Usher v. Califano

• Decision Date: 20 January 1981
• Docket Number: Civ. A. No. 78-3261-Z.
• Citation: 506 F. Supp. 1230
• Parties: Delma USHER, Margaret Dolan, Matilda DeFranco, Reba Shaer and Rose Burgio v. Joseph A. CALIFANO, Jr., Secretary of Health, Education and Welfare.
• Court: U.S. District Court — District of Massachusetts

506 F. Supp. 1230

Delma USHER, Margaret Dolan, Matilda DeFranco, Reba Shaer and Rose Burgio v. Joseph A. CALIFANO, Jr., Secretary of Health, Education and Welfare.

Civ. A. No. 78-3261-Z.

United States District Court, D. Massachusetts.

January 20, 1981.

Mark S. Coven, Patricia A. Cantor, Greater Boston Elderly Legal Services, Boston, Mass., for plaintiffs.

Donald R. Anderson, Asst. U. S. Atty., Boston, Mass., for defendant.

MEMORANDUM OF DECISION

ZOBEL, District Judge.

Plaintiffs are named recipients and a former recipient of benefits under the Supplemental Security Income program ("SSI") 42 U.S.C. §§ 1381 et seq., who live and pay rent on a house or apartment owned by a son or daughter. Defendant Secretary of Health, Education and Welfare, now the Department of Health and Human Services, ("the Secretary") decreased or eliminated plaintiffs' SSI benefits pursuant to regulations codified at 20 C.F.R. § 416.1125, which impute income to SSI recipients in an amount equal to the difference between the amount of rental payments actually made and the fair market value of the accommodations. The Secretary thereupon deducted this amount of "in-kind income" from plaintiffs' benefits in accordance with the agency regulation.

Plaintiffs challenge the regulation and its enforcement by the Secretary on several grounds: first, that it is inconsistent with the Social Security Act and thus an invalid exercise of defendant Secretary's authority to issue regulations; second, that the classification scheme violates plaintiffs' rights to due process and equal protection of the laws; third, that the agency rulemaking was arbitrary, capricious or an abuse of discretion in violation of 5 U.S.C. § 706(2)(A), the Administrative Procedure Act. On February 7, 1979 this court entered a preliminary injunction to prevent imputation of in-kind income with respect to plaintiffs Usher and Dolan, and on May 31, 1979 with respect to remaining plaintiffs. The case is now before me on cross motions for summary judgment.

I. Facts

The plaintiffs are four recipients and one former recipient of SSI benefits. In 1977 and 1978 the Secretary contacted the respective family members from whom the named plaintiffs rented their residences and determined from communications with those family members that the units would be rented to a non-family member at a specified monthly rate higher than that which the plaintiffs paid. The Secretary then reduced the SSI benefits received by plaintiffs or eliminated the benefits entirely based on the market value rate communicated to the Secretary by the family members who owned the dwellings. Pursuant to the regulation in question, the Secretary deducted the difference in rental cost from the SSI benefits which plaintiffs received.¹

II. Statutory Claims

Plaintiffs contend that Congress' definition of income in the SSI statute, 42 U.S.C. § 1382a(a)(2), is inconsistent with the Secretary's Regulation at 20 C.F.R. § 415.1125, because the regulation authorizes the imputation to plaintiffs of "income" which is not actually available to them and which cannot be converted to cash to meet basic needs. Under the statutory scheme of the SSI program, benefits are reduced by the amount of income, both earned and unearned, of each recipient, 42 U.S.C. § 1382a. 42 U.S.C. § 1382a(a)(2) defines income as follows:

(a) For purposes of this subchapter, income means both earned income and unearned income; and (2) Unearned income means all other income, including,

(A) Support and maintenance furnished in cash or kind; except that in the case of any individual (and his eligible spouse, if any) living in another person's household and receiving support and maintenance in kind from such individual (and spouse) as specified in subsections (a) and (b) of section 1382 of this title shall be reduced by 33 1/3 percent in lieu of including such support and maintenance in the unearned income of such individual (and spouse) as otherwise required by this subparagraph.

