Sandpiper Residents Ass'n v. U.S. Dep't of Hous. & Urban Dev.

• Docket Number: 22-5334
• Decision Date: 05 July 2024
• Citation: Sandpiper Residents Ass'n v. U.S. Dep't of Hous. & Urban Dev., 106 F.4th 1134 (D.C. Cir. 2024)
• Parties: SANDPIPER RESIDENTS ASSOCIATION, et al., Appellants v. UNITED STATES DEPARTMENT OF HOUSING & URBAN DEVELOPMENT, Appellee
• Court: U.S. Court of Appeals — District of Columbia Circuit

106 F.4th 1134

SANDPIPER RESIDENTS ASSOCIATION, et al., Appellants v. UNITED STATES DEPARTMENT OF HOUSING & URBAN DEVELOPMENT, Appellee

No. 22-5334

United States Court of Appeals, District of Columbia Circuit

Argued October 17, 2023

Decided July 5, 2024

Appeal from the United States District Court for the District of Columbia (No. 1:20-cv-01783)

Kimberly Brown Myles argued the cause for appellants. With her on the briefs were Velimir Rasic, Laura B. Beshara, and Michael M. Daniel.

Simon C. Brewer, Attorney, U.S. Department of Justice, argued the cause for appellee. With him on the brief were Brian M. Boynton, Principal Deputy Assistant Attorney General, and Abby C. Wright, Attorney.

Before: Wilkins, Katsas, and Pan, Circuit Judges.

Wilkins, Circuit Judge:

Sandpiper Cove, a privately owned apartment complex in Galveston, Texas, is subsidized by the U.S. Department of Housing and Urban Development ("HUD") under the agency's Section 8 project-based rental assistance program. Through that program, HUD works with landlords to reduce residents' rent payments based on residents' ability to pay. Residents and the resident association of Sandpiper Cove (collectively, "Plaintiffs") filed suit against HUD, arguing that the agency had failed to ensure that Sandpiper Cove was maintained in a habitable condition. As a result of the conditions at Sandpiper Cove, Plaintiffs sought to compel HUD to issue so-called "Tenant Protection Vouchers"—vouchers that would allow Sandpiper Cove's tenants to receive rental payment assistance from HUD for use at properties elsewhere.

Congress has authorized HUD to provide tenants like Plaintiffs with Tenant Protection Vouchers, but only under certain circumstances. Specifically, HUD "may" provide vouchers to tenants "where the owner" of the relevant units "has received a Notice of Default and the units pose an imminent health and safety risk to residents." Consolidated Appropriations Act, 2021, Pub. L. No. 116-260, 134 Stat. 1182, 1869 (2020) (the "Act"). Here, when Plaintiffs filed their original complaint, "the owner" of Sandpiper Cove had received a Notice of Default. Id. But that owner then sold the property, and the new owner was not issued a Notice of Default. Plaintiffs amended their complaint to reflect the sale. The District Court dismissed Plaintiffs' claims for lack of subject-matter jurisdiction, reasoning that Plaintiffs' claims had been mooted by the sale because, in light of the sale, "the owner" of Sandpiper Cove had not "received a Notice of Default."

Plaintiffs appeal the District Court's dismissal of their claims. We hold that the District Court erred in dismissing Plaintiffs' claims as moot. The question whether Plaintiffs are legally entitled to relief after the sale of Sandpiper Cove goes to the merits of their case, not mootness. Still, although we disagree with the District Court's jurisdictional holding, we nonetheless affirm the District Court's dismissal of Plaintiffs' complaint because Plaintiffs failed to state a claim upon which relief could be granted.

I.

A.

In 1974, Congress amended the United States Housing Act of 1937 to establish, among other things, a "lower-income housing assistance" program, Housing and Community Development Act of 1974, Pub. L. No. 93-383, § 201(a), 88 Stat. 633, 662 (1974), designed to "aid[ ] low-income families in obtaining a decent place to live," 42 U.S.C. § 1437f(a); see also Cisneros v. Alpine Ridge Grp., 508 U.S. 10, 12, 113 S.Ct. 1898, 123 L.Ed.2d 572 (1993). Through that program, now commonly known as the Section 8 housing program, see Cisneros, 508 U.S. at 12, 113 S.Ct. 1898, Congress authorized HUD to provide financial assistance payments "with respect to existing housing" to further that goal, 42 U.S.C. § 1437f(a). HUD disburses this financial assistance primarily through two forms of programs: "tenant-based" assistance and "project-based" assistance. Id. § 1437f(f)(6)-(7); see also id. § 1437f(d)(2), (o); 24 C.F.R. § 982.1(b)(1). Tenant-based assistance is linked to individual households, while project-based assistance is linked to specific housing units. See 24 C.F.R. §§ 886.309, 982.1(b).

