential and non-severable

condition of this approval is compliance

with the Development Fee Ordinance of the

City of Hoboken, if applicable, which

Ordinance is intended to generate revenue to

facilitate the provision of affordable

housing.

NJ Casket received final site plan approval in early 2012,

without any significant changes to its plans. The approval

resolution included the following conditions:

4. The applicant shall be responsible for

obtaining any other approvals or permits

from other governmental agencies, as may be

required by law, including but not limited

to the Municipality's and State's affordable

housing regulations; and the applicant shall

comply with any requirements or conditions

of such approvals or permits[.]

5. The applicant must comply with the

Development Fee Ordinance of the City of

Hoboken, if applicable, which Ordinance is

intended to generate revenue to facilitate

the provision of affordable housing.

Consistent with the way the other developers behaved, the

record before us does not indicate NJ Casket objected to or

opposed any of these conditions at the time of the approval.

II

On November 9, 2012, the trial court issued a final

32 A-1535-12T2

judgment in this consolidated matter confirming earlier rulings

it had issued on June 1, 2012. The court found Hoboken's

Affordable Housing Ordinance, codified as § 196-68 to -81, "is

inconsistent with the Municipal Land Use Law, the Fair Housing

Act, and the procedures and guidelines that have been

promulgated by the Council on Affordable Housing[.]" The court

"declared" the ordinance "null, void, and unenforceable as a

matter of law[.]" The court enjoined the City from enforcing

"any requirement" on the developers to construct affordable

housing units and/or collect from these developers "any monetary

contribution" related to the affordable housing.

Without citing to any specific statute, the trial judge

reached the following conclusion:

[I]t is the [c]ourt's view that the

Legislature's intent was not that COAH

review ordinances or review municipalities

one time and leave it alone. COAH is

intended, the [c]ourt's view, to be a

vehicle that is permanent, fluid, consistent

and regular. In that, the [c]ourt takes the

position that COAH is vested with the

authority not only to review the existing

ordinances at the time that Mount Laurel

became effective but, also, to continue the

review. In other words, they would be able

to determine whether there was a need to

alter, modify, increase or decrease a

municipality's fair share responsibilities

which necessarily would require their

involvement through the entire process at

some point.

The trial court found support for this expansive oversight

33 A-1535-12T2

role for COAH in Holmdel Builders Ass'n v. Holmdel, 121 N.J. 550

(1990). Without citing to any specific language or analysis in

Holmdel or discussing the facts of that case, the trial court

concluded the Supreme Court in Holmdel "held that every

municipality with an affordable housing obligation must submit

to COAH for approval of its plan to meet that need."

Fair Share and the City both argue the trial court erred in

holding all municipal affordable housing ordinances require

review by COAH, whether or not the municipality is under COAH

jurisdiction seeking substantive certification. They maintain

the trial court failed to appreciate the voluntary nature of

COAH's jurisdiction, and the alternative route the FHA provides

to municipalities under N.J.S.A. 52:27D-313(a).

1415 Park, 9th Monroe, and NJ Casket collectively argue

COAH's involvement was required in all matters affecting

affordable housing and satisfaction of obligations under the

Mount Laurel doctrine. According to these developers, the FHA

was intended to preempt the field, thus rendering the City's

inconsistent affordable housing ordinance invalid.

We are satisfied the trial court misconstrued the purpose

and role the Legislature intended COAH to play in assisting

municipalities in fulfilling their constitutional obligation to

provide a realistic opportunity for the construction of their

34 A-1535-12T2

fair share of the present and prospective regional need for low

and moderate income housing. See Mt. Laurel I, supra, 67 N.J.

at 174. The substantive certification process available to

municipalities under N.J.S.A. 52:27D-313(a) is entirely

voluntary. Toll Bros., Inc., supra, 173 N.J. at 513, 545. As

Justice LaVecchia explained:

The FHA created the Council on Affordable

Housing (COAH), which was designed to

provide an optional administrative

alternative to litigating constitutional

compliance through civil exclusionary zoning

actions. Under the FHA, towns are free to

remain in the judicial forum should they

prefer it as the means to resolve any

disputes over their constitutional

obligations.

