TO BE FILED: 7/28/02 (CJ)
(This syllabus is not part of the opinion of the Court. It has been prepared by the Office of the Clerk for the convenience of the reader. It has been neither reviewed nor approved by the Supreme Court. Please note that, in the interests of brevity, portions of any opinion may not have been summarized).
Argued November 27, 2001 -- Decided August 1, 2002
Poritz, C.J., writing for a majority of the Court.
The Court decides whether the Township of West Windsor (Township) failed to provide a realistic opportunity for the development of affordable housing and, if so, whether the plaintiff is entitled to a builder's remedy.
Toll Brothers, Inc. (Toll Brothers) owns a 293-acre tract of land located in
the Township. In 1993, Toll Brothers filed this lawsuit alleging that the Township
had engaged in an unconstitutional pattern of exclusionary zoning that violated Mount Laurel
I (municipalities must provide a realistic opportunity for development of affordable housing), Mount
Laurel II (permitting, under certain conditions, a builder to seek court approval for
construction that will include affordable housing, i.e., the builder's remedy), and the Fair
Housing Act (FHA). Prior litigation against the Township had resulted in a 1984
judgment establishing the Township's requisite number of affordable housing units. That number was
modified by methodology adopted by the Council on Affordable Housing (COAH), an agency
created by the FHA to oversee the development of affordable housing through voluntary
municipality participation. To meet its fair share requirement, the Township adopted in 1985
a housing plan and various zoning amendments. Eleven sites were zoned for developments
that would include affordable housing (inclusionary zones). By 1994, however, only two of
the eleven sites had been developed, while a large number of conventional single-family,
high-priced homes had been built in non-inclusionary zones. Toll Brothers argued, in part,
that the low development rate for the construction of affordable housing was due
to the Township's failure to include conventional single-family houses on small lots in
its zoning for inclusionary sites, despite the strong market demand for them. The
builder's remedy sought by Toll Brothers would require the rezoning of the site
to permit single-family detached houses on small lots along with affordable rental units
that would consist of both single family zero lot-line housing and detached homes.
After a bench trial, the trial court concluded that the Township had met
241 units of its 929-unit fair share housing obligation. The sole means of
meeting the remaining obligation was the nine remaining sites, none of which possessed
zoning that permitted the construction of conventional single-family detached housing. The trial court
evaluated the nine sites to determine whether the Township was providing, in fact,
a realistic opportunity for the development of affordable housing. In so doing, the
trial court considered (1) unnecessary cost-generating site development standards unrelated to health or
safety; (2) restrictions on the type and mix of housing permitted; (3) infrastructure
requirements; (4) environmental constraints; and (5) access to water and sewer services at
a reasonable cost. Based on its assessment of the number of affordable housing
units each site could reasonably support, the court determined that the Township was
not in compliance with its present affordable housing obligation and awarded Toll Brothers
a builder's remedy. In respect of the single-family detached housing issue, the court
found it proper to consider housing-type market demand as a factor in determining
whether the Township had provided a realistic opportunity for the development of affordable
housing. The court found that the Township's almost exclusive reliance on multi-family housing,
despite the slight demand for it, provided little incentive for the owners of
inclusionary sites to commence development. The court concluded further that the Township's sewer
construction requirements created a disincentive to development, the Township improperly counted sites lacking
common ownership that could not be approved for construction unless they were assembled,
and that environmental constraints on construction must be considered in calculating the number
of units that could be constructed.
The Appellate Division affirmed, substantially for the reasons expressed by the trial court.
334 N.J. Super. 109 (2000). In an unpublished portion of the opinion, the
Appellate Division also rejected the Township's argument that Toll Brothers was not entitled
to a builder's remedy because it had failed to act in good faith.
The Supreme Court granted certification limited to whether the Township's ordinances, regulations and
site factors prevented a realistic opportunity for development of affordable housing; whether market
demand for particular housing types was properly considered; and whether Toll Brothers was
entitled to a builder's remedy. The Court declined consideration of issues raised by
parties that participated as amici curiae.
HELD : The trial court correctly found that the Township of West Windsor violated
the New Jersey Constitution and the Fair Housing Act of New Jersey by
preventing a realistic opportunity for development of affordable housing through its ordinances, regulations
and site factors regulating the development of property. Plaintiff satisfied the requirements for
the grant of a builder's remedy.
1. The New Jersey Constitution bars municipalities from using land use regulations to
hinder the construction of affordable housing, thereby excluding low and moderate income persons
from their towns. Under the Mount Laurel doctrine, a municipality is responsible for
promulgating appropriate land use ordinances under which a developer could be expected to
construct the municipality's fair share of affordable housing. The builder's remedy is a
judicial remedy for enforcement of the Mount Laurel doctrine. It serves as an
incentive to private developers to challenge a municipality's zoning ordinances. (Pp. 48 to
55).
2. Pursuant to the FHA, COAH is charged with estimating the State and
regional present and prospective need for affordable housing and with adopting criteria and
guidelines for determining a municipality's present and prospective fair share of the region's
housing need. COAH provides a review and mediation process to resolve Mount Laurel
disputes. When a plaintiff files a Mount Laurel challenge in the Superior Court,
the plaintiff must also file a notice to request review and mediation with
COAH. Municipalities not faced with a Mount Laurel challenge may seek COAH review
of their zoning and affordable housing regulations to receive a degree of protection
from future challenge. If COAH finds that the municipality's housing element provides a
realistic opportunity for the development of affordable housing units equal to its fair
share obligation, substantive certification is granted and a ten-year presumption of validity of
the municipality's plan attaches. That presumption may be overcome in subsequent litigation only
by clear and convincing evidence. (Pp. 55 to 62).
3. Case law, the FHA, and COAH all recognize that the realistic opportunity
evaluation cannot be made in a theoretical vacuum. Zoning for affordable housing that
cannot or will not be built by private developers, who are motivated by
profit, does not satisfy a municipality's Mount Laurel obligation. Here, in assessing whether
a municipality's zoning ordinances are exclusionary, the trial court properly considered market demand.
