Austin Apartment Ass'n v. City of Austin

• Decision Date: 27 February 2015
• Docket Number: Case No. A–14–CA–1146–SS.
• Citation: 89 F.Supp.3d 886
• Parties: AUSTIN APARTMENT ASSOCIATION, Plaintiff, v. CITY OF AUSTIN, Defendant.
• Court: U.S. District Court — Western District of Texas

89 F.Supp.3d 886

AUSTIN APARTMENT ASSOCIATION, Plaintiff

v.CITY OF AUSTIN, Defendant.

Case No. A–14–CA–1146–SS.

United States District Court, W.D. Texas, Austin Division.

Signed Feb. 27, 2015.

Craig T. Enoch, Melissa Anne Lorber, Shelby O'Brien, Enoch Kever PLLC, Austin, TX, for Plaintiff.

Meitra Farhadi, Assistant City Attorney, Patricia L. Link, City of Austin Law Department, Austin, TX, for Defendant.

Fred Fuchs, Nelson H. Mock, Kelli Howard, Texas RioGrande Legal Aid, Austin, TX, for Intervenors.

ORDER

SAM SPARKS, District Judge.

BE IT REMEMBERED on the 26th day of January 2015, the Court held a hearing in the above-styled cause, and the parties appeared by and through counsel. Before the Court are Plaintiff Austin Apartment Association's Motion for Preliminary Injunction [# 4], Defendant City of Austin's Response [# 8] thereto, Intervenors Doris Landrum, Dimple Smith, Gloria Middleton, and Latorie Duncan's Response [# 7] thereto, Plaintiffs Trial Brief on Legal Authorities and Comparing Ordinance–Mandated and Free–Market Lease Terms [# 11], Defendant's Response [# 15] thereto, and Intervenors' Response [# 14] thereto. Having reviewed the documents, the arguments of the parties at hearing, the governing law, and the file as a whole, the Court now enters the following opinion and orders.

Background

On December 11, 2014, the City Council of the City of Austin, Texas, enacted Ordinance Number 20141211–050 (the Ordinance). The Ordinance amends the City's fair housing code to prohibit landlords from refusing to rent to prospective tenants on the basis of “source of income,” which is defined to include “housing vouchers and other subsidies provided by government or non-governmental entities.” Prelim. Inj. Hrg. Ex. P–8 (the Ordinance) at 2. Consequently, under the Ordinance, where a person is otherwise qualified to rent a property, the landlord may not reject that person's application solely because he or she wishes to pay a portion of the rent with a voucher obtained through the federal Housing Choice Voucher Program (HCVP or the Program), formerly known as Section 8.

Plaintiff Austin Apartment Association (the Association), a trade association whose members control rental properties serving over 192,000 households, claims the Ordinance is invalid and seeks a preliminary injunction against its enforcement pending resolution of this action. Specifically, the Association argues the Ordinance is preempted by Texas and federal law, impairs the obligation of contracts in violation of the Texas Constitution, and constitutes a regulatory taking and due process violation under the Texas and United States Constitutions. As set forth below, the Court finds the Association has failed to demonstrate a substantial likelihood of success on the merits of its claims, and therefore DENIES the motion for preliminary injunction.

A. The Housing Choice Voucher Program

Congress created the Housing Choice Voucher Program to “aid[ ] low-income families in obtaining a decent place to live” and to “promot[e] economically mixed housing.” 42 U.S.C. § 1437f(a). The Program is funded by the United States Department of Housing and Urban Development (HUD) and administered by state and local public housing authorities (PHAs) in accord with the regulations promulgated by HUD. Families (or individuals) who wish to receive housing vouchers must apply with their local PHA, which is responsible for screening prospective participants for federal eligibility, issuing vouchers, and contracting with landlords who lease to HCVP participants. See Prelim. Inj. Hrg. Ex. P–12 (HCVP Guidebook) at 1–12.

Once a family is approved by and receives a voucher from the PHA—a process that may take years, as demand for vouchers far outstrips supply and waiting lists are very long—the family is responsible for finding a landlord in the private rental market willing to lease to them. See 24 C.F.R. § 982.302(a). Federal law does not require landlords to accept housing vouchers, and landlords who do accept vouchers are not required to approve tenants merely because they are voucher holders. Rather, landlords who participate in the Program may screen prospective tenants and reject them if screening reveals red flags in terms of paying rent and utility bills, caring for rental housing, respecting neighbors, criminal activity, and the like. See 24 C.F.R. § 982.307(a) (discussing landlord's obligation to screen prospective tenants and factors properly considered in so doing).