[In re N.J.A.C. 5:96 & 5:97, supra, 221 N.J.

at 4.]

There are no provisions in the FHA or regulations promulgated

by COAH that required Hoboken in 1988 to submit its affordable

housing ordinance for approval by COAH. This question is so

firmly settled that it requires no further elaboration. See In

re Adoption of N.J.A.C. 5:94 & 5:95, supra, 390 N.J. Super. at

6-9.

III

What is not settled, however, is whether the "payment in

lieu" provisions in Hoboken's affordable housing ordinance

needed COAH's approval under the Court's decision in Holmdel.

35 A-1535-12T2

Analysis of this issue requires a brief recitation of the legal

landscape prior to and after the Holmdel decision. Before the

Court issued its decision in Holmdel, COAH had proposed and

adopted some relevant regulations. These amendments to COAH's

first-round rules were proposed in April 1988, adopted in June

1988, and codified at N.J.A.C. 5:92-8.4 under the heading

"Developer Agreements." 20 N.J.R. 865 (Apr. 18, 1988); 20

N.J.R. 1689 (July 18, 1988).

In its proposal, COAH noted its prior rules provided that

inclusionary developments should presumptively contain a twenty

percent set-aside of affordable housing units, at a gross

density of six units per acre. This was intended to "provide a

reasonable balance necessary to insure that the project is

realistic and will actually be constructed." 20 N.J.R. 865.

After it received several plans that deviated from those

requirements, COAH found it necessary to develop standards

regarding its consideration of such deviations. Ibid. COAH

analyzed developer agreements throughout the state, and

determined deviations from the presumptive requirements should

be permitted if the three following conditions were met: "1.

That the agreement continues to provide the requisite realistic

opportunity [for affordable housing]; 2. That the agreement not

unduly burden the market units; and 3. That the developer must

36 A-1535-12T2

have the experience and financial ability to perform its

obligations. The burden is on the municipality proposing the

agreement." Ibid.

The result of this process was the adoption of N.J.A.C.

5:92-8.4(d), through which COAH codified those three conditions

and additionally provided increased densities and incentives for

developers to build the affordable housing:

(e) All agreements where the market units

are single family detached dwellings may

provide that, in exchange for an increase

over existing density, the developer either:

construct low and moderate income units as

part of an inclusionary development; or pay

a voluntary fee to be utilized by the

municipality for an RCA [regional

contribution agreement] or municipally

constructed low and moderate income housing.

The developer's expense in either case must

bear a reasonable relationship to the

increase in density, such that the agreement

does not violate the test in (d)l.-3. above.

(f) Agreements where the market units are

multi-family dwellings may permit deviations

from the presumptive requirements of a 20

percent set-aside:

l. Where there is also an increase over

existing density. For example, in cases

where the allowable density exceeds the

presumptive minimum density requirement (for

example, 10 to 16 units per acre on a multi-

family development) it may be reasonable to

have a set-aside higher than 20 percent.

2. Where the developer builds a higher

proportion of moderate to low income units;

or

37 A-1535-12T2

3. Where the agreement contains a comparable

incentive.

4. Absent such incentives, a deviation from

the presumptive requirement is not

permitted. For example, an ordinance which

requires a set-aside higher than 20 percent

or a 20 percent set-aside plus additional

fees, and which permits only the minimum six

units per acre and an equal split of low to

moderate income units without any additional

bonus densities or without other significant

cost reductions or other incentives to the

developer would not meet the test of

(d) above since it results in a significant

reduction of the realistic opportunity.

5. No agreement may provide for a voluntary

developer fee without also providing for a

comparable off-setting incentive.

[20 N.J.R. 1689-90.]7

These regulatory changes occurred before the City adopted

its affordable housing ordinance in May 1988. A representative

from COAH met with the City Council at a special meeting prior

to the unanimous adoption of the City's affordable housing

ordinance. COAH made more regulatory changes in December 1990

in response to the Court's Holmdel decision.

