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Millburn’s Affordable Housing Settlement: Everything You Need to Know

September 1, 2021 by in "Two Minute Takeaway"

 

Millburn recently settled important litigation concerning its affordable housing obligations. The Settlement Agreement was publicly filed in court on August 18, 2021 and a copy is available here. 

The Settlement amends Millburn’s zoning to allow development of large multi-family housing complexes in areas previously zoned for commercial use.  Here is everything you need to know about the Settlement.

What Does the Settlement Do?

The Settlement changes Millburn’s zoning to permit private developers to build multi-family housing in which 20% of new units meet local affordability guidelines.  Such “inclusionary” projects — in which market-rate units subsidize affordable units — are feasible in Millburn’s strong housing market but require developers to operate on tighter margins.  Most of the market rate units will be high-end luxury units targeted to Millburn’s affluent community.  The Settlement contains one exception to this approach and requires Millburn to sponsor a dedicated 75-unit affordable housing complex proposed to be located at the Millburn Department of Public Works location.   

For purposes of the Settlement, Millburn agrees that the Town has a target of 1,485 units of affordable housing, although the Town reserves the right to challenge that number in any further litigation.  That number imputes an affordable housing density of 150 affordable units per square mile (1,485 units over Millburn’s 9.89 square miles).

To address this obligation, Millburn agrees to make zoning changes — and independently to sponsor the DPW project — to allow development of approximately 4,700 multi-family units, including almost 1,000 affordable units. 

What Areas Are Affected?

1.     A Larger, More Developed, Downtown

The Settlement re-zones Millburn’s entire downtown area, stretching from the old Wells Fargo building on Millburn Avenue west of downtown, to the Trader Joe’s/PetSmart shopping center on Millburn Avenue east of downtown.     

          Central Downtown           

The Settlement permits the entire central downtown area adjacent to Millburn and Essex Avenues to be developed at a density of 25 units per acre. 

The central downtown area comprises approximately 25 acres, permitting development of 625 residential units, including 125 affordable units.  As part of the Settlement, the Town re-confirms its prior approval of a proposal to develop the 1.5-acre parcel housing the old Wells Fargo building as a 53 unit apartment complex with 8 affordable units.  It will be interesting to see if a density of 25 units per acre is sufficient quickly to induce redevelopment in other parts of the central downtown area.

          Eastern Downtown

Further east on Millburn Avenue, the Settlement permits redevelopment — at a density of 40 units per acre — on the north side of Millburn Avenue from the point where Essex and Millburn Avenues separate all the way to Myrtle Avenue.  This 2,000 foot stretch of street frontage includes the old Annie Sez building, the Investors and Santander banks buildings, the plazas containing Jade Lake Gourmet and the Genius Gems play center, and the large commercial plaza containing CVS, Motion Fitness, Trader Joe’s, and PetSmart.  This tract comprises 17.5 acres, and permits development of 700 new units, including 140 affordable units.

Density of 40 units per acre provides significant incentive to redevelop this area.  Indeed, the Settlement approves a project on the Annie Sez property slated to contain 150 residential units, including 30 affordable units.  Other properties such as the Genius Gems property (which has changed tenants several times over the past years) and the large New Wyoming Dry Cleaners property next door, would appear to be attractive targets for redevelopment.  However, properties with major anchor tenants presumably subject to long and profitable leases — such as the parcel containing CVS, Trader Joe’s, and PetSmart — may find redevelopment unattractive or impossible. 

          The DPW Site (a/k/a “the dump”)

Finally, the Settlement requires the Town independently to sponsor a 75-unit affordable housing project, which is currently planned for the downtown site where the Department of Public Work’s waste disposal area is located.  Unlike the other provisions of the Settlement, this provision requires the Town to raise funding to build and manage this housing.  Environmental obstacles may hamper development of this site and the Town agrees to provide an alternative site or sites if the DPW site is not suitable.  

In conclusion, the Settlement encourages significant redevelopment of new mixed-use luxury and affordable housing complexes that may significantly transform the entire downtown area into a more densely populated and busier commercial center.

2.     A New Neighborhood Below Shop-Rite

The Settlement re-zones the entire commercial area south of the Shop-Rite located on Main Street to permit redevelopment at a density of 18 units per acre.  Many Millburn residents know this area as the former location of Sports Academy, a popular indoor athletic venue which closed last year.  While 18 units per acre is not high-density, it likely presents an attractive redevelopment opportunity for some of the owners of dated commercial buildings in this area.  This area comprises 40 acres and permits development of 720 units, including 144 affordable units. 

