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Alschuler v. Department of Housing and Urban Development

decided: August 4, 1982.


Appeal from the United States District Court for the Northern District of Illinois, Eastern Division. No. 80-C-4595 -- Nicholas J. Bua, Judge.

Bauer and Wood, Circuit Judges, and Evans, District Judge.*fn*

Author: Wood

WOOD, Circuit Judge.

Plaintiffs, a local neighborhood association and three of its members, filed suit to enjoin HUD from disbursing housing assistance funds and providing mortgage insurance for a HUD-approved low-income housing project in the Uptown area of Chicago's North Side, and to enjoin occupancy and further construction of the project. The complaints also named the project developers as defendants. After eleven days of hearings, the district court denied plaintiffs' motion for a preliminary injunction and dismissed their pendent state claim. See Alschuler v. HUD, 515 F. Supp. 1212 (N.D. Ill. 1981). This appeal followed.


This action arises under various federal statutes and regulations controlling HUD's authority to implement the objectives of the national housing policy. Section 8 of the United States Housing Act of 1937 authorizes HUD to enter into contracts to provide housing assistance payments on behalf of eligible low-income tenants. 42 U.S.C. § 1437f (1976 & Supp. IV 1980) (as amended). Pursuant thereto HUD promulgated a set of comprehensive regulations governing the approval of section 8 funding for substantially rehabilitated housing such as the project at issue here. 24 C.F.R. Pt. 881 (1981). Those regulations establish specific standards for site and neighborhood selection and project eligibility. In pertinent part, 24 C.F.R. §§ 881.206(b) and (c) require that the proposed site further full compliance with Title VIII of the Civil Rights Act of 1968 ("Fair Housing Act"), 42 U.S.C. §§ 3601 et seq.,*fn1 and avoid undue concentration of assisted persons in areas containing a high proportion of low-income persons, respectively. The regulations also provide that high-rise elevator projects for families with children are prohibited unless there is no practical alternative, 24 C.F.R. § 881.202(d); see 42 U.S.C. § 1437(c)(1), and that all projects must comply with applicable local ordinances, 24 C.F.R. § 881.207(f). To further encourage private investment and participation in furnishing decent housing for low-income people, the National Housing Act of 1954 authorizes HUD to insure mortgages secured by property on which is located a dwelling conforming to the standards for section 8 assistance and "meeting the requirements of all . . . local ordinances or regulations, relating to the public health or safety, zoning or otherwise, which may be applicable thereto." 12 U.S.C. § 1715 l (d)(2) (1976 & Supp. IV 1980) (as amended).

The factual background of this matter is set forth in detail in the district court's opinion. 515 F. Supp. 1212. The basic facts are not disputed; rather, the controversy centers on the legal significance to be attached thereto. We therefore recount only so much as is essential to an understanding of our decision.

In June 1979, HUD received from private defendants a preliminary proposal for 82 units of family section 8 housing to be located in the Uptown Community Area. The proposal called for substantial rehabilitation of two adjacent apartment buildings, one a nine-story elevator building and the other a three-story building containing three apartments (collectively, the "Monterey project"). After a one-year period of processing the application, HUD gave final approval for mortgage insurance and rental assistance. Before doing so, HUD determined, inter alia, that the buildings were not located in an area of low-income or minority concentration and would not create an undue concentration of assisted or minority persons in the vicinity, and that there was no practical alternative to approval of the nine-story elevator building. HUD based its determination primarily on 1970 census data on the racial and economic make-up of census tract 321 (in which the project was located),*fn2 census tracts contiguous with tract 321, and the Uptown Community as a whole, but considered other indicators as well. HUD had ranked the Monterey project seventh out of 28 proposed projects on the basis of several criteria pertaining to project desirability. In particular, Monterey was found to be located in a relatively attractive area with several parks and playgrounds, good public transportation, and above average commercial and community services. The quality of the Monterey apartments and the extensive private investments in restoring the neighborhood also impressed HUD officials.

HUD further determined that the buildings conformed to all applicable local ordinances. That conclusion was based on a building permit issued by the Chicago Building Department and a legal opinion letter supplied by the developer at the time of closing.

Plaintiffs alleged as a federal claim that HUD's action in approving Monterey was arbitrary and capricious for the following reasons. First, HUD in effect ignored the statutory prohibition against high-rise elevator projects for families with children. Second, the proposed rehabilitation violates the Lake Michigan and Chicago Lakefront Protection Ordinance, Chicago, Ill., Municipal Code, ch. 194B (1973) ("Lakefront Protection Ordinance"), because it was not submitted to the Chicago Plan Commission for approval. Third, HUD relied on outdated data to determine the concentration of low-income and minority people in the area and failed to define the relevant area for the purpose of making those determinations. Plaintiffs further asserted the violation of the Lakefront Protection Ordinance as a pendent state claim against the private defendants.

