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BECKHAM v. NEW YORK CITY HOUS. AUTH.

June 26, 1984

THELMA BECKHAM, HENRIETTA TIMMONS, SONIA STARK, and LENORA GORDON, on behalf of themselves and all other persons similarly situated, Plaintiffs, against THE NEW YORK CITY HOUSING AUTHORITY, JOSEPH J. CHRISTIAN, as Chairperson of the New York City Housing Authority, BLANCA CEDENO and WALTER S. FRIED, as Members of the New York City Housing Authority, Defendants.


The opinion of the court was delivered by: WARD

WARD, District Judge.

Plaintiffs commenced this action on behalf of themselves and all other persons similarly situated to challenge a policy of the New York City Housing Authority (the "Authority"). *fn1" Pursuant to that policy, when public housing tenants fail to recertify their income and family composition in a timely manner, the Authority raises the rents of such tenants to one of several maximum rent alternatives more fully described below. Plaintiffs assert that this policy is invalid because it imposes rents in excess of the limits established by the United States Housing Act, 42 U.S.C. § 1401, et seq., (the "Act"), the implementing regulations, and tenant leases; and because it violates plaintiffs' rights under the due process clause of the Fourteenth Amendment. *fn2" Plaintiffs have moved for partial summary judgment, pursuant to Rule 56(a), Fed. R. Civ. P., on all claims except for their claims for mental and emotional distress and monetary expense. Defendants have cross-moved for summary judgment, pursuant to Rule 56(b), Fed. R. Civ. P. For the reasons hereinafter stated, plaintiffs' motion is granted in part and denied in part, and defendants' cross-motion is denied.

 BACKGROUND

 The Authority owns, operates and manages 275 public housing developments in New York City, providing housing to approximately 500,000 low-income citizens. See Affidavit of Raymond Hensen at P3 (Nov. 23, 1983) ("Hensen Affidavit"). With respect to approximately eighty-five percent (85%) of these developments, the Authority has contracted with the United States Department of Housing and Urban Development ("HUD") for the reciept of operating subsidies, which in 1982 totalled approximately $275,000,000. Such subsidies are conditioned upon annual verification by the Authority of the income and family composition of its tenants, and are designed to offset the expense balance remaining in the Authority's operating budget after the collection of tenant rents.

 In June, 1980, the Authority established a "maximum" or basic "economic" rent schedule applicable in instances in which tenants failed to timely recertify their incomes and family composition. *fn3" The rents contained in this schedule were intended to enable the Authority to meet its budgetary demands without the benefit of the federal subsidies that would be withheld for failure to verify tenant income and family composition. From June 1980 until May 1983, the Authority adjusted the rents of those tenants who failed to timely file such recertification forms to conform with the applicable maximum rent established by this schedule. However, in 1981, Congress passed the Omnibus Budget Reconciliation Act, Pub. L. No. 97-35, 95 Stat. 357 (1981) ("OBRA"), the housing provisions of which, inter alia, altered and consolidated the rules for computing tenant rent contributions, and increased subsidized housing rent limits to thirty percent (30%) of the tenants' adjusted income. *fn4" The relevant provision of this statute provides:

 TENANT RENTAL PAYMENTS

 Sec. 322. (a) Section 3 of the United States Housing Act of 1937 is amended to read as follows:

 RENTAL PAYMENTS; DEFINITIONS

 Sec. 3. (a) Dwelling units assisted under this Act shall be rented only to families who are lower income families at the time of their initial occupancy of such units. A family shall pay as rent for a dwelling unit assisted under this Act the highest of the following amounts, rounded to the nearest dollar:

 (1) 30 per centum of the family's monthly adjusted income;

 (2) 10 per centum of the family's income; or

 (3) if the family is receiving payments for welfare assistance from a public agency and a part of such payments, adjusted in accordance with the family's actual housing costs, is specifically designated by such agency to meet the family's housing costs, the portion of such payments which is so designated.

 See Id. at Title III § 322(a), 95 Stat. 400. *fn5" A significant effect of the OBRA housing amendments was to establish a uniform formula for computing gross rent applicable to federally-assisted housing programs, thereby voiding the ceiling rents and rent schedules established by the various local housing authorities. Consequently, in July 1982, HUD issued new rules and regulations to guide local housing authorities in effectuating the requirements of the OBRA housing amendments. These regulations eliminated the rent schedules and maximum rents established by the local housing authorities and equalized the rent to be charged to tenants with the same adjusted income, despite differences in their apartment sixes. The Authority implemented these regulations on May 1, 1983. However, it also determined that all tenant households, regardless of income, apartment size, or family composition, would be charged a monthly rent of $561.00 if they failed to annually recertify their income and family composition in a timely manner. This rent is equal to thirty percent (30%) of the maximum income limit for tenants eligible for federally assisted housing, and, thus, corresponds to the highest rent that a new tenant could be required to pay for an authority apartment under the new HUD regulations. See Hensen Affidavit at P15. *fn6" Such rent increases are generally imposed prior to affording the affected tenants an opportunity to be heard and to demonstrate either that they did, in fact, submit recertification forms within the required deadline or good cause for their failure to do so. *fn7"

 Plaintiffs assert, and defendants agree, that such rent increases are imposed in accordance with a more general policy of the Authority, pursuant to which the Authority raises the rent of tenants who fail to timely recertify income and family composition to either: "(1) the maximum rent based upon apartment size, (2) thirty percent of the maximum admission income limit for tenants in federally subsidized projects, or (3) the HUD-approved market rent based on apartment size." Certification Stipulation at 1. If, subsequent to such rent increase, the affected tenants' income is satisfactorily determined, an interim change is affected so that the tenants' rent accords with the income ultimately reported, and a retroactive credit is given if it is determined that the delay in the timely filing ...


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