Holmdel arose from "attempts by several municipalities to

comply with their obligation to provide a realistic opportunity

7

These regulations were adopted as proposed. See 20 N.J.R. 865.

They generated only a few comments. 20 N.J.R. 1689. In

response, COAH emphasized the need for appropriate incentives to

developers to create a regulatory environment that provided a

realistic opportunity for the housing to actually be built.

Ibid.

38 A-1535-12T2

for the construction of affordable housing under [the] ruling in

Mt. Laurel II and the provisions of the FHA." Holmdel supra,

121 N.J. at 556. After reviewing the history of the FHA and

COAH's then evolving regulatory role and identity, the Supreme

Court concluded,

agency rulemaking is reasonably required in

order to fulfill the legislative purpose of

the FHA with respect to inclusionary-zoning

measures. We further conclude that COAH's

exercise of its rulemaking authority in the

area of inclusionary zoning is incomplete

because COAH has not yet specifically

addressed mandatory development fees as

available inclusionary zoning devices.

[Id. at 578 (emphasis added).]

As a result, "the development-fee ordinances were subject

to review and certification by COAH as a constituent part of the

housing-element plan of the respective municipalities." Id. at

579. The Court determined "that COAH, through its rulemaking

procedures, should specify standards for development fees, so

that municipalities may consider employing such fees as

inclusionary-zoning devices in designing their housing elements

under the FHA." Ibid.

After discussing and rejecting various constitutional

challenges, id. at 581-84, the Court emphasized the clear

"similarities between mandatory set-asides and the development-

fee ordinances." Id. at 584. Harking back to Mt. Laurel II,

39 A-1535-12T2

supra, 92 N.J. 158, the Holmdel Court reminded the litigants

that "mandatory set-asides as a form of inclusionary zoning were

not analogous to a tax. We viewed them as legitimate regulatory

measures suitably addressed to the broad goals of zoning.

Development fees, to reiterate, perform an identical function."

Ibid. Thus, the Court in Holmdel affirmed in part and reversed

in part, holding: "Because of the absence of enabling

administrative regulations, we hold that the current

development-fee ordinances were not validly adopted." Id. at

586.

Three months later, in March 1991, COAH published in the

New Jersey Register a notice of pre-proposal for Mandatory

Developer Fee Regulations, citing COAH's intent to adopt rules

to implement the Holmdel decision. 23 N.J.R. 646 (Mar. 4,

1991). COAH characterized Holmdel as having held that

municipalities were authorized under the FHA, MLUL, and the

police power "to establish mandatory developers' fees on

commercial and non-inc1usionary residential property to fund low

and moderate income housing but that municipalities could not

exercise that authority until COAH adopted rules establishing

the circumstances under which such fees may be permissibly

collected and spent." Ibid. To establish such rules, COAH

wrote that it had formed a Task Force and was soliciting

40 A-1535-12T2

comments from interested parties on the following issues:

the overall wisdom of mandatory developers'

fees in the overall context of the State's

affordable housing policy; the type of

developments that should be subject to fees;

the amount of the fees imposed and the

nature of its assessment; the relationship

of fees to other inclusionary-zoning

measures such as mandatory set-asides and

density bonuses, the conditions for the

creation and administration of affordable

housing trust funds; the requirements for

the use and application of such funds,

whether a system of development fees should

include counterbalancing density bonuses;

and any other relevant concerns.

[Id. at 646-47.]

COAH also issued an order authorizing municipalities to retain

previously collected fees pending its rules promulgation, adding

that the anticipated rules "will address the appropriate

disposition of any fees collected prior to the Supreme Court's

Holmdel decision." Id. at 647.

COAH proposed its new rules in September 1991. COAH

determined that, as a general rule, a municipality wishing to

collect development fees would need to undertake the otherwise

optional step of petitioning COAH for substantive certification.

23 N.J.R. 2813 (Sept. 16, 1991). COAH would review the fee

collection proposal as part of its comprehensive review of

substantive certification. Ibid. Several circumstances would

require exceptions to that rule, including these: where

41 A-1535-12T2

municipalities already had received substantive certification or

the court-issued alternative judgment of repose; where

exclusionary zoning cases were in litigation; or where fees

already had been collected. Ibid.

