Lee v. Pierce, Civ. A. No. 88-2395-OG.

• Decision Date: 22 September 1988
• Docket Number: Civ. A. No. 88-2395-OG.
• Citation: 698 F. Supp. 332
• Parties: Deborah LEE, et al., Plaintiffs, v. Samuel R. PIERCE, Jr., Secretary of Housing and Urban Development, Defendant.
• Court: U.S. District Court — District of Columbia

698 F. Supp. 332

Deborah LEE, et al., Plaintiffs, v. Samuel R. PIERCE, Jr., Secretary of Housing and Urban Development, Defendant.

Civ. A. No. 88-2395-OG.

United States District Court, District of Columbia.

September 22, 1988.

COPYRIGHT MATERIAL OMITTED

William Bradford, Emily Moskowitz, Hogan & Hartson, Washington, D.C., for plaintiffs.

Robert Irvin, U.S. Dept. of Justice, Washington, D.C., for defendant.

MEMORANDUM

GASCH, Senior District Judge.

In this matter plaintiffs seek to enjoin the Department of Housing and Urban Development (HUD) from selling or disposing of houses in its single-family inventory other than for the benefit of the homeless. Plaintiffs argue that HUD's program of selling houses out of its single-family inventory violates the Stewart B. McKinney Homeless Assistance Act (the McKinney Act), the National Housing Act, and several other federal statutes. Plaintiffs are four individual homeless persons currently residing in shelters, and numerous organizations made up of or representing homeless persons. The defendant, Samuel R. Pierce, Jr., is Secretary of HUD.

On August 26, 1988, Judge Thomas F. Hogan, acting as motions judge pursuant to Local Rule 408, entered a temporary restraining order (TRO) prohibiting HUD from selling single-family properties from its inventory in the state of Michigan. Plaintiffs amended their complaint and filed a motion for a nationwide TRO on August 29. On August 30, Judge Harold H. Greene, acting as motions judge, entered a TRO enjoining HUD from selling any homes in the single-family inventory other than for the benefit of homeless and low income persons. In response to the government's motion for clarification of the first TRO, Judge Greene ruled that HUD could close on those sales where the purchase contract was signed prior to the issuance of the first TRO.

The injunctive relief requested of this Court by the plaintiffs would prevent HUD from taking any steps to dispose of its single-family inventory except for the benefit of homeless or low income persons until it surveyed those homes in compliance with the McKinney Act, considered its statutory obligation to promote fair housing, and otherwise complied with the various federal statutes.

I. Factual background

A. The Homeless

Plaintiffs assert, without contradiction, that there are many more homeless persons in the United States than units of available housing. There are approximately three million homeless persons nationwide, including many families and children. The absence of affordable housing is reflected by the long waiting lists for subsidized housing programs: 800,000 households nationwide. In addition to the homeless, there are millions of low income or poverty-level Americans spending a disproportionate amount (over 30%) of their income on housing.

B. The plaintiffs

There are both individual and organizational plaintiffs. The four individual plaintiffs are women who have children and reside in homeless shelters. Three of the four are members of minority groups. There are two types of organizational plaintiffs. Two organizations, Philadelphia Union of the Homeless and Community for Creative Non-Violence, are made up primarily of homeless persons. They represent their members' legal interests and provide shelter and medical care. Five plaintiffs are charitable organizations that aid homeless and low-income persons in ways that include acquiring and, if necessary, renovating, housing. The plaintiffs also claim to represent a class of persons and organizations similarly situated.

C. HUD's program

HUD currently owns approximately 50,000 vacant single-family houses. Nearly all of these properties were acquired through HUD's mortgage insurance program. See 12 U.S.C. § 1709. Under this National Housing Act program, when a mortgagee forecloses on the federally insured property, it can make a claim for insurance benefits. See 24 C.F.R. § 203, subpart B. In most cases the mortgagee must deed title to HUD and deliver the property in vacant condition to receive its benefits. See 12 U.S.C. § 1710(a); 24 C.F.R. § 203.355-57. HUD then attempts to sell the property by a bidding process in which HUD advertises the property (usually within 14 days of acquisition) and receives sealed bids in the form of signed HUD sales contracts and earnest money deposits. The highest bid is accepted if the price is acceptable and certain contractual conditions are satisfied. The sale is ordinarily closed within 60 days of HUD's acceptance of the bid. Declaration of Stephen A. Martin, Director, Office of Insured Family Housing, HUD. HUD's sales program is not administered on a nationwide basis; its 73 field offices conduct their own programs.

