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Housing Authority of Snohomish County v. United States Department of Housing and Urban Development

United States District Court, W.D. Washington, Seattle

September 2, 2014

HOUSING AUTHORITY OF SNOHOMISH COUNTY, Plaintiff,
v.
UNITED STATES DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT, et al., Defendants.

ORDER

RICHARD A. JONES, District Judge.

I. INTRODUCTION

This matter comes before the court on the parties' cross-motions for summary judgment. Plaintiff, the Housing Authority of Snohomish County ("HASCO"), requested oral argument; Defendants, the United States Department of Housing and Urban Development and its Secretary (collectively "HUD"), did not. The court finds oral argument unnecessary. For the reasons stated herein, the court GRANTS HASCO's motion (Dkt. # 11) to the extent stated in this order, and DENIES HUD's motion (Dkt. # 13). HUD must make a new decision as to HASCO's application to dispose of its public housing units. The parties must submit a joint statement no later than September 15, 2014 as to their preferences for the disposition of this civil action.

II. BACKGROUND

HASCO is a "public housing agency" ("PHA") within the meaning of the United States Housing Act of 1937 ("Housing Act"), which is codified along with amendments beginning at 42 U.S.C. § 1437. HASCO administers more than 5, 000 housing units through a variety of programs, including the Section 8 Housing Choice Program, in which qualified persons receive vouchers that they use to subsidize market-rate rentals of privately-owned housing. HASCO administers just 210 units of "public housing, " which are units that HASCO owns and manages with subsidies from the federal government. HUD administers those federal subsidies. HASCO's 210 public housing units are in 14 geographically dispersed properties with as many as 30 and as few as 2 units. Administrative Record ("AR, " Dkt. # 7) at 18, 206.

In July 2011, HASCO filed an application with HUD to "dispose" of its 210 public housing units. "Disposition" is a term of art in the Housing Act that describes the sale or other transfer of public housing from the public housing program. 42 U.S.C. § 1437p; 24 C.F.R. § 970.5 (defining "Disposition"). HASCO's plan is to lease its 210 units to a nonprofit affiliate who would operate the units as low-income housing. The residents of the units would receive Section 8 vouchers, allowing them to stay in their home or seek other housing. HASCO planned to use proceeds of the disposition to perform capital improvements and maintenance on the 210 units and to acquire an additional 46-unit building to use for low-income housing. AR 18-20. HASCO offered a host of reasons for disposition in its application to HUD. It explained that the disposition would offer greater housing choice to is public housing residents, and that residents supported the proposed disposition. AR 20, 69-70. It explained that the disposition would help it deconcentrate poverty in its jurisdiction. AR 19. It emphasized that the proceeds of the disposition would allow it to buy additional low-income housing. AR 20-21. It also stated that under the financing structure applicable to public housing, it could not meet its projected capital needs at the 210 units over the next 20 years. AR 18-20

HUD denied HASCO's disposition application in February 2012, again in July 2012 after HASCO requested reconsideration, and a third time November 2012 after HASCO requested reconsideration again. AR 202-203, 370-72, 470-71. Each time HUD denied HASCO's application, it focused on one issue: whether HASCO had sufficient funds for capital improvements and maintenance at the 210 units with its existing income and federal subsidies. AR 202 ("Specifically, the HASCO certified that it does not have the resources necessary to address capital needs with its existing HUD subsidies."), 372 ("Specifically, the size of the operating deficit combined with the lack of significant capital needs does not justify disposition."), 470 ("The Department... has determined that all the information [HASCO provided] remain inadequate to justify the disposition...."). HUD did not address HASCO's assertion that the disposition would allow it to acquire more low-income housing. HUD did not address HASCO's assertion that the disposition would benefit the residents of the 210 units.

HASCO sued, invoking the judicial review provisions of the Administrative Procedures Act ("APA, " 5 U.S.C. §§ 701-706). It contends that HUD erred at the threshold by disregarding the duties that the Housing Act imposes on HUD in approving disposition requests. In its view, HUD's singular focus on HASCO's capital needs and resources at the 210 units is itself a violation of the Housing Act, regardless of whether its substantive determination that HASCO had adequate resources to meet its capital needs was correct. It also contends that the substantive determination was erroneous. It asks the court to do what HUD would not - grant its disposition application. HUD, for its part, contends that it both followed the Housing Act and that the court can set aside its denial of HASCO's disposition application only if it acted arbitrarily and capriciously, which it did not. The parties' cross-motions for summary judgment express their disparate views, and the court now resolves them.

III. ANALYSIS

A. HUD "Shall Approve" a Disposition Application If a PHA Makes Certain Certifications, and "Shall Disapprove" It If HUD Has Information That Is "Clearly Inconsistent" With Those Certifications.

Section 1437p of the Housing Act establishes HUD's duties in reviewing a disposition application in two subsections. Subsection (a) mandates that HUD "shall approve" a disposition application if a PHA makes a series of certifications described in the statute. Eliminating the certifications that do not apply to the disposition of dwelling units, the statutory certifications are as follows:

1) that keeping the property is not in the "best interests of the residents or the public housing agency, " § 1473p(a)(2)(A), or that disposing of the property is in the "bests interests of the residents and the public housing agency, § 1437p(a)(2)(B);
2) that the PHA's agency plan authorizes the disposition, § 1437p(a)(3);
3) that the PHA has given residents advance notice of the disposition and advised the residents of its plan to provide them with comparable housing, relocation ...

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