Finding the Outer Edges of 'Good Faith' in 'Mt. Laurel' Litigation

In 2015, the court directed that municipalities revise their housing elements and fair share plans “with good faith” and with “reasonable speed.” In re: N.J.A.C. 5:96 & 5:97, 221 N.J. 1, 33 (2015). Now, four and a half years later, the question of what constitutes “good faith” in these constitutional compliance cases is paramount, as the trial courts are now faced with whether a municipality’s housing element and fair share plan are consistent with the Mount Laurel obligations. The recent trial court decision in In re Englewood Cliffs, as well as the 2016 decision from Judge Wolfson in In the Matter of the Application of South Brunswick, both demonstrate what steps are necessary to establish “good faith” in these cases.

Of the 300-plus declaratory judgment actions commenced in the wake of the Supreme Court’s decision in In re: N.J.A.C. 5:96 & 5:97, 221 N.J. 1 (2015), many have now settled, or are in the process of settling. The result of this process will be measured by the construction of actual housing, rather than any singular article. The court created a new process for addressing compliance with the Mount Laurel doctrine by sending these matters back to the courts to serve in the stead of the moribund Council on Affordable Housing (COAH). However, through this new process, courts have had the opportunity to clarify and establish the outer bounds of what the courts have envisioned as moving forward and creating housing elements “with good faith.”

Voluntary Compliance and Good Faith

Since its initial announcement in 1975, the Mount Laurel doctrine has always put a primary emphasis on encouraging a municipality to affirmatively zone to provide realistic opportunities for the construction of affordable housing. In nearly every iteration of the decisions from the Supreme Court, the preference for “voluntary compliance” through the use of subsidies, density bonuses, mandatory set-asides or other tools was paramount.

In In re: N.J.A.C. 5:96 & 5:97, our Supreme Court directed the trial courts to “endeavor to secure, whenever possible, prompt voluntary compliance from municipalities in view of the lengthy delay in achieving satisfaction of towns’ Third Round obligations.” 221 N.J. at 33. For the past four and a half years, housing advocates, municipalities and developers have been attempting to mold fair share plans that are constitutionally compliant, while identifying appropriate methodologies for calculating regional fair share obligations and identifying the crediting mechanisms for those obligations. The court’s opinion set forth that municipalities should rely on the prior round methodologies, and use as a starting point the prior round’s unfulfilled housing obligations. See, e.g., 221 N.J. at 30. Additional guidance from the courts came confirming inclusion of the so-called gap period need for the period from 1999 to 2015, and guidance on how the fair share methodology could or should be calculated followed. None of these interim decisions, however, eliminated or altered the existing obligations on municipalities.

In 2015, the court directed that municipalities revise their housing elements and fair share plans “with good faith” and with “reasonable speed.” 221 N.J. at 33. In ordering that the trial courts step into COAH’s former role, the court granted municipalities a 90-day delay period in which to file declaratory judgments with the courts, and then granted an additional period of immunity from any challenges to the constitutionality of such a plan. See id. at 25 (directing that courts be “generously inclined” to grant applications for immunity); id. at 27 (granting five months for “participating” municipalities). The court’s opinion here envisioned a prompt process, with a narrow focus. These constitutional compliance actions were (and are) different from the “typical” builder’s remedy litigation, but it wasn’t at all clear how the two worked together. Municipalities were required to act “with good faith,” but the outer bounds of this concept were not well established. Did this require some level of willful disobedience to remove immunity? Or was more of a “disparate impact” standard envisioned? Did municipalities continue to enjoy presumptive immunity without end following filing a suit, or was there a point at which the courts would force a municipality to take action? These were all open questions in 2015, and remained open until the trial court decisions began to sketch the outer boundaries of “good faith” in these constitutional compliance cases.

