Alschuler v. Department of Housing and Urban Development

• Citation: 686 F.2d 472
• Decision Date: 04 August 1982
• Docket Number: No. 81-1904,81-1904
• Parties: Frank ALSCHULER, Diane Sokolofski, Morton Weisman and the Hutchinson-Hazel- Junior Terrace Association, Plaintiffs-Appellants, v. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT, Elmer C. Binford, Lawrence B. Simons, Monterey Apartments, a California Limited Partnership, Sabina Realty Corporation, G. Bliudzius Contractors, Inc., ADC Mortgage Corporation, Ranbir S. Sahni, George Gottfried and unknown Partners of Monterey Apartments, Defendants-Appellees.
• Court: United States Courts of Appeals. United States Court of Appeals (7th Circuit)

Page 472

686 F.2d 472

Frank ALSCHULER, Diane Sokolofski, Morton Weisman and the

Hutchinson-Hazel- Junior Terrace Association, Plaintiffs-Appellants, v. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT, Elmer C.

Binford, Lawrence B. Simons, Monterey Apartments, a

California Limited Partnership, Sabina Realty Corporation,

G. Bliudzius Contractors, Inc., ADC Mortgage Corporation,

Ranbir S. Sahni, George Gottfried and unknown Partners of

Monterey Apartments, Defendants-Appellees.

No. 81-1904.

United States Court of Appeals, Seventh Circuit.

Argued Nov. 9, 1981.

Decided Aug. 4, 1982.

Rueben L. Hedlund, Chicago, Ill., for plaintiffs-appellants.

Edna Selan Epstein, Sidley & Austin, Michael S. O'Connell, Fredick H. Branding, Asst. U. S. Attys., Chicago, Ill., for defendants-appellees.

Before BAUER and WOOD, Circuit Judges, and EVANS, District Judge. ^*

HARLINGTON WOOD, Jr., Circuit Judge.

Plaintiffs, a local neighborhood association and three of its members, filed suit to enjoin HUD from disbursing housing assistance funds and providing mortgage insurance for a HUD-approved low-income housing project in the Uptown area of Chicago's North Side, and to enjoin occupancy and further construction of the project. The complaints also named the project developers as defendants. After eleven days of hearings, the district court denied plaintiffs' motion for a preliminary injunction and dismissed their pendent state claim. See Alschuler v. HUD, 515 F.Supp. 1212 (N.D.Ill.1981). This appeal followed.

I. Background

This action arises under various federal statutes and regulations controlling HUD's authority to implement the objectives of the national housing policy. Section 8 of the United States Housing Act of 1937 authorizes HUD to enter into contracts to provide housing assistance payments on behalf of eligible low-income tenants. 42 U.S.C. § 1437f (1976 & Supp. IV 1980) (as amended). Pursuant thereto HUD promulgated a set of comprehensive regulations governing the approval of section 8 funding for substantially rehabilitated housing such as the project at issue here. 24 C.F.R. Pt. 881 (1981). Those regulations establish specific standards for site and neighborhood selection and project eligibility. In pertinent part, 24 C.F.R. §§ 881.206(b) and (c) require that the proposed site further full compliance with Title VIII of the Civil Rights Act of 1968 ("Fair Housing Act"), 42 U.S.C. §§ 3601 et seq., ¹ and avoid undue concentration of assisted persons in areas containing a high proportion of low-income persons, respectively. The regulations also provide that high-rise elevator projects for families with children are prohibited unless there is no practical alternative, 24 C.F.R. § 881.202(d); see 42 U.S.C. § 1437f(c)(1), and that all projects must comply with applicable local ordinances, 24 C.F.R. § 881.207(f). To further encourage private investment and participation in furnishing decent housing for low-income people, the National Housing Act of 1954 authorizes HUD to insure mortgages secured by property on which is located a dwelling conforming to the standards for section 8 assistance and "meeting the requirements of all ... local ordinances or regulations, relating to the public health or safety, zoning or otherwise, which may be applicable thereto." 12 U.S.C. § 1715l (d)(2) (1976 & Supp. IV 1980) (as amended).

The factual background of this matter is set forth in detail in the district court's opinion. 515 F.Supp. 1212. The basic facts are not disputed; rather, the controversy centers on the legal significance to be attached thereto. We therefore recount only so much as is essential to an understanding of our decision.

In June 1979, HUD received from private defendants a preliminary proposal for 82 units of family section 8 housing to be located in the Uptown Community Area. The proposal called for substantial rehabilitation of two adjacent apartment buildings, one a nine-story elevator building and the other a three-story building containing three apartments (collectively, the "Monterey project"). After a one-year period of processing the application, HUD gave final approval for mortgage insurance and rental assistance. Before doing so, HUD determined, inter alia, that the buildings were not located in an area of low-income or minority concentration and would not create an undue concentration of assisted or minority persons in the vicinity, and that there was no practical alternative to approval of the nine-story elevator building. HUD based its determination primarily on 1970 census data on the racial and economic make-up of census tract 321 (in which the project was located), ² census tracts contiguous with tract 321, and the Uptown Community as a whole, but considered other indicators as well. HUD had ranked the Monterey project seventh out of 28 proposed projects on the basis of several criteria pertaining to project desirability. In particular, Monterey was found to be located in a relatively attractive area with several parks and playgrounds, good public transportation, and above average commercial and community services. The quality of the Monterey apartments and the extensive private investments in restoring the neighborhood also impressed HUD officials.