3.     Redevelopment Along Morris Avenue

The Settlement re-zones the Millburn side of Morris Avenue to permit residential development at a density of 18 units per acre.  This tract spans the northern side of Morris Avenue from Wine Library to Benihana’s and includes such popular locations of Panera Bread, Bagel’s 4 You, Wendy’s, and King’s Supermarket.  The 31-acre tract can accommodate 630 residential units, including 126 affordable units.

4.     More Condos Near the Short Hills Mall

The Settlement makes significant zoning changes that will continue redevelopment near the Short Hills Mall.  The recently completed 195-unit Upton Apartments next door to the Short Hills Mall was the first project in Town to include a set-aside of affordable units.  The Settlement indicates the Upton Apartments will be joined by some new neighbors.

          The Woodmont Property

The Settlement approves a large proposed project — called the “Woodmont Property” — containing 195 units, including 39 affordable units, in the wooded area directly opposite the Upton Apartments.  The Settlement, however, acknowledges that the Woodmont Property may face environmental hurdles beyond the control of Millburn Township, due to the project’s proximity to two reservoirs used as public drinking sources.

          The Short Hills Hilton Property

The Settlement also re-zones the approximately 22-acre parcel upon which the Short Hills Hilton and the adjacent office tower across from the Short Hills Mall are located.  The Settlement permits density of 20 units per acre, allowing approximately 440 new units, including 88 affordable units. 

          Condos on Canoe Brook Golf Course?

The Settlement also re-zones the entire 129-acre tract owned by Canoe Brook Country Club for redevelopment at 8 units per acre.  Canoe Brook appears to be a thriving country club and it is unlikely that it will be redeveloped as condominiums any time soon.  The Settlement, therefore, smartly re-zones Canoe Brook to remove any claim that town zoning prevents its development as housing.  The Town’s primary obligation, after all, is to remove zoning barriers to housing, not to provide such housing itself.  Canoe Brook golf course may now site 1,032 residential units, including 207 affordable units, but it is unrealistic to expect any development here. 

5.     Condos Across from the Short Hills Train Station

Finally, the Settlement confirms the approval that the Town previously gave to the project located at the corner of Chatham and Woodland Roads, across the street from the Short Hills Train Station.  This project is comprised of 62 units, including 12 affordable units. 

Why Did the Township Enter the Settlement?

          The “Mount Laurel” Doctrine

The Township entered the Settlement to satisfy its Constitutional obligation to allow development of affordable housing.  There is a misperception among some that the Town is allowing affordable housing out of a liberal bent favoring progressive housing policies, but that is not the case.  Millburn’s current actions are primarily motivated by a desire to minimize Millburn’s exposure to contentious affordable housing lawsuits and the chaotic development process resulting therefrom.   

In 1975, the New Jersey Supreme Court’s Mount Laurel decision held that the State Constitution prohibits zoning that unreasonably prevents development of affordable multi-family housing.  Many towns prefer zoning that permits only (1) large-lot, detached, single-family homes and (2) commercial properties, because such zoning maximizes tax revenues and minimizes burdens on schools and other infrastructure.  The Supreme Court, however, viewed such zoning as a form of government regulation preventing normal forces of supply and demand from developing plentiful housing.  One negative consequence that the Mount Laurel Court was concerned with was that affordable housing typically is located in poor urban areas far from employment opportunities in suburban areas.   

To address these imbalances, the Mount Laurel decision held that every municipality must implement zoning allowing the development of its “fair share” of affordable housing, as that share is determined by local population, employment, income, housing, and other demographics.  Towns not allowing development of affordable housing may be sued by developers via “builders’ remedy lawsuits” seeking to obtain a court order invalidating a town’s zoning and permitting a project to proceed over a town’s objection.  

Despite the Mount Laurel decision, Millburn for decades maintained classic suburban zoning permitting mostly detached, large lot, single-family homes and commercial use.  Over the last several years, however, it became clear that Millburn would face a rash of builder’s remedy lawsuits which would likely be successful and result in a chaotic patchwork of development presided over by the local courts.  

Rather than face such an expensive, adversarial, and chaotic process, in 2018 Millburn availed itself of a procedure whereby towns can stay all builders’ remedy lawsuits by filing declaratory judgment actions seeking court approval of their zoning.  Millburn litigated its 2018 declaratory judgment action for three years until the  Court recently set a firm trial date of October 18, 2021.  Consequently, Millburn was under extreme pressure to enter the Settlement or face a difficult trial addressing Millburn’s 45-year failure to implement zoning that allowed a reasonable opportunity for development of affordable housing.