There was substantial evidence to support the trial court's holding that market demand
for multi-family housing would not provide a realistic opportunity for the development of
affordable housing. The Court emphasizes, however, that the use of market demand is
a factor in the court's evaluation and not an end unto itself. (Pp.
62 to 73).
4. The trial court correctly disregarded N.J.A.C. 5:93-3.5(b), a COAH regulation, in its
evaluation of eight undeveloped sites included in the original compliance plan. By its
very terms, that regulation is not applicable because it applies only when a
municipality and a developer of a previously certified site have mutually agreed to
alter the permitted zoning density. (Pp. 73 to 76).
5. The Township's sewer construction and financing requirements were unduly cost-generative and therefore
presented a significant impediment to the potential development of affordable housing. (Pp. 76
to 77).
6. The builder's remedy is a means to accomplish what a municipality might
otherwise have been unable or unwilling to do itself. Although the Court has
expressed support for COAH-resolution of Mount Laurel disputes, there has not been universal
municipal participation in the COAH process. When a municipality does not avail itself
of the COAH processes and protections, it remains vulnerable to a Mount Laurel
challenge. Here, Toll Brothers satisfied the Mount Laurel II requirements for the grant
of a builder's remedy. The Township did not establish that Toll Brothers acted
in bad faith by not applying to the Planning Board for variances. The
site was not a good candidate for variances, and Toll Brothers communicated with
the Planning Board prior to commencing litigation and throughout the summer and fall
of 1993 regarding this issue. (Pp. 78 to 90).
The judgment of the Appellate Division is AFFIRMED.
JUSTICE STEIN, concurring in part and dissenting in part, joined by JUSTICE ZAZZALI,
agrees with the Court's disposition of the three certified questions, including its determination
that Toll Brothers was entitled to a builder's remedy, but believes that the
specific remedy granted to Toll Brothers was insufficient to address the housing needs
of low income households.
JUSTICES COLEMAN, LONG, VERNIERO, and LaVECCHIA join in CHIEF JUSTICE PORITZ's opinion. JUSTICE
STEIN filed a separate opinion concurring in part and dissenting in part, in
which JUSTICE ZAZZALI joins.
SUPREME COURT OF NEW JERSEY
A-103/
104 September Term 2000
TOLL BROTHERS, INC., a Delaware Corporation,
Plaintiff-Respondent,
v.
TOWNSHIP OF WEST WINDSOR, a Municipal Corporation of the State of New Jersey
located in Mercer County, MAYOR AND COUNCIL OF THE TOWNSHIP OF WEST WINDSOR,
and THE PLANNING BOARD OF THE TOWNSHIP OF WEST WINDSOR,
Defendants-Appellants.
Argued November 27, 2001 – Decided August 1, 2002
On certification to the Superior Court, Appellate Division, whose opinion is reported at
334 N.J. Super. 109 (2000).
Karen L. Cayci and Michael J. Herbert argued the cause for appellants Township
of West Windsor and Mayor and Council of the Township of West Windsor
(Herbert, Van Ness, Cayci & Goodell, attorneys).
Gerald J. Muller argued the cause for appellant Planning Board of the Township
of West Windsor (Miller, Porter & Muller, attorneys).
Carl S. Bisgaier and Henry A. Hill, Jr. argued the cause for respondent
(Hill Wallack and Flaster Greenberg Wallenstien Roderick Zuckerman Skinner & Kirchner, attorneys; Mr.
Hill and Kenneth E. Meiser, on the briefs).
Howard D. Cohen argued the cause for amicus curiae American Planning Association and
its New Jersey Chapter (Stern Greenberg & Kilcullen, attorneys).
Edwin W. Schmierer argued the cause for amicus curiae New Jersey State League
of Municipalities (Mason, Griffin & Pierson, attorneys; Trishka Waterbury, on the brief).
Peter J. O'Connor argued the cause for amici curiae Southern Burlington County NAACP,
Camden County NAACP and Fair Share Housing Development (Mr. O’Connor, attorney; Mr. O’Connor
and Kevin D. Walsh, on the brief).
John M. Payne argued the cause for amici curiae Housing and Community Development
Network of New Jersey, Coalition for Affordable Housing and the Environment, Association of
New Jersey Environmental Commissions, Regional Planning Partnership and New Jersey Future (Ann Alexander,
Acting Director, Rutgers Environmental Law Clinic, attorney; Mr. Payne and Susan J. Kraham,
on the brief)
The opinion of the Court was delivered by
PORITZ, C.J.
This is a second round Mount Laurel exclusionary zoning case brought by Toll
Brothers, Inc. (Toll Brothers) against the Township of West Windsor, the Township Committee
of the Township of West Windsor, and the Planning Board of the Township
of West Windsor (collectively “West Windsor” or the “Township”). Toll Brothers, the owner
of a 293 acre tract of land located in West Windsor, alleged below
that the Township had engaged in exclusionary zoning in violation of the New
Jersey Constitution and the Fair Housing Act of New Jersey (FHA), N.J.S.A. 52:27D-301
to –329, and sought a builder’s remedy from the trial court. Toll Bros.,
Inc. v. Township of West Windsor,
303 N.J. Super. 518, 526-27 (Law Div.
1996) (West Windsor). Following a bench trial, the court concluded that West Windsor
was “not in compliance with the Mount Laurel mandate, and thus . .
. [had] violat[ed] . . . the New Jersey Constitution and the New
Jersey Fair Housing Act.” Id. at 574. Based on that finding, the trial
court held that Toll Brothers was entitled to a builder’s remedy, the specifics
of which were to be addressed at a later date. Id. at 575-76.
