New Jersey municipalities have an occupancy rule for rentals that a minimum of
Seventy square feet of sleeping room space must be provided for each person occupying
The rental. No similar code exists for private residences... ie... same size house privately owned could have twelve people living in it... versus a rental where the space restrictions would provide an area for say three people. Has this law been challenged... and if so...
Does anyone know of the status?

I don't know the particular statute for NJ but privately owned does not have to follow the same rules as rentals for various reasons.

The laws protect the landlord on safety concerns, damage issues and things like that.

Is the last month's rent I paid back inh 2002 suppose to be in a bank account along with my 500.00 pet/security deposit

Depends on what state you reside and what your lease indicates, the "last" months rent isn't security... but the lease should specify what amount is considered "security". Generally the landlord is responsible
For telling the tenant where the security deposit has been placed... and some states [ie New Jersey] require the landlord to pay the going rate of interest on the security deposit either yearly or at the end of the lease term.

The answer above from "johnvincent" was in response to the security question from "kathyCap"...

Regarding codes for minimum occupancy for rentals... I do not know the status of the minimum sq. ft. rule in NJ but here is the rule from the "Uniform Housing Code" Section 503(b) requires that a dwelling unit have at least one room with at least 120 square feet and all other habitable rooms except kitchens have at least 70 square feet. The size of a room used for sleeping more than two people must be increased above these minimums by 50 square feet for each occupant in excess of two. Here is a good reference for New Jersey re: rules and regs... http://www.nj.gov/dca/divisions/codes/topics/

Another source is a book available on Amazon.com "So You Want To Be A Landlord: Tales From The Crypt" by djv murphy