The opinion of the court was delivered by: POLLACK
The plaintiffs have moved for a preliminary injunction to restrain the defendants from putting into effect rent increases imposed upon the plaintiffs pursuant to the City's rent restructuring program for in rem housing.
Defendants have cross-moved for dismissal of the complaint under Fed.R.Civ.P. 12(b)(1) and 12(b)(6) or for summary judgment dismissing the complaint under Fed.R.Civ.P. 56. Three tenants and tenant associations have moved to intervene pursuant to Fed.R.Civ.P. 24. For the reasons stated hereafter, the motion to intervene will be denied, plaintiff's motion for a preliminary injunction will be denied, and defendants' motion for summary judgment dismissing the federal claims in the complaint will be granted and with them the pendent claims will also be dismissed and the restraint on rent increases consented to in the order of March 4, 1982 will be vacated.
Pursuant to N.Y.Admin.Code Tit. D, § D17-4.0, (Supp.1981) New York City may foreclose the property of a landlord who is in arrears in his property tax payments for one year.
§ D17-12.0(b) (1975) provides that upon such foreclosure and execution of a deed to the City:
the city shall be seized of an estate in fee simple absolute in such land and all persons, including the state of New York, infants, incompetents, absentees and non-residents who may have had any right, title, interest, claim, lien or equity of redemption in or upon such lands shall be barred and forever foreclosed of all such right, title, interest, claim, lien or equity of redemption.... (emphasis added)
Housing taken over by the City in this fashion is known as in rem housing.
The City manages and operates in rem housing through its Department of Housing, Preservation and Development ("HPD"). Housing acquired through tax foreclosure is generally severely deteriorated and often represents a hazard to the surrounding community; the tenants are on the average considerably poorer than the tenants of non-in rem buildings.
HPD has three programs for dealing with in rem apartments and their tenants. The consolidation program is targeted at buildings with occupancy rates of less than 50%, lacking at least one essential service and where repair costs are higher than budget limitations allow. The City closes down such buildings and relocates the tenants to other City-owned property in nearby neighborhoods. Buildings that the City continues to operate are either centrally-managed by HPD ("CMP" buildings), i.e., the City directly pays all operation and maintenance costs and the tenants pay their rent directly to the City, or are under various Alternative Management Programs ("DAMP" buildings) whereby third parties such as community organizations, tenant associations, individuals and private real estate firms manage such properties and act as a liaison between the City and its tenants.
All three plaintiffs in this action are tenants of DAMP buildings and thus the other programs are not at issue.
The sources of funding for in rem buildings include federal funds from the Community Development Block Grant funds, ("CDBGs"), City of New York tax revenues, and in rem building rental revenues. DAMP buildings utilize CDBGs solely for capital improvements, major building systems rehabilitation and emergency repairs. Rent collections are the primary source of funds for operating and maintenance expenses.
Defendants have been seeking for several months to raise the rents of the plaintiffs pursuant to a policy of restructuring rents in DAMP buildings in order to reduce the shortfall between the current rent revenues of a particular building and the costs of operation and maintenance of that building. An ultimate goal of DAMP, (and indeed all in rem housing programs) is to make such buildings self-sufficient and to return them to the private sector.
Pursuant to N.Y.Admin.Code, Title Y, § Y51-3.0e2(f) (Supp.1981) and Title YY § YY51-3.0a(1)(a) (1975), housing owned or operated by public agencies are exempted from the rent control and rent stabilization laws respectively.
§ Y51-5.0a(7) (Supp.1981) and § YY51-3.3 (Supp.1981) further provide that housing acquired by the City through tax foreclosure and then sold to private interests other than the original landlord who had abandoned the building shall be subject to the rent control or rent stabilization laws at the last rents charged by the City.
Defendants concede that some of the increases sought pursuant to the rent restructuring program are in excess of those that would be permissible under the local rent control and rent stabilization laws. The defendants seek to raise the rents of the plaintiffs herein as follows:
Plaintiff Idis Rota, resident of 1175 Clay Avenue, the Bronx, from $ 86 to $ 248
Plaintiff Frank Pomerico, resident of 67 Hanson Place, the Bronx, from $ 95.20 to $ 190.00
Plaintiff Juanita Sanchez, resident of 444 West 167th St., the Bronx, ...