City of Boston v. Hills

• Decision Date: 30 September 1976
• Docket Number: Civ. A. No. 75-902-C.
• Citation: 420 F. Supp. 1291
• Parties: CITY OF BOSTON v. Carla HILLS, Secretary of United States Department of Housing and Urban Development, et al.
• Court: U.S. District Court — District of Massachusetts

420 F. Supp. 1291

CITY OF BOSTON v. Carla HILLS, Secretary of United States Department of Housing and Urban Development, et al.

Civ. A. No. 75-902-C.

United States District Court, D. Massachusetts.

September 30, 1976.

Thomas H. Martin, Mason & Martin, Boston, Mass., for plaintiff.

James N. Gabriel, U. S. Atty., William Hughes, Asst. U. S. Atty., Boston, Mass., for defendant.

MEMORANDUM

CAFFREY, Chief Judge.

I. PRIOR PROCEEDINGS

This action was originally filed by the plaintiff, the City of Boston (the City) against Carla Hills, the Secretary of the Department of Housing and Urban Development (HUD) and others, on March 10, 1975. In its original complaint the City sought injunctive and declaratory relief and relief in the nature of mandamus from the operation of a regulation of HUD, 24 C.F.R. 403.1 et seq., which the City contends was invalid, which authorized HUD to exercise exclusive control over the level of rents to be set in units in "federally insured and subsidized" housing projects.¹

On April 18, 1975, after a hearing, this Court denied the plaintiff's motion for a preliminary injunction, holding that: (1) the plaintiff had not shown that it was in danger of suffering immediate and irreparable harm from the continued application of the federal regulation in question in that the federal regulation had not increased the rent of any unit subject to the City's rent control ordinance; and (2) the plaintiff had failed to demonstrate a probability of success on the merits because (a) under the circumstances of the case, the federal regulation under attack was validly promulgated under the applicable provisions of the Administrative Procedure Act, 5 U.S.C.A. 553(d)(3); and (b) it was not likely that the plaintiff could show that the regulation was beyond the authority of the Secretary to promulgate.

On October 22, 1975, HUD further amended 24 C.F.R. by adding a new part 403.1 which clarified HUD's authority to set rents in federally-insured and subsidized housing free from state or local rent control ordinances or regulations. Thereafter the plaintiff submitted a Substitute Complaint to reflect the promulgation of the amendments to part 403.1. The City contests the validity of 24 C.F.R. 403.1 et seq., as amended, and seeks a declaration from this Court of its right to regulate rents in housing constructed under the subsidized insured programs as part of its imposition of rent control generally upon housing in the City.

On July 16, 1976, HUD moved to add the Rent Board of the City of Boston (the Rent Board) as a party plaintiff pursuant to Rule 19, F.R.Civ.P., and for leave to amend its answer for the purpose of filing a counterclaim pursuant to Rules 13(e) and 15(d), F.R.Civ.P. It appearing that neither motion is opposed, an Order will enter allowing HUD's motion for leave to amend its answer and allowing HUD's motion to add the Rent Board of the City of Boston as a party plaintiff. HUD has also moved for summary judgment.

HUD's proposed counterclaim brought pursuant to 28 U.S.C. 2201 and 2202, seeks a declaration that the City of Boston Ordinances, Ch. 19 (1972), as amended, violate the Supremacy Clause, Article VI, Clause 2, of the United States Constitution. Additionally, HUD seeks to enjoin the City from regulating the level of rents in federally-insured and subsidized housing projects in Boston. HUD alleges that jurisdiction for its counterclaim lies under 28 U.S.C. §§ 1331 and 1345, that the matter in controversy exceeds $10,000, and that the Secretary of HUD has the capacity to sue pursuant to the National Housing Act, 12 U.S.C. § 1702.

In support of its claim for injunctive relief, HUD contends that it is being irreparably harmed and the public interest adversely affected by the City's action in allegedly preventing mortgagors from collecting the minimum amount of rent determined by HUD to be necessary for the economic viability of federally-insured and subsidized housing projects in Boston. HUD alleges that it has no adequate legal remedy because defaults and foreclosures will result from the plaintiffs' actions and these will result in financial loss to the federal government for which it cannot be fully reimbursed. Additionally, HUD alleges that such foreclosures would terminate the subsidy benefits to tenants which benefits provide displaced and low and middle income families with the opportunity to occupy decent housing.

The issues underlying the instant controversy have been the subject of three state court decisions and one federal district court decision which conflict on the issue of preemption under the Supremacy Clause.