The Appellate Division affirmed, Toll Bros., Inc. v. Township of West Windsor,
334 N.J. Super. 109 (App. Div. 2000), and we granted certification limited to the
issues of whether West Windsor’s ordinances, regulations, and site factors prevented a realistic
opportunity for development of affordable housing; whether market demand for particular housing types
should have been considered in making that determination; and, whether Toll Brothers was
entitled to a builder’s remedy. Toll Bros., Inc. v. Township of West Windsor,
167 N.J. 599 (2001) (granting certification in part on limited issues); Toll Bros.,
Inc. v. Township of West Windsor,
167 N.J. 600 (2001) (same).
I. Mount Laurel and Affordable Housing Litigation. . . . 5
II. The Fair Housing Act and the Council on
Affordable Housing . . . . . . . . . .
. . . . . . . 8
III. The Prior and Present Litigation. . . . . . . .
. . . 9
A. The Prior Litigation. . . . . . . . .
. . . . . . 9
B. The Present Litigation. . . . . . . . .
. . . . . 13
1. Site-by-Site Evaluation.. . . . . . . . . .
. 23
2. Market Demand . . . . . . . . . .
. . . . . . 33
3. Sewer Policies. . . . . . . . . . .
. . . . . 38
4. Assemblage. . . . . . . . . . . .
. . . . . . 42
5. Environmental Constraints . . . . . . . . . .
42
C. The Appellate Division Decision . . . . . . .
. . 43
IV. The Mount Laurel Doctrine . . . . . . .
. . . . . . . 48
V. The Certified Questions . . . . . . . .
. . . . . . . 62
A. Whether the Trial Court Erred in Concluding
that the Township Failed to Provide a Realistic Opportunity for the Development of
Affordable
Housing and in Considering Market Demand for Particular Housing Types in Making That
Determination . . . . . . . . . . . .
. . . . . . 63
1. Market Demand . . . . . . . . . .
. . . . . . 65
2. Housing Yield . . . . . . . . .
. . . . . . . 73
3. Sewer Policies. . . . . . . . . .
. . . . . . 76
4. Summary . . . . . . . . . .
. . . . . . . . . 77
B. Whether the Trial Court Erred in Holding
that Toll Brothers is Entitled to a
Builder’s Remedy. . . . . . . . . . . .
. . . . . 78
VI. Conclusion. . . . . . . . . . . .
. . . . . . . . . . 89
Mount Laurel and Affordable Housing Litigation
In 1975, this Court decided Southern Burlington County NAACP v. Mount Laurel Township, 67 N.J. 151, cert. denied, 423 U.S. 808, 96 S. Ct. 18, 46 L. Ed.2d 28 (1975) (Mount Laurel I). In that opinion, we held that developing municipalities are obligated under our State Constitution to provide a realistic opportunity for the development of low and moderate income housing. See footnote 1 Id. at 174, 187.
Two years later, the Court created the “builder’s remedy” as an “incentive for the institution of socially beneficial but costly litigation such as . . . Mount Laurel.” Oakwood at Madison v. Township of Madison, Inc., 72 N.J. 481, 550-51 (1977). The builder’s remedy permitted builders to seek court approval for construction
of the housing project they proposed to the township prior to or during the pendency of the action, pursuant to plans which, as they originally represented, will guarantee the allocation of at least 20% of the units to low or moderate income families.
Despite Mount Laurel I and the subsequent creation of the builder’s remedy, the years that followed saw “many municipalities fail[ing] to comply with the clear mandate of Mt. Laurel I.” Holmdel Builders Ass’n v. Township of Holmdel, 121 N.J. 550, 555 (1990). Thus, in Southern Burlington County NAACP v. Mount Laurel Township, 92 N.J. 158 (1983) (Mount Laurel II), “[w]e clarified and reaffirmed the constitutional mandate set forth in Mt. Laurel I, imposing an affirmative obligation on every municipality to provide its fair share of affordable housing.” Holmdel, supra, 121 N.J. at 555 (citing Mount Laurel II, supra, 92 N.J. 158).
Most relevant to the instant matter, the Court also clarified the conditions under which a builder’s remedy may be granted. We began by acknowledging that “[b]uilder’s remedies have been one of many controversial aspects of the Mount Laurel doctrine.” Mount Laurel II, supra, 92 N.J. at 279. Notwithstanding that controversy, however, we found that “[e]xperience . . . has demonstrated to us that builder’s remedies must be made more readily available to achieve compliance with Mount Laurel.” Ibid. Yet, because of concerns about land use planning, we urged the trial courts when formulating a builder’s remedy to “make as much use as . . . [possible] of the [municipal] planning board’s expertise and experience so that the proposed project is suitable for the municipality.” Id. at 279-80. We also cautioned that “[t]rial courts should guard the public interest carefully to be sure that plaintiff-developers do not abuse the Mount Laurel doctrine.” Id. at 281.
Affordable Housing
On July 2, 1985, “the Legislature codified the Mt. Laurel doctrine, including its available compliance measures,” by enacting the FHA. Holmdel, supra, 121 N.J. at 556.
The FHA creates a new administrative agency, the Council on Affordable Housing (COAH), N.J.S.A. 52:27D-307, 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. To carry out its function, the agency is authorized to adopt necessary rules and regulations. Id. at -307.5.
Under the FHA, COAH serves as an alternative forum for the resolution of Mount Laurel disputes. Municipalities facing Mount Laurel challenges may use the COAH mediation and review process, id. at -316b, or independently may seek COAH review of their zoning and affordable housing regulations, id. at -314, in order to receive a measure of protection from future challenges. See id. at -317a. On a grant of substantive certification from COAH, id. at -314, a municipality’s housing plan enjoys a ten-year See footnote 2 presumption of validity that may be overcome in subsequent litigation only by clear and convincing evidence. See footnote 3 See id. at -317a; id. at -313.
In Hills Development Co. v. Bernards Township, 103 N.J. 1, 25 (1986), this Court upheld the constitutionality of the FHA.
