problem" was clearly arbitrary and capricious.
At the hearing, Shenk admitted that one of the memorandum's
conclusions was incorrect because it erroneously minimized the
impact of the Jacob Riis housing project on the community.
Specifically, the memorandum stated, "its location across
avenue D is somewhat isolated from the Casa Victoria project
site, and we do not expect significant interaction with Casa
Victoria residents." At the hearing, Shank admitted that he
incorrectly described the Jacob Riis project as "isolated"
since it was separated from the project site by only one
crosstown city block. Tr. 134. Moreover, there is no evidence
that stores, schools, or recreational facilities were situated
within the Riis project, which would reduce the likelihood of
interaction with other area residents. Furthermore, this Court
has grave doubts whether, based on a three-or-four-hour visit
to a sixteen-block area, Shenk's original conclusion could be
reliably drawn since it is unlikely that a brief observer of
the neighborhood could distinguish between residents and
nonresidents of Jacob Riis. Considering that the Jacob Riis
Project constitutes almost one-third of the housing units in
the relevant area, this error is significant. Given HUD's
admitted error, the Court has no clear picture of the impact on
the area of the Jacob Riis project and its effect on the undue
concentration inquiry. Shenk has admitted that there is no
rational connection between the facts found — that the Jacob
Riis project was isolated from the community — and the
decision that this ameliorated the effect of the high
concentration of assisted persons in the area.
The errors and omissions described above, when taken as a
whole, demonstrate that Shenk's decision likely lacked a
"rational connection between the facts found and the choice
made." Motor Vehicle Mfr. Ass'n, 463 U.S. at 43, 103 S.Ct. at
2866. This Court finds that plaintiffs have shown a substantial
likelihood of meeting the admittedly heavy burden of showing
that HUD made a "clear error in judgment." See Id.; Falk v.
Secretary of the Army, 870 F.2d 941, 945 (2d Cir. 1989).
3. HUD's Interpretation of Section 880.206(d)
The problems which this Court has found with respect to HUD's
February 14, 1990 decision are illustrative of a larger problem
in this action, HUD's interpretation of the meaning of section
880.206(d). Plaintiffs claim that HUD's interpretation of
"undue concentration" is a violation of the regulation itself.
"[A]n agency's construction of its own regulations is
entitled to substantial deference." Lyng v. Payne,
476 U.S. 926, 939, 106 S.Ct. 2333, 2341, 90 L.Ed.2d 921 (1986); New York
v. Lyng, 829 F.2d 346, 350 (2d Cir. 1987). Plaintiffs must show
that the agency's interpretation of the regulation is "plainly
erroneous or inconsistent with the regulation." United States
v. Larionoff, 431 U.S. 864, 872, 97 S.Ct. 2150, 2155, 53
L.Ed.2d 48 (1977) (quoting Bowles v. Seminole Sand Co.,
325 U.S. 410, 414, 65 S.Ct. 1215, 1217, 89 L.Ed. 1700 (1945)). The
Court must defer to the agency's interpretation unless an
"alternative reading is compelled by the regulation's plain
language or by other indications of the Secretary's intent at
the time of the regulation's promulgation." Gardebring v.
Jenkins, 485 U.S. 415, 430, 108 S.Ct. 1306, 1314, 99 L.Ed.2d
Defendants assert that HUD enjoys wide latitude in
interpreting regulations to effectuate Congress' broadly
outlined policies. Japan Whaling Ass'n v. American Cetacean
Soc'y., 478 U.S. 221, 233, 106 S.Ct. 2860, 2867, 92 L.Ed.2d 166
(1986). HUD argues that this Court should defer to its
experience in developing and selecting the appropriate
criteria. See Lyng, 829 F.2d at 350.
While such deference is clearly due, this Court cannot
sanction such a broad exercise of discretion as to eviscerate
the very meaning of the term "undue concentration" in the
applicable regulation. The effect of deferring to HUD in this
case would be to give HUD an effectively unlimited license to
build assisted housing regardless of the concentration of such
housing in the
area. Unless the term "undue concentration" is given some
objective meaning, HUD can use subjective factors, such as the
existence of stores or community services in the area, to
support whatever result it desires to reach. It is not
necessary, or perhaps even appropriate, for this Court to
specify what the appropriate meaning is. However, the Court
does find, based on the present record, that there is a
substantial likelihood that the treatment accorded the
regulation by HUD in this case does not comport with any
reasonable interpretation of its terms.
a. Purpose of the Regulation.
Congress created the Section 8 Housing Assistance Program in
the United States Housing Act of 1937 (the "1937 Act"),
42 U.S.C. § 1437-1437j:
[f]or the purpose of aiding lower-income families
in obtaining a decent place to live and of
promoting economically mixed housing.
42 U.S.C. § 1437f(a) (1937).
In Section 5301(c) of the Housing and Community Development
Act of 1974 (the "1974 Act"), Congress stated:
The primary objective of this chapter is the
development of viable urban communities, by
providing decent housing and a suitable living
environment and expanding economic opportunities,
principally for persons of low and moderate
42 U.S.C. § 5301(c). A specific objective of the 1974 Act is