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Costly Decisions

Costly Decisions

As numerous local municipalities settle affordable housing litigation, how much impact will these developments have on suburban communities?

“I will have to sell my house and move.” 

That’s the decision from Moorestown resident Russ Smith if a proposed affordable housing apartment complex on Route 38 bordering his neighborhood comes to reality. “It’s a four-story building and a parking lot with 100 spaces 150 feet away from my bedroom window. The cost of the units is irrelevant.”

Moorestown’s planning board granted preliminary approval for the 76-unit project—dubbed Moorestown Crossing—in early June, but it has not come without its share of public criticism. Residents of the surrounding neighborhood voiced repeated concerns about the impact on the environment and home values, not to mention the fact that a deed covenant dating back to 1945 restricts the project, not because it’s affordable housing, but because it’s an apartment building. Smith is one of dozens of residents being sued by the developer Pennrose Properties. As long as the current deed covenant stands, which states that only one single-family home per half acre can be built, Pennrose cannot move forward. All landowners would need to agree to lift the covenant, otherwise only a judge can sign off on it.

In his own counter-lawsuit, Smith alleges Moorestown did not follow the rules for passing a zoning ordinance and had to take extra steps to make the development plan comply with the master plan.

“It looks like we have a good case because of the deed restrictions. As for other sites I don’t think people can stop it because they don’t have something like a deed restriction,” he says.

Is affordable housing something that should be stopped? It’s one of the most controversial topics in New Jersey, from Moorestown to Morris Plains. Townships have been mired in lawsuits alleging they aren’t doing enough to meet affordable housing needs, and are now caught between trying to fulfill a court mandated quota while managing uproar from current residents who fear that the burdens of development outweigh the greater good.

The Doctrine Decision
All around South Jersey there seems to be an almost-monthly announcement of another affordable housing development coming to a town near you. It’s nothing new. Towns have been integrating these housing options into their development plans for decades, but there was a noticeable slowing of these commitments in recent years.

A number of decisions in the ’70s and ’80s essentially opened up the predominantly middle- and upper-class suburban neighborhoods to those who could not otherwise afford it. The first being the Mount Laurel Doctrine, a 1975 NJ Supreme Court decision preventing towns from using zoning regulations to discriminate against people in low- to moderate-income brackets. Towns would be mandated to meet an affordable housing obligation based on statewide need, which was evaluated and determined by COAH (Council on Affordable Housing), an agency formed after the Fair Share Housing Act was adopted in 1985. COAH sought to evaluate a municipality’s obligations and how they were to be satisfied every few years. Rules were released in two rounds, with the third round of obligations expected in 1999, however, political challenges delayed those numbers. After years of governors pushing this issue aside, it fell into the hands of the Supreme Court and in 2015 it removed the matter from the executive branch and turned it back over to the courts.

“The state went through a 16-year delay where this agency wasn’t doing its job. Now because of that delay, we’re not just dealing with the need from 2015 to 2025, we’re dealing from 1999 to 2025,” says Kevin Walsh, executive director of the Fair Share Housing Center (FSHC) located in Cherry Hill. Founded by some of the attorneys and plaintiffs involved in the original Mount Laurel case, FSHC has worked for more than four decades to promote the availability of affordable homes throughout the state.

Since the 2015 decision, FSHC has been taking municipalities all across New Jersey to court, suing them for not fulfilling their affordable housing obligations. Of 330 court cases, 220 have been settled, spurring the recent flurry of news about proposed affordable housing developments.

“Towns don’t comply or they ignore the law, but they can be sued by an organization or developer who forces them to comply,” Walsh says. “Some towns have done a decent job of meeting their obligations and controlling their destiny without builders suing them. Development has been happening all these years because some towns have allowed for it to happen. This could be Bancroft, housing built by Habitat for Humanity, The Jewish Federation of Cherry Hill, veterans’ organizations. ...There’s a broad range and they’ve done it without any government support other than agreeing to the zoning.”

But in some cases, it didn’t go far enough. Arnold Cohen, senior policy coordinator at the Housing and Community Development Network of NJ, says towns didn’t just suddenly decide to start pursuing these projects. “Their hand is being forced. We saw during that 15-year period where there were no rules for towns to address their obligations. Development happened but little of it reached within means of working families most in need … especially in suburban areas,” he says.

To their credit, many towns didn’t know what their need for housing was. “There was a wide gap between what Fair Share Housing was saying the statewide obligation should be and what the NJ League of Municipalities’ need was. In rough numbers, Fair Share saw a need for 200,000 units, the league said 80,000. That’s a big gap,” says Matthew Reilly, president and CEO of MEND in Moorestown, a nonprofit affordable housing developer. “There was no consensus as to how individual obligations should be calculated.”