A. The Prior Litigation
This action represents “the second Mount Laurel suit initiated against defendant.” West Windsor, supra, 303 N.J. Super. at 529. Previously, “[o]n March 14, 1984, Affordable
Living Corporation had instituted exclusionary zoning
litigation against [West Windsor] that resulted in a [1984 judgment] establishing defendant’s fair share at 1,619 low
and moderate income units.” Ibid. In 1985, that number was
reduced to 1,453 units, and later, on October 14, 1986, the
1985 judgment was “modified to conform West Windsor’s fair
share housing obligation to that established by [COAH] --
592 units.” See footnote 4 West Windsor, supra, 303 N.J. Super. at 529.
To meet its original obligation, West Windsor adopted
a housing plan and various conforming zoning amendments. The amendments addressed issues such as common open space, density and residential-type distribution, affordable unit distribution and locational criteria, and expedited review of low and moderate income developments. New zones “EH” (Elderly Housing), and “R3A,” “R4A,” and “R4B” (Residence Districts) were added, and eleven sites were zoned for inclusionary development as follows: Sites 1 and 5A (120 affordable units), Sites 2 and 8 (312 affordable units), Site 3 (twenty affordable units), Site 4 (thirty-four affordable units), Site 5 (100 affordable units), Site 6 (the Toll Brothers property -- 527 affordable units), See footnote 5 Site 7 (forty affordable units), Site A (102 affordable units), and Site B (206 affordable units).
Those eleven sites were to provide a realistic opportunity for the development of 1,461 affordable housing units. Also, under the compliance plan West Windsor agreed to rehabilitate thirty-seven existing dwellings that, in the main, consisted of multi-family units. Id. at 532-33. In all, the plan provided for the potential development of 1,498 affordable units generally consisting of multi-family housing. See footnote 6 As described by the trial court in the opinion below, the plan
rel[ied] almost exclusively on
multi-family housing as the vehicle for development of inclusionary projects. Conventional single-family detached housing [was] generally not permitted in the inclusionary zones. The single-family detached housing that [was] permitted either must be located in a specialty zone, or it must be a novel product, e.g., zero lot-line homes[,]
. . . where one side of the house is windowless and lies directly on a side
lot-line.
In October 1985, the compliance plan was memorialized in a Judgment of Compliance and Repose, id. at 529, which was to remain effective for six years.
B. The Present Litigation
On May 12, 1993, Toll Brothers filed this lawsuit alleging that West Windsor had engaged in a pattern of exclusionary zoning in violation of the New Jersey Constitution as interpreted in the Mount Laurel cases and the FHA. Ibid. West Windsor’s period of repose under the 1985 judgment had expired on July 21, 1991, and West Windsor had not applied to COAH for interim certification. Id. at 529-30. If granted interim certification, West Windsor would have been required to continue implementing the terms of the 1985 judgment and would have continued to enjoy the same measure of protection from litigation that was provided by that judgment. Id. at 529 n.1 (citing N.J.A.C. 5:92-1.6(d) and 5:91-14).
West Windsor nonetheless continued to implement the 1985 court-approved plan, id. at 526, which “remained in effect essentially unchanged, until late summer 1994.” Id. at 531. Of the eleven sites included in the 1985 judgment, however, only two actually had been developed by the time Toll Brothers instituted its Mount Laurel challenge -- the Windsor Haven property (Site 3 from the 1985 judgment), which produced thirty-seven “for-sale” condominium units, and Steward’s Watch (Site A from the 1985 judgment), which yielded 102 rental units. Ibid. During roughly the same period (1982-1994), however, “a massive amount of development of conventional single-family detached homes ha[d] occurred in non-inclusionary zones.” Id. at 553. Specifically, “the number of houses in West Windsor Township more than doubled, increasing from 2,907 units to 6,115 units,” with the purchasers generally moving into “high-priced, large-lot, single-family houses.” Id. at 526.
Toll Brothers argued that West Windsor’s “poor” development rate for the construction of affordable housing was due to a variety of factors, including: (1) the severe impact of environmental constraints (e.g., freshwater wetlands, freshwater wetlands buffers, and floodplain areas) on the developability of the sites zoned for affordable housing; (2) West Windsor’s unduly cost-generative public sewer policies that required developers of inclusionary sites to provide and “front” the high costs of oversized and expensive gravity flow sewer systems; (3) public resistance to, and application processing delays regarding, development of sites zoned for affordable housing (highlighted by the testimony of plaintiff’s expert, who also had been the planner for the former owner, that when attempting to obtain development approval from the West Windsor Planning Board the developer was subjected to over fifty public hearings in three-and-one-half years, a delay that the trial court, in October 1987, found to be unjustified,’ ‘purposeful or unexcusable’”), id. at 535-36; (4) West Windsor’s failure, in its zoning of affordable housing sites, to include conventional single-family houses on small lots despite the demonstrated strong market demand for such units; and (5) West Windsor’s other restrictive zoning standards and cost-generative ordinances, such as the requirement that 175 senior citizen affordable units be built on the Toll Brothers site “without regard to the number of market units built,” id. at 536, as well as ordinances establishing the set-aside of an “unreasonable amount of common open and recreational space.” Ibid. As the trial court summarized,
plaintiff asks this court to look beyond the face of defendant’s assertedly inclusionary
zoning. It asks for consideration of numerous factors -- environment, infrastructure, market demand,
municipal policy and other zoning-related factors -- for a finding that defendant is
deficient in its affirmative duty under the Mount Laurel cases. It asks for
a builder’s remedy to permit development of its property in a more cost-effective,
market-responsive manner than defendant’s current zoning allows.
The builder’s remedy sought by Toll Brothers would necessitate the rezoning of the Toll Brothers site. At the time, the site was zoned PRN-1, which requires a mix of three housing types with no one housing type accounting for more than eighty percent of the total units. The permitted types were townhouses, garden apartments, patio homes, two-family rentals, maisonettes and zero lot-line single-family units. Id. at 526. The rezoning sought by Toll Brothers would allow it to construct 735 to 765 units, of which 625 to 650 would be conventional, market-rate, single-family detached houses on small lots and 110 to 115 units would be affordable rental housing. See footnote 7 Id. at 526-27. Eighty percent of the affordable rental units would be single-family detached zero lot-line housing, with the balance a mix of conventional single-family detached houses on small lots, as well as a second unidentified housing type.
