Ferguson v. METRO. DEVELOP. AND HOUSING AUTHORITY

• Citation: 485 F. Supp. 517
• Decision Date: 05 March 1980
• Docket Number: No. 78-3197.,78-3197.
• Parties: Louise FERGUSON et al. v. The METROPOLITAN DEVELOPMENT AND HOUSING AGENCY et al.
• Court: U.S. District Court — Middle District of Tennessee

485 F. Supp. 517

Louise FERGUSON et al. v. The METROPOLITAN DEVELOPMENT AND HOUSING AGENCY et al.

No. 78-3197.

United States District Court, M. D. Tennessee, Nashville Division.

March 5, 1980.

Russell J. Overby, Robert L. Ray, G. Gordon Bonnyman, Peter Komlos-Hrobsky, Nashville, Tenn., for plaintiffs.

James R. Kniffen, Nashville, Tenn., for defendants.

MEMORANDUM

WISEMAN, District Judge.

Plaintiff instituted this action pursuant to 42 U.S.C. § 1437f, 42 U.S.C. § 1983, 28 U.S.C. §§ 2201-2202, and the Fourteenth Amendment to the United States Constitution. She challenges the policy of defendants Metropolitan Development and Housing Agency MDHA¹ and Jack D. Harrington, Executive Director of MDHA,² of terminating rent subsidy benefits under section 201(a)(8) of the United States Housing and Community Development Act of 1974, 42 U.S.C. § 1437f hereinafter referred to as "Section 8", without providing a pretermination hearing, and terminating and denying these benefits for the sole reason of alleged prior indebtedness to MDHA unrelated to the Section 8 program. Jurisdiction is conferred on this Court by 28 U.S.C. § 1343(3).

The named plaintiff entered into a lease agreement, effective May 1, 1977, with a private landlord after defendant MDHA certified her as eligible for federal rent subsidies under the Section 8 program.³ She and her two children subsequently moved into the approved apartment, where they continue to reside. Plaintiff had previously lived in a public housing project operated by MDHA. After vacating that apartment in October of 1975, she was informed that she owed MDHA $227.88 for physical damage to her apartment, although plaintiff contends that the apartment was in good condition when she left. In October of 1977, plaintiff was notified by MDHA of its policy that former MDHA tenants are ineligible for Section 8 assistance if they owe MDHA money resulting from the prior tenancy. Plaintiff was told that she would continue to receive Section 8 assistance until the anniversary date of her lease agreement but that such payments would be discontinued thereafter unless she paid her prior debt to MDHA. In April of 1978, MDHA informed plaintiff that the assistance payments would be discontinued as of April 30, 1978, because of her failure to provide requested information for income verification.

As a result of plaintiff's motion for a temporary restraining order filed with her complaint on May 15, 1978, this Court ordered that the defendants refrain from terminating plaintiff's Section 8 housing benefits until a preliminary injunction hearing could be conducted. The parties subsequently agreed to the entry of a preliminary injunction until further order of the Court. Plaintiff then filed a motion for class certification pursuant to Rule 23 of the Federal Rules of Civil Procedure, and a motion for preliminary injunction or, in the alternative, pursuant to Rule 65(a)(2), to consolidate the hearing on her motion for a preliminary injunction with a hearing on her motion for summary judgment. On October 20, 1978, this Court conducted a hearing, at which time the Court approved an agreed order of class certification. Two classes, both represented by the originally named plaintiff, were certified. Class I is comprised of all persons who presently are, have been, or in the future will be terminated from the Section 8 housing program, without being given a prior opportunity for a hearing. Class II is composed of all persons who are, have been, or in the future will be barred from participation in the Section 8 housing program because of an alleged prior indebtedness to defendant MDHA unrelated to the Section 8 housing program. At the conclusion of the same hearing, the Court also enjoined defendants from terminating, denying, or in any manner barring any beneficiary of or any applicant for Section 8 housing benefits due to an alleged prior indebtedness not connected to the Section 8 housing program. On March 16, 1979, the Court heard arguments on plaintiffs' restated motion for summary judgment.

From the arguments of counsel and evidence submitted in this case, the Court finds that plaintiffs have met their burden of showing that they are entitled to summary judgment pursuant to Rule 56 of the Federal Rules of Civil Procedure. The only material factual questions in this case are whether or not defendants exclude persons from the Section 8 housing program because of prior indebtedness unrelated to the Section 8 program and what, if any, pretermination procedures the defendants provide prior to termination of participants in the Section 8 program. Since the answers to these questions are matters of record and not disputed and since all other questions herein concern the legal effect of these facts, summary judgment is proper.

