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HUD Tenants Coalition v. U.S. Dep't of Housing and Urban Devel.

December 15, 2006

RE: HUD TENANTS COALITION, ET AL.
v.
U.S. DEPT. OF HOUSING AND URBAN DEVEL. ET AL.



The opinion of the court was delivered by: William J. Martini Judge

FEDERAL BLDG . & U.S. COURTHOUSE 50 WALNUT STREET , P.O . BOX 419 NEW ARK, NJ 07101-0419 (973) 645-6340 MARTIN LUTHER KING JR .

LETTER OPINION

Dear Counsel:

This matter comes before the Court on Defendants U.S. Department of Housing and Urban Development and Alphonso Jackson's (the "Federal Defendants") motion to dismiss pursuant to Fed. R. Civ. P. 12(b)(1), (2), (5) and (6). Also before the Court is Defendants Marge Della Vecchia and Anthony Cupano's (the "State Defendants") 12(b)(1) and (6) motion to dismiss. For the reasons outlined below, these motions will both be GRANTED and the Complaint DISMISSED.

I. Background

This case is essentially a dispute over the form of rent increases in a New Jersey subsidized housing project. Plaintiffs are an organization that includes residents at Zion Towers Apartments in Newark ("Zion") and Zion tenant Samuel Rivers. Plaintiffs are suing both Federal and State Defendants for raising rents without adhering to proper procedure.

Plaintiffs filed the Complaint on June 29, 2005 (First Amended, October 14, 2005) alleging that Defendants, variously, violated the Administrative Procedure Act ("APA"), the National Housing Act ("NHA"), the Due Process Clause and New Jersey housing regulations. The Complaint seeks unspecified damages, a declaratory judgment that Defendants have violated their rights, permanent injunctions resetting rents to prior levels, and that Defendants promulgate a rule or implement a policy defining the minimum obligations of the "narrative statement" and "energy conservation plan" ("ECP") filings required in submissions for certain rent-increases.

Zion is a part of the Section 236 NHA Housing Program which provides subsidies to encourage private organizations, or "sponsors," like Zion, to develop and maintain affordable housing for low-income tenants by subsidizing housing project mortgages. Zion was initially financed by HMFA, and HUD pays interest-reduction subsidies to HMFA under the 236 program. When Zion wants to raise rents, it must first submit an application to HMFA which then reviews the application and makes a recommendation to HUD; HUD makes the final approval as to any rent-increase.

In order to raise rents to certain levels, Zion must adhere to specific procedures outlined by both HMFA and HUD. Rent increases are submitted by Zion to HMFA which can either deny or recommend approval of the application. If HMFA recommends approval, then the application goes to HUD for final approval. 24 C.F.R. § 245.330. However, at least 30 days prior to submitting a rent-increase application to HMFA, Zion must first provide reasonable and adequate notice to its tenants, in a specified format, of the proposed increase. 24 C.F.R. 245.310. This notice informs tenants where they may inspect the documents Zion intends to submit in support of the rent-increase application and also provides tenants with a 30-day opportunity to make any comments on the proposed increase. Among the documents Zion must provide in support of each rent-increase are "[a] narrative statement of the reasons for the requested increase in maximum permissible rents," and "[a] status report on the project's implementation of its current Energy Conservation Plan." 24 C.F.R. 245.315(a). The contents of neither the narrative statement nor the energy conservation plan are further defined in the relevant statutes.

At contention in this suit are a series of proposed rent-increases at Zion Towers between 1999 -2004 summarized as follows:

· March 31, 1999: Zion requested a 2% rent increase. The narrative statement said "Administrative Expenses, Maintenance and Repairs, Water, Real Estate Taxes, Insurance and Electricity." The ECP status report stated that Zion was "continuing to purchase natural gas from a third-part buyer and continuing to use cogeneration to offset the use of natural resources." Rivers wrote to HMFA complaining that the narrative statement was insufficient and that Zion Towers lacked corporate status necessary to apply for the increase. HMFA wrote back to Rivers on June 9, 1999 that the narrative statement was sufficient and that Zion's corporate status was not relevant. On June 14, 1999, HMFA forwarded the packet to HUD recommending approval. HUD approved the 2% increase.

April 30, 2001: Zion requested a 4% rent increase. The narrative statement said "Increased Utility Costs, Generate Funds to pay down additional debt of project (i.e. DeWilde Pool Mortgage), and Inflationary Increases in Administration, Salaries, Insurance, and Maintenance Expenses." The ECP status report was identical to March 1999. Rivers wrote to HMFA commenting that the narrative statement and ECP were inadequate. Zion then revised the rent increase application and slightly revised the narrative statement. Rivers wrote two more letters complaining to HMFA that the statements were inadequate for him to intelligently comment and adding that the application also lacked a Zion Board resolution authorizing the increase. HMFA responded to the letters on October 1, 2001 that the narrative statement and ECP were sufficient and forwarded the application to HUD recommending approval. HUD approved the 4% increase.

March 31, 2002: Zion requested a 3% rent increase. The narrative statement said only "Insurance." The ECP status report was unchanged from before. Rivers wrote to HMFA that the application should be rejected because of inadequate narrative statement and ECP. HMFA responded to Rivers that it accepted the narrative statement and ECP as sufficient and had forwarded the application to HUD recommending approval. HUD denied the increase in September 2002.

March 31, 2003: Zion requested an 11% rent increase. The narrative statement said "Inflationary Increase to Salary Expenses, Maintenance & Repair Expenses, Maintenance Contracts Expenses and Insurance Premiums." The ECP status report said Zion was "continuing to purchase natural gas from a third-party buyer, continuing to use cogeneration to offset the use of natural resources, and it qualified for the Lighting Rewards Program to reduce Kilowatt-hour demand." Rivers again wrote to ...


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