The trial court conducted a bench trial that began on September 28, 1994, and ended on March 29, 1995. Id. at 528, 530. The court relied primarily on the reports, exhibits, and testimony provided by Toll Brothers’ experts, West Windsor’s experts, and a court-appointed Special Master. For purposes of deciding whether Toll Brothers was entitled to a builder’s remedy, the court held that West Windsor’s “conduct,” i.e., its housing plan, zoning ordinances, regulations, and sewer policies, would be evaluated as of the date that Toll Brothers initiated its challenge. Id. at 531 (citing Van Dalen v. Washington Township, 205 N.J. Super. 308, 334 n.11 (Law Div. 1984)).
As a threshold matter, it was necessary for the trial court to determine West Windsor’s present affordable housing obligation. For that purpose, the court turned to the numbers promulgated “by COAH in regulations that were first proposed on March 15, 1993, 25 N.J.R. 118 (March 15, 1993), and finally adopted on June 6, 1994, 26 N.J.R. 2300 (June 6, 1994).” West Windsor, supra, 303 N.J. Super. at 530. Those regulations established West Windsor’s present obligation at 929 units of affordable housing. Ibid. Of that number, thirty units represented West Windsor’s “indigenous need,” which COAH defines as “deficient housing units occupied by low and moderate income households within a municipality . . . .” N.J.A.C. 5:93-1.3. The remaining 899 units represented West Windsor’s new regional obligation. West Windsor, supra, 303 N.J. Super. at 530.
Under COAH’s regulations, the 929-unit obligation was cumulative, i.e., it covered both Round I and Round II, or the period from 1987 to 1999. Thus, West Windsor was credited with the 139 units that had been constructed on two sites during that period -- thirty-seven units for the Windsor Haven parcel (Site 3 under the original compliance plan), and 102 units for the Steward’s Watch property (Site A under the original compliance plan). Id. at 531-32. The trial court also credited West Windsor with 102 rental bonus credits for the development of Steward’s Watch. See footnote 8 West Windsor, supra, 303 N.J. Super. at 532. In sum, the trial court concluded that “defendant ha[d] met 241 units of its 929-unit fair share housing obligation.” Ibid. West Windsor’s remaining obligation was 688 units. Because West Windsor’s original compliance plan “remained in effect, essentially unchanged, until late summer 1994,” id. at 531, the “sole means of meeting . . . [that 688 unit] obligation was the inclusionary zoning of nine remaining sites” contained in the original compliance plan and 1985 judgment. Id. at 532.
Before evaluating the viability of those sites, the trial court considered which party should bear the burden of persuasion in respect of the realistic development potential of those nine undeveloped sites. West Windsor argued that the burden of persuasion must rest with Toll Brothers, in keeping with the general presumption of validity afforded municipal ordinances. Id. at 548 (citing Zilinsky v. Zoning Bd. of Adjust., 105 N.J. 363, 368 (1987)). Toll Brothers, on the other hand, contended that “in a ‘second round’ case, a substantial burden rests with defendant, who must explain the prior cycle sites’ failure to develop.” Ibid. As the trial court observed, West Windsor “received prior credit for [those] . . . sites, and . . . [yet,] so little inclusionary development has taken place over an extended period of time -- here, ten years -- despite significant development of the single-family housing market.” Id. at 528.
To resolve that issue, the trial court followed the mandate of Mount Laurel II, a case that involved a second round of litigation between the same parties, and ruled that
“[p]laintiff may continue to prove . . . that the land use regulations fail to provide a realistic opportunity for low and moderate income housing or that they contain ‘expressly prescribed requirements or restrictions which preclude or substantially hinder it.’ Mount Laurel I, 67 N.J. at 180-81. As before, such a showing shall create a prima facie case of a failure to satisfy the Mount Laurel obligation. The municipality shall then have the heavy burden of demonstrating, by a preponderance of the evidence, its fair share and its satisfaction of that share or any justification of its failure.”
[Id. at 549 (quoting Mount Laurel II, supra, 92 N.J. at 222-23) (emphasis
added by trial court).]
The court then concluded:
Although the affordable housing plan and inclusionary sites at issue here have not
previously failed any test of compliance in court, they have now failed the
test of time. Since the prior judgment of compliance was entered approximately one
decade ago, most of defendant’s
inclusionary sites have failed to develop despite a housing boom. Defendant’s affordable housing
plan enjoyed a presumption of validity through the first cycle; defendant must now,
in this second cycle, explain why the sites have failed to produce housing.
Although plaintiff bears the burden of coming forward and presenting a prima facie
case as to sites not previously credited, defendant bears the burden of explaining
the failure to develop sites for which it received credit ten years ago.
[Id. at 550 (footnote omitted).]
Despite that conclusion, the trial court found that Toll Brothers had “developed sufficient facts” so that “[e]ven if the burden did not shift, plaintiff ha[d] successfully met the burden in its case.” Id. at 550 n.5.
Having disposed of those preliminary matters, the court considered whether West Windsor had provided a realistic opportunity for development of its present 688-unit affordable housing obligation. The court conducted a site-by-site analysis of the parcels zoned for affordable housing by evaluating (1) unnecessary cost-generating site development standards unrelated to health or safety, (2) restrictions on the type or mix of housing permitted, id. at 542, (3) infrastructure requirements relating to “public water, sanitary sewers, or roads, which may unnecessarily increase costs of development,” id. at 542-43, (4) environmental constraints, id. at 543, and (5) access to water and sewer services at a reasonable cost. Ibid. The court also indicated that it would hear testimony from site owners that express a willingness “to develop inclusionary housing, or to sell the property to a developer who will do so.” Ibid. (citing Mount Laurel II, supra, 92 N.J. at 297-99). That approach, as the court pointed out, is consistent with COAH's definition of “realistic opportunity.” Id. at 544 (“When reviewing assertedly inclusionary zoning, COAH ‘[s]hall include but not be limited to a consideration of environmental factors, the location of existing infrastructure and the likelihood of the current zoning to result in the creation of low and
moderate income housing during the period of substantive certification.’”) (quoting N.J.A.C. 5:93-3.5).
