With the Council on Affordable Housing (COAH) recently voting to adopt the proposed third round regulations, the impact on all types of development will be dramatic.  For an excellent synopsis of the impact of the new rules on commercial development, see Ian Shern’s article from Sunday’s Star Ledger here. 

For a copy of the bill (S-1783) proposed by Senator Ray Lesniak which would reduce (but not eliminate) commercial development fees required by the new COAH rules, click here.

 The Ledger article provides a powerful example of the staggering costs imposed upon new commercial development:

New COAH rules aim to establish 115,000 units of affordable housing through 2018 (up from 52,000 in the previous rules). The rules demand fees to pay for one affordable house per five built, and fees for one affordable unit for every 16 jobs created by new commercial construction (previous ratios were one among nine and one for every 25 jobs).

For a hypothetical 100,000-square-foot office building, the COAH regs would play out like this:

280 jobs would be created, prompting fees to build 17.5 affordable houses, costing between $146,000 to $183,000 apiece, depending on the region of the state. That means a developer would pay an additional $2.6 million to $3.2 million for the office building.

For a same-sized warehouse, fees would range from $1.4 million to $1.7 million. For a same-sized retail project, they would be $1.6 million to $1.9 million.

Today, May 6, 2008, the Council on Affordable Housing (COAH) voted to approve the proposed third round regulations, with minor clarifications, as N.J.A.C. 5:96 (Procedural Rules) and N.J.A.C. 5:97 (Substantive Rules).  The new regulations will be published in the NJ Register on June 2, 2008.  Also today, COAH proposed amendments to the adopted and revised third round rules (N.J.A.C. 5:96 and N.J.A.C. 5:97) and the procedural rules for municipalities certified before January 25, 2007 (N.J.A.C. 5:95). The proposed rule amendments are scheduled to be published in the NJ Register on June 16, 2008.

Upon publication, written comments can be submitted to COAHmail@dca.state.nj.us until August 15, 2008. 

According to COAH, the major proposed substantive amendments to N.J.A.C. 5:97 are as follows:

Proposed Major Changes to N.J.A.C. 5:97

* Municipal level household and employment growth projections have been updated to reflect new DEP Water Quality Management rules, municipal zoning data for municipalities in the Highlands region, and actual growth through 2006 for each municipality.

* COAH’s vacant land analysis was revised to incorporate new DEP spatial data to expand the definition of C-1 streams, remove environmentally sensitive lands from current sewer service areas and recompute the development capacity of lands supported by septic systems pursuant to the pending DEP Water Quality Management Act Rule (WQMR), and use recently released Highlands spatial and other data to recompute the development capacity of lands in the Highlands Planning Area. With these revisions, the report results in a revised estimate of 1,012,692 acres of unconstrained and undeveloped vacant land in the State, and that this land has a residential development capacity of 711,670 dwelling units and non-residential capacity space of 1,090.6 billion square feet.

* Municipalities that approved affordable housing projects between December 20, 2004 and June 2, 2008 will receive a one-for-one bonus for each affordable housing unit approved.

* To promote development in smart growth and redevelopment areas, municipalities that include affordable housing units in smart growth areas near transit or those that include affordable housing units in redevelopment areas will receive a one-third bonus for every affordable unit approved.

* COAH has established presumptive densities and affordable housing set-asides for inclusionary developments based on the State Development and Redevelopment Plan. Higher density standards are established in Planning Area 1, 2 and Centers and lower densities outside of these growth areas.

* Inclusionary developments in workforce housing census tracts will have a 15 percent affordable housing set-aside requirement to recognize potential economic feasibility issues with these projects and encourage the production of rental housing.

* Municipalities may subtract demolitions of occupied non-residential buildings from the calculation of net growth in the municipality.

* A new regional provision has been added to permit municipalities to work with regional entities such as the New Jersey Meadowlands Commission and Fort Monmouth to address regional obligations.

* More flexibility has been added to the provision allowing credit for affordable housing in redevelopment areas.

* Hospitals and nursing homes relocating within the same COAH region will be exempt from a growth share obligation.

* The number of jobs generated by warehouse construction was reduced from 1.5 to 1 job per 1,000 square feet.

For a copy of the proposed amendments,  go to http://www.state.nj.us/dca/coah/june08rules.shtml or contact Phil Morin at pmorin@saul.com.

For the Asbury Park Press article with reaction from environmentalists and municipal representatives, click here. 

For the Star Ledger article summarizing the proposed rule changes, click here.