COAH recently proposed new regulations, which among other changes will give it some oversight over the fees municipalities may collect from developers in lieu of constructing affordable housing units onsite. These fees have been one of the most controversial aspects of COAH’s Round Three regulations as was detailed by Thomas Jay Hall, Esq. in his article, “Commercial Development and COAH: A Bad Mix,” published in the New Jersey Law Journal on October 23, 2006.
As initially adopted, COAH’s Round Three regulations permit a municipality to require all developers to build affordable housing units onsite as a condition of their approval or – in lieu of constructing the units onsite – the developer could “negotiate” with the municipality to pay a fee. There are no standards governing the amount that a municipality may charge under the existing COAH regulation.
COAH has now proposed substantial modifications to its regulations. If a municipality collects an in lieu fee, it must be calculated in one of three ways:
1. The municipality may accept COAH’s calculations based upon the average cost of providing an affordable housing unit within the housing region. Depending on the housing region, these fees range from a little over $140,000 to a little over $170,000 per affordable unit, which are a substantial reduction from the fees currently required by some municipalities.
2. The municipality may require an in lieu fee based upon the costs of buying down market rate units to become affordable units.
3. The municipality may propose an alternative valuation method subject to COAH’s approval. Any money received shall be used for affordable housing as set forth in the municipality’s approved spending plan.
It is uncertain how high of a fee COAH will approve under the second and third option. If COAH simply rubber stamps the fees sought to be imposed by the municipality, then these regulations will provide no relief to the development community.
Furthermore, developers may receive the worst of both worlds under these regulations. The region’s average cost will set the minimum fee for all municipalities, even if the actual cost of constructing affordable housing offsite is much lower in a given municipality. In the more expensive communities, the developers will likely have to pay the higher fee.