How Did Millburn Select Areas for Redevelopment?

The zoning changes in the Settlement loosely follow Millburn’s Housing Element and Fair Share Plan, dated April 18, 2018.  A copy of the 2018 HEFSP is available here.  The 2018 HEFSP was developed in consultation with a local real estate consulting firm and, like the Settlement, proposed allowing multi-family development (1) north of Millburn Avenue from the old Annie Sez building to the Trader Joe’s plaza; (2) in the commercial zone below Shop Rite; (3) on most of the Millburn side of Morris Turnpike; and (4) of the Canoe Brook Country Club property.  See below.  The 2018 HEFSP, however, proposed low density levels that permitted only 299 affordable housing units, 155 of which were located at Canoe Brook Country Club and had no realistic chance of being developed.    

The Settlement modified the HEFSP in many ways.  First, the Settlement dramatically increased the allowed density for all the properties covered by the 2018 HEFSP — for example, by increasing the density for the property running from Annie Sez to Trader Joe’s from 10 units per acre to 40 units per acre.  

The Settlement also added new areas not covered by the 2018 HEFSP.  The Settlement re-zoned the entire central downtown area — comprising the area between Millburn and Essex Avenues and adjacent areas —not previously covered by the 2018 HEFSP.  The Settlement also extended the Morris Avenue zone by about 700 feet, all the way to Millburn Avenue, when it previously stopped at the old Bill’s Army/Navy Store, across the street from the Firestone Tire Center.  The Settlement also included the Short Hills Hilton plaza, also not included in the HEFSP.  Finally, the Settlement added the Woodmont property in an environmentally sensitive area near the Town’s reservoirs.  

There was no opportunity for public input about the increased density levels and new properties added to the Settlement.  It is therefore difficult to determine how Millburn decided to include these changes in the Settlement.  The lack of public input on the Settlement stems from the fact that the 2018 HEFSP was never a plausible affordable housing plan.  Rather than adopting a plausible plan that could be discussed by voters, the Town stuck with the unrealistic 2018 HEFSP as the only public statement about the Town’s affordable housing strategy.  Not surprisingly, the 2018 HEFSP proved to be entirely inadequate when subject to scrutiny in the Town’s 2018 declaratory judgment action.  Consequently, the Town was required to add new properties and vastly increase density levels during confidential settlement negotiations, on the eve of trial, and without any public input.

Is the Settlement a Good Deal for Millburn?

The Settlement is a very typical agreement that is in line with numerous settlements reached by similar neighboring towns. 

Millburn is an entirely developed suburban town adjacent to metropolitan areas and mass transit.  The Settlement imputes an affordable housing density in Millburn of approximately 150 affordable units per square mile (1,485 units over Millburn’s 9.89 square miles).  That density is similar to the affordable housing density in settlements entered by other comparable towns.  Madison’s settlement imputes a density of 140 units/sm; Summit’s settlement a density of 143 units/sm; Ridgewood’s settlement a density of 155 units/sm; Westfield’s settlement 185 units/sm; and Glen Ridge’s settlement imputes a density of 248 units/sm.  Millburn was represented by Edward Buzak who is one of New Jersey’s most experienced attorneys representing municipalities.  I suspect that settlement negotiations were somewhat contentious because of Millburn’s long time failure to allow development of affordable housing.  In any event, Buzak and Millburn reached a settlement comparable to other towns with similar demographics.       

What’s Next?

The Court will schedule a fairness hearing to entertain potential objections to the Settlement.  The Fair Share Housing Center, however, has signed off on the Settlement and it is therefore unlikely that the Court will make any significant changes to it.  The FSHC is recognized as the State’s primary advocate for affordable housing obligations and its approval of the Settlement will carry great weight with the Court.

          Progress Must be Made by July 2025

Once approved by the Court, the Settlement will provide Millburn immunity from builder’s remedy lawsuits until July 2025.  At that time, Millburn will need to be able to show that changes in the Settlement provided a reasonable opportunity for the development of Millburn’s fair share of affordable housing needs.  If progress has been made, Millburn will have meritorious defenses that should deter builders’ remedy suits.  If, however, the Settlement fails to induce developers to build affordable housing in Millburn, the Town will again have exposure to builders’ remedy suits after July 2025 and we will find ourselves back in litigation struggling with these issues.