Cole v. Lynn

• Decision Date: 07 February 1975
• Docket Number: Civ. A. No. 74-1872.
• Parties: Sadie E. COLE et al., Plaintiffs, v. James T. LYNN et al., Defendants.
• Court: U.S. District Court — District of Columbia

389 F. Supp. 99

Sadie E. COLE et al., Plaintiffs, v. James T. LYNN et al., Defendants.

Civ. A. No. 74-1872.

United States District Court, District of Columbia.

February 7, 1975.

Florence Wagman Roisman, Ann K. Macrory, Washington Lawyers' Committ. for Civil Rights, Washington, D. C., for plaintiffs.

Robert M. Werdig, Asst. U. S. Atty., Washington, D. C., for defendants.

FINDINGS OF FACT AND CONCLUSIONS OF LAW

GESELL, District Judge.

This is a class action brought by present and former tenants¹ challenging the decision of the Secretary of the Department of Housing and Urban Development (HUD) to demolish Sky Tower, a multifamily housing project, renovated with federal funds at substantial expense, for low-income families in this city. The matter came before the Court on plaintiffs' application for preliminary injunction. A hearing was held and after considering the testimony, affidavits, briefs and arguments of counsel, the Court issued a Temporary Restraining Order on January 28, 1975, to prevent further demolition pending the preparation of findings of fact, conclusions of law and an appropriate form of preliminary injunction. The Court's detailed findings and conclusions are set out herein and present the basis on which the Court has concluded that a preliminary injunction is required.

Background of the Project

Sky Tower was built in the mid-1950's as a 217-unit garden apartment complex consisting of 19 sturdy brick buildings located in the far Southeast area of the District of Columbia. In 1971, the complex was purchased by a non-profit corporation which proposed to rehabilitate it and transform it into a 150-unit complex of larger units to serve low- and moderate-income tenants with large families. A $2.9 million mortgage to cover the acquisition and rehabilitation costs was insured by HUD pursuant to Section 236 of the National Housing Act, 12 U.S.C. § 1715z-1. Pursuant to Section 236, HUD also subsidized the interest rate on the mortgage. In addition, HUD undertook to pay rent supplement benefits on behalf of up to 60 households and 20 of the units at Sky Tower were to be leased to the National Capital Housing Authority (NCHA), which would re-lease them, at public housing rents, to households eligible for public housing under the United States Housing Act of 1937, as amended, 42 U. S.C. § 1401 et seq.

Rehabilitation work began at Sky Tower in May of 1971. By November, 1972, two contractors had defaulted in their performance of the rehabilitation work. At that time, eight buildings had been completely rehabilitated, three were approximately 50 percent rehabilitated, and work had not yet begun on eight others. Although the non-profit sponsor wished to complete the rehabilitation work, and the mortgagee was prepared to allow that, HUD insisted that the property be foreclosed. See 24 C.F.R. § 236.56. Title was transferred to HUD on June 15, 1973.

When HUD took title to the property, the eight rehabilitated buildings had new air-conditioning and heating systems, new kitchens, laundry facilities and other amenities. These buildings, all of which remain standing, comprised 63 units: 18 two-bedroom; 15 three-bedroom; 21 four-bedroom; 1 five-bedroom and 8 six-bedroom. Rents ranged from approximately $75 to $225. Approximately 70 families were residing at Sky Tower.

After acquiring title to the property, HUD employed a management firm, Urban Management Services, Inc., to operate the project and new leases were executed with the tenants. The lease with NCHA was continued and the public housing tenants continued in possession. Urban Management Services executed new rent supplement leases with the tenants who had been receiving rent supplement benefits. HUD then began to consider what to do with the property.

HUD considered several alternatives to demolition consisting of various permutations of partial rehabilitation and rent supplements. In each case, insufficient subsidies were available to insure economic feasibility without risks that "would not be in the best interests of the Secretary" and therefore it was decided that there was "no alternative" to demolition. On September 17, 1974, HUD concluded that the property would be cleared and the vacant land made available for sale to developers for the construction of single-family homes for the middle class. The cost of demolition will exceed $150,000, but the gross return from sale of the land is projected at only approximately $58,000.

