TENANTS'COUN. OF TIBER ISLAND-CARROLLSBURG SQ. v. Lynn, 71-1931.

• Decision Date: 10 December 1973
• Docket Number: No. 71-1931.,71-1931.
• Citation: TENANTS'COUN. OF TIBER ISLAND-CARROLLSBURG SQ. v. Lynn, 162 U.S.App.D.C. 61, 497 F.2d 648 (D.C. Cir. 1973)
• Parties: TENANTS' COUNCIL OF TIBER ISLAND-CARROLLSBURG SQUARE, Appellant, v. James LYNN, Individually and in his capacity as Secretary of Housing and Urban Development, et al.
• Court: U.S. Court of Appeals — District of Columbia Circuit

497 F.2d 648 (1973)

TENANTS' COUNCIL OF TIBER ISLAND-CARROLLSBURG SQUARE, Appellant, v. James LYNN, Individually and in his capacity as Secretary of Housing and Urban Development, et al.

No. 71-1931.

United States Court of Appeals, District of Columbia Circuit.

Argued May 23, 1972.

Decided December 10, 1973.

As Amended December 20, 1973.

Rehearing Denied January 15, 1974.

B. Michael Rauh, Washington, D. C., with whom Martin Shulman, Washington, D. C., was on the brief, for appellants.

Paul L. Friedman, Asst. U. S. Atty., with whom Harold H. Titus, Jr., U. S. Atty., John A. Terry, Gil Zimmerman and J. Michael McGarry, III, Asst. U. S. Attys. were on the brief, for appellees.

Before FAHY, Senior Circuit Judge, and LEVENTHAL and ROBB, Circuit Judges.

LEVENTHAL, Circuit Judge:

This case is one of three related cases decided today which involve the procedural rights of tenants of housing, constructed under various provisions of the Federal housing legislation, prior to official approval of rent increases. In Thompson v. Washington, No. 71-2049, 162 U.S.App.D.C. ___, 497 F.2d 626, we hold that tenants of low-rent public housing are entitled not only to receive notice of proposed rent increases but also to participate in the process of official consideration of rent increases by making written presentations. In Marshall v. Lynn, No. 71-1786, 162 U.S. App.D.C. ___, 497 F.2d 643, we hold that such opportunities must also be afforded tenants of low- and moderate-income housing constructed, pursuant to § 221(d) (3) of the National Housing Act, with both FHA mortgage insurance and below-market-interest-rate loans. In the case at bar we hold that the opportunity to participate need not be accorded tenants of housing constructed under § 220 of the Housing Act as part of area redevelopment plans.

I. INTRODUCTION

Plaintiffs are individual tenants and a tenants' association of Carrollsburg Square and Tiber Island apartment dwellers. These two apartment buildings, located in the Southwest Redevelopment Area of Washington, D. C., consist of upper-middle and upper-income units financed with loan guarantees by Federal Housing Administration (FHA is a division of the Department of Housing and Urban Development) under § 220 of the National Housing Act, 12 U.S.C. § 1715k (1970). In January and February of 1969, and in August 1970, the FHA approved rent increases in one or both of these two projects.

Plaintiffs claim that FHA's refusal to give them a hearing before acting upon the rent increases was contrary to their statutory and constitutional rights. On cross-motions for summary judgment, the District Court awarded summary judgment to defendants. We affirm.

II. STATEMENT OF THE FACTS

Southwest Washington is a 550-acre triangle of land located near the Capitol to the East, and the Potomac River (its southern and western boundary). Prior to its recent redevelopment, the area typified the blighted large cities; housing was often unsafe, unsanitary and insufficiently heated in the winter.¹ Congress concluded that to improve permanently the appearance of such areas, entire communities would have to be replanned.²

The development plan centered on enlisting the aid of private investors. It was contemplated that they would insist upon a high return and low equity requirements before committing private capital to redevelopment of slum areas.³ Section 220 of the Housing Act of 1954 was to serve as the vehicle. Under the program envisioned, developers could acquire land in urban renewal areas, after it had been written down in cost by the local agencies,⁴ mortgage loan terms would be available for 90% of the value of the construction subject to a $50,000,000 limit,⁵ and the FHA would guarantee repayment of the loan. The guarantee, which insured in large part against the lender's risks, made money available at low enough rates of interest to support the required rate of return, given the predicted market rentals for the area.⁶

Pursuant to the provisions of § 220 and the urban renewal plan for Southwest Washington, the FHA determined in 1962 and 1963 to insure mortages granted by private lenders for the Tiber Island and Carrollsburg Square developments. Together they contain 811 rental units, most of which are in seven high-rise apartment buildings.

