Immediately, the decision reverses Christie's executive order of June to abolish the independent Council on Affordable Housing (COAH) and fold its functions into the state Department of Community Affairs, which handles other housing programs.
The plan, announced during the June budget battle, would have given municipalities and the governor more control over determining the number of affordable-housing units required. Christie argued at the time that it would save money, reduce regulations, and simplify the administration of affordable housing.
The Fair Share Housing Center in Cherry Hill sued, saying the governor did not have the power to eliminate an independent agency.
"He was asking the court to basically ignore the constitution and the statutes, and saying, as executive, he just inherently has this power," Adam Gordon, a lawyer with the advocacy group, said in an interview. Gordon argued the case before the three-judge appellate panel three weeks ago.
Gordon said that with COAH under the control of DCA - which is led by a commissioner appointed by the governor - transparency was eliminated. Public hearings were replaced by behind-closed-doors decisions, Gordon argued, and the commissioner could unilaterally waive affordable-housing obligations.
For example, Gordon told the appellate judges, the DCA commissioner recently ruled that a subdivision approval allowing two affordable-housing units need not provide a third. But the decision relied on a report on economic feasibility that was not made publicly available, he said.
Long a headache for suburban mayors because of what they view as unfair, bureaucratic, and confusing obligations to build, COAH has been a target of Christie's since he ran for office. He said that rural and suburban towns without access to mass transportation or jobs should not be subject to the same housing rules as cities.
Advocates for the poor have countered that poverty is too concentrated in the state and far away from the retail and office jobs that are zoned for approval in place of cheap housing.
"We are obviously disappointed with the court decision, which only perpetuates the nightmare New Jersey has endured for decades with the COAH bureaucracy," said a Christie spokesman, Michael Drewniak, in an e-mail.
He said Christie was committed to abolishing COAH, "a pledge that has bipartisan support and the support of local leaders across New Jersey."
In fact, the Legislature passed a bill last year to abolish the agency. But Christie conditionally vetoed the legislation, in part because it required that towns have 10 percent of their total housing dedicated as affordable.
The court's ruling Thursday said that only the Legislature could abolish COAH and that the governor could not abolish any agency that was created by the Legislature and is an independent authority, even if it technically sits within the executive branch.
The opinion said: "While the framers of our constitution intended to create a strong executive in the office of governor (perhaps the strongest in the United States), they also recognized the need to insulate functions and agencies from executive control."
Assembly Republicans blasted the court's opinion.
"The current system under which COAH operates has always been a detriment to all municipalities and has been since it was established," Assemblyman Scott Rumana (R., Passaic) said in a statement. "Today's decision is another example of the judiciary's lack of understanding and appreciation for the impact this terrible public policy has on property taxpayers and towns."
Sen. Raymond Lesniak (D., Union), who sponsored the bill that Christie vetoed, said the governor could not ignore the constitution.
"We cannot simply throw COAH out the window without first developing a mechanism which seriously addresses the shortage of affordable-housing opportunities in New Jersey communities," he said in a statement. Lesniak also vowed to reintroduce his bill.
COAH was created because a 1975 state Supreme Court case involving Mount Laurel determined that municipalities have a constitutional obligation to provide affordable housing. Ever since, the need to create housing for the poor has clashed with the desire to preserve space in a densely populated state.
Shortly after becoming governor in 2010, Christie created a task force to review whether COAH should continue to exist. Until the task force came out with its report, Christie ordered, COAH should cease to function.
That approach did not work. The Fair Share Housing Center appealed, and the appellate court at the time agreed. The administration then rescinded its order.
The Fair Share Housing Center framed its victory Thursday as part of a larger effort to prevent Christie from having too much power.
"The Appellate Division properly found, based on a careful reading of the original intent of New Jersey's statutes and constitution, that Gov. Christie simply does not have the power to unilaterally abolish independent agencies he doesn't like," the group's associate director, Kevin D. Walsh, said in a statement.
"In doing so, the court properly protected the independence of agencies such as the Election Law Enforcement Commission, State Ethics Commission, Public Defender, and dozens of other agencies that would have been subject to gubernatorial abolition if the plan for COAH had been upheld."
Contact Matt Katz at 609-217-8355 or email@example.com, or follow on Twitter @mattkatz00. Read his blog, "Christie Chronicles," at www.philly.com/christiechronicles