HUD further determined that the buildings conformed to all applicable local ordinances. That conclusion was based on a building permit issued by the Chicago Building Department and a legal opinion letter supplied by the developer at the time of closing.

Plaintiffs alleged as a federal claim that HUD's action in approving Monterey was arbitrary and capricious for the following reasons. First, HUD in effect ignored the statutory prohibition against high-rise elevator projects for families with children. Second, the proposed rehabilitation violates the Lake Michigan and Chicago Lakefront Protection Ordinance, Chicago, Ill., Municipal Code, ch. 194B (1973) ("Lakefront Protection Ordinance"), because it was not submitted to the Chicago Plan Commission for approval. Third, HUD relied on outdated data to determine the concentration of low-income and minority people in the area and failed to define the relevant area for the purpose of making those determinations. Plaintiffs further asserted the violation of the Lakefront Protection Ordinance as a pendent state claim against the private defendants.

The district court, denying preliminary injunctive relief, ruled that plaintiffs had failed to show a reasonable likelihood of success on the merits of their federal claim. The court also dismissed the state claim, finding that plaintiffs had no private right of action under Illinois law.

II. Federal Claim

Standing

The district court ruled that plaintiffs, as neighborhood residents, have standing to challenge HUD's decision approving the Monterey project. 515 F.Supp. at 1227-28. In response to plaintiffs' appeal on the federal claims, defendants reassert their position in the proceedings below that plaintiffs lack standing. Because standing affects jurisdiction, and all parties have had an opportunity to brief the issue on appeal, we review the district court's conclusion on that threshold inquiry.

The concept of standing "involves both constitutional limitations on federal-court jurisdiction and prudential limitations on its exercise." Warth v. Seldin, 422 U.S. 490, 498, 95 S.Ct. 2197, 2205, 45 L.Ed.2d 343 (1975). To satisfy the "case and controversy" requirement of Article III, a plaintiff must allege a sufficient personal stake in the outcome of the dispute to ensure that the matter to be adjudicated will be presented in an adversary context and in a form historically viewed as capable of judicial resolution. Association of Data Processing Service Organizations, Inc. v. Camp, 397 U.S. 150, 151-52, 90 S.Ct. 827, 829, 25 L.Ed.2d 184 (1970). In other words, "the plaintiff must show that he personally has suffered some actual or threatened injury as a result of the putatively illegal conduct of the defendant." Gladstone, Realtors v. Village of Bellwood, 441 U.S. 91, 99, 99 S.Ct. 1601, 1607, 60 L.Ed.2d 66 (1979). As an added prudential limitation, section 10 of the Administrative Procedure Act ("APA"), 5 U.S.C. § 702, under which we assume each facet of the federal claim arises, requires that plaintiffs be "adversely affected or aggrieved within the meaning of the relevant statute." The Supreme Court in Camp construed this to mean that the alleged injury must be to an interest "arguably within the zone of interests to be protected or regulated by the statute ... in question." 397 U.S. at 153, 90 S.Ct. at 830.

Plaintiffs alleged as an injury-in-fact that HUD's approval of the Monterey project will cause substantial harm to their neighborhood by creating an imbalance in the minority and low-income population, breeding an increase in crime, and placing an added strain on community resources. They also contend that their property values and the "special environmental, recreational, cultural, historical and aesthetic qualities of the Lake Michigan and Chicago Lakefront Protection District" will be adversely affected. See 515 F.Supp. at 1216. The district court ruled that plaintiffs' allegation of threatened injury satisfied the Article III standing requirement. Id. at 1227. On appeal defendants argue that this conclusion contradicts the court's more specific finding that plaintiffs had failed to establish the harm necessary to obtain a preliminary injunction. See Id. at 1226-27, 1239. That finding, however, was made upon a motion for a preliminary injunction, not summary judgment, and thus is not conclusive of the merits. We must, therefore, take as true plaintiffs' allegations of threatened injury in the pleadings. ³ Jenkins v. McKeithen, 395 U.S. 411, 421-24, 89 S.Ct. 1843, 1848-49, 23 L.Ed.2d 404 (1969); cf. Simon v. Eastern Kentucky Welfare Rights Organization, 426 U.S. 26, 53-54, 96 S.Ct. 1917, 1931, 48 L.Ed.2d 450 (1976) (Brennan, J., concurring). Those...