On October 8, 2010, the Appellate Division of the New Jersey Superior Court rejected a significant portion of the Council of Affordable Housing’s (“COAH”) revised affordable housing regulations (the “third round rules”). COAH was given five months to adopt new compliant regulations. This is the second time in three years that the Appellate Division has remanded third round rules to COAH for redrafting. In 2007, In re Adoption of N.J.A.C. 5:94 and 5:95, 390 N.J. Super. 1 (App. Div. 2007), the court invalidated a substantial portion of COAH’s original third round rules and remanded to COAH for the adoption of revised rules. The COAH third round rules were designed to establish the responsibilities of municipalities to provide affordable housing during the period from 1999 to 2018. The third round rules adopted a number of significant changes in the methodologies that had been used and approved during the first and second round rules. Notably, the court invalidated COAH’s "Growth Share" methodology for allocating the prospective need for affordable housing. The court found that the methodology was invalid as it allowed municipalities to reduce or avoid any substantial responsibility for satisfying its obligations to provide affordable housing simply by discouraging growth through passage of their zoning ordinances. In giving COAH five months to adopt new regulations, the court directed COAH to utilize a methodology similar to the one used in the first and second round rules, which had been approved by the courts. The court invalidated several other parts of the revised third round rules. The court found that the rules’ presumptive minimum densities of only four, six or eight units per acre, and maximum set-asides of 25% did not provide sufficient incentives for the construction of inclusionary developments. The court took judicial notice of the fact that a 20% set-aside has been considered the norm for construction of affordable housing and rejected COAH’s rationale for utilizing a 25% set-aside. The Court declined to issue a blanket stay of proceedings before COAH or in the courts pending completion of the remand to COAH. However, its decision still allows any municipality or other interested party to apply for a stay to COAH or the court in which the Mount Laurel case is pending. Any such application should be decided in light of the status of the individual municipality’s compliance with its affordable housing obligations and other relevant circumstances. The Court’s decision raises significant questions with regard to the plan of any municipality which received COAH certification under the third round rules. If you are proceeding with development in a municipality that received third round certification, please contact us to discuss the particular facts related to your proposed development. In addition to the Appellate Division’s decision, there is also pending legislation which, if passed, would have a significant impact on the affordable housing landscape. The state Senate passed S1 on June 10, 2010. S1 would abolish COAH and transfer many of COAH’s responsibilities to the New Jersey Department of Community of Affairs. The state Assembly has not yet passed similar legislation, although legislative action on a revised version of S1 is expected before the end of the year. For more detailed or site specific information, please contact William F. Harrison.