When HUD demolition plans became known, tenants were under increasing pressure to leave, vandalism increased and gradually the whole project became moribund except for a few families that still remain, presumably due to inability to find comparable living arrangements. Those who felt obliged to leave have found inferior quarters at higher rent. Indeed, no comparable low-income housing of equal quality was available to any of the tenants at the time the demolition decision was made. In fact, at all relevant times, there has been an acute housing shortage in the District of Columbia, which has been particularly serious for low-income persons with large families, the very class Sky Tower serves. Thus, NCHA has a current waiting list of over 4,000 families, concentrated in the four-bedroom and larger category. Only one other HUD-assisted project in the District of Columbia metropolitan area has any six-bedroom units whatsoever.

HUD's Obligations

This litigation has brought into sharp focus a most anomalous situation. HUD, an agency directed by Congress to implement national housing policy by creating decent, sanitary housing for low-income families and generally authorized to foster improved living conditions in slum-like areas, proposes to wreck and demolish eight low-income apartment buildings containing 63 apartments which were recently renovated at a net "sunk" investment of over $2 million in Government money and are now occupied by low-income tenants. It is planning to take this action against the expressed wishes of the Government of the District of Columbia, and squarely in the face of an acute low-income housing shortage which causes much distress in this community. HUD is proceeding without published demolition regulations,² without providing even minimum notice and rule-making hearings, and without any statement of its reasons adequately explaining why other alternatives short of demolition expressly provided by federal statutes are disregarded or deemed impractical. See 12 U.S.C. §§ 1715z-3(a)(2); 1713(l).

HUD was created by Congress to carry out a national housing policy which Congress has developed, refined and implemented over a period of years by a series of enactments. In brief, that policy is designed to remedy acute shortages of decent, sanitary housing for low-income families and to preserve rather than destroy existing housing by rehabilitation and other measures. See 42 U.S.C. § 1441a, as amended by § 801 of Pub.L. 93-383, 88 Stat. 633 (1974). "HUD is obliged to follow these policies. Action taken without consideration of them, or in conflict with them, will not stand." Commonwealth of Pennsylvania v. Lynn, 501 F.2d 848, 855 (U.S.App.D.C., 1974).

Assuming, although it is far from clear,³ that the Secretary is authorized to demolish useful buildings built with Government funds that are serving an undisputed housing need, he must yet act in an appropriate manner and for a rational reason related to the achievement of the statutory objectives. It is apparent he has done neither in this instance.

The decision to demolish was apparently substantially influenced by a single, broad, sweeping policy determination not made with any particular property in mind, certainly not Sky Tower, which, by its very nature, perforce eliminated a need to hear tenants, consider alternatives or proceed to a rationalized judgment consistent with national housing policy. HUD has declared that it is "HUD's primary objective to dispose of all acquired multifamily properties at the earliest possible date at the highest price obtainable in the current market." HUD, Property Disposition Handbook for Multifamily Properties, HM 4315.1 (Feb. 17, 1971) ¶ 21 at 3.⁴ This is an oversimplified and inappropriate premise. The Secretary's statutory mandate to seek to better housing conditions for low-income groups does not evaporate when a Section 236 project comes into his hands through foreclosure.⁵

Not only has the Secretary's discretion thus been unfortunately placed in a straitjacket of his own design, but the Secretary has proceeded in a fashion that prevents meaningful judicial review because minimal due process requirements and many sections of the entire statutory scheme from which the Secretary derives his overall authority have apparently been disregarded. The Secretary has apparently interpreted his authority as a grant to proceed in his absolute discretion in whatever manner he may, for convenience, choose. This is a fundamental mistake. While he has no doubt attempted to act in good faith, his discretion is not absolute. The exercise of his discretion is subject to court review when, as here, it is responsibly challenged by tenants affected and a prima facie showing has been made that he may have acted arbitrarily and irrationally.

HUD's Omissions

The Secretary did not consider alternatives available to him and failed to afford a hearing.

There were, in fact, a number of alternatives which, as far as the record shows, HUD never considered, although available to it. HUD never considered continuing to operate the eight fully rehabilitated buildings as a rental property under its own management, and specifically maintained at oral argument it lacked the authority to do so. But see 12 U.S.C. § 1713(l). HUD never considered the impact of the new Section 8 subsidy program on its decision, although that program was enacted by the Congress on August 22, 1974, several weeks before the final decision to demolish the project...