Mount Laurel Housing comes from the lead 1975 New Jersey Supreme Court case Southern Burlington County NAACP v. Mount Laurel Township which spawned what is now known as the Mount Laurel Doctrine.
The plaintiffs challenged Mount Laurel’s zoning ordinance (which favored large lot residential development) on the grounds that it excluded low- and moderate-income families. The plaintiffs prevailed, but there were numerous challenges and the case was again before the Supreme Court in 1983. The court reaffirmed in what was later known as the Mount Laurel II decision and added some enforcement mechanisms:
- A small number of trial judges were put in charge of all Mount Laurel actions
- Allowing “builder’s remedy” lawsuits that would allow developers to sue for higher zoning densities
The New Jersey legislature, accepting the concept that there is some constitutional obligation to provide affordable housing, passed the Fair Housing Act in 1985 with the creation of the Council on Affordable Housing (“COAH”). A community that filed a compliance plan with COAH became immune from builder’s remedy lawsuits. Motivated by the ability to control their own destiny, many municipalities complied.
So how does this all work today? For practical purposes, many municipalities have already zoned certain areas for higher density housing like apartments, condominiums and townhomes. A developer seeking to develop in these areas must set aside 20% of the units for low- and moderate-income families. The rents and sale prices of these homes are based on incomes defined as low and moderate in the area. For example, if a household income of $60,000 is considered moderate income, the sale price of an affordable unit is based on a small downpayment and a mortgage payment equal to roughly 30% of the $60,000 income.
From a valuation perspective, a developer buying an approved parcel typically does not pay for the Mount Laurel units because the sale prices of the units and the construction costs are often an unprofitable “wash”.
So does it work? Not very well. While there has been some affordable housing built, it is no where near the projected demand. And yet people find places to live in this most densely populated state. Without massive government intervention.
I am just trying to figure out how to get a 20% affordable set aside on some sweet oceanfront land.