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November 19, 1991



The opinion of the court was delivered by: JAMES B. ZAGEL

Plaintiffs filed a five-count complaint against the Chicago Housing Authority ("CHA"), Vincent Lane (as chairman of the CHA), the United States Department of Housing and Urban Development ("HUD"), and Jack Kemp (as the secretary of HUD). Plaintiffs assert Counts I, IV and V of their complaint against defendants CHA and Lane (collectively "the CHA defendants"). The CHA defendants seek dismissal of those counts under Fed. R. Civ. P. 12(B)(6). *fn1"

 Plaintiffs bring Count I pursuant to 42 U.S.C. § 1983, charging the CHA defendants with a violation of plaintiffs' rights under § 1437p of the United States Housing Act ("Housing Act"). 42 U.S.C. §§ 1441, et seq. Count IV alleges a breach of the Annual Contributions Contract ("ACC") between HUD and the CHA; plaintiffs assert that they are third party beneficiaries of the ACC. Finally, plaintiffs allege in Count V that the CHA defendants have breached their lease agreements with Henry Horner tenants.

 For purposes of defendants' 12(b)(6) motion, the court must accept the well pleaded allegations of the complaint as true, and shall draw reasonable inferences in the light most favorable to plaintiff. Bethlehem Steel Corp. v. Bush, 918 F.2d 1323, 1326 (7th Cir. 1990); Yeksigian v. Nappi, 900 F.2d 101, 102 (7th Cir. 1990). Furthermore, the record is limited to the complaint and defendants may not challenge the allegations of the complaint. Webster v. New Lenox School Dist. No. 122, 917 F.2d 1004, 1005 (7th Cir. 1990); Gomez v. Illinois State Bd. of Educ., 811 F.2d 1030, 1039 (7th Cir. 1987). *fn2"


 The CHA is a public housing authority that administers federally subsidized and assisted low rent housing programs pursuant to the Housing Act. 42 U.S.C. §§ 1441 et seq. Plaintiffs are a class composed of residents at the Henry Horner Homes and applicants for public housing. Plaintiffs allege that the CHA's failure to maintain the Henry Horner Homes resulted in their substantial deterioration, such that half the units have been vacated and the remaining units exist in a state of perpetual disrepair. Plaintiffs further allege that as a result of the CHA's neglect, the buildings have become health and fire hazards and the unoccupied units have been overrun with vandals, trespassers and drug dealers. According to plaintiffs, this combination of deterioration and vacancy has resulted in a constructive or de facto demolition of the Henry Horner developments.

 The Housing Act establishes conditions under which a public housing authority may demolish or dispose of existing public dousing units. Section 1437p(d) provides that a public housing agency "shall not take any action to demolish or dispose of a public housing project without obtaining the approval of the Secretary and satisfying the conditions specified in subsections (a) and (b) of this section." 42 U.S.C. § 1437p(d) (1991). Subsection (a) requires a public housing authority to secure the approval of the Secretary of HUD before demolishing or disposing of the development. 42 U.S.C. § 1437p(a). Subsection (b) requires that the public housing authority consult with tenants and tenant councils who will be affected by the demolition or disposition, and to provide assistance and alternative units to any displaced tenants. 42 U.S.C. § 1437p(b).

 Plaintiffs contend that because defendants have not satisfied the requirements enumerated in subsections (a) and (b) for demolition or disposal of the Henry Horner developments, their § 1983 claim alleging a violation of their rights under § 1437p(d) states a claim upon which this Court can grant relief. In response, the CHA defendants concede that they have not met the requirements of subsections (a) and (b). They contend, however, that de facto or constructive demolition is not actionable under § 1437p(d) and seek dismissal on those grounds.

 A. Actual v. De Facto Demolition

 The CHA defendants argue that § 1437p(d) does not cover a public housing agency's omission or failure to act that leads to a state of disrepair of a building or housing project. Under defendants' interpretation, until a public housing agency takes active measures to tear down a public housing project or makes an affirmative decision to demolish a project, a public housing tenant does not possess an enforceable right under § 1437p(d). Not surprisingly, plaintiffs disagree. They contend that the requirements of § 1437p(d) apply to any type of conduct by a housing authority that results in the destruction of all or part of a housing project. Under plaintiffs' reading of the Act, conduct that destroys a project -- in the sense that the housing units would not longer be habitable -- is governed by § 1437p(d) regardless of whether such conduct is characterized as affirmative conduct or passive neglect.

 Congress responded to the circuit court's decision in Edwards by amending § 1437p to include subsection (d). Subsection (d) and its legislative history supplied the congressional intent that Judge Wald, in Edwards, appropriately found lacking when she concluded that the pre-amendment § 1437p did not create an enforceable right that could be violated by a de facto demolition. This subsection clarified that Congress intended that:

 no [public housing authority] shall take any steps toward demolition and disposition without having satisfied the statutory criteria. This provision is intended to correct an erroneous interpretation by the United States Court of Appeals for the D.C. Circuit in Edwards v. District of Columbia and shall be fully enforceable by tenants of and applicants of the housing that is threatened.

 H.R. Conf. Rep. No. 426, 100th Cong., 1st Sess (1987), reprinted in 1987 U.S. Code Cong. & Admin. News ...

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