HUD provides tenant-based assistance through the Housing Choice Voucher Program. See id. § 982.1(a)(1). Under that program, HUD's assistance is linked directly to individual households; households can obtain a housing subsidy from HUD for use on the private rental market. Once participants are admitted to the program, they are responsible for finding a suitable housing unit on the private rental market. Id. § 982.1(b)(2); see also id. § 982.302(a)-(b). HUD then subsidizes the program participant's rent based on the participant's monthly income, id. § 982.1(a)(3); HUD partners with state and local public housing agencies to disburse financial assistance for rent payments directly to owners on behalf of individual families, see id. § 982.1(a)(1).

Through HUD's project-based assistance programs, meanwhile, HUD contracts with individual landlords and designates units in particular buildings owned by those landlords as subsidized, project-based assistance units. Landlords select their own tenants. See 42 U.S.C. § 1437f(d)(1)(A). Tenants selected by the landlords then "make rental payments based on their income and ability to pay"; HUD, in turn, "makes 'assistance payments' to the private landlords in an amount calculated to make up the difference between the tenant's contribution and a 'contract rent' agreed upon by the landlord and HUD." Cisneros, 508 U.S. at 12, 113 S.Ct. 1898; see also 42 U.S.C. § 1437f(c)(1)(A).

Congress provides funding for HUD's Section 8 programs through annual appropriations legislation, including in the 2021 Consolidated Appropriations Act. See 134 Stat. at 1865-99. The Act places certain requirements on HUD and on the landlords who participate in HUD's Section 8 programs. Specifically, the Act requires "[a]ny entity receiving" payments through HUD's project-based assistance program to "maintain decent, safe, and sanitary conditions." § 219(a), 134 Stat. at 1897.¹ HUD, in turn, must ensure that owners of project-based assistance units do not fall short of this requirement. See § 219, 134 Stat. at 1897-98. To that end, HUD has promulgated regulations requiring participating landlords to "maintain decent, safe, and sanitary conditions," id. § 219(a), 134 Stat. at 1897; see also 24 C.F.R §§ 5.703, 883.101(a), 886.323(a), and comply with various maintenance- and utilities-related obligations, 24 C.F.R. § 5.703. As required by the Act, HUD also completes regular inspections of project-based assistance units and notifies owners of any deficiencies identified. § 219(b)-(c), 134 Stat. at 1897-98; see also 24 C.F.R. §§ 5.703, 886.323(c)-(e).

The Act requires HUD to take action when an inspection reveals that a property is not in decent, safe, and sanitary condition. In that circumstance, HUD must "provide the owner with a Notice of Default with a specified timetable, determined by the Secretary, for correcting all deficiencies." § 219(c)(1), 134 Stat. at 1898. If an owner does not correct the deficiencies identified in the Notice of Default within the time allotted, HUD may then take a number of enforcement actions, including "requir[ing] immediate replacement of project management," "impos[ing] civil money penalties," or seeking to "stabilize the property" through "transfer of ownership." § 219(c)(2), 134 Stat. at 1898.

In addition, the Act provides that HUD may directly assist tenants of an affected property by providing them with "Tenant Protection Vouchers" ("vouchers"), which allow a tenant to relocate to a property on the private rental market while continuing to receive a housing subsidy from HUD. Vouchers are a form of tenant-based rental assistance. An individual who has received a voucher may find a landlord on the private market willing to rent to them; HUD then subsidizes their rent based on their ability to pay.

The Act contains a lump sum appropriation that permits HUD to provide individuals with vouchers for a variety of reasons, including to relocate individuals whose housing units are "demolished" and to relocate "witnesses . . . in connection with efforts to combat crime in public and assisted housing." 134 Stat. at 1869. The Act authorizes HUD to provide vouchers to residents of project-based assistance units, but only under certain circumstances:

[T]he Secretary may provide [S]ection 8 rental assistance from amounts made available under this paragraph for units assisted under a project-based subsidy contract funded under the "Project-Based Rental Assistance" heading under this title where the owner has received a Notice of Default and the units pose an imminent health and safety risk to residents[.]

Id. Thus, the Act authorizes HUD to provide vouchers to tenants receiving project-based rental assistance, so long as "the owner" of the relevant units "has received a Notice of Default and the units pose an imminent health and safety risk to residents." Id.

B.

This case concerns Plaintiffs' efforts to compel HUD to issue them vouchers so that they may move out of Sandpiper Cove while continuing to receive a housing subsidy from HUD. Sandpiper Cove has been subsidized by HUD since 1984. As of March 2015, Sandpiper Cove was owned by Compass Pointe Apartments Texas, LLC ("Compass Pointe").

In May 2019, a HUD inspection of Sandpiper Cove revealed numerous problems with the property, including insect infestations, inoperable kitchen appliances, poor plumbing, and inoperable or missing smoke detectors. As a result of the severity of the deficiencies discovered on the property, and in keeping with HUD's obligations under the Act, see § 219(c)(1), 134 Stat. at 1898, HUD issued a Notice of Default to Compass Pointe in which it provided the company sixty days to correct the deficiencies identified.

HUD then worked with Compass Pointe to correct the conditions at Sandpiper Cove. The agency helped Compass Pointe to develop...