Once the family has located a willing landlord and the family and landlord have negotiated the terms of the lease, the PHA must also approve the prospective tenancy. The landlord and family fill out and submit to the PHA a two-page Request for Tenancy Approval, which provides the PHA with basic information such as the address and size of the unit to be rented and the utilities and appliances provided by the landlord versus paid for by the tenant. See Prelim. Inj. Hrg. Ex. P–2 (Request for Tenancy Approval) at 1. The Request for Tenancy Approval also requires landlords who rent more than four units to disclose the rent charged for comparable units, so the PHA can ensure the rent charged to the voucher holder is comparable to that charged to unassisted tenants. Id. at 2.

The portion of the rent paid by the government is pegged to the PHA's schedule of “payment standards,” dollar amounts based on the local fair market rent for apartments or houses of a certain size. HCVP Guidebook at 7–1. The PHA will never pay more than its fixed share, equal to the applicable payment standard less the dollar amount for which the voucher holder is responsible. Id. at 6–2. Typically, a family must pay thirty percent of its monthly adjusted income toward rent. Id. at 6–1; see 42 U.S.C. § 1437f(o )(2)(A). If a family wants to rent a unit which costs more than thirty percent of its monthly adjusted income plus the PHA's fixed share, the family may do so and pay the additional cost—but the amount paid by the family may never exceed forty percent of its monthly adjusted income. 42 U.S.C. § 1437f(o )(3) ; see HCVP Guidebook at 6–2. If the family's responsibility would exceed forty percent of its monthly adjusted income, the family may not rent that unit. HCVP Guidebook at 6–2.

If the PHA approves the tenancy, an inspection of the house or apartment to be leased to the family is scheduled. The inspection ensures the unit passes basic federal housing quality standards (HQS) geared toward ensuring tenant health and safety; for example, the property must have “a shower or bathtub with hot and cold running water,” lockable exterior doors, “a safe heating system,” permanently installed electrical outlets, and the like. See Prelim. Inj. Hrg. Ex. P–3 (HQS Checklist) at 5–7. All utilities must be turned on prior to the inspection. Id. at 9. According to the HQS Checklist, some of the most common reasons a unit fails inspection include broken smoke detectors, missing or cracked electrical outlet covers, peeling paint, trip hazards from carpet or other permanent floor coverings, cracked windowpanes, and inoperable stove burners. Id. at 4. If a property fails inspection, the landlord is required to make any needed repairs and notify the PHA when the property is ready for re-inspection.

Once the unit has passed inspection, the landlord and the PHA must execute the HUD-prepared Housing Assistance Payments Contract. See Prelim. Inj. Hrg. Ex. P–4 (HAP Contract). Execution of the HAP Contract is required by HUD, and without an executed HAP Contract covering a particular family's tenancy, the PHA will not pay any rent to the landlord. See id. at 4 (“During the HAP contract term, the PHA will pay housing assistance payments to the owner[.]”). The landlord cannot modify or negotiate the HAP Contract; it “must be word-for-word in the form prescribed by HUD.” Id. at 1. Further, the landlord must append a Tenancy Addendum to the landlord-tenant lease agreement, which controls in the event the two conflict. Prelim. Inj. Hrg. Ex. P–5 (Tenancy Addendum) at 1 § 1(b).

Under the HAP Contract, the PHA's responsibility to pay rent terminates automatically under a number of circumstances, including if the tenant terminates the lease, moves out of the unit, or is dropped from HCVP, or if the PHA determines there is not enough funding to continue the Program.See HAP Contract at 4 § 4(b)(1)-(6) (detailing situations in which the HAP Contract automatically terminates). The PHA has discretion to terminate payments if the family leasing the property breaks up, “if the PHA determines that the [property] does not provide adequate space ... because of an increase in family size or a change in family composition,” or if the landlord violates the HAP Contract. Id. at 5 § 4(b)(7)-(9). Additionally, the HAP Contract governs the timing of payment of rent. Although the PHA “must pay housing assistance payments promptly when due,” it will only be obligated to pay late fees for tardy payments if (1) charging late fees is general practice in the community, (2) charging late fees is the landlord's general practice, and (3) the landlord also charges the leasing family late fees. Id. at 5 § 7(a). Additionally, the PHA is not required to pay late fees, even where those three conditions are met, “if HUD determines that late payment by the PHA is due to factors beyond the PHA's control.” Id. at 5 § 7(a)(3). Late payment of rent by the PHA is not a violation of the lease, and the landlord cannot terminate a tenancy because the PHA fails to pay its share. Id. at 9 § 5(d).

B. Procedural History

On December 12, 2014, the Association filed suit in the 345th Judicial District Court of Travis County, Texas, seeking a declaration the Ordinance is invalid, a temporary restraining order, and preliminary and permanent injunctive relief. See Notice Removal [# 1–3] at 2 (Orig. Pet.). The City removed to this Court on December 31, 2014, invoking federal question jurisdiction. Id. [# 1] ¶ 1. Intervenors Latorie...