july 2008

Two Key Bills Impact Development Throughout New Jersey

BACKGROUND

On July 17, 2008, Governor Corzine signed legislation amending New Jersey’s affordable housing laws, while a second bill, which impacts development permits and approvals in the State, was passed by the Senate and Assembly in June and is now awaiting the Governor’s signature.

These two important pieces of legislation will have a broad-based impact on many development projects throughout the state. Accordingly, it is critical to understand and anticipate the key elements and potential ramifications of each bill.

A500 – Affordable Housing Laws

A500, as signed by Governor Corzine, amends portions of the Fair Housing Act, the Local Redevelopment and Housing Law and the Administrative Procedure Act, establishing a uniform 2.5% development fee to be applied to non-residential construction projects statewide. Exceptions include hospital, recreational and transit hub oriented development projects.

The new fee replaces the Council on Affordable Housing’s (COAH) third round growth share municipal ordinances that provided for the alternatives of development fees, inclusive on-site housing, or payments in lieu of construction of inclusive on-site housing. These alternatives are prohibited by the new legislation. The 2.5% fee will be charged regardless of a municipality’s status in providing affordable housing.

A500 provides for a credit for prior improvements. In calculating the fee for a new construction project, the equalized value of the land and previous improvements at the time of the issuance of demolition permits must be subtracted from the equalized value of the land and new construction at the time of the issuances of a certificate of occupancy. The development fee is payable to the state prior to the issuance of a certificate of occupancy.

The new legislation eliminates the future use of Regional Contribution Agreements (RCAs), which have permitted municipalities to transfer a certain portion of their fair share housing transfer obligation outside of their municipal borders. This change in the law does not affect RCAs previously approved by COAH, including those in regional planning areas such as the Highlands, Pinelands and Meadowlands.

A2867 – The Permit Extension Act

If enacted into law as expected, The Permit Extension Act will set forth a tolling and extension period for many types of state, county and local development permits and approvals from January 1, 2007 through July 1, 2010. A2867 provides for an automatic extension of up to six month for approvals or permits that would otherwise expire during the tolling period, or within six months thereafter. Under no circumstances will such extensions run beyond December 31, 2010.

Exceptions to the Permit Extension Act include permits granted under the Flood Hazard Area Control Act, certain coastal center designations pursuant to the Coastal Area Facility Review Act; permits granted within certain “environmentally sensitive areas” as defined by the Act; certain permits or approvals granted by the Department of Transportation and administrative consent orders issued by the Department of Environmental Protection (DEP). In addition, the tolling/extension period does not affect any other extensions which a party would otherwise be allowed to request after the tolling period.

RECOMMENDATIONS

The broad range of development permits and approvals included within the scope of A2867, as well as the previously noted exceptions to the bill, jointly establish the need to evaluate the status of approvals for both pending and ongoing development projects on a one by one basis. We will continue to track the status of this bill.

On the affordable housing front, development projects that have already received approval should be evaluated to determine the possibility of exemption from the 2.5% fee. It should also be noted that the changes set forth in A500, as signed by the Governor, will in all likelihood generate additional remedial legislation.

If you have any questions concerning this legislation, or development issues in New Jersey, please contact John H. Hague at 908-789-8550 or by email at jhague@farerlaw.com