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KOHL v. HOUSING AUTH. OF CITY BLOOMINGTON

May 3, 1982

DOROTHY A. KOHL, PLAINTIFF,
v.
HOUSING AUTHORITY OF THE CITY OF BLOOMINGTON, ILLINOIS, ET AL., DEFENDANTS.



The opinion of the court was delivered by: J. Waldo Ackerman, District Judge.

ORDER

This case arises from a rental dispute between the plaintiff and the Bloomington Housing Authority (hereinafter referred to as BHA). It raises the question of the propriety of the BHA's establishing certain eligibility requirements before issuing a Certificate of Family Participation to applicants seeking housing under Section 201(a)(8) of the United States Housing and Development Act of 1974, 42 U.S.C. § 1437f (hereinafter referred to as "Section 8"). Three United States District Courts and the United States Courts of Appeal for the Third and Sixth Circuits have considered precisely this same issue, with differing results. It appears to be a matter of first impression in this Circuit.

The Section 8 Existing Housing Program is a program of federal rent subsidies for low income persons which is administered by local public housing authorities (hereinafter referred to as PHA). This legislation was enacted for the dual purpose of "aiding lower-income families in obtaining a decent place to live and of promoting economically mixed housing. . . ." 42 U.S.C. § 1437f(a). Pursuant to this legislation, the PHA enters into an annual contributions contract (hereinafter referred to as ACC) with the Department of Housing and Urban Development (hereinafter referred to as HUD). 42 U.S.C. § 1437f(b)(1). The ACC gives the authority to the PHA to enter into housing assistance payments contracts with owners of existing dwelling units. Id. These contracts establish a maximum monthly rental for the unit, not to exceed the fair market rental for such a unit by more than 10 per cent. 42 U.S.C. § 1437f(c)(1). Depending primarily upon family size and income, the monthly assistance payment is the difference between the maximum monthly rental and fifteen to thirty per cent of the family income. 42 U.S.C. § 1437f(c)(3). In other words, if a family qualifies for Section 8 housing assistance, a maximum of thirty per cent of its income will be used to pay rent. The rest is paid to the landlord by the PHA with federal funds.

Plaintiff Dorothy Kohl applied for a Certificate of Participation in the Section 8 program administered by the BHA. Her application was rejected because she allegedly owed rent on a conventional public housing unit. This debt arose from plaintiff's failure to give thirty days' written notice of termination of her lease to the BHA.

Plaintiff and her twelve-year-old daughter are both afflicted with multiple disabilities. Plaintiff leased an apartment from BHA on March 7, 1979, but never took possession. She became ill at the time she was to occupy the apartment and the apartment stairs were not manageable by her daughter, thus making the apartment unsuited to their needs. Although she was contacted twice about her intentions to either move in or return the key, Mrs. Kohl did neither until August 30 when she returned the key. At an informal hearing where she was represented by counsel, it was determined that plaintiff owed rent through July 20, the date on which BHA leased the apartment to a new tenant.

Plaintiff contends that to deny her the opportunity to participate in the Section 8 program because of an alleged rent arrearage owing to BHA from an unrelated housing program is unlawful because (1) it creates an additional condition of eligibility not authorized by Congress; (2) the use of the Section 8 program as a private collection device violates defendants' fiduciary duty to administer federal funds to aid lower income families in obtaining decent, safe, and sanitary dwellings, i.e. in a manner consistent with the Housing Act; and, (3) it denies plaintiff equal protection of the law and violates her substantive due process rights.

Plaintiff's position is that the PHA may apply only the specific criteria for eligibility outlined in the HUD regulations. Those criteria relate primarily to family composition and income. See 24 C.F.R. § 889.101 (1981) et seq.; 24 C.F.R. § 882.102 (1981); and, 24 C.F.R. § 812.1 (1981) et seq. She contends that any additional criteria not specifically authorized by Congress are invalid.

Under the regulations, the PHA is to submit an equal opportunity housing plan to HUD no later than the time it submits the PHA-executed ACC. 24 C.F.R. § 882.204(b)(1) (1981). That plan is supposed to describe the PHA's policies and procedures for, inter alia, "[S]electing among eligible applicants those to receive Certificates of Family Participation, including any provisions establishing local requirements for eligibility or preference for selection in accordance with § 882.209(a)(3)." 24 C.F.R. § 882.204(b)(1)(i)(C) (1981). Section 882.209(a)(3) provides that a PHA may select families in accordance with its own HUD-approved rules for preferences. It further provides that "Requirements or preferences for those living in the jurisdiction of the PHA at the time of application are permissible" except that no requirement or preference may be based upon the location of the housing or upon length of residence in the jurisdiction of the PHA. Lastly, § 882.209(f) delineates the procedures to be followed if an applicant is determined by the PHA to be ineligible "on the basis of Income or family composition, or for any other reason. . . ." (Emphasis supplied).

Thus, the HUD regulations contemplate that the PHA may establish local eligibility requirements other than those prohibited by 24 C.F.R. § 882.209(a)(3) (1981), so long as the PHA's policies and procedures are submitted for HUD approval in its equal opportunity housing plan. The BHA's Equal Opportunity Housing Plan and Regulations which contain the rental arrearage policy were expressly approved by HUD on April 21, 1980.

Three other district courts have considered the issue of whether a PHA may require payment of arrearages before issuing a Section 8 certificate. In Baker v. Cincinnati Metropolitan Housing Authority, 490 F. Supp. 520 (S.D.Ohio 1980), the district court rejected arguments similar to those made by the plaintiff here. In that case, plaintiffs were denied Section 8 Certificates of Family Participation because of an arrearage resulting from prior tenancy in Cincinnati Metropolitan Housing Authority-owned public housing. Id. at 522. Plaintiffs argued there (1) that defendants' policies and practices conflicted with federal statutes and regulations; (2) that this practice violated equal protection and due process rights of the plaintiffs; and, (3) that defendants' acts constituted an unlawful collection practice. Plaintiffs also attacked as inadequate the procedures afforded to ineligible Section 8 applicants. Those procedures are not in issue here.

The court in Baker held that the policies and practices of the CMHA did not conflict with federal statutes, regulations, the ACC or Administrative Plan of the housing authority. Id. at 528. Furthermore, it held that there was a rational basis for excluding from the Section 8 program past CMHA residents who were in arrears. Such a policy would encourage assisted families to meet lawful obligations for rental payments, thereby maximizing effective use of available federal financial assistance to meet national housing goals. Consequently, the court held that the CMHA policy did not violate the Equal Protection Clause.

The court also rejected plaintiff's claim that CMHA's policy amounted to an illegal debt collection practice. It noted first that CMHA took no affirmative action to collect the arrearages. Furthermore, disputes about the appropriateness of the assessments could be handled at a hearing. Therefore, because a hearing would substantially diminish the likelihood of improper assessment of the past debt, the court found CMHA's policy did not constitute an illegal collection practice. Id. at 531.

The United States Court of Appeals for the Sixth Circuit recently affirmed the district court's judgment, holding, inter alia, that because the arrearage policy operated pursuant to fixed rules which provided adequate procedural safeguards, there was no danger of arbitrary application of the policy. Baker v. Cincinnati Metropolitan Housing Authority, 675 F.2d 836 at 841 (1982).

The court in Vandermark v. York Housing Authority, 492 F. Supp. 359 (M.D.Pa. 1980) also upheld the policy of a local housing authority to exclude applicants with arrearages owing to the authority from participating in the Section 8 program. This policy was embodied in the York Housing Authority's (hereinafter referred to as ...


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