UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK
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").
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.
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.
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.
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.
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.
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.
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.
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 of the recertification forms was not attributable to the tenant. See Statement of Material Facts in Support of Defendants' Motion for Summary Judgment at P6 (Nov. 23, 1983) ("Defendants' Statement").
In August 1983, plaintiff instituted the instant action for declaratory and injunctive relief, as well as damages and attorneys' fees, on behalf of all tenants in public housing owned and operated by the Authority under the provisions of the Act. Defendants in this action are the Authority, its chairman and its board members. Plaintiffs seek judgment on behalf of themselves and all others similarly situated, declaring unlawful and enjoining the Authority's policy and practice of charging tenants rents in excess of the alleged statutory, regulatory and contractual limits. Plaintiffs' challenge to the Authority's policy is based on several independent grounds.
Plaintiffs contend that this policy is invalid because it imposes rents in excess of the limits established in 42 U.S.C. § 1437a and the regulations implementing that section, and because it contravenes the terms of the public housing leases signed by plaintiffs.
They further argue that this policy violates their rights under the due process clause of the Fourteenth Amendment both because the policy creates an unconstitutional irrebutable presumption not founded in fact or law, and because the policy authorizes substantial increases of plaintiffs' rents prior to providing plaintiffs with an opportunity to show good cause for their failure to timely recertify income and family composition.
More specifically, plaintiffs seek a permanent injunction enjoining defendants, their successors in office, agents, employees, and other persons in concert with them:
a) From raising the rents of public housing tenants above the limits established by statute, regulation, and lease when tenants allegedly fail to verify income and family composition in [sic] timely manner;
b) To credit all current tenants for excess rent paid above and beyond the statutory, regulatory and contractual limits;
c) To purge the records of all tenants, past and present, of any notation of rent delinquency recorded by virtue of the enforcement of the policy and practice challenged in the complaint;
d) To restore to occupancy of an appropriate housing authority apartment former tenants whose evictions were the result of the enforcement of the policy and practice challenged in the complaint.
e) To pay all former tenants who can be located with due diligence a sum equal to any amount paid as rent in excess of the limits established by statute, regulation, and lease as a result of the policy and practice challenged in the complaint.
Plaintiffs' Notice of Motion for Partial Summary Judgment at P4.
In addition, plaintiffs pray for damages in compensation for mental distress, monetary expense, humiliation and other hardships allegedly suffered by plaintiffs. They also seek attorney's fees and costs pursuant to 42 U.S.C. § 1988.
Plaintiffs now move for partial summary judgment against defendants to secure all the relief requested in their complaint, save damages for mental and emotional distress, monetary expense, costs and fees. Agreeing with plaintiffs that there are no disputed issues of fact to be tried, defendants cross-move for summary judgment. Because this Court holds that the policy at issue violates the tenant rental contributions limits established in section 1437a, the Court finds it unnecessary to reach plaintiff's other claims.
Defendants do not dispute that the Act requires that plaintiffs' rent be set no higher than the limits established in section 1437a. This is not surprising, "since the statutes explicitly require this result, and it is confirmed by the legislative history and HUD's administrative interpretations." Barber v. White, 351 F. Supp. 1091, 1095 (D. Conn. 1972) (Newman, J.) (footnotes omitted) (construing the Brooke Amendment).
The Act sets explicit limits on the rental charges that a public housing authority may impose on tenants. Pursuant to section 1437a of the Act, the maximum rent that may be charged such tenants is the highest of: (1) thirty percent of the family's monthly adjusted income, (2) ten percent of the family's income without adjustments, or (3) for public assistance recipients, the amount of money received as shelter allowance.
The implementing regulations enacted by HUD track this statutory scheme. See 24 C.F.R. § 860.404.
Neither the regulations nor the statute itself provide for any exceptions to the maximum rent limitations that would enable a public housing authority to raise tenants' rents above the limits imposed by section 1437a.
Plaintiffs contend that the Authority's policy of unilaterally increasing the rents of tenants who fail to timely recertify income and family composition is, in effect, a penalty designed to coerce tenants to comply with the recertification requirements, which charges may not properly be included as rent. The Authority's attempts to collect such rent increases are proscribed both by the express terms of section 1437a and by HUD's implementing regulations. Section 1437a provides that "A family shall pay as rent for a dwelling unit assisted under this chapter . . . the highest" of the enumerated alternative amounts.Defendants have not cited and this Court is unaware of any source that would indicate that the maximum rent limitations provided by section 1437a are not absolute and that Congress intended to provide the Authority with the power to increase tenant rents above the limits established by that section.In fact, the legislative history of both section 1437a and former section 1402(1) reveal that the limits imposed in section 1437a have always been cast in absolute terms, clearly precluding any attempt to read any exception into the restrictions of section 1437a. See supra footnotes 4, 5, 9.
Moreover, the regulations implementing this statutory scheme prohibit the inclusion of miscellaneous charges and penalties as rent. See 24 C.F.R. § 860.403(a), (i), (1), (p).