Before FHA insurance is granted to a project, rental schedules must be approved by the Commissioner.⁷ The schedules consist of a maximum permissible rental ceiling and an initial rent schedule. Originally the FHA approved ceilings of $1,169,035 and $1,093,476, and initial rent schedules of $947,580 and $998,700, for Tiber Island and Carrollsburg Square respectively. These aggregate figures amounted to an average initial rental per unit of about $200 per month for the 811 units in the two combined projects, with a ceiling of approximately $230 per month.⁸ Using a conventional assumption that families spend about 20% of their income on rent,⁹ the income of the average family unit was envisioned as $13,800. In fact, incomes seem to be in a range from $12,000 to $45,000 per annum. In the case of family tenants, few have children living with them and usually both husband and wife work. Typically the tenants are professionals — lawyers, doctors, economists — and their work is connected with the Federal Government.

On February 3, 1969, FHA gave its required approval to increases bringing the rental schedules to $1,063,440 per year for Tiber Island and $1,085,580 per year for Carrollsburg Square. The Tenants' Council, believing this increase to be unjustified, requested an audit of the financial reports submitted in support of the increase and a meeting with FHA representatives to discuss the merits of the increase. Both requests were refused.

These events resulted in litigation in the District of Columbia Court of General Sessions between the project owners and numerous tenants who had placed the rental increase increment into escrow pending a determination of the legality of the increases, as well as the institution of the present action. These suits were dismissed. Thereafter, in December, 1969, a Settlement Agreement was entered into between the Tenants' Council and the owners. The tenants agreed not to seek restitution for alleged rental overcharges in excess of FHA maximums, in return for which they retained the funds in escrow and were protected against further increases until July 1970 or November 1970, depending on which of two options each tenant elected.

On August 26 and 27, 1970, FHA granted a second round of rental increases, which was allegedly accompanied by the setting of new methods for calculating maximum rental increases allowable under the required rent schedule. Tenants' Council again tried to obtain an audit or gain access to information justifying the rent increase; its requests were refused by the FHA. On September 30, 1970, the Tenants' Council and the project owners again entered into a settlement agreement temporarily resolving their renewed dispute concerning rental levels, and only part of the increase approved by FHA was put into effect immediately for those tenants protected by the agreement. On this record the District Court granted summary judgment to the FHA officials. We affirm.

III. THE CLAIM OF RIGHT TO A HEARING

In disposing of the case at hand we refer to the analysis in Thompson v. Washington, No. 71-2049, 162 U.S.App. D.C. ___, 497 F.2d 626 decided this day That opinion suffices to establish jurisdiction and standing. In Thompson we held that tenants of lower income public housing programs established under the United States Housing Act, 42 U.S.C. § 1401 et seq., have a right to contest rent increase proposals through written statements. In Marshall v. Lynn, No. 71-1786, also decided this day, we found a similar right to participate held by tenants of housing financed with FHA aid mortgage insurance at below market interest rates, pursuant to Section 221(d) (3) of the National Housing Act, 12 U.S.C. 1715l (1970). We based this procedural protection on our finding that tenants were intended beneficiaries of the rent limitation provisions of those housing programs.

The same analysis leads us to a different result for tenants in housing constructed under § 220 of the National Housing Act. Unlike the other housing programs, § 220 was not passed to benefit any specific class of tenants. Its purpose was to¹⁰

aid in the elimination of slums and blighted conditions and the prevention of the deterioration of residential property . . .

This was a remedial program to eliminate slum conditions, while the production of new housing for specific classes of needy persons was left to other programs.¹¹ It was a different, though complementary, program that was established under § 221(d) (3), combining FHA insurance with below-market-interest-rate loans to developers, to benefit low-and-middle-income¹² families displaced by § 220 urban renewal projects.¹³ And public housing was also to serve the needs of low-income families.

This absence of purpose to benefit tenants accounts for the absence of any language in § 220 corresponding to the § 207 provision regarding "reasonable rentals." The omission was intentional. Although the Presidential Advisory Commission had proposed that such language be included in the statute,¹⁴ this suggestion was not followed in the bills put forward for House and Senate consideration.¹⁵ At the hearings the omission was called to the attention of the legislative committees,¹⁶ but the "reasonable rentals" language was not inserted.

Section 220 did enable HUD to control rents through a provision that the Secretary

may in his discretion require such mortgagor to be regulated or restricted as to rents or sales, charges, capital structure, rate of return and methods of operation, and for such purpose the Secretary may make such contracts with . . . any such mortgagor as the Secretary may deem necessary to render effective such

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