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September 22, 1972


The opinion of the court was delivered by: Tone, District Judge.


This action is brought to challenge the refusal of the defendant city to permit construction within its boundaries of houses financed under Section 235 of the Federal Housing Act, 12 U.S.C. § 1715z. Jurisdiction exists under 28 U.S.C. § 1343(3) and (4) and § 2201. The case was tried to the court without a jury.

The following facts are not in dispute:

Plaintiff is a Negro citizen of the United States who entered into a contract to purchase a house to be built by Maridan Construction Company in Harvey, Illinois and financed under Section 235. The defendants are the City of Harvey, Illinois, its Mayor, James A. Haines, and its former Planning Commission Chairman, Raymond Bodnar, who held that office at the time of the conduct complained of but is no longer an officer of the defendant city.

Prior to the events in issue here Maridan Construction Company had constructed approximately 400 Section 235 financed houses in the City of Harvey. All or substantially all of these houses were purchased and occupied by Negroes. These houses are standard models which conform to Federal Housing Administration regulations and to all of the building code regulations of the city in all respects save one: Some of the houses are single family dwellings built on an unpaved street, which is in conflict with the City of Harvey Housing Code Regulation No. 1527.

Regulation No. 1527 has been waived by the City of Harvey many times and has never been enforced during the administration of defendant Haines, which began May 1, 1967, except in the instance complained of here. The city has no accurate record of the number of times this provision has been waived.

Section 235 houses are financed under an arrangement whereby the purchaser, who must meet a statutory standard as to earnings and family size, may qualify for Government subsidized interest payments. Beneficiaries under this kind of financing arrangement are not destitute but are of "low and moderate income" as defined by the statute.

Section 235 financed houses are not distinguishable from other homes in their price category. A Section 235 house is not permitted to exceed $24,500 for a four-bedroom single family dwelling, under Department of Housing and Urban Development regulations. It must meet local and federal housing standards and regulations in the same way as any other newly constructed home. It can be purchased under conventional financing, Veterans Administration financing or standard F.H.A. financing. Section 235 relates only to the Federal Government subsidy in the form of a partial payment of some percentage of the mortgage interest. The exact percentage of the mortgage interest paid by the Government is based on factors relating to cost, interest, and the recipient family's net income and number of children.

In the summer of 1970 Maridan Construction Company received all necessary H.U.D. and F.H.A. clearances and commitments to build a group of 90 Section 235 homes in the City of Harvey, among which at least one was to be built on a paved street so that Housing Code Regulation No. 1527 would not apply. It was one of these 90 homes, to be located at 26 East 104th Street in the City of Harvey, for which the plaintiff contracted to purchase and for which she sought a building permit.

Late in the summer of 1970 the defendants administratively decided that the city would not allow any more homes financed under Section 235 to be built within the city's limits. In implementing this decision the defendants refused to issue any building permits for Section 235 homes which Maridan Construction Company proposed to build, including the one which was to be built for plaintiff. About one year later, on September 27, 1971, the City Council adopted Resolution No. 868, which gave formal recognition to this decision and provided that no permits would be issued for such homes for a period of one year from the date of the resolution.

Following the refusal by the city to issue a building permit for construction of the home she had contracted to purchase from Maridan Construction Company, plaintiff sought conciliation of the refusal pursuant to 42 U.S.C. § 3610 by application to H.U.D. She never personally consulted with H.U.D., but the defendants did several times and during these consultations they never raised the objection that any of the homes scheduled to have been built were in technical violation of Housing Code Regulation No. 1527, relating to construction of single family dwellings on unpaved streets.

It is stipulated that the number and percentage of the City of Harvey's Negro population, as shown by the last two United States censuses, are as follows:

                          Total            Percentage
            Total         Negro             of Negro
Year      Population      Population        Population
1960        29,071          1,986               6.8%
1970        33,864         ...

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