The Closing the Segregated Housing Loophole Act aims to eliminate segregation in affordable housing inclusionary developments in New Jersey. The bill mandates that these developments, which include both market-rate and low- to moderate-income units, must not discriminate based on race, color, religion, sex, national origin, or any other protected classification. Developers are prohibited from creating separate entrances, amenities, or features that would segregate residents based on income or other protected characteristics. Additionally, municipal authorities are barred from approving any development that violates these provisions, and any affordable unit found to be in violation will not count towards a municipality's fair share affordable housing obligation.

To enforce these regulations, the bill empowers the Commissioner of Community Affairs to establish penalties and enforcement mechanisms for municipalities that approve non-compliant developments. It allows interested parties to file complaints regarding violations, which the Department of Community Affairs is required to investigate. The Commissioner must also enact rules and regulations to implement the bill's provisions within six months of its enactment. The act is set to take effect ten months after it is signed into law.