Money earmarked for local affordable housing programs will stay where it is for now, following a ruling by the Appellate Division of Superior Court.

The court issued an injunction late Monday that halted the state’s attempts to seize $140 million that towns had set aside for affordable housing projects.

The state originaly moved to seize the funds under a 2008 law that said it could use the money if towns had not committed to spending it within four years of collecting it. The issue went to the courts, with the latest step being New Jersey's Council on Affordable Housing, or COAH, approved seizing the funds at its May 1 meeting.

The move was criticized by local officials and affordable housing advocates, who objected to taking money from municipalities that were planning to use it to build more affordable homes — especially as the need has increased after Hurricane Sandy.

The largest amounts of money that could be taken from Cape May County towns include $1.8 million from Ocean City and $1.3 million from Middle Township, according to Affordable Housing Trust Funds balances listed by the state Department of Community Affairs.

In Atlantic County, the largest amounts are in Hamilton Township, $390,000, and Somers Point, $230,000.

Kevin Walsh, an attorney and associate director of the Fair Share Housing Center, a nonprofit that advocates for affordable housing, said the $140 million figure is from 2008, and more money was collected through 2009 that has not been released. He estimates the actual amount in the trust fund is about

$164 million.

The center filed a lawsuit with the Appellate Division on Friday, and the three-member panel issued the injunction Monday, keeping the money in the trust, Walsh said. The court will hear arguments June 5 and then rule on the issue, he said.

Walsh said the money is critical for the development of more affordable housing, which is used to supplement new housing construction and renovation of current structures. The money could be used for between 3,000 and 4,000 households, he said.

Of the $140 million, 57 percent — or about $79.8 million — would be taken from the nine counties affected most by Hurricane Sandy. They include Atlantic, Cape May and Ocean counties.

“There are many ways government is acting that are not very good,” Walsh said. “They’re not sharing information. They’re rushing through.”

The Governor’s Office did not release a statement Tuesday regarding the ruling. The state has said it wanted to use the money to fund an anticipated deficit in upcoming fiscal year’s budget.

COAH determines the affordable housing quota that needs to be met by each town and charged a 2.5 percent fee on developers to fill the trust fund. The fee was removed in early 2011 by the Legislature.

The New Jersey league of Municipalities issued a statement in support of the court’s decision, saying the state’s attempted efforts to take the funds “lack any fairness or logic, coming after the lack of State regulations to guide municipal spending” on the housing projects and the COAH board’s failure to meet for more than two years before the May 1 meeting.

"No reasonable person could find this lack of process and state money grab acceptable,” East Windsor Mayor Janice S. Mironov, the league’s president, said in the statement.

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