COURT HOUSE – Among the many municipal activities that the public seldom hears about is the use of Council on Affordable Housing (COAH) Trust Fund reserves. Recently, two news stories in the county have shown a light on these accounts.
In one case, the affluent community of Stone Harbor used its COAH reserves to purchase property for low- to moderate-income housing to meet an obligation created when the borough approved a multi-home development, as part of the Villa Maria redevelopment plan.
In the other, former Cape May City Manager Jerry Inderwies Jr. issued a series of checks to city employees from the COAH restricted account, citing work the individuals did on behalf of COAH obligations.
The Trust Fund includes a provision for use of funds for administrative expenses. The city is investigating Inderwies’ use of the funds.
What are COAH Municipal Trust Funds?
In 1975 and 1983, the New Jersey Supreme Court declared municipal land-use regulations that limited or prevented affordable housing opportunities unconstitutional.
The Mount Laurel decisions, as they were known, began a process of establishing and enforcing low- and moderate-income housing obligations on municipalities across the state.
The history of that process is long and circuitous. It continues today, as municipalities adopt court-approved housing elements and fair share plans to protect themselves from builder remedy lawsuits. Such lawsuits could overturn elements of zoning control, like housing development density.
Over decades, the municipalities across the county have been involved in litigation, negotiations and settlements that establish local obligations and create local plans for providing affordable housing. Detailing those years of conflict and controversy would take a book.
There was a point when the state tried to confiscate the unspent balances in municipal COAH Trust Funds only to be stopped by the courts.
The COAH Trust Funds, fed by developer fees, are intended as dedicated reserves to aid municipalities in meeting their obligations to low- and moderate-income housing, based on their obligations and the details of their court-approved plans.
How Much is in the Accounts?
In Cape May County, the COAH Trust Fund balances have varied greatly over the years. Reports from the state Department of Community Affairs (DCA) show that in 2008, four of the county’s 16 municipalities had COAH accounts totaling just under $4 million.
By 2012, when the state made its first move to redirect the money from the trust funds to general state purposes, seven county municipalities had accounts totaling $6 million.
As of 2019, local municipal audits show eight municipalities with COAH Trust Funds totaling almost $12 million. The list is led by Ocean City, with $6 million in its COAH account, as of 2019.
Use of the Funds
Stone Harbor recently allocated $1.6 million of its COAH Trust Fund for the purchase of a triplex building on Third Avenue, which will be used to meet its affordable housing obligations, arising from approval of a multi-home development on the site of the Villa Maria retreat.
As of Dec. 31, 2019, audit records showed the balance in the borough’s COAH Trust Fund at $2.8 million.
In Cape May, controversy swirls around the $100,000 worth of checks issued to employees, beginning in September 2020, and ending Dec. 31, 2020.
The city’s ongoing investigation will determine if the use of the funds was for an appropriate purpose, given the restrictions on the trust fund. It will also consider whether the city manager had the unilateral authority to disburse the funds.
Cape May, as of Dec. 31, 2019, had a COAH Trust Fund balance of $1.2 million.
30% of Income
The COAH funds are intended to meet a need in the county for affordable housing. The standard indicator of affordable housing in the U.S. is housing that requires no more than 30% of income.
The 30% of income affordability threshold is an imperfect measure but is the basis of much public policy. Using this measure in Cape May County, combined with state income data, shows that no municipality in the county provides average housing costs at or below 30% of income.
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