A coalition of 27 New Jersey municipalities suffered another legal setback this week in their high-profile effort to block the state’s new affordable housing framework, after a federal appeals judge refused to pause the law while their broader lawsuit moves forward.
In a brief order issued Friday, Judge Cindy K. Chung of the U.S. Court of Appeals for the Third Circuit denied the towns’ request for an emergency stay of New Jersey’s recently enacted Affordable Housing Reform Law. The ruling marks the third rejection of emergency relief for the group in just over two weeks and leaves the state’s new housing mandates fully in effect.
The municipalities, organized under the banner Local Leaders for Responsible Planning, had turned to the federal appeals court after losing twice in rapid succession before a U.S. District Court judge. Their appeal was aimed at stopping implementation of the law while they continue to challenge its legality and constitutionality.
Instead, the Third Circuit’s decision reinforces a growing judicial consensus that the new rules governing housing obligations in New Jersey will remain in place as litigation continues.
Despite the loss, municipal officials made clear that their legal strategy is far from over.
Montvale Mayor Mike Ghassali, whose borough is the lead plaintiff in the case, said in a public statement that the group will now seek emergency intervention from the U.S. Supreme Court. Ghassali indicated that a filing directed to Justice Samuel Alito, the Supreme Court justice assigned to handle emergency matters from the Third Circuit, is expected to be submitted in the coming days.
The lawsuit brings together mostly affluent suburban communities across North and Central New Jersey, including towns such as Holmdel, Millburn and Franklin Lakes. Many of these municipalities have a long history of opposing high-density development and have previously engaged in litigation over affordable housing obligations dating back to earlier rounds of statewide housing enforcement.
At the center of the dispute is New Jersey’s Affordable Housing Reform Law, enacted in 2024 as part of a sweeping overhaul of how the state calculates and enforces municipal obligations to provide housing opportunities for lower- and moderate-income residents. The law shifted key elements of the affordable housing process away from the courts and into an administrative framework overseen by the state, including a new Affordable Housing Dispute Resolution Program.
State defendants named in the case include the New Jersey attorney general, the administrative director of the courts, and members of the state program responsible for resolving municipal housing disputes.
The towns argue that their request for a stay is critical because once local zoning changes, approvals and construction begin, the impact of the law becomes irreversible. Even if the municipalities were to prevail later in their appeal, they contend, new developments could already be under construction, rendering any court victory largely symbolic.
In their filings, the towns maintain that the law alters long-standing procedures governing affordable housing enforcement in ways that undermine local planning authority and impose accelerated development obligations without sufficient procedural safeguards. They also argue that the law fundamentally reshapes how disputes are resolved by limiting the judiciary’s role and replacing it with a largely administrative process.
Supporters of the law, however, say the reform was designed to bring clarity, consistency and predictability to a system that had become bogged down by years of litigation, inconsistent rulings and prolonged negotiations between municipalities and housing advocates. State officials have repeatedly emphasized that the new structure is intended to accelerate the production of affordable housing across New Jersey at a time when the state faces an acute shortage of homes at nearly every price point.
The broader legal battle is unfolding against the backdrop of an intensifying housing crisis that has reshaped land-use policy debates throughout the state. Rising rents, shrinking inventories and increasing development pressure in suburban communities have turned zoning and growth into some of the most politically sensitive issues in local government. Municipal leaders argue that state-driven housing targets could dramatically alter community character, infrastructure capacity and school enrollment, while housing advocates counter that decades of resistance to multifamily development have contributed directly to regional inequality and limited access to opportunity.
The coalition of towns first filed its lawsuit in state court shortly after the law was signed by Governor Phil Murphy in 2024, seeking to invalidate the statute before municipalities were required to begin compliance. When those efforts failed to halt implementation at the trial level, the group pivoted to emergency relief in federal court, triggering the rapid series of denials now stacking up against their case.
Legal analysts following the litigation note that the Third Circuit’s refusal to issue a stay does not resolve the underlying lawsuit, but it does significantly weaken the towns’ leverage. Without a pause in enforcement, municipalities must continue working under the new rules while the courts weigh the merits of their claims.
For local governments, that means moving forward with housing plans, zoning amendments and negotiations with developers under a regulatory system they are actively challenging in court. For builders and housing advocates, the ruling provides additional certainty that projects aligned with the new law can proceed without the risk of a sudden statewide halt.
The dispute is being closely watched by planners, developers and public officials across New Jersey’s real estate community, where the law is already reshaping local development strategies, site selection and municipal compliance planning. Industry leaders say the outcome could define how future residential growth is distributed across the state, particularly in suburban towns that have historically produced little multifamily or income-restricted housing.
As the case heads toward the nation’s highest court on an emergency basis, the clash highlights a deep divide between local control and statewide housing policy that shows no sign of easing. Whether the Supreme Court will intervene remains uncertain, but for now, New Jersey’s affordable housing framework continues to move forward, placing pressure on municipalities to adapt quickly to a new legal and regulatory reality shaping the future of housing and development across the state.
Readers following the evolving impact of the law on New Jersey’s housing market can find continuing coverage and analysis in Sunset Daily News’ dedicated real estate reporting.
