Fox Rothschild LLP ATTORNEYS AT LAW FEBRUARY 2009 Animal House Re-Lived 1: A Depiction of New Jersey’s Current Affordable Housing Landscape By Thomas Daniel McCloskey The Intro Movie aficionados will never forget that 1978 mega-hit, Animal House , the hilarious, side-splitting and rambunctious look at college fraternities and sororities here in the U.S., and the antics that almost uniformly arise from the feuds and interactions of college administrations, their faculties, local communities, students and, of course, the Greek systems established campus-wide to provide social outlets for the student body. Those who have seen the movie will, no doubt, vividly recall the story of the two feuding frat houses at fictional Faber College circa 1962: “Delta House,” the wild and worst frat on campus, so obnoxious that it included among its members just about anybody – from the cool and super smooth Otter and Boon, resident wildman “7 years of college down the drain” John “Bluto” Blutarsky, to the school’s most socially awkward losers; and “Omega House,” the conservative anti-thesis of Delta comprised of nothing but white, Anglo-Saxon, uppity rich guys so holier-than-thou they were reviled by everyone save the chief college officer, DeanVernon Wormer. I, for one, will never forget the high- jinks of the Delta House members, the havoc they wreaked through endless parties, a love and penchant for practical jokes, their unending battles with the Omega’s, the “trial” leading to the revocation of the Delta House charter before Omega’s Doug Niedermeyer and the Student Court, the penultimate showdown with Dean Wormer after he enlisted Omega House to help him “kick those punks right off of this campus,” and the movie’s ending climax at the Faber Day parade. As I reflected on the most notable legal events of this year just past, I never imagined there could be a series of uncanny resemblances between the most memorable scenes and sound-bites from that movie, and what actually played itself out here in New Jersey in the affordable housing arena of social engineering. Imagery and analogy are, after all, beautiful and oft-times effective ways of making a point. So, in disbelief there could be such analogies, I took to the task of outlining the chronology of salient events and commentary (bolded thusly ), and, in pertinent part, this is what it looked (and sounded!) like to me: The Plot Summary The year just concluded marked the 25th anniversary of our Supreme Court’s decision in Mt. Laurel II . In that matter, the High Court - annoyed that municipalities had done nothing in the intervening eight years of its seminal affordable housing decision in Mt. Laurel I “to provide realisitc opportunities for a variety and choice” of affordable housing in meeting their constitutionally mandated obligation 1 National Lampoonʼs Animal House , directed by John Landis and written by Harold Ramis, Douglas Kenney and Chris Miller; Ivan Reitman and Matty Simmons, Producers (Universal Pictures, 1978). California Delaware Florida Nevada New Jersey New York Pennsylvania www.foxrothschild.com to provide for their fair shares – fashioned the enforcement device known commonly as the “builders remedy.” In short, the remedy provided builder-developers the right to bring legal action against recalcitrant municipalities to force, judicially, approvals of residential development projects that proposed to include components of housing product affordable to those of low to moderate income households. A rash of such suits were brought in the wake of Mt. Laurel II , prompting fears by municipalities that the courts would be dictating to them how and where residential development (with and without affordable housing) would be implemented. Tensions immediately fomented and reached a feverish pitch between and among the judicial, legislative and executive branches of government over who was the more responsible, and equipped, agency of government to socially engineer housing policy and implement construction state-wide. The end result was the Legislature’s enactment of the “Fair Housing Act of 1985” and its creation of the state agency known as the “Council on Affordable Housing,” or “COAH,” which now by statute, was charged with the regulatory responsibility to oversee and develop a uniform set of substantive and procedural regulations that ostensibly would facilitate the implementation of the mandates of both Mt. Laurel I and Mt. Laurel II . While co-extensive with the judicially fashioned “builders remedy” process, for towns that sought to voluntarily comply with COAH’s labyrinth of ensuing substantive and procedural regulations, such towns would enjoy a “safe harbor” immunity from builders remedy actions while they undertook to comply. Now fast forward. Over the 25 