The court also observed that “[e]xcept as to the new NJIT and PRRC zones, defendant's zoning plan does not have conventional single-family detached housing as permitted uses within inclusionary developments.” Id. at 556-57. Because West Windsor’s housing plan relied heavily on zoning for multi-family units and on unconventional zero lot-line single-family detached housing, id. at 536, for which Toll Brothers contended there was little market demand, and because the housing type allegedly in greatest demand -- conventional single-family units on small lots -- was generally precluded under West Windsor’s inclusionary zoning plan, id. at 536, 571, the court carefully examined that issue. Finally, the court declined generally to include in its evaluation those sites that required assemblage in order to satisfy West Windsor’s zoning requirements and other regulations. Id. at 528.
In conducting its site-by-site analysis, the trial court considered the projected affordable housing yields submitted by the parties’ experts and the Special Master, ultimately choosing to follow closely the low yield calculation of 501 affordable units submitted by the Special Master. Although the low
yield approach assumed construction of the “novel” and “unconventional” single-family housing permitted under West Windsor’s existing zoning ordinances, i.e., zero lot-line units, that housing more closely resembled the housing type for which there existed the greatest market demand -– conventional single-family detached units. See id. at 554. By comparison, the high yield approach assumed development of primarily multi-family housing that the court determined “control[led] only a minute fraction of the market.” Id. at 545, 571-72. The court’s analysis and conclusions appeared in the unreported portion of its opinion, See footnote 9 and are summarized below.
1. Site-by-Site Evaluation
Site 1
Site 1 is an undeveloped site in West Windsor’s original compliance plan and 1985 judgment. Under that plan, it was anticipated that Site 1, together with Site 5A, would yield 120 affordable units. See footnote 10 The trial court noted that no credible evidence was put forward that any development proposal for the two sites had been presented to West Windsor in the nine years since the adoption of the compliance plan. Further, the
Special Master advised that defendant had not submitted a certification affirming the site’s continued viability as inclusionary.
Although Site 1 consists of 40.2 acres, located in an
R-5 zone, the court found that only 24.5 acres were
developable due to environmental constraints, open recreation space requirements, and storm water detention needs. The
court held that 14.4 units could be built on each acre,
yielding a total of 353 units, of which seventy-one would be “affordable” assuming a twenty percent set-aside.
Site 2
Site 2, also an undeveloped site included in the original compliance plan, was expected to yield 312 affordable units when coupled with Site 8. West Windsor did not offer any explanation for why this site had not yet been developed. The trial court found that the number of affordable units that could be developed on the site was affected substantially by market demand because the potential yield would vary depending on the type of unit a developer chose to build.
The need for assemblage, as well as storm water and open space requirements, also affected the number of units that realistically could be developed on this site. Site 2 was described as an unassembled multiple lot parcel located in an R-4B zone that allows for single-family, zero lot-line, detached dwellings; two family and semi-detached dwellings; townhouses; and garden apartments. The site consists of 199.3 acres, of which only 53.3 acres are located in an environmentally unconstrained area. The court found that, without assemblage, realistic development was possible only on three lots -- 48, 11.02, and 15.
The Special Master reported on the minimum and maximum number of affordable units that each lot could yield, depending on the type of units built and the percentage of units set aside for affordable housing. His report indicated that Lot 48, the largest of the three lots, could yield somewhere between thirty-four and 108 affordable units; that Lot 11.02 could yield between six and thirty-one units; and that Lot 15, absent assemblage, could not yield any affordable units because it was a “severely constrained parcel” with road access difficulties and an “obvious problem of a lack of economy of scale.” The court held that Site 2 as a whole could provide a total of forty-five affordable units (thirty-four for Lot 48 and eleven for Lot 11.01).
Site 5 (Exxon)
Site 5 is another undeveloped parcel in the original compliance plan, where it is designated as appropriate for the development of 100 senior affordable units. The site was eliminated because “[a]ll parties and experts agree[d] that no credit [was] appropriate for Site 5,” and because “[t]here [were] too many preconditions [to] be met before this site [could] be completed.”
Site 5A (La Placa)
Site 5A also is an undeveloped site included in the original compliance plan, under which that site and Site 1 were expected to yield a total of 120 affordable units. In the plan, Site 5A contained 10.32 acres and was zoned to allow only multi-family housing. The site subsequently was rezoned R-5B, which also permits “only multifamily development” restricted to “garden apartments, townhouses or maisonettes.” The rezoning “increas[ed the site’s] allowable density to fifteen units per acre conditioned upon a forty percent affordable housing setaside.” An adjacent, partially developed property also was added, increasing the size of the parcel to twenty-two acres.
The trial court, in rejecting defendant’s claim that ninety-six affordable units could be built on Site 5A, pointed out that defendant’s estimate “assume[d] construction under the Low Income Tax Credit Program,” which all parties agreed is “extremely competitive and requires that all municipal approvals be in place.” The court observed that the developer’s attorney had testified at trial that neither the municipal approvals nor the tax credits had been secured, and that the developer was “reluctan[t] to build a ‘conventional’ multifamily inclusionary development.” After consideration of those factors, the court held that the Special Master’s twenty-nine unit yield estimate was realistic for this site, “assuming there is market demand,” and credited West Windsor accordingly.
Site 6 (Toll Brothers)
Site 6 was assigned 527 affordable units in the original compliance plan. Subsequent to the 1985 judgment, West Windsor and the previous owner negotiated a revision to the number of units that the site potentially could produce. Specifically, those parties agreed that Site 6 would yield 315 affordable units. In 1988, they again agreed to a reduction in the number of affordable units for this site, this time from 315 to 225 units, but because they did not seek the necessary court approval the trial court determined that that agreement was no longer in effect.
