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Vol. LXI, No. 52
Wednesday, December 26, 2007
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State Removes Housing Burden From Schools, but Others Feel Weight

Matthew Hersh

The state’s proposed new affordable housing growth share mandates released last week calling for a significant increase in New Jersey’s low-cost housing stock received praise from housing advocates, but could prove problematic for Princeton as the rules now exempt some of the region’s most significant developers: K through 12 schools and higher education institutions.

New Jersey’s Council on Affordable Housing, or COAH, acting on a January 2007 court ruling that effectively threw out the state’s 2004 formula for construction growth share, unveiled its new proposal last Tuesday, and while the verdict is not yet in, it is likely both Princetons will have to spend significant time, as they did in 2005, in crafting code to comply with the state’s new mandates.

Basically a continuation of the growth share approach employed by the 2004 rules, the new rules measure a town’s affordable housing requirement as a percentage of both non-residential and residential growth. The new rules outline a town’s requirement between 2004 and projected growth through 2018.

But in eliminating most schools from the equation, the state now requires that one out of every five residential units that are built be affordable and that one affordable unit be built for every 16 jobs a non-residential development produces. The state formerly stipulated that one affordable unit was needed for every eight residential units or every 25 jobs produced.

The new provisions provide significantly more state-wide, low-cost units though 2018, with an estimated 115,000 units  up from the state’s previous 53,000-unit calculation. Other notable changes include an increase in Regional Contribution Agreements to fall in the $67,000 to $80,000 range per unit, up from the previous $35,000 standard. However, a builder’s ability to use a payment in lieu of housing cannot be used to fund an RCA, and the new in-lieu payments have been retooled to mirror regional construction costs.

However, in 2004, schools K through 12 had a mandate to provide one affordable unit for every 25,000 square feet of construction; now those schools, along with higher education institutions, no longer generate a growth share obligation, leaving towns, particularly Princeton -Borough, in a position to completely rethink its housing obligation. Under the previous COAH rules, the Borough had projected that it would need to build 97 low-cost units through 2014, with about 38 of those units necessitated by anticipated Princeton University development. According to Borough zoning officer Derek Bridger, who also oversees the municipal affordable housing regulations, those numbers will now require a drastic readjustment.

“They took out the higher education institutions, and it doesn’t effect all communities, but it impacts the Borough,” he said Thursday

Having already committed to financing and building five affordable residential units on Leigh Avenue as part of Princeton Borough’s old COAH requirements, Princeton University has nevertheless maintained that it would still work with the municipalities in creating a low-cost housing stock.

“We expect there will be discussions with the municipalities about the implications of the housing mandates,” said PU spokesperson Cass Cliatt. “But our thinking right now is that we plan to stay on board with our existing initiatives and we continue to appreciate the importance of helping the community to provide affordable housing.”

When COAH announced its 2004 proposal, Princeton University was one of several academic and research institutions arguing that the growth share formula did not properly address school construction. It was pointed out, for example, that a 2,500-square-foot laboratory would not create the kind of job growth that would be created in a similarly sized non-residential development.

Removing the housing burden from the schools, however, has increased the burden on other entities, particularly hospitals, nursing homes, assisted living facilities and jails, whose low-cost housing obligations have just about doubled under COAH’s proposed changes. For instance, if the new rules were implemented, Princeton HealthCare System would be required to build one unit for every 6,154 square feet of new construction. Under the previous recommendations, it was one affordable unit for every 12,500 square feet of building. Further, the hospital would now be mandated to build a low-cost unit for every 2.6 new jobs generated from growth, up from the 2004 recommendations of one unit per every two jobs created.

The first phase of Princeton HealthCare System’s planned campus in Plainsboro is estimated at 600,000 square feet. Under the new COAH proposal, without factoring in any credit it would have received from demolition of existing buildings, the hospital’s obligation has gone from 48 units to 89 units.

The new rules allow a municipality to charge non-residential developers a developer’s fee rather than pay the growth share cost of building a unit. However, “this also is extremely difficult financially for us,” said Pam Hersh, vice president of Government and Community Affairs at PHCS, “because hospital construction costs are far more expensive than other types of construction.”

The developer’s fee was increased to three percent, which means that for a project on par with the hospital’s planned construction costs of roughly $400 million, the fee would be about $12 million.

Ms. Hersh did say, however, that she “wholeheartedly agrees” that higher education construction should be exempt from the new regulations. As a former administrator at Princeton University, Ms. Hersh said she had “argued for this exemption for a number of years.”

Hotels throughout the state are also shouldering a heavier burden, and Princeton Borough’s Nassau Inn, eyeing over 50,000 square feet of improvements to its retail space, conference space, and room space, could potentially be required to more than triple it’s growth share calculations. Hotels and motels, under the new COAH regulations, would be required to build one affordable unit for every 9.412 square feet of construction, as compared with the former one unit per 31,250 square feet.

The Regional Planning Board of Princeton is expected to review the Nassau Inn concept at its January 17 meeting.

When the state appellate court invalidated COAH’s 2004 proposal, it gave the Corzine administration until December 31 to adopt new rules. COAH was then granted an extension through June 2008 for public comment. That comment period will run from January 22 through March 22, 2008, with towns expected to adopt the new rules between four and seven months following that period, the Borough’s Mr. Bridger said.

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