Throughout the last four years, municipalities have been under a constant directive to conform their housing elements to the obligations of COAH. Some municipalities recognized that their vacant land adjustments would allow for zoning to accommodate only a portion of their overall obligation. Still others chose not to engage in the constitutional compliance process at all, and instead waited for developers to come to them with proposals for development. But all were obligated to do so with reasonable speed and in good faith. But what does that good faith look like?

‘In re: South Brunswick’

South Brunswick had been a participating municipality before COAH and filed its constitutional compliance action promptly. Over the next year, it made various submissions to the trial court, and the trial court extended the initial immunity granted by the court’s 2015 decision to allow the municipality to address its concerns.

However, in February 2016, following a number of hearings directing specific revisions to the fair share plan, Judge Wolfson determined that the Township’s plan failed to adequately rely on COAH’s regulations, proposed developments that were not economically feasible, and was reliant on proposals that were “ill-conceived.” In the Matter of the Application of South Brunswick, 448 N.J. Super. 441, 451 (Law Div. 2016). Even after revoking immunity from builder’s remedy suits in February, the trial court stayed its order, effectively extending temporary immunity to give South Brunswick one last chance to revise its plan. Specifically, the trial court ordered the Township to comply with COAH’s regulations, to decrease reliance on competitive tax credit developments, and to revise the proposed developments to include presumptive densities and set-asides that were feasible. The trial court granted the Township until May 2, 2016, to comply; when the Township failed to do so, the court removed its immunity.

The South Brunswick decision was notable for its directness and its adherence to the direction of the Supreme Court to “assiduously assess whether immunity, once granted, should be withdrawn if a particular town abuses the process.” As a participating municipality, South Brunswick sought protection while it proceeded in the process of revision. However, when South Brunswick did not conform to the obligations under COAH’s prior round rules or to the directions of the trial court, the court found that this constituted an abuse of the process, removed immunity, and allowed the builder’s remedy litigation to proceed.

‘In re: Englewood Cliffs’

In the case of Englewood Cliffs, the inaction of the municipality for a period of almost four years was determined to constitute “bad faith.” In re: Englewood Cliffs is an unpublished trial court decision, entered by Judge Farrington and dated Aug. 27, 2019, removing municipal immunity from builder’s remedy suits and permitting an intervening party to proceed with its builder’s remedy litigation.

In Englewood Cliffs, the municipality was originally granted immunity on the basis of its status as a “participating municipality” under the prior iteration of COAH’s rules. It had been granted a vacant land adjustment, but disputed what its realistic development potential might be. Over the 18 months between July 2015 and December 2017, the court appointed a special master, who reviewed the municipal analysis of its claim for a vacant land adjustment and the associated proposed zoning changes. Over the next year, attempts to settle the case failed, and the trial court lays out in detail the flaws with an adopted housing element and fair share plan from January 2019 as well. In addition, the trial court identifies a number of moments of clear inaction or intransigence by the municipality, all of which created “a path of resistance” in the determination of the trial court. This, paired with the failure of the Borough to “produce a single unit of affordable housing in the 40-plus years since the original Mount Laurel decision” convinced the trial court that “further delay will be justice denied.”

Conclusion

These decisions should remind practitioners for developers and municipalities alike that, while Mount Laurel encourages voluntary compliance, the courts will enforce the municipal obligation to provide realistic opportunities for the construction of affordable housing. At times, that may require imposing a remedy of last resort. The findings in South Brunswick and Englewood Cliffs show two different municipalities, with two very different processes toward compliance. In both cases, however, the failings of the plans were rooted in a failure to comply with fundamental regulatory and judicial directives, rather than any dispute over the propriety of the mechanisms proposed from a policy perspective. The “good faith” envisioned by the court requires both realistic progress and action toward compliance, and the trial courts are prepared to enforce that obligation where they must.

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Reprinted with permission from the November 11, 2019 issue of the New Jersey Law Journal. © 2019 ALM Media Properties, LLC. Further duplication without permission is prohibited. All rights reserved. For information, contact 877-257-3382 or reprints@alm.com or visit www.almreprints.com.