Site 6, zoned PRN-1, consists of 222.1 undeveloped acres. The PRN-1 zone requires a “mix of three housing types with no single housing type accounting for more than eighty percent of the total units.” The Township estimated that this site could produce 1,500 units, of which 300 would be set aside for affordable housing. Those numbers were based on a proposal put together by the site’s prior developer, “Countryside.” The Special Master, however, rejected that estimate, noting that Countryside’s proposal had called for only 225 affordable units, and that in any event new wetlands regulations had been adopted subsequently that “ma[de] additional constraints and [yield] reductions likely.” In his view, the site’s low to moderate yield range was 169 to 225 affordable units. After considering market demand and rejecting the notion that the site would develop at maximum density, the court found that the low yield estimate of 169 affordable housing units was the most realistic.
Site 7
Site 7 is an undeveloped property in the original plan that was estimated to yield forty affordable units. That number was reduced later to twenty-four units. The site consists of multiple lots, is twenty-nine acres in size, and is located in an R-4B zone. The trial court found that due to various constraints and development limitations, the only viable lot was Lot 31, which contained only 2.8 acres of developable area. Even though the court questioned whether Site 7 would yield any inclusionary development whatsoever, it accepted three affordable units for the purpose of its analysis.
Site 8
Site 8 also is an undeveloped site that was part of the original compliance plan and, together with Site 2, was to provide 312 affordable units. The site consists of nine lots totaling 64.32 acres, with a developable area of 38.12 acres. West Windsor’s expert projected that as a whole this site would yield 504 garden apartment units, of which 101 would be affordable. The court’s Special Master observed that the expert’s estimate assumed both full assemblage and “that the market could sustain garden apartments.” He reported that the site consists of two “zones,” with separate zoning designations, and that there were assemblage issues in connection with lots in the second zone.
More specifically, the first zone contains four lots --
1, 2, 8, and 166 -- that the Special Master found might reasonably be expected to develop together. The second zone contains five lots -- 13, 14, 15, 16, and 34. Lots 13, 15, and 34 are under common ownership, Lot 16 is owned by West Windsor, and a private entity (different from the owner of Lots 13, 15, and 34) owns Lot 14. The “estimated site area” for the five lots is twenty-three acres, as to which the Special Master noted that “only about 10.5 acres are [located] in upland.” The Special Master also stated that it was crucial that all five lots be assembled for there to be a realistic chance that affordable housing would be constructed because separate developments would present considerable road access problems.
Taking into account the assemblage issues, and cognizant of the concern expressed by plaintiff’s expert about “‘the availability of sanitary sewer services to this site,’” the court concluded that “the potential affordable housing yield for this site ranges from twenty-nine units to seventy-eight units, depending on the type of housing and assuming market demand.” Twenty-nine units were credited.
Site B (Copperfield)
Site B is an undeveloped property that had been included in the original compliance plan for the development of 206 affordable units. That estimate was later reduced to 100 units in 1990. The site consists of 165 acres that are zoned for a mix of housing types.
Three issues affect the development of affordable housing on this site. First, the Department of Environmental Protection had not clarified the boundaries of the relevant wetlands area; second, the cul-de-sac design does not comply with state or local standards; and third, the extensive reliance on multi-family units is problematic. The trial court expressed its concern that the low demand for multi-family units coupled with the early development of such units on other sites could reduce the prospects for this site and elsewhere. Regardless, the court assumed that the planned multi-family and unconventional units would be marketable, and concluded that the site realistically could yield sixty-four affordable units.
Site R-3A
Site R-3A was not included in the original plan but nevertheless was considered by the Special Master and the trial court. The site consists of 109.90 acres, covering multiple lots with a net developable area of seventy acres. One lot, known as the Maycho parcel, had received preliminary approval in 1989, but the approval never was made final. Nonetheless, the Special Master recommended, and the trial court agreed, that this lot could generate three or four units. The court also found that Lot 14 could yield four affordable units, and determined that Lots 15, 27, 55, and 56 were not suitable for development. In sum, the court concluded that Site R-3A could yield up to seven or eight affordable units. West Windsor was granted an eight unit credit for this site.
Site PRRC
The PRRC site, located in a new zoning district created during the course of the trial, was not part of the original compliance plan. Nevertheless, the trial court included this site in its analysis.
The site contains approximately 400 acres, 150 of which defendant claimed were developable. According to defendant’s expert, this site could yield 580 single-family, detached units, of which eighty-seven would be affordable units (assuming a fifteen percent set-aside). The Special Master, however, reported that five open space and recreational area ordinances limited development to 111 of the site’s acres. He added that the 111 acres theoretically could accommodate 580 single-family units at full build-out, but that the resulting density would make the construction of townhouses or apartments more appropriate (and likely). Nonetheless, the Special Master assumed, and the trial court agreed, that “the yields can be achieved with single-family dwellings and that 87 low/mod units will be provided in this zone.”
Site NJIT
Site NJIT was not part of the original plan. The site was one of only two sites for which West Windsor’s new zoning ordinances “provided inclusionary developers with the option of constructing conventional, single-family detached units.” West Windsor, supra, 303 N.J. Super. at 554. Because “the NJIT zone was designed for a specific government-sponsored project,” ibid., the trial court concluded that the site would yield no affordable housing units.
Summary
Based on its extensive and careful evaluation of those sites, the trial court found that the maximum potential affordable housing yield was 505 units, 183 units short of defendant’s obligation of 688 units. See footnote 11 Having determined that West Windsor was not in compliance with its present affordable housing obligation, the trial court awarded Toll Brothers a builder’s remedy for its site, the specifics of which were to be subsequently determined. Id. at 576. The court also retained jurisdiction “over remediation of defendant’s housing plan as a whole, including the appointment of a special master.” Ibid. West Windsor’s failure to meet its present obligation was attributed to a lack of market demand for the housing types permitted under the existing zoning (particularly multi-family and zero lot-line single-family housing), id. at 573; West Windsor’s requirement that developers of sites zoned for affordable housing “front” the costs of a gravity-fed sewage system (instead of permitting the use of a less-expensive pumped system), id. at 528; the reality that unlikely-to-occur multiple lot assemblage was necessary for certain sites to comply with West Windsor’s zoning ordinances and other regulations, ibid.; and, the impact of environmental constraints, ibid., as well as certain of West Windsor’s other development requirements such as open space “set-asides.” Ibid.