COAH set forth another exception relating to "urban aid

municipalities," which expressly included Hoboken. See 18

N.J.R. 1547 (August 4, 1986); 26 N.J.R. 2352 (June 6, 1994)

(listing urban aid municipalities including the City in first

and second round rule adoptions). As to these municipalities,

COAH explained:

Urban aid municipalities present a special

case. These municipalities have

historically accepted a disproportionate

share of New Jersey's poor and, as a result,

many have exceedingly high fair share

obligations. Therefore, it would be very

difficult for these cities, as a class, to

address their entire obligation in a six

year period.

The Legislature has recognized the

effort of urban aid cities in Section 302

and 320 of the Fair Housing Act. The

Council has recognized the role urban aid

municipalities have accepted in its

methodology. Urban aid municipalities have

not been assigned reallocated present need

or prospective need. Therefore, the Council

will allow these municipalities to collect

fees outside of the substantive

certification process.

[23 N.J.R. 2814 (emphasis added).]

Substantively, the proposed rule described both how fees

42 A-1535-12T2

could be collected and how COAH would analyze whether

municipalities could retain fees that had been paid prior to the

rule's adoption. On the latter issue, COAH wrote:

The Council has determined that it is vital

for purposes of implementing the Fair

Housing Act for municipalities to have the

opportunity to retain development fees

collected prior to December 13, 1990.

Millions of dollars were collected as a

result of ordinances regulating development

during years of substantial real estate

activity. These residential and commercial

projects were not directly related to the

satisfaction of a municipality's fair share

obligation, yet they consumed the one

irreplaceable resource for satisfying the

town's obligation under the Fair Housing

Act.

[Ibid. (emphasis added).]

COAH further highlighted that development approvals had

been conditioned on payment of the fees, so now the development

sites were no longer available to satisfy the affordable housing

obligation. "Therefore, a resource that could have been used

for low and moderate income housing will have been dissipated,

unless municipalities can retain development fees." Ibid. It

was thus equitable to allow the municipalities to retain the

fees. Ibid.

COAH explained further that it had studied available

municipal ordinances in New Jersey and throughout the nation to

craft fee maximums, based on a percentage of equalized assessed

43 A-1535-12T2

valuation that would not be confiscatory. Ibid. COAH's rules

would allow higher fees if a compensatory benefit, such as a

density bonus, was allowed, or under a negotiated agreement with

the developer. Ibid. With this approach, COAH deleted as no

longer necessary its prior rule regulating voluntary agreements,

N.J.A.C. 5:92-8.4(d) through (g). Ibid.

As part of this 1991 rule proposal, in the sections setting

forth the "Basic requirements" and "Urban aid municipalities"

rules, municipalities were prohibited from collecting or

spending funds without COAH's approval. Id. at 2816 (setting

forth the proposed rules N.J.A.C. 5:92-18.2 and -18.3).

As to the maximum fees that would be allowable under the

rules without granting additional density bonuses, the proposed

N.J.A.C. 5:92-18.10 allowed municipalities to collect one-half

of one percent of the equalized assessed value for residential

development, and proposed N.J.A.C. 5:92-18.11 allowed one

percent of the equalized assessed value for non-residential

developments. Id. at 2817 (setting forth the proposed rules

N.J.A.C. 5:92-18.10 and -18.11). Negotiated agreements, subject

to COAH's approval, could be allowed if they included incentives

in exchange for higher fees. Ibid.

Similar to the ordinance at issue here, the rule provided

for payments in lieu as follows:

44 A-1535-12T2

(c) Municipalities may allow developers of

sites zoned for inc1usionary development to

pay a fee in lieu of building low and

moderate income units provided the Council

determines the municipal housing element and

fair share plan provides a realistic

opportunity for addressing the municipal

fair share obligation. The fee may equal

the cost of subsidizing the low and moderate

income units that are replaced by the

development fee. For example, an

inclusionary development may include a 20

percent set-aside, no set-aside and a fee

that is the equivalent of a 20 percent set-

aside or a combination of a fee and set-

aside that is the equivalent of a 20 percent

set-aside.