years that ensued from the Court’s Mt. Laurel II decision, a reported 60,000 plus or minus “affordable housing units” were constructed within the more vulnerable of New Jersey’s 566 municipalities, i.e ., those with developable land, and during no less than two construction boom cycles. Recent judicial intervention in the process, discussed below, invalidated COAH’s “third round rules” as having been, in material part, defective and trumped-up in such a way that, the Appellate Division concluded, recklessly if not deliberately underestimated the affordable housing need state-wide and over-stated the successes of municipal compliance with affordable housing obligations. Ordered by the Court to revamp, revise and re-promulgate new rules that would rectify the deficiencies detected, COAH adopted a new set of “third round” rules on May 6, 2008 that resulted in a re-calculation of need at some 115,000 affordable housing units state-wide yet to be met; and further, a dramatic alteration of the methodology by which towns could and would “pass through” its development obligations to developers. Known as “growth share,” towns would be empowered to impose upon developer’s their “fair share” of the town’s “fair share” – and for the first time ever introduced into the equation the developers of both residential and “non-residential,” or commercial development projects effectively subsidize a municipality’s compliance efforts. Here’s one glaring, simple fact. As we begin the new year, with what is presently on the books – unless or until overturned by the courts, modified, vacated or revised, re-introduced and re-enacted in some new form or another by the executive branch, the Legislature, administrative bodies or the courts – no less than 115,000 affordable housing units must be built and/or somehow otherwise created in New Jersey by 2018. With the advent of 2009, and both the state’s and national economies “tanking,” that’s a mere nine years left to incentivize, fund, actually build and deliver almost twice as many affordable housing units than the 60,000 affordable housing units, which in fact, were delivered during the full 25 years that have elapsed since the Mt. Laurel II decision in 1983. Builders and developers are bleeding to death. Small businesses are struggling to meet payroll each week, and even the most successful and/or creditworthy business enterprises cannot get their banks to advance credit. And, with COAH’s own newly adopted Third Round Rules, depending upon what region a town falls within, the range of estimated costs COAH has established for the construction of one new affordable housing unit and alternative payment-in-lieu purposes – i.e ., of between $145,000 - $182,000 -- raises this troubling arithmetic quandary. Taking the simple average of that range, i.e ., California Delaware Florida Nevada New Jersey New York Pennsylvania www.foxrothschild.com $163,500, when you do the math, $163,500 X 115,000 equals $18.8 billion. Where is that incredibly large sum of investment capital going to come from, especially in these precarious economic times, over the next 9 years? I’m quite certain no provision was made for a New Jersey affordable housing bail-out in Congress’ “white-collar welfare” initiative known as the “Troubled Asset Recovery Program,” or “TARP,” that was rammed through before year’s end ostensibly to prop up failing credit markets. As we’ve quickly come to see, TARP is now being picked away at by the auto industry and potentially every and any other industry in need – even the porn industry has its hand out! -- like crows feeding on a recent road kill. It’s not quite clear who first planted, and then punched that proverbial ball of cottage cheese out of the cheeks and mouth of Blutarsky that served up the scream of “Food Fight” here. Arguably, the Appellate Division’s decision of January 25, 2007 invalidating COAH’s then version of its Third Round Rules might qualify as the trigger designation – or, from one perspective of the legal concept of causation, the “efficient cause.” Of course, other innumerable contributing causes had been occurring or building up in the interim of that decision to provoke it. Regardless, what is clear is what ensued. The same or similar tensions between and among the executive, legislative and judicial branches of our state government that fomented to their fever pitch and the resultant enactment of the Fair Housing Act in 1985 – following Mt. Laurel I in 1975 and Mt . Laurel II in 1983 – are back in full swing. As Yogi Berra might observe, “[i]t’s deja vu all over again.” As you consider the following, picture in your mind the resemblant, inter-woven scenes, quotes, sights and sounds of Animal House inter-spersed throughout. If spliced together and made into a movie,