On March 1, 1976, Judge Garrity of the Boston Housing Court ruled that HUD's scheme of rent regulation (1) did not preempt the City's rent control ordinance; and (2) that in Druker v. Sullivan, 322 F.Supp. 1126 (D.Mass.1971), Judge Julian ruled as a matter of law that both federal regulations and the City ordinance "may both be enforced without impairing federal superintendence;" and (3) that if the Boston Rent Board "was in violation of federal law or is frustrating the purposes of a federal program, HUD could commence litigation against the Board." Kargman, et al. v. Boston Rent Control Board, et al., Civil Action No. 3085; Brown, et al. v. Kargman, et al., Civil Action No. 4150. In these cases the issues raised were whether HUD's final regulation (24 C.F.R. 403.1 as amended) conflicted with the Boston rent control ordinance and whether the authority granted to HUD by Congress was an unconstitutional delegation of legislative authority.

On March 19, 1976, after a consolidated trial in Druker v. City of Boston et al., C.A.No. 71-45-F and Kargman v. Sullivan et al., C.A.No. 71-2712-F,² Judge Freedman held that the City of Boston's rent control ordinances do conflict with the federal regulations and frustrate the purposes and objects of the National Housing Act and thus violate the Supremacy Clause of the United States Constitution. He accordingly ruled that the orders of the Rent Control Board were invalid as to the plaintiff-project owner's federally-insured and subsidized housing projects.

Subsequently, on July 1, 1976, Judge Daher of the Boston Housing Court in Rent Board of the City of Boston v. Druker, et al., Civil Action No. 3452, in effect held that the federal regulatory scheme embodied in 24 C.F.R. 403.1 et seq., was unconstitutional under the 9th and 10th Amendments to the United States Constitution insofar as it preempted the Commonwealth's substantive law of landlord-tenant relations. The issue as framed by Judge Daher in initially ruling on the motion for injunctive relief was not whether the local ordinance conflicted with the purposes and operation of the federal housing program, as embodied in the National Housing Act, but rather whether HUD's interim regulation (now clarified in an amended version of 24 C.F.R. 403.1) conflicted with the Boston rent control ordinance.

Judge Daher's ruling was made on a motion by the defendant-project owners to revoke an injunction which had been issued in the case on July 9, 1975. In granting injunctive relief the Judge had ruled that federally-insured and subsidized housing projects in Boston were subject to the regulations of the Boston Rent Board. Subsequent to granting the injunction, two events occurred which prompted the plaintiff-project owners to move for a revocation of the injunction: (1) the federal regulation in question, 24 C.F.R. 403, was amended; and (2) Judge Freedman, after a trial, ruled in Druker v. City of Boston et al., supra.

Judge Daher denied the motion to revoke the injunction notwithstanding the intervening developments cited by the plaintiffs, thus leaving intact his ruling that rents in federally-insured and subsidized housing in Boston could be validly controlled by the local rent control ordinance, and that the federal regulations at 24 C.F.R. 403.1 et seq. to the contrary were invalid.

There is thus a head-on conflict between the decisions of the United States District Court (Freedman, J.) and the decisions of the Housing Court of the City of Boston (Garrity, J. and Daher, J.) as to the question of whether the federal regulatory scheme of rent-setting in federally-insured and subsidized housing, 24 C.F.R. 403.1 et seq. preempts Boston's rent control ordinance insofar as it relates to such housing in the matter of rent setting.³

A review of the federal statutes, regulations and programs, as well as a review of the state statutes and local ordinances, will indicate more accurately the provisions of the state and federal laws as well as the extent of the conflict between them.

The National Housing Act, 12 U.S.C.A. § 1701, et seq. (the Act), enacted in 1934 establishes most of the federally-insured and subsidized housing programs involved in the instant case. Pursuant to Congress' Article I, Section 8 powers (the Commerce and Tax Spend Clauses of the U.S. Constitution), the Act promotes the private construction of housing for individuals and families not otherwise able to afford adequate housing.

The Secretary of HUD, having found that local rent control ordinances are a "significant factor," 40 Fed.Reg. 49319 (October 22, 1975), in causing mortgage defaults, promulgated the regulations in question, 24 C.F.R. 403.1, et seq. In so doing she acted pursuant to the authority granted in the Act "to make such rules and regulations as may be necessary to carry out the provisions of this title Mortgage Insurance." 12 U.S.C.A. § 1715b; see also 42 U.S.C. § 3531, et seq.; 12 U.S.C. § 1701q; 12 U.S.C. § 1715l(d)(3) and (5); and 12 U.S.C. § 1701s.

Effective February 26, 1975, HUD promulgated a proposed regulation, 40 Fed. Reg. 8189, which in essence declared HUD's intention to preempt local rent control ordinances in subsidized insured projects. This regulation was published in final form on October 22, 1975. 40 Fed.Reg. 49318. See 24 C.F.R. 403. The new part 403.1 of 24 C.F.R....