Based on the evidence presented in this case, it is the holding of this Court that defendant MDHA attempted to terminate the named plaintiff from participation in the Section 8 program, at least in part, on the basis of her failure to pay an alleged debt owed to MDHA unrelated to the Section 8 program. It is also clear that it is defendants' established policy to find applicants ineligible for Section 8 assistance if they owe MDHA money as a result of past tenancy.⁴ It is further apparent that the named plaintiff was not afforded an opportunity for a hearing prior to termination of Section 8 assistance and that MDHA does not provide pretermination hearings to persons currently participating in the Section 8 program.

Congress first instituted the conventional public housing program in the National Housing Act of 1934, 12 U.S.C. §§ 1701 et seq. In the Housing Act of 1937, the federal policy of providing decent, safe, and sanitary housing for low income families was articulated as follows:

It is . . . to be the policy of the United States to promote the general welfare of the Nation by employing its funds and credit . . . to remedy the unsafe and insanitary (sic) housing conditions and the acute shortage of decent, safe, and sanitary dwellings for families of low income, in urban, rural nonfarm, and Indian areas, that are injurious to the health, safety, and morals of the citizens of the Nation. . . .

42 U.S.C. § 1401 (1969). This policy was expanded and strengthened by the Housing Act of 1949, 42 U.S.C. §§ 1441 et seq., and reaffirmed in the Housing and Urban Development Act of 1968, 42 U.S.C. § 1441a.

Since 1934, Congress has enacted many programs to increase the supply of decent housing for low and moderate income families. Among those programs are the section 221(d)(3) Below Market Interest Rate BMIR program of the Housing Act of 1961, 12 U.S.C. § 1715l(d)(3), which provides federal mortgage insurance and subsidized interest payments to owners. Tenants in projects subsidized pursuant to section 221(d)(3), and section 236 of the Housing and Urban Development Act of 1968, 12 U.S.C. § 1715z-1, may receive rent supplement payments under section 101 of the Housing and Urban Development Act of 1965, 42 U.S.C. § 1701s, and section 212(2) of the Housing and Community Development Act of 1974, 12 U.S.C. § 1715z-1.

In the enactment of the Section 8 program, Congress asserted an additional goal of promotion of economically mixed housing:

For the purpose of aiding lower-income families in obtaining a decent place to live and of promoting economically mixed housing, assistance payments may be made with respect to existing, newly constructed, and substantially rehabilitated housing in accordance with the provisions of this section.

42 U.S.C. § 1437f(a). The Section 8 program is comprised of several subprograms, including new construction, substantial rehabilitations, and existing housing. The present case involves the statutory provisions and federal regulations surrounding the existing housing program.

The Section 8 Existing Housing Program provides rent subsidies for lower-income families through the payment of housing assistance payments to owners of existing rental units. The program is administered by public housing agencies PHAs, pursuant to annual contribution contracts entered into with HUD. See 24 C.F.R. §§ 882.116, 882.201-.206 (1979).

Under the terms of the annual contributions contract, the PHA issues a Certificate of Family Participation CFP to any applicant who qualifies as an Eligible Family, that is, a family whose income does not exceed 80 percent of the median income for the area. 42 U.S.C. § 1437f(f)(1); 24 C.F.R. § 882.102 (1979). The Certificate of Family Participation certifies, inter alia, that its holder is authorized to participate in the Section 8 Existing Housing Program. 24 C.F.R. § 882.102 (1979).

Operating under a policy known as "Finders-Keepers," the holder of the certificate is responsible for finding an existing housing unit within the PHA's jurisdiction. 24 C.F.R. § 882.103 (1979). When the certificate holder finds a suitable rental unit and the owner is willing to participate in the program, the PHA must inspect the unit for compliance with federally established housing quality standards. 24 C.F.R. §§ 882.109, 882.116(o) (1979).

Thereafter, the owner of the rental unit and the holder of the certificate must submit a lease to the PHA for its approval. 24 C.F.R. §§ 882.116(j), 882.210 (1979). The terms of the lease are substantially controlled by federal regulations. 24 C.F.R. §§ 882.106-.108, 882.112 (1979).

The contract rent cannot, absent special circumstances, exceed the federally determined "Fair Market Rent" for the area, and it must be reasonable in relation to rents being charged for comparable units in the private unassisted market. 24 C.F.R. § 882.106 (1979). The tenant's contribution toward rent is computed by the PHA on the basis of the family's income. This amount is between 15 and 25 percent of the family's net adjusted annual income, depending on the size of the family and its income level. 24 C.F.R. §§ 889.101-.105 (1979). The owner of...