TRENTON - A proposal to overhaul New Jersey's controversial affordable-housing rules won approval Monday by the Assembly, 43-32.

The bill, which might be considered next week in the Senate, would abolish the state Council on Affordable Housing and strike a 2.5 percent fee on nonresidential development to subsidize low-cost housing.

Supporters said it would streamline the state's affordable-housing regulations, which are rooted in state Supreme Court rulings during the 1970s and 1980s mandating that towns have a constitutional obligation to provide low- and moderate-income housing.

Chief sponsor Assemblyman Jerry Green (D., Union) described the measure as an answer to the widespread assertion by municipal leaders that the Council on Affordable Housing, which enforces those obligations, is costly and ineffective.

Green said he had received calls of congratulations on his bill, because the housing obligations are "a hell of a lot less than what [towns] had before."

The Fair Share Housing Center, which opposes the proposal, released an analysis finding that it would reduce local housing obligations 71 percent.

"There are going to be a lot of towns that have to do little or nothing for the next 10 years," said Kevin Walsh, the center's associate director.

Lawmakers amended the bill to remove the nonresidential development fee after Gov. Christie said he would veto any housing measure that kept it in. But the current measure also institutes a new 1.5 percent fee on residential developments that don't include affordable homes.

The amendments did not appease Republicans, who were defeated in a motion to table the bill.

Towns in which at least half of the children qualify for free or reduced-price school lunches would be exempt from the new affordable-housing requirements.

The bill requires towns with between 20 percent and 50 percent of students on free or reduced-price meals to develop a housing supply that is 8 percent affordable.

Municipalities with less than 20 percent of their children on free and reduced-price school lunches would have to ensure that 10 percent of their housing is affordable.

Towns that don't meet the 10 percent requirement would have to try to meet affordable-housing quotas or take other steps to comply.

Contact staff writer Maya Rao

at 856-779-3220 or mrao@phillynews.com.