Johnson v. Pennsylvania Housing Finance Agency

• Decision Date: 19 September 1973
• Citation: 309 A.2d 528,453 Pa. 329
• Parties: Joyce JOHNSON, a Citizen, Resident and Taxpayer of the Commonwealth of Pennsylvania, in her own right and on behalf of all other citizens, residents and taxpayers of the Commonwealth v. PENNSYLVANIA HOUSING FINANCE AGENCY et al., Appellants.
• Court: Pennsylvania Supreme Court

Page 528

309 A.2d 528

453 Pa. 329

Joyce JOHNSON, a Citizen, Resident and Taxpayer of the Commonwealth of Pennsylvania, in her own right and on behalf of all other citizens residents and taxpayers of the Commonwealth v. PENNSYLVANIA HOUSING FINANCE AGENCY et al., Appellants.

Supreme Court of Pennsylvania.

Sept. 19, 1973.

Jerome J. Shestack, Thomas R. Schmuhl, Philadelphia, for appellants; Schnader, Harrison, Segal & Lewis, Philadelphia, of counsel.

Mitchell S. Lipschutz, Philadelphia, for amicus curiae, Commonwealth of Pa.

Israel Packel, J. Justin Blewitt, Jr., Harrisburg, for appellee.

Before JONES, C.J., and EAGEN, O'BRIEN, ROBERTS, POMEROY and MANDERINO, JJ.

OPINION OF THE COURT

ROBERTS, Justice.

This is a taxpayer's suit in equity, challenging the constitutionality of the recently enacted Housing Finance Agency Law, Act of December 5, 1972, P.L. ---, No. 282, § 1 et seq., 35 P.S. § 1680.101 et seq. (Supp.1973). This Court has assumed plenary jurisdiction. ¹ Given the innovativeness of the undertaking authorized by the Housing Finance Agency Law, '(i)t (has) naturally invite(d) . . . the attack of those who are inclined to regard all experiments in our social and economic life as presumptively unconstitutional.' Dornan v. Philadelphia Housing Authority, 331 Pa. 209, 213, 200 A. 834, 836 (1938).

Appellee, plaintiff below, has presented to this Court a veritable barrage of constitutional arguments apparently 'in the hope that a stray shot may find its way to some vital target.' Belovsky v. Redevelopment Authority, 357 Pa. 329, 341, 54 A.2d 277, 283 (1947). However, our determination of the merits of appellee's contention leaves the Housing Finance Agency Law unscathed; it is undoubtedly constitutional in all respects.

Specifically, appellee argues that the Housing Financing Agency Law (hereinafter 'H.F.A.L.') is unconstitutional in that it 1) does not serve a public purpose; 2) contravenes the constitutional prohibition against delegation of legislative power; 3) authorizes a debt or pledge of credit by the Commonwealth; 4) constitutes an irrevocable grant of special privileges and immunities; 5) provides for a prohibited exemption from taxation; 6) creates a special or local law; and 7) fails, in its title, to state the full subject of the Law. As noted above, all of these contentions are without legal substance.

The legislative findings ² make clear that the H.F.A.L. stems from and is mandated by the critical housing shortage presently existing throughout the Commonwealth with respect to low income, moderate income, and elderly persons and families. ³ H.F.A.L., 35 P.S. § 1680.102 (Supp.1973). See also Reitmeyer v. Sprecher, 431 Pa. 284, 290, 243 A.2d 395, 398 (1968). In response to this problem of critical state concern, and in the hope of alleviating it, the Legislature has established the Pennsylvania Housing Finance Agency (H.F.A.L., 35 P.S. § 1680.201 (Supp.1973)) as a 'public corporation and government instrumentality,' with express powers to administer two basic programs involving housing purchases (H.F.A.L., 35 P.S. § 1680.301a (Supp.1973)) and housing rentals (H.F.A.L., 35 P.S. §§ 1680.401a--1680.404a (Supp.1973)).

Under the housing purchase program, the Housing Finance Agency is authorized to lend funds to any mortgagor for the 'construction, reconstruction or rehabilitation of housing units for sale to individual purchasers of low or moderate income . . ..' H.F.A.L., 35 P.S. § 1680.301a(a) (Supp.1973). All sales are to be supervised by the Agency. Once a unit is sold to a purchaser of low or moderate income, the original mortgagor's obligation to the Agency is released, and the new purchaser assumes his own mortgage obligation to the Agency. Under this phase of the program, the Agency is additionally empowered to issue loans directly to individuals of low or moderate income for the purchase of housing units. H.F.A.L., 35 P.S. § 1680.301a(e) (Supp.1973).

The rental program (H.F.A.L., 35 P.S. §§ 1680.401a--1680.404a (Supp.1973)) authorizes the Agency to 'make mortgage loans to mortgagors for such projects as in the judgment of the Agency have promise of supplying well-planned, well designed apartment units which will provide housing for low and moderate income persons . . ..' H.F.A.L., 35 P.S. § 1680.402a (Supp.1973). All loans granted by the Agency subject the mortgagor to regulation and limitation of rents charged, and permissible profits earned.