The Secretary is empowered by 42 U.S.C. § 1302 to "make and publish such rules and regulations not inconsistent with chapter seven of Title 42 U.S.C. as may be necessary to the efficient administration of the functions with which she is charged..." Pursuant to that authority the Secretary promulgated 20 C.F.R. § 416.1102(a) which defines income as "the receipt by an individual of any property or service which he can apply, either directly or by sale or conversion to meeting his basic needs for food, clothing and shelter." This general definition is then elaborated through other regulations that describe particular situations, including the challenged regulation, 20 C.F.R. § 416.1125(d), which reads in full:

(d) Valuation of support and maintenance for individuals in household situations. When an eligible individual (or eligible spouse) lives in a household (i. e., is not in an institution), the reduction in the payment standard described in paragraph (b) of this section is inapplicable, and the provisions of §§ 416.1185 (see paragraph (c)(3)) and 416.1190 do not apply, any support and maintenance received in kind but not received in lieu of cash wages (see § 404.429(c) of this chapter) is unearned income. In such cases effective with payments for December 1974, the maximum value of such support and maintenance is presumed to be that amount which, for an individual or a couple with no other income, would result in payment at two-thirds of the applicable standard; i. e., the value is presumed to be one-third of the payment standard, plus the exclusion applicable to unearned income. This presumption will be applied in determining the benefits payable unless it is rebutted by the individual's establishing that the current market value of such support and maintenance, less any payment he makes therefor, is lower than the presumed value.

By defining income inclusively to cover all "support and maintenance furnished in cash or kind" Congress allocated to the Secretary the task of interpreting, through regulations such as those cited above, the particular circumstances in which SSI recipients would be deemed to be receiving deductible income "in kind". Plaintiffs contend that the Secretary's policies and the case law on the subject have narrowed the ambit of the statutory definition to include only those circumstances in which the income received is "actually available" to the recipient. King v. Smith, 392 U.S. 309, 319 n.16, 88 S.Ct. 2128, 2134 n.16, 20 L.Ed.2d 1118 (1968); National Welfare Rights Organization v. Mathews, 533 F.2d 637, 647 (D.C.Cir.1976). Plaintiffs then argue that because they cannot transform into cash the amount by which the fair market value of their apartments exceeds the rental they pay, they have received no income which is "actually available" to them, relying on Kimmes v. Califano, 472 F.Supp. 474 (D.Colo.1979). While the question is not without difficulty, I find that by living in apartments for which they pay less than market value, plaintiffs receive a benefit which is applied directly to meeting their needs for adequate housing. Although they cannot translate that benefit into cash which may be used for other purposes, the benefit is nevertheless "actually available" to them in the sense that it directly affects and improves the quality of their living environment. Such a benefit may be characterized by the Secretary as "in-kind" income consistent with the meaning of 42 U.S.C. § 1382a(a)(2). I therefore conclude that the Secretary's challenged regulation does not contravene Congress' statute. Styles v. Harris, 503 F.Supp. 125 (D.Md. 1980); Antonioli v. Harris, 624 F.2d 78 (9th Cir. 1980).

III. Constitutional Claims

Plaintiffs further challenge the Secretary's regulation at 20 C.F.R. 416.1125(c) and (d) on the ground that it creates an irrational classification in violation of the equal protection component of the Due Process Clause of the Fifth Amendment. The challenged regulation operates to reduce the SSI benefits of recipients who live in "informal" living situations, typically apartments in two- or three-family houses owned by a son or daughter for which they pay a rent less than market value. The regulatory scheme, as described above, characterizes the difference between rent paid and market value as "in-kind income" to the recipient, and reduces benefits accordingly, up to a maximum amount. Recipients who enter into formal leases for their apartments, however, are excluded from the operation of the regulation, irrespective of whether the landlord is a relative or a stranger, or whether the rental specified in the lease accurately reflects market value. In addition, SSI recipients who live in federally subsidized housing are explicitly excluded from the application of the challenged regulation by 20 C.F.R. §§ 416.1146(k) and 1236(12), although the market value of a subsidized apartment is almost invariably far greater than the rental payment made by the tenant.² SSI recipients who live in apartments owned by relatives, those who lived in leased apartments, and those who live in subsidized housing all have the same non-housing expenses for items such as food, clothing and transportation. All have extremely limited incomes with which to attempt to meet those needs. All may well live in apartments for which they pay significantly less than market value rentals. Yet only those who, like plaintiffs, live in houses owned by relatives will have their SSI benefits reduced or even discontinued, (as in the case of plaintiff Dolan) by the application of the challenged regulation. By definition plaintiffs have no additional sources of income which they can apply to purchasing the necessities of life; indeed, eligibility requirements assure that even with SSI payments, recipients will have only the minimum necessary to meet basic and essential needs. 42 U.S.C. § 1382.

In practical effect, the challenged regulation creates at least two classes of persons...