The district court, denying preliminary injunctive relief, ruled that plaintiffs had failed to show a reasonable likelihood of success on the merits of their federal claim. The court also dismissed the state claim, finding that plaintiffs had no private right of action under Illinois law.



The district court ruled that plaintiffs, as neighborhood residents, have standing to challenge HUD's decision approving the Monterey project. 515 F. Supp. at 1227-28. In response to plaintiffs' appeal on the federal claims, defendants reassert their position in the proceedings below that plaintiffs lack standing. Because standing affects jurisdiction, and all parties have had an opportunity to brief the issue on appeal, we review the district court's conclusion on that threshold inquiry.

The concept of standing "involves both constitutional limitations on federal-court jurisdiction and prudential limitations on its exercise." Warth v. Seldin, 422 U.S. 490, 498, 45 L. Ed. 2d 343, 95 S. Ct. 2197 (1975). To satisfy the "case and controversy" requirement of Article III, a plaintiff must allege a sufficient personal stake in the outcome of the dispute to ensure that the matter to be adjudicated will be presented in an adversary context and in a form historically viewed as capable of judicial resolution. Association of Data Processing Service Organizations, Inc. v. Camp, 397 U.S. 150, 151-52, 25 L. Ed. 2d 184, 90 S. Ct. 827 (1970). In other words, "the plaintiff must show that he personally has suffered some actual or threatened injury as a result of the putatively illegal conduct of the defendant." Gladstone, Realtors v. Village of Bellwood, 441 U.S. 91, 99, 60 L. Ed. 2d 66, 99 S. Ct. 1601 (1979). As an added prudential limitation, section 10 of the Administrative Procedure Act ("APA"), 5 U.S.C. § 702, under which we assume each facet of the federal claim arises, requires that plaintiffs be "adversely affected or aggrieved within the meaning of the relevant statute." The Supreme Court in Camp construed this to mean that the alleged injury must be to an interest "arguably within the zone of interests to be protected or regulated by the statute. . . in question." 397 U.S. at 153.

Plaintiffs alleged as an injury-in-fact that HUD's approval of the Monterey project will cause substantial harm to their neighborhood by creating an imbalance in the minority and low-income population, breeding an increase in crime, and placing an added strain on community resources. They also contend that their property values and the "special environmental, recreational, cultural, historical and aesthetic qualities of the Lake Michigan and Chicago Lakefront Protection District" will be adversely affected. See 515 F. Supp. at 1216. The district court ruled that plaintiffs' allegation of threatened injury satisfied the Article III standing requirement. Id. at 1227. On appeal defendants argue that this conclusion contradicts the court's more specific finding that plaintiffs had failed to establish the harm necessary to obtain a preliminary injunction. See Id. at 1226-27, 1239. That finding, however, was made upon a motion for a preliminary injunction, not summary judgment, and thus is not conclusive of the merits. We must, therefore, take as true plaintiffs' allegations of threatened injury in the pleadings.*fn3 Jenkins v. McKeithen, 395 U.S. 411, 421-24, 23 L. Ed. 2d 404, 89 S. Ct. 1843 (1969); cf. Simon v. Eastern Kentucky Welfare Rights Organization, 426 U.S. 26, 53-54, 48 L. Ed. 2d 450, 96 S. Ct. 1917 (1976) (Brennan, J., concurring). Those allegations are sufficient to confer Article III standing.*fn4 See South East Lake View Neighbors v. HUD, 685 F.2d 1027 (7th Cir. 1982).

The district court also concluded that plaintiffs satisfied the zone of interests test. 515 F. Supp. at 1228. Defendants contend that section 8 is intended solely for the benefit of the project tenants and that plaintiffs, as mere incidental beneficiaries, have no standing. See Dialysis Centers, Ltd. v. Schweiker, 657 F.2d 135, 138 (7th Cir. 1981).

The zone of interests test requires making a separate analysis of standing for each claim raised. Society Hill Civic Association v. Harris, 632 F.2d 1045, 1058 n.8 (3d Cir. 1980). As in any case of statutory interpretation, we must "examine the language of the relevant statutory provision, the pertinent regulations, and the legislative history to discern the parameters of the relevant zone of interest and to determine whether the interest of [plaintiffs] arguably falls within the zone." Peoples Gas, Light & Coke Co. v. United States Postal Service, 658 F.2d 1182, 1195 (7th Cir. 1981).