For example, charges "for maintenance and repair beyond normal wear and tear and for consumption of excess utilities," as well as penalties for late payments under the lease are distinguished by the regulation from charges for rent, itself. 24 C.F.R. § 866.4(b). Taken together, he statute and the implementing regulations establish a scheme for the assessment of rental charges for tenants in public housing, which scheme expressly proscribes the rent increases challenged by plaintiffs in the instant action. "When the command of a statute is clear, it must be enforced." Williams v. Pierce, 708 F.2d 57, 61 (2d Cir. 1983) cert. denied, 464 U.S. 1046, 104 S. Ct. 719, 79 L. Ed. 2d 181 (1984) (citing Barlow v. Collins, 397 U.S. 159, 167, 25 L. Ed. 2d 192, 90 S. Ct. 832 (1970)). Whatever remedies the Authority may properly invoke to coerce tenants to comply with their statutory and contractual obligations, such as termination of the tenancy after adequate notice and hearing, it may not unilaterally increase tenants' rents above the limits established in section 1437a. Therefore, plaintiffs' motion for partial summary judgment must be granted insofar as it seeks an injunction precluding defendants from raising the rents of public housing tenants above the limits established by section 1437a. However, because there does not currently exist an adequate record to enable this Court to determine the nature and extent of the further relief, if any, to which plaintiffs might be entitled, the balance of the relief sought by plaintiffs cannot be granted at this time, and to that extent plaintiffs' motion must be denied.
Defendants argue that it was properly within the province of the Authority to promulgate and enforce the policy and practice at issue in this case. Citing N.Y. Pub. Hous. Law § 154, they assert that under state law the power to fix rents in a public housing project rests exclusively with the Authority. Moreover, they observe state law also grants the Authority the power to establish and revise and to make and from time to time amend rules and regulations not inconsistent with state public housing statutes. See N.Y. Pub.Hous. Law § 37(1)(K), (W). However, it cannot seriously be urged that rent increases imposed pursuant to state law can be enforced when federal law requires the establishment of a lower rent.
Plainly, the Supremacy Clause requires that federal law prevail. As Justice Cardozo said in upholding the original Social Security Act, "When money is spent to promote the general welfare, the concept of welfare or the opposite is shaped by Congress, not the states. So the concept be not arbitrary, the locality must yield." Helvering v. Davis, 301 U.S. 619, 645, 81 L. Ed. 1307, 57 S. Ct. 904 (1937). See also King v. Smith, 392 U.S. 309, 333 n.34, 20 L. Ed. 2d 1118, 88 S. Ct. 2128 (1968).
Barber v. White, supra, 351 F. Supp. at 1096. Moreover, the grant to the Authority of the power to fix public housing rents contained in N.Y. Pub.Hous. Law § 154 is expressly "[s]ubject to the terms of any loan or subsidy contract with a government." Defendants readily concede in this action that the Authority's control over policy and practice in public housing projects is subject to the requirements and limitations established by the federal regulatory scheme. As defendants have explained, "the Authority has contracted with [HUD] for the receipt of operating sukbsidies" and "[t]he payment of these operating subsidies is . . . conditioned upon [annual verification of the income and family composition of public housing tenants], which the Authority must then certify to HUD (42 U.S.C. § 1437 [sic]; 24 CFR § 890.115)." Hensen Affidavit at PP3, 5. Thus, even under state law, the Authority's ability to raise the rents of public housing tenants is subject to, and curtailed by federal legislation.
Defendants' reliance on New York City Housing Auth. v. Shedletsky, 44 Misc. 2d 338, 253 N.Y.S.2d 822 (N.Y. Civ. Ct. 1964) and New York City Housing Auth. v. Stern, 3 Misc. 2d 1007, 159 N.Y.S.2d 500 (N.Y. Mun. Ct. 1956) is similarly misplaced. In both of these cases, unlike the situation sub judice, the state courts clearly found that the tenants had fraudulently concealed material facts with respect to their income, and that, pursuant to provisions in their leases, they were liable for certain rent surcharges. Moreover, both of these cases were decided prior to Congress' enactment of the maximum rent limitations contained in the Brooke Amendment. Prior to that amendment, rents in public housing projects were fixed by local housing authorities with the approval of HUD. The exercise by local housing authorities of this rather expansive power has been significantly curtailed by recent statutory amendments. See supra footnote 4.
Accordingly, plaintiffs' motion for partial summary judgment is granted insofar as it seeks an injunction precluding defendants from raising the rent contributions of public housing tenants above the limits established by section 1437a. In all other respects plaintiffs' motion is denied. Further proceedings in connection with plaintiffs' requests for damages and other relief will be conducted hereafter. Defendants' cross-motion for summary judgment is denied. Discovery in this action is to be completed by September 25, 1984, and a joint pre-trial order is to be submitted by the parties by October 22, 1984.
Settle order on notice.