Open Cmtys. Alliance v. Carson

• Decision Date: 23 December 2017
• Docket Number: Civil Action No. 17–2192 (BAH)
• Citation: 286 F.Supp.3d 148
• Parties: OPEN COMMUNITIES ALLIANCE et al., Plaintiffs, v. Ben S. CARSON, Sr., Secretary of Housing and Urban Development, in his official capacity, et al., Defendants.
• Court: U.S. District Court — District of Columbia

286 F.Supp.3d 148

OPEN COMMUNITIES ALLIANCE et al., Plaintiffs,

v.Ben S. CARSON, Sr., Secretary of Housing and Urban Development, in his official capacity, et al., Defendants.

Civil Action No. 17–2192 (BAH)

United States District Court, District of Columbia.

Signed December 23, 2017

Ajmel A. Quereshi, Coty R. Montag, NAACP Legal Defense & Educational Fund, Inc., Allison Marcy Zieve, Public Citizen Litigation Group, Jon M. Greenbaum, Lawyers' Committee for Civil Rights Under Law, Michael Gerhart Allen, Sasha Samberg–Champion, Relman, Dane & Colfax PLLC, Washington, DC, Samuel Spital, NAACP Legal Defense & Educational Fund, Inc., New York, NY, for Plaintiffs.

Johnny Hillary Walker, III, U.S. Attorney's Office, Washington, DC, for Defendants.

MEMORANDUM OPINION

BERYL A. HOWELL, Chief Judge

Section 8 of the Fair Housing Act of 1968 serves two statutory purposes: (1) "aiding low-income families in obtaining a decent place to live" and (2) "promoting economically mixed housing." 42 U.S.C. § 1437f(a). This case is not about what is good housing policy, however. This case is about the rule of law—whether an agency effectively may suspend a duly promulgated regulation without observing the procedures or identifying relevant factual criteria that the law requires to effect such a change. The U.S. Department of Housing and Urban Development ("HUD"), without notice and comment or particularized evidentiary findings, has delayed almost entirely by two years implementation of a rule requiring over 200 local Public Housing Authorities ("PHAs") in 24 metropolitan areas, which HUD selected based on fixed, objective criteria, to calculate housing vouchers' values based on local, rather than metropolitan-wide, prevailing market rents. The plaintiffs, two voucher holders and a nonprofit organization devoted to providing housing opportunities for low-income people in Connecticut, move to preliminarily enjoin HUD to implement the rule on January 1, 2018, the rule's effective date. Pls.' Mot. Preliminary Injunction, ECF No. 15 ("Pls.' Mot."). For reasons this Memorandum Opinion explains in detail, the plaintiffs' motion for a preliminary injunction is granted.

I. FACTS

A. Overview of the Housing Choice Voucher Program and Fair Market Rents

Congress enacted the Housing Act of 1937 to assist state and local governments "to remedy unsafe and insanitary housing conditions and the acute shortage of decent, safe, and sanitary dwellings for families of low income." Pub. L. No. 75–412, § 1, 50 Stat. 888, 888 (1937) (codified at 42 U.S.C. § 1437(a) ). The Housing and Community Development Act of 1974, enacted nearly 40 years later, amended the Housing Act to add Section 8, which authorized HUD to contract with PHAs to pay landlords rental subsidies on low-income tenants' behalf. Pub. L. No. 93–383, § 8(a), 88 Stat. 633, 662 (codified at 42 U.S.C. § 1437f(a) ). The Housing and Urban–Rural Recovery Act of 1983, Pub. L. No. 98–181, § 207, 97 Stat. 1153, 1181 (codified as amended at 42 U.S.C. § 1437f(o) ), created the Housing Choice Voucher ("HCV") program, which is HUD's "major program for assisting very low-income families, the elderly, and the disabled to afford decent, safe, and sanitary housing in the private market." Housing Choice Vouchers Fact Sheet , U.S. DEP'T HOUSING & URB. DEV. , https://www.hud.gov/topics/housing_choice_voucher_program_section_8 (last visited Dec. 23, 2017) ("HCV Fact Sheet ").¹ HUD oversees the HCV program, directing funds to PHAs to administer the program locally by issuing vouchers to qualified individuals and families, who use those vouchers to secure housing in the private rental market. Id. A voucher holder may use a voucher toward any housing that meets the HCV program's requirements, subject to a PHA's approval. 24 C.F.R. § 982.1(a)(2). HCV participation is limited to low-income households, which typically cannot afford to rent dwellings for which the rent substantially exceeds the HCV program payment standard. See HCV Fact Sheet , supra ; see, e.g. , Pls.' Mot., Attach. 9, Decl. of Tiara Moore ("Moore Decl.") ¶¶ 3, 7, ECF No. 15–9.