2. Market Demand
The West Windsor sites examined by the trial court were zoned almost exclusively for the construction of multi-family units and unconventional zero lot-line single-family detached housing. Id. at 554. In fact, none of the nine undeveloped sites that was included in the original compliance plan permitted the construction of conventional single-family detached housing. Id. at 556-57. Recognizing that West Windsor’s zoning for multi-family housing was, at least superficially, in accord with the method historically used by “both developers and the courts to implement the Mount Laurel requirements,” id. at 527, the court framed the issue before it as whether that “model” may be modified based on evidence of a lack of market demand for multi-family housing and a strong demand for conventional single-family dwellings. Id. at 527-28.
Initially, the court decided that it was proper to consider housing-type market demand as a factor in determining whether West Windsor had provided a realistic opportunity for the development of affordable housing. Id. at 545. Nonetheless, sites zoned to permit a housing type for which there is little market demand would not be excluded automatically as incapable of producing affordable units. Ibid. Instead, the court would examine West Windsor’s “inclusionary zoning scheme as a whole to determine whether anticipated inclusionary development is grounded in reality, or whether it is indeed a ‘phantom.’” Ibid.
In undertaking that examination, the court observed that whether a site zoned for affordable housing actually provides a realistic opportunity for such housing to be built necessarily involves an inquiry into whether the site, as presently zoned, generates a favorable cost/benefit calculation. Id. at 546. The court explained further that
the question of marketability after costs [of building], and thus market demand, has
always been a [proper] consideration [for the realistic development opportunity inquiry], implicitly if
not explicitly. If this were not the case, municipalities could engage in exclusionary
zoning by simply zoning extensively for “inclusionary” development of a housing type for
which there is little or no demand. Neither the Supreme Court nor COAH
contemplated or would tolerate such a result.
In support of its consideration of market demand, the court cited the FHA and various COAH regulations. For example, N.J.S.A. 52:27D-311a directs municipalities, when developing housing elements, to consider “‘[r]ezoning for densities necessary to assure the economic viability of any inclusionary developments.’” West Windsor, supra, 303 N.J. Super. at 546 (quoting N.J.S.A. 52:27D-311a). Further, COAH’s regulations incorporate similar considerations. In particular, N.J.A.C. 5:93-5.6 provides that COAH’s review of municipal inclusionary zoning shall include an inquiry into “‘the present ability of a developer to construct low and moderate income housing at a specific density.’” West Windsor, supra, 303 N.J. Super. at 546-47 (quoting N.J.A.C. 5:93-5.6). COAH explains that N.J.A.C. 5:93-5.6 “‘recognizes that housing markets change and by permitting some zoning at higher densities land will be available to accommodate changes in housing demand.’” West Windsor, supra, 303 N.J. Super. at 547 (quoting 25 N.J.R. 5787 (Dec. 20, 1993)) (emphasis added by trial court). Moreover, COAH has stated that
“N.J.A.C. 5:93-5.6(b) does not establish an inflexible standard that requires all sites to
be zoned for a single-family inclusionary product. The rule establishes criteria that should
be considered by the municipality and will be considered by [COAH] in determining
the appropriate zoning for a specific site. The factors to be considered include
land use planning considerations and a consideration of the current market. After consideration
of these factors, [COAH] may require that a substantial percentage of inclusionary sites
be zoned to allow market units within an inclusionary development to be constructed
as single-family detached units.”
[West Windsor, supra, 303 N.J. Super. at 546-47 (quoting
26 N.J.R. 2304 (June
6, 1994)) (emphasis added by the trial court).]
The trial court concluded that “COAH has definitively indicated that market demand is an appropriate factor to consider when addressing Mount Laurel compliance issues.” Id. at 548.
Extensive information was submitted by both the parties and their experts on the question of market demand for various housing types, particularly multi-family housing in West Windsor and the surrounding area. The trial court reviewed data relating to building permits issued, the inventory of approved but unconstructed units, the zoning of vacant unapproved land, the vacancy rates of constructed units, the absorption rates of units coming onto the market, and demographic data. Id. at 566. After considering the information presented, and the parties’ arguments, the court concluded that multi-family housing is “a product-type for which there is little actual or projected demand” in West Windsor. Id. at 557. According to the court,
the testimony presented by both parties leads to the conclusion that the present cycle period of the market calls for greater use of single-family dwellings as part of the product available for inclusionary sites. An analysis of the competing experts’ data and opinions supports the view that the over-reliance on multi-family housing as the method of producing inclusionary housing has had only limited success in the past and has questionable viability in the future. Clearly, the housing demographics for West Windsor have changed during the past cycles and changes will continue into the future. A municipality must respond to these changes if it is to fulfill its affirmative obligation to provide a realistic opportunity for inclusionary development.
Specifically, the court found significant that even though market demand might exist to support the construction of multi-family housing on an individual site, it would be “wholly unrealistic” to assume that “a majority of numerous sites” zoned for multi-family housing also would be developed. Id. at 545-46. Simply put, West Windsor’s almost exclusive reliance on multi-family housing, despite the slight demand for such housing, provided little or no incentive for the owners of inclusionary sites to commence development. See id. at 546. The court cautioned, however, that
[t]he endorsement and recognition of affordable, small-lot, single-family detached housing unconstrained by artificial restrictions, e.g., the zero lot-line requirement, should not be interpreted as condoning a return to the large-lot, single-family dwellings that have historically been condemned as an exclusionary device. The product that must be permitted by defendant is an affordable product (in the common sense of the word) that will stimulate the construction of additional affordable housing consistent with the Mount Laurel doctrine. Municipalities and developers must not co