However, New Jersey now has a better sense of its need for affordable housing. This past March a judge released a highly anticipated decision, putting the statewide need at over 155,000 units. “Because of this decision, we’ve now been seeing more towns come to some sort of agreement based on the methodology of this court decision,” Reilly says. As settlement details trickle out, the public is learning of individual towns’ “fair share” obligations. For instance, Moorestown, which settled in March, must fulfill 337 units. After settling in late July, Evesham’s number is 680 by 2025. Down the Shore, Ocean City’s obligation amounts to 1,687 units. Towns are not obligated to build these units new, but must accommodate for them in zoning.

How Great is the Need?
It’s no shock to those of us living here that New Jersey is an expensive state to call home. A recent study by the Health Opportunity and Equity Initiative ranked New Jersey 44th in the country for affordable housing. This echoes the findings of the Out of Reach NJ report released by Cohen’s organization, which showed, in order to rent a modest, two-bedroom apartment at fair market value, a person would need to make $28.17 an hour. For someone making minimum wage, it would require 131 hours of work a week, or at least three full-time jobs. Even those making the mean wage of $18 an hour would need to clock in for 62 hours a week.

“There are many people in the state who cannot afford either rental or ownership of market-rate housing,” says Reilly. “A lot of people in the country are struggling to get by day-to-day, and it’s especially true if you are unfortunate enough to have no other source of income except social security. Elderly tenants are half of our portfolio of affordable housing.”

Who qualifies for affordable housing exactly? It’s a wider net than senior citizens, and it’s not only low-income earners. “A person earning up to 60 percent of an area’s median income is eligible for affordable housing. These are entry-level workers, office clerks, fast food workers, folks that fit in between very low income and the upper tier of those who can afford market rate,” says Jonathan Lubonski, vice president of development for The Michaels Organization, headquartered in Marlton. Founded in 1973, Michaels is one of the largest owners of affordable housing developments with nearly 52,000 units in 36 states.

Roughly a quarter of New Jersey’s population qualifies for affordable housing. “For a three-person household in Camden, Burlington and Gloucester counties they could earn between $20,000 and $53,000 a year and qualify for most affordable homes,” says Walsh. “Some go lower like those with disabilities or veterans.”

Cohen says this is a crisis for New Jersey. “The lower your income the more crisis there is,” he says. “If a new apartment is being built and rent is $1,500 a month, that’s a crisis for someone earning $23,000 a year. 

“We use the term ‘affordable home’ because it’s about all of us,” Cohen continues. “Everybody needs a home they can afford. The Out of Reach report shows that this is significant for a number of people in our state. The market has increasingly been geared toward people with higher incomes, leaving more people unable to find market-rate homes. … People are doubling up on jobs or living in overcrowded situations as a result.”

What few people take into account is the need among the working middle class. “Affordable housing is designed for people who are working,” says Bernadette Blackstock, CEO/president of the People for People Foundation of Gloucester County. “Think of the recent college graduate who is only making $35,000 a year. How do you afford rent on that income? Affordable housing provides them a good starter base.”

Last month in Clayton, People for People opened Camp Salute, an affordable housing development with preference given to veterans. The project will total 76 units once complete, of which 18 are currently occupied, 60 percent of them by veterans.

“It took seven years to bring this dream to fruition,” says Blackstock. “Gloucester County is one of the higher income areas, and these veterans come home from service, their income is not high and while they are dealing with adjusting back into society they can face threats of eviction. We wanted to provide an affordable place to live.”

The response to Camp Salute’s model, which includes access to veterans’ services on the same site, has been overwhelmingly positive, prompting other towns to reach out with interest, showing the need exists.

MEND’s waiting list is a minimum of six months, says Reilly. “We are at 100 percent capacity. It’s sad, but we regularly turn people away because we don’t have the housing available.” MEND has developed over 700 affordable housing units in nearly 30 locations in South Jersey. Its latest project will be construction of a 54-unit senior housing project on Riverton Road in Cinnaminson. Reilly expects to be accepting applications by fall 2019. “We’ll have no difficulty filling that up almost immediately,” he says.

Affordable Solutions … At a Cost 
In a recent public hearing with the Assembly Housing and Community Development Committee in Trenton that lasted four hours, an overwhelming crowd turned out to say their piece about how affordable housing should be implemented in New Jersey. Many who spoke, including mayors and citizens, say the costs and frustrations are too much for municipalities to bear.

Locally, Moorestown has been sued by four developers and FSHC and was originally told it would need to create 1,600 units in the township. Mayor Stacey Jordan says they worked to get the number down as much as possible. “We don’t mind having affordable housing, but it has to be done in a way that keeps with the traditional developments of the town,” she says. “When people say, ‘Moorestown doesn’t want affordable housing,’ that’s not the case. We’ve always had it, and in some ways we were ahead of the curve with having MEND in our town.”