A voucher's value is calculated largely on the basis of HUD's determination of the "fair-market rent" ("FMR") for a dwelling of a particular size and type (e.g ., a two-bedroom home). 24 C.F.R. § 982.503(a)(1). An FMR represents the amount required "to rent standard quality housing throughout the geographic area in which rental housing units are in competition," including "the cost of utilities, except telephone." Id. § 888.113(a). HUD annually calculates and publishes in the Federal Register FMRs for different types of units in each market area as well as any proposed changes to FMR calculation procedures. 42 U.S.C. § 1437f(c)(1)(B) ; see also 24 C.F.R. § 982.503(a)(1). PHAs, in turn, use FMR calculations to establish "payment standard amounts" for each unit type. 24 C.F.R. § 982.503(a)(1).

A PHA generally sets a payment standard "between 90 percent and 110 percent of the published FMR for that unit size." Id. § 982.503(b). A voucher holder typically pays a landlord 30 percent of her or his adjusted monthly income toward rent; the PHA pays the rent's balance directly to the landlord, so long as a dwelling's actual gross rent is at or below the relevant payment standard. Id. § 982.1(a)(3). If, however, a dwelling's actual rent exceeds the payment standard, the voucher holder pays the balance. Id. A PHA may use the same payment standard amount for all areas within the PHA's jurisdiction, or else "may establish a separate payment standard amount for each designated part of the FMR area." Id. § 982.503(a)(3).

B. Problems with FMR Calculations in Metropolitan Areas

FMRs often do not, in practice, accurately reflect rents actually charged in neighborhoods within a broad metropolitan area, as "rents can vary widely within a metropolitan area depending upon the size of the metropolitan area and the neighborhood in the metropolitan area within which one resides." See Establishing a More Effective Fair Market Rent System; Using Small Area Fair Market Rents in the Housing Choice Voucher Program Instead of the Current 50th Percentile FMRs , 81 Fed. Reg. 80,567, 80,567 (Nov. 16, 2016) ("Final Rule "). Consequently, "[t]he result of determining rents on the basis of an entire metropolitan area is that a voucher subsidy ... may be too low to cover market rent in a given neighborhood." Id. FMRs calculated on metropolitan-wide bases may not enable voucher holders to afford rents in high-rent, high-opportunity neighborhoods, consigning them to low-opportunity areas of concentrated poverty. See id. ; Moore Decl. ¶¶ 5–7; Pls.' Mot., Attach. 4, Decl. of Crystal Carter ("Carter Decl.") ¶¶ 6–7, ECF No. 15–4. Calculating FMRs locally, in contrast, makes rents in high-opportunity areas more affordable.

Prior to 2000, HUD generally calculated FMRs to reflect the 40^th percentile rent in a given metropolitan area. See 24 C.F.R. § 888.113(a)-(b). In 2000, however, HUD published a new rule authorizing PHAs in areas meeting specified criteria to calculate payment standards based on FMRs reflecting the 50^th percentile rent in a given area. See Fair Market Rents: Increased Fair Market Rents and Higher Payment Standards for Certain Areas , 65 Fed. Reg. 58,870, 58,870 (Oct. 2, 2000). This new policy was "designed to achieve two fundamental program objectives: (1) Ensuring that low-income families are successful in finding and leasing decent and affordable housing; and (2) ensuring that low-income families have access to a broad range of housing opportunities throughout a metropolitan area." Id. Consistent with these goals, the 50^th Percentile Rule authorized PHAs to calculate payment standards using a 50^th percentile FMR under two circumstances: where "families are having difficulty using housing vouchers to find and lease decent and affordable housing" and "a FMR increase is most needed to promote residential choice, help families move closer to areas of job growth, and deconcentrate poverty." Id. FMR calculation would revert to a 40^th percentile basis, however, in PHAs that experienced no or an insufficient decrease in concentration of voucher holders after three years. Id. at 58,871.

HUD has concluded, based on recent research, that the 50^th Percentile Rule is "not an effective tool" for "increasing HCV tenant moves from areas of low opportunity to higher opportunity areas." Final Rule , 81 Fed. Reg. at 80,570. Rather, HUD has found that "much of the benefit of increased FMRs simply accrues to landlords in lower rent submarket areas in the form of higher rents rather than creating an incentive for tenants to move to units in communities with more and/or better opportunities." Id. HUD also observed that a "large number of areas have been disqualified from the 50th percentile program for failure to show measurable reduction in voucher concentration of HCV tenants since 2001 when the program started, which strongly suggests that the deconcentration objective is not being met." Id.

C. The Small Area FMR Demonstration Project

In the wake of the 50^th Percentile Rule's apparent failure, HUD considered alternative ways to expand housing opportunities for voucher holders. See id. Using census data collected through the American Community Survey, HUD developed "Small Area FMRs" ("SAFMRs"), which reflect fair-market rents in individual ZIP codes, rather than in broad metropolitan areas. Id. HUD's goal in applying this new, more targeted methodology was to "create more effective means for HCV tenants to move into higher opportunity, lower poverty areas by providing them with subsidy adequate to make such areas accessible and to thereby reduce the number of voucher families that reside in areas of high poverty concentration." Id.²

HUD undertook a demonstration project to test SAFMRs' effectiveness. Section 8 Housing Choice Voucher Program Demonstration Project of Small Area Fair Market Rents in Certain Metropolitan Areas for Fiscal...