Plaintiffs' standing to claim that Monterey will tip the racial balance of their neighborhood must be examined in the context of section 808(d)(5) of the Fair Housing Act, 42 U.S.C. § 3608(d)(5). Section 808(d)(5) requires administration of HUD programs "in a manner affirmatively to further the policies of this subchapter." (emphasis added). That language reveals a clear identity of purpose between section 808(d)(5) and the Fair Housing Act as a whole. See Peoples Gas, 658 F.2d at 1196 & n.11 (regulation at issue adopted pursuant to enabling act which authorized the adoption of rule "to accomplish the objectives of this title"). The legislative history to related sections of the Act consequently takes on added significance in delineating the proper zone of interests. Id.

Construing section 810(a) of the Act, 42 U.S.C. § 3610, which establishes a private right of action for any "person aggrieved" by a discriminatory housing practice, the Court in Trafficante v. Metropolitan Life Insurance Co., 409 U.S. 205, 34 L. Ed. 2d 415, 93 S. Ct. 364 (1972), held that Congress intended to define standing as broadly as is permitted by Article III. In reaching that conclusion the Court read the Act as recognizing that even those who are not direct objects of discrimination have an interest in ensuring fair housing. Id. at 210. As the Court declared, "the person on the landlords blacklist is not the only victim of discriminatory housing practices; is it, as Senator Javits said in supporting the bill, 'the whole community, ' 114 Cong. Rec. 2706, and as Senator Mondale who drafted § 810(a) said, the reach of the proposed law was to replace ghettos 'by truly integrated and balanced living patterns, ' Id. at 3422." 409 U.S. at 211. See Gladstone, Realtors, 441 U.S. at 100-09, and Havens Realty Corp. v. Coleman, 455 U.S. 363, 102 S. Ct. 1114, 71 L. Ed. 2d 214 (1982) (white neighborhood residents have standing under section 812, 42 U.S.C. § 3612, in action against practices which prevented integration). This generous view of the Act makes clear that plaintiffs are within the zone of interests to be protected and therefore have standing under the APA*fn5 to challenge HUD's decision as contrary to the mandate of section 808(d)(5). See, e.g., Shannon v. HUD, 436 F.2d 809, 817-18 (3d Cir. 1970);*fn6 Jorman v. Veterans Administration, 500 F. Supp. 460, 464 (N.D. Ill. 1980); Jones v. Tully, 378 F. Supp. 286, 287 n.1 (E.D.N.Y. 1974), aff'd sub nom. Jones v. Meade, 510 F.2d 961 (2d Cir. 1975).

Before we analyze the other statutory provisions and regulations that comprise plaintiffs' general federal claim, it is helpful, if not essential, to place into proper perspective some of the basic goals of the federal housing program. The United States Housing Act of 1937, 42 U.S.C. §§ 1437-1437j (1976 & Supp. IV 1980) (as amended), which contains the section 8 provision, id. § 1437f, was originally enacted to "remedy the unsafe and insanitary housing conditions and the acute shortage of decent, safe, and sanitary dwellings for families of low income." Sept. 1, 1937, ch. 896 § 1, 50 Stat. 888 (emphasis added) (current version at 42 U.S.C. § 1437). But in the Housing and Community Development Act of 1974, Congress amended the 1937 Act as part of a broader effort "to consolidate and simplify existing programs," S. Rep. No. 93-693, 93d Cong., 2d Sess. 1, reprinted in [1974] U.S. Code Cong. & Ad. News 4273 ("Senate Report"), and in doing so, coordinated the section 8 program with the broader goals of the community development program. The objectives of the community development program -- "to eliminate slums and blight and to upgrade and make the nation's cities more livable, attractive and viable places in which to live"*fn7 -- were to be articulated and implemented by HUD-approved local housing assistance plans ("HAP"s). 42 U.S.C. § 5304. As a bridge between the two programs, Congress added 42 U.S.C. § 1439, which requires the Secretary to consider the HAPs in determining whether to approve section 8 funding. Pub. L. No. 93-383, Title II, § 213, Aug. 22, 1974, 88 Stat. 674. Stressing the importance of this interprogram approach,*fn8 Congress in 1977 amended section 1439 to require the Secretary to "assure, to the maximum extent practicable in carrying out the national housing and community development objectives, that funds . . . shall be allocated or reserved in accordance with the goals described in local, state, or other housing assistance plans approved by the Secretary pursuant to section 5304 of this title. . . ." Pub. L. No. 95-128, Title II, § 207, Oct. 12, 1977, 91 Stat. 1130.

The 1974 and 1977 revisions reveal that although the primary goal of section 8 is to provide decent housing for the poor, its secondary concern is to develop and maintain stable, desirable urban communities. We therefore believe that many, but not necessarily all, of the specific site, neighborhood, and project standards may arguably encompass the interests of people in the relevant ...

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