Moorestown’s settlement for 337 units could end up equating to many more when all of the dust settles. Because some for-profit developers can set aside a percentage of units in a given development, classifying them as affordable, the other new units add to the infrastructure stress on towns. “It’s not just 337 units. It’s going to be over 890 units of new housing, which is why it was so critical we got that number down. It would have changed this suburban town into an urban setting,” Jordan says. “People don’t come to Moorestown for high-rises.” 

Aside from the aforementioned 76-unit development proposed for Route 38, where Smith lives, Moorestown’s plans include the other pieces of land called Nagle Tract and Sbar. In order to get closer to its full obligation, the town will have to use overlay zoning for mixed-use on the commercial properties of Moorestown Mall, the Lenola Road Shopping Center and former Kmart shopping center.

“Our premise as a town council was to do this in the most fiscally responsible and most common sense way. … We really did take everything into account and we feel we came up with the best solution that we could,” Jordan says. “But one of the things we talked about throughout the process was that the addition of affordable housing may end up kicking out people on fixed incomes who have lived here all their lives. They won’t be able to afford Moorestown anymore as the costs for infrastructure like water service and police go up. … It’s one of the ironic things that happens with affordable housing.”

Jordan, who has been on the council for eight years, says, “This is the most complicated, frustrating and time-consuming process I’ve ever dealt with in my public service.”

Evesham Township Planner Leah Furey Bruder, PP, AICP, says the township settled in late July for its obligation. She says, despite the COAH-related delays, the township has moved forward with compliance mechanisms to make sure affordable housing units were available. For instance, the township worked with MEND in 2006 when the organization acquired property on Sharp Road, amounting to 104 units. And just last month, officials approved a 30-year payment-in-lieu-of-taxes (PILOT) agreement for Cornerstone at Marlton, a 64-unit family apartment complex, with all units for low- and moderate-income families.

“The town has continued to set the stage from a municipal standpoint by using these compliance mechanisms— inclusionary zoning or group homes. … When doing redevelopment we have tried to include a set aside to amass inventory, like at the new Renaissance Square. We amended it to include 10 percent affordable, and Barclay Chase on Route 70 near Medford will have 33 units mixed in. … The question was, ‘Was that number enough or too much?’” she says. And according to the FSHC, it wasn’t enough, leading to litigation.

In Jordan’s words, it was a “catch-22” for municipalities. “There were no rules from COAH. If you did something it wasn’t enough, and then it was thrown into the courts. They took it into their own hands and made the rules,” she says.

Bruder feels the dialogue surrounding affordable housing has been skewed. “We haven’t had opposition to the principle of [affordable housing], but the inefficiencies in implementing it,” she says. “It’s frustrating and time consuming for our staff, council and planning board. The sense from the Fair Share Housing Center is they assume you’re doing something wrong in land use planning. We’re trying to think about the township as a whole, how the pieces fit together and affordable housing is just one piece. Now that we’ve gotten closer to the other side we’ve found some balance. It was a long haul but we came to a conclusion everybody is satisfied with.” 

Both Moorestown and Evesham will proceed to a fairness hearing this month where a judge determines whether or not the agreement is fair to those in the low- and moderate-income brackets.

 “If the judge agrees, we have 120 days to put together a full plan, get it adopted by the planning board, adopt ordinances and the spending plan and have it come together in the next seven years,” says Bruder.

Uncertainty remains however in how these projects across the state will be funded, and some aspects place another burden on townships. Almost no affordable housing project will receive government funding without a PILOT agreement. PILOTs allow developers to make annual payments on the property taxes, most commonly seen at the rate of 5 percent.

“Towns will work with high-quality, well-managed affordable housing developers and funding comes from different sources, but in order to win funding, they must score as high as possible,” says Bruder. “Township participation in the form of a PILOT is something they can earn points for and something they need in order to make their application competitive.”

Reilly says developers may as well not apply if they don’t have a perfect score. “A PILOT is required to make the operation financially feasible, but also because if not, then you can’t get a perfect score under the Housing and Mortgage Finance Agency (HMFA),” he says.

PILOTs do raise concerns from residents who see it as a loss for the townships that will likely need that influx of money to cover infrastructure costs. “Some members of the public do ask if this is a good deal, but in the big picture a public good is being served here,” says Bruder. “They may consider the loss of revenue from affordable units, but in the process we’re also reviving a site that was underutilized. It’s an investment that includes environmental cleanup, beautifying the area, possibly with a public park.”

Even with a PILOT in hand, Reilly says there is just no guarantee that all of these projects will be approved for funding. “Developers are scurrying and competing for the only significant source of financing which is the low income housing tax credit program offered through the HMFA. Each state is allocated a certain number of credits from the federal government and NJHMFA distributes the credits to developers that are financing housing projects in specific towns,” says Reilly. “But here’s the rub: In 2017, the HMFA received 60 applications from around the state, but they only had enough to fund 29 of those projects. That’s all they had.”