The average selling price of homes from the single-family inventory is $38-50,000. Compare Declaration of Stephen Martin with Plaintiffs' Amended Complaint, Exhibit G, Letter from Michael Dorsey, HUD General Counsel. According to HUD, a family of four with no major credit liabilities would need an annual income of $15,000 to qualify for a typical home mortgage of $38,000. HUD defines "low income" families as those whose annual income is $25,600 or less.

HUD estimates that 50% of the single-family houses are sold to investors who rent the properties or resell them for profit. Supplemental Declaration of Stephen A. Martin. Affidavits from leaders of various non-profit organizations ("housing providers") that have attempted to acquire these single-family houses estimate the figure to be much higher, especially in urban areas such as the District of Columbia where affordable housing is scarce. See Declaration of Rev. Thomas Knoll, Executive Director of Community Family Services. HUD cannot estimate what percent of the houses are sold to homeless or low income persons.

The sale proceeds are deposited into the four funds that make up the Federal Housing Administration (FHA) Insurance Fund. The FHA Insurance Fund uses these monies to pay insurance claims, maintenance and sales costs, salaries, and to fund future mortgage insurance transactions. There is a rapid turnover of the single-family homes acquired by HUD. In the first ten months of fiscal year 1988, HUD acquired approximately 7,128 properties per month and sold approximately 6,212 per month. HUD acquired 64,880 properties in fiscal year 1987 and sold 52,694 of them, resulting in a net intake of 2.2 billion dollars. HUD has three programs intended to assist the homeless. In its Reduced Sales Program, HUD offers a 10% discount to qualified homeless organizations. HUD has sold 164 single-family properties to homeless providers since 1985. Its Lease Program leases houses to homeless organizations at a cost of one dollar per year on a case-by-case basis. This program was recently changed to include the single-family inventory. Currently, 185 houses are leased under this program. HUD also has a Lease Option Program that permits homeless providers to lease houses for six months while applying for grants to purchase them. Plaintiffs allege that they have been "frustrated and rebuffed" when seeking to obtain housing under these programs, and that the HUD local field offices are either not aware of or not supporting the programs. See Declaration of Rodman McCoy, Director of Program Services of Neighborhood Housing Services; Declaration of Rev. Thomas Knoll. A phone survey conducted by plaintiffs of housing providers in 32 cities revealed that none were aware of these HUD programs. Declaration of Mary Ellen Hombs, Analyst for National Coalition for the Homeless. In their declarations in this case, several organizations specifically averred that when they sought to purchase single-family houses at some type of discount, HUD field offices told them HUD was forbidden from selling the houses under any circumstances other than sale to the highest bidder. See Declaration of Rev. Jim Dickerson, Director of MANNA; Declaration of Rodman McCoy. In one instance the Washington field office allegedly told area housing providers that it would accept bids for a block of properties on a preferential basis, the organizations submitted bids, and the field office rescinded the sale on orders from the national office. Declaration of Rev. Jim Dickerson.

II. Standing

Defendant Pierce contends that the plaintiffs lack standing because their injuries are speculative, not fairly traceable to HUD's conduct, and not likely to be redressed by the relief they seek. The injury cited by the individual plaintiffs is being homeless. The organizational plaintiffs face a severe shortage of houses that they can make available for homeless and low-income families, and their members are homeless as a consequence. These claims of injury are sufficiently concrete. Havens Realty Corp. v. Coleman, 455 U.S. 363, 379, 102 S.Ct. 1114, 1124, 71 L.Ed.2d 214 (1982); Action Alliance of Senior Citizens v. Heckler, 789 F.2d 931, 937-38 (D.C.Cir. 1986).

Plaintiffs have also satisfied the causation and redressability requirements for standing. They have convincingly demonstrated that their inability to find sufficient housing is caused, at least in part, by HUD's refusal to make houses available from its single-family inventory. Some of the organizations have bid for HUD properties against other purchasers with little or no success. See Declaration of Rodman McCoy. Plaintiffs cite specific examples where houses purchased by investors at HUD auctions remained vacant after their sale and subsequently deteriorated. See id. In other cases, homes purchased by investors deteriorated beyond repair even when occupied. Declaration of Martha Scott, Mayor of Highland Park, Michigan. Plaintiffs also cite instances in which HUD refused to sell houses because its minimum price was not met, and the vacant houses subsequently fell into a state of disrepair. Declaration of Rodman McCoy; Declaration of Rev. Jim Dickerson. In short, plaintiffs' injuries are caused by HUD's refusal to make...