In order to finance the above programs, the General Assembly has empowered the Agency to issue bonds and notes, which are to be payable out of the Agency's revenue, including the proceeds of its mortgage loans. H.F.A.L., 35 P.S. § 1680.501a (Supp.1973). As the H.F.A.L. declares, the notes and bonds issued by the Agency do not constitute 'a debt of the Commonwealth or of any political subdivision thereof' and 'that neither the faith and credit nor the taxing power . . . is pledged to the payment of the principal of or of the interest on such bonds.' H.F.A.L., 35 P.S. § 1680.502a (Supp.1973). Furthermore, the Agency is required to establish and maintain a 'Capital Reserve Fund' in an amount equal to the entire principal and interest due on its outstanding bonds and notes during the succeeding calendar year. H.F.A.L., 35 P.S. § 1680.504a (Supp.1973).

If the Agency determines that there will be, in any year, a deficiency in the Capital Reserve Fund or a default in the payment of interest or principal, the Agency is required to submit to the Governor an estimate of the funds necessary to avoid such a deficiency or default. The Governor is then required to include this amount in the requested Commonwealth budget submitted to the Legislature; the Legislature, however, is not required to, but may, appropriate funds to avoid a deficiency or default. Id.

The H.F.A.L. further provides that all bonds and notes issued by the Agency are to be free from all taxes and assessments, except inheritance, gift, estate, and transfer taxes. H.F.A.L., 35 P.S. § 1680.506a (Supp.1973). The Commonwealth also pledges and covenants not to impair the rights and remedies of holders of Agency obligations. H.F.A.L., 35 P.S. § 1680.508a (Supp.1973).

I

Initially we note that statutes similar to the H.F.A.L. have been adopted by several states and have been upheld, without exception, when challenged on constitutional grounds closely akin to those presented here. See, e.g., Massachusetts Housing Finance Agency v. New England Merchants National Bank, 356 Mass. 202, 249 N.E.2d 599 (1969); Maine State Housing Authority v. Depositors Trust Co., 278 A.2d 699 (Me.1971); Advisory Opinion on the Constitutionality of Act No. 346, 380 Mich. 554, 158 N.W.2d 416 (1968); New Jersey Mortgage Finance Agency v. McCrane, 56 N.J. 414, 267 A.2d 24 (1970); Martin v. North Carolina Housing Corporation, 277 N.C. 29, 175 S.E.2d 665 (1970); Vermont Home Mortgage Credit Agency v. Montpelier National Bank, 128 Vt. 272, 262 A.2d 445 (1970); West Virginia Housing Development Fund v. Copenhaver, 153 W.Va. 636, 171 S.E.2d 545 (1969).

Plaintiff-appellee firstly contends that the H.F.A.L. is unconstitutional in that it does not involve a 'public purpose' in which a public governmental body may engage. In direct contradiction to this argument, the Legislature has determined that the H.F.A.L.'s 'purposes are public purposes for which public money may be spent.' H.F.A.L., 35 P.S. § 1680.102(7) (Supp.1973).

In determining the merits of plaintiff-appellee's contention, we are guided by the salutary rule that the legislative declaration, although not conclusive 'is entitled to not only respect but to a prima facie acceptance of its correctness.' Dornan, supra, 331 Pa. at 222, 200 A. at 841. Moreover, we note that

'views as to what constitutes a public use necessarily vary with changing conceptions of the scope and functions of government, so that to-day there are familiar examples of such use which formerly would not have been so considered. As governmental activities increase with the growing complexity and integration of society, the concept of 'public use' naturally expands in proportion.'

Id. at 221, 200 A. at 840.

With these two concepts in mind, we are unable to conclude that the purpose of providing housing to individuals of low and moderate income is not one of a 'public' nature, particularly in view of the acute housing shortage existing within the Commonwealth. See note 2, supra. The Legislature has acted quite properly in ascertaining the extent of the problem and in determining 'the means necessary to combat that problem.' Basehore v. Hampden Industrial Development Authority, 433 Pa. 40, 48--49, 248 A.2d 212, 217 (1968). The need to deal effectively with the public challenge posed by the present lack of housing is of critical concern and well within the ambit of lawful governmental authority. Basehore, supra; Dornan, supra. Indeed, this Court has upheld programs far more expansive than the one instantly contested. See, e.g., Basehore, supra; McSorley v. Fitzgerald, 359 Pa. 264, 59 A.2d 142 (1948); Belovsky v. Redevelopment Authority, 357 Pa. 329, 54 A.2d 277 (1947); Dornan, supra.

As the New Jersey Supreme Court recently noted in sustaining a statute similar to the H.F.A.L.:

'(I)t is elementary that the very purpose of government is to provide for the health, safety and general welfare of the people. When a particular condition arises which poses a threat to the fulfillment of that function, the government has the power to take whatever steps are necessary to check the threat subject only to applicable constitutional limitations.

'The question of whether a citizenry had adequate and sufficient housing is certainly one of the prime considerations in assessing the general health and welfare of that body. . . . In the present case, the Legislature made a determination that there was 'a critical shortage of adequate housing,' that 'a large and significant number of . . . residents...