With funding hanging in the balance, Reilly says towns need to get creative. “All of these units don’t need to be new,” he says. “In Moorestown for instance, MEND is willing to extend the affordability controls on 101 units of housing that we’ve been operating since the early and mid ’70s. Moorestown is also considering purchasing existing homes on the market and turning them into affordable housing. There are different ways.”

For developers like MEND and others that have been in the business of affordable housing for decades, it is more competitive than ever and more developers are venturing into these waters.

“New Jersey has always been competitive because it’s the birthplace of affordable housing through the Mount Laurel Decision, but now we’re seeing developers from elsewhere in the country coming here to develop,” Lubonski says. “New Jersey is a place of opportunity right now.”

Lubonski says developers getting into this arena need to be prepared for the complications ahead. “This is a much more complicated arena than market-rate housing,” he says. “There is a lot of regulatory oversight and it’s typical we have many different levels of financing from different agencies: local contributions, state funds, federal tax credits, and depending on the project we could access funds from the VA.” Along with competitors coming into the market, Lubonski says the construction industry is booming in general, raising the costs of materials and labor.

Local agencies can be a valuable resource for developers, says Louis Cappelli, Camden County freeholder. He says the Camden County Improvement Authority (CCIA) can identify potential sites for development and work with municipalities in the process of creating housing. 

“A lot of these properties are under-utilized and are primed for these developments,” he says.

The Dissenting Opinion
Despite the progress being made with settlements and development proposals, opposition exists.

The affordable housing veterans we spoke with say there has always been a vocal minority speaking out against it. “In my experience the overwhelming majority of people in the state support development of affordable homes. The vocal but small minority will often complain about any form of change,” says the FSHC’s Walsh.

Reilly says he has heard every detraction when it comes to affordable housing. “There is less opposition to senior housing. Towns by and large don’t see them as a drain on resources, but if it’s a non-elderly population there can be a perception they will have behavioral issues or they will bring an influx of children into the schools,” he says. “I don’t personally buy that argument. The statistics don’t bear out. You can go on the NJ Department of Education website and look at year-by-year count of school district populations and the numbers are all declining. Their argument sounds almost rational but unfortunately it’s not consistent with the facts.”

Even for the veteran-priority Camp Salute, Blackstock says there were towns that turned them down. “We had a couple [towns that] told us they didn’t want that type of housing. What they don’t understand is that affordable housing is not the same as Section 8 or public housing.”

Dissent extends to legislators as well, namely to Assemblyman Jon Bramnick (R-Union), who would like to see the courts removed from this process. He and fellow Republicans have proposed amendments that would put the power back in the state’s hands, among other things, but these bills have not been brought up for a vote by the Democratic-controlled House. Although Bramnick did not respond to repeated attempts for comment, South Jersey Magazine did learn he is spearheading a Sept. 20 bipartisan rally in Trenton to push back on high-density housing.

Walsh has been criticized for leveling racist implications against municipalities in the context of affordable housing, including to Cherry Hill’s town council at a July meeting and at the public hearing in Trenton. In both cases, officials on the other side of the microphone spoke out against these slights. Walsh maintains, “New Jersey is one of the most racially and economically segregated states in the country. They are not racially segregated by accident but by decades of policies that divided our state.”

Smith takes issue with the correlation of racism just because he is speaking up. “Moorestown has also been engaged in race baiting and is claiming the residents fighting the lawsuit are racist and trying to keep poor people out,” he says. “The Fair Share Housing Center used the same techniques at a recent hearing in Trenton. Basically the issue is the density of the housing and four-story structures next to single homes rather than the fact it is affordable. However, whenever people complain about the density the response from Moorestown and Fair Share is to just call people racist and never answer the underlying issue.”

Jordan says no matter where these developments are proposed, people will be up in arms. “They equate affordable housing with problems, founded or unfounded. They don’t like buildings next to their houses,” she says. “Someone said this wouldn’t affect me because it wouldn’t be near my house. I have MEND housing all around me. My house is fine. It has to be done with a reputable company and good planning. A lot of what is coming out about Pennrose is misinformation, as if Moorestown is initiating it. That’s not correct. The builder picked the property and we could either negotiate and get the best possible outcome or let the courts decide.”

Cohen says communities that adopt affordable housing will see real benefits from a diverse population. “[Townships will be] able to have people who work in their town—sanitation [workers], teachers’ aides, health care providers— [also living there] supporting the needs of the town,” he says. “We depend upon them for everything and they are people who are also raising families, adding to the social fabric of the town. It’s not just an opportunity for them—it’s the right thing to do.” 



Published (and copyrighted) in South Jersey Magazine, Volume 15, Issue 5 (August 2018).

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