[Ibid. (setting forth the proposed rule

N.J.A.C. 5:92-18.10(c)).]

These rules were adopted in December 1991, effective

January 21, 1992, as N.J.A.C. 5:92-18.1 to -18.20, with minimal

changes. 24 N.J.R. 235, 242-45 (Jan. 21, 1992).

As this historical recitation demonstrates, Holmdel and the

regulatory scheme it spawned were meant to address development

fees, not payments in lieu as described in Hoboken's affordable

housing ordinance. Holmdel, supra, 121 N.J. at 578. Although

the Middletown Township payment-in-lieu provision in Holmdel was

substantially similar to the provision in Hoboken's ordinance,

the Holmdel case involved a very dissimilar procedural posture

from the present matter. The Holmdel case arose when

municipalities were first tinkering with the idea of development

fees. The Holmdel Court wanted COAH's regulatory input on this

45 A-1535-12T2

issue before the State's numerous municipalities created a

multitude of "cash cow" ordinances unrelated, and perhaps even

inimical, to the public policy and constitutional underpinnings

of the Mount Laurel Doctrine. The case before us here arose

decades later, when COAH's position on how to deal with fees had

been long established.

Independent of this historical analysis, we also find

support for this outcome in the FHA. N.J.S.A. 52:27D-329.3(a)

expressly authorizes "Payments in lieu" subject to regulatory

oversight by COAH only when a municipality seeks substantive

certification:

The council may authorize a municipality

that has petitioned for substantive

certification to impose and collect

payments-in-lieu of constructing affordable

units on site upon the construction of

residential development, which payments may

be imposed and collected as provided

pursuant to the rules of the council.

Payment-in-lieu fees shall be deposited into

a trust fund, and accounted for separately

from any other fees collected by a

municipality. Whenever a payment-in-lieu is

charged by a municipality pursuant to this

subsection, a development fee authorized

pursuant to section 8 of P.L.2008, c.46

(C.52:27D-329.2) shall not be charged in

connection with the same development.

(Emphasis added).

This key distinction is also replicated in COAH's

regulations. Under N.J.A.C. 5:97-8.3(b), a municipality is

46 A-1535-12T2

authorized to impose "development fees" after it has "petitioned

the Council" and obtained approval of its "development fee

ordinance":

No municipality, except municipalities

seeking to achieve or that have received a

judgment of compliance, shall impose or

collect development fees unless the

municipality has petitioned the Council with

an adopted Housing Element and Fair Share

Plan and the Council has approved the

municipality's development fee ordinance

pursuant to N.J.A.C. 5:96-5.1.

[N.J.A.C. 5:97-8.3(b).]

By contrast, N.J.A.C. 5:97-8.4(a), the regulation

permitting municipalities to include "payments in lieu" as an

"option for onsite construction," does not contain the kind of

COAH approval process reflected in N.J.A.C. 5:97-8.3(b).

Indeed, N.J.A.C. 5:97-8.4(a) provides,

[a] municipality may, as an option to the

on-site construction of affordable housing

otherwise required by ordinance, provide for

a payment in lieu of construction subject to

the requirements of this section and

[8]

N.J.A.C. 5:97-6.4.

To summarize, the payment in lieu section of the Hoboken

Affordable Housing Ordinance did not require approval by COAH as

a condition of enforcement.

8

N.J.A.C. 5:97-6.4 describes the provisions of "Zoning for

inclusionary development."

47 A-1535-12T2

IV

Conclusion

We reverse the trial court's decision invalidating the

Hoboken Affordable Housing Ordinance for the reasons expressed

here. We remand these cases to the trial court for such further

proceedings as may be necessary to address and adjudicate to

finality the remainder of the issues raised by defendants/third-

party plaintiffs.

Reversed and remanded. We do not retain jurisdiction.

48 A-1535-12T2