The opinion of the court was delivered by: JAMES B. ZAGEL
Plaintiffs filed a class action complaint in 1991 against the Chicago Housing Authority ("CHA"), Vincent Lane (as chairman of the CHA), the United States Department of Housing and Urban Development ("HUD"), and Henry Cisneros (as the secretary of HUD). The plaintiff class is composed of applicants for public housing and residents of three public housing developments, the Henry Horner Homes, Henry Horner Extension and Henry Horner Annex, referred to collectively as "Horner" or the "Horner developments." plaintiffs allege that by failing to maintain the Horner developments, defendants have, in effect, demolished Horner in violation of 42 U.S.C. § 1437p of the United States Housing Act, the Annual Contributions Act between the CHA and HUD, and the tenants' leases. Plaintiffs seek declaratory and injunctive relief against defendants. The injunctive relief sought includes an order prohibiting defendants from continuing to "demolish" Horner and requiring them to maintain reasonably full occupancy at the development, after, among other things, making all the residential units there habitable.
The parties have filed cross-motions for summary judgment. For the reasons stated in this opinion the motions are denied.
The Henry Horner Mothers Guild, a not-for-profit corporation established to improve living conditions at Horner, current tenants of various Horner buildings and applicants for public housing at the Horner developments sue the CHA and HUD and both agencies' top administrators--Vincent Lane and Henry Cisneros--in their official capacities. The CHA is a public housing agency that administers federally subsidized and assisted low-rent housing as authorized under the United States Housing Act of 1937. HUD is the federal agency charged with the administration and enforcement of federal laws, regulations and contracts relating to the operation, administration and maintenance of public housing programs.
A. CHA Vacancy Rates and Comprehensive Occupancy Plans
The Horner developments, which are owned and operated by the CHA, consist of approximately 1775 units located on the West side of Chicago. In November 1981 the overall vacancy rate at Horner was 2.3%, or 40 units. The vacancy rate at Horner climbed steadily for almost ten years, peaking at about the time plaintiffs filed their complaint (in July 1991) at 49.3%, which translates to 868 vacant units. Of the nine other large high-rise CHA developments with over 1,000 units, Cabrini had the next highest vacancy rate of 33.6%. The others ranged from 2.8% to 25.5%. When the vacancy rate at Horner reached 49.3% in June 1991, the vacancy rate for all of CHA's public housing was 17.3%. By July 1992, the vacancy rate at Horner had dropped to 44.8%, which was still the highest rate of vacancy among the ten largest CHA developments.
Periodically, the CHA submits to HUD for approval something called a Comprehensive Occupancy Plan ("COP"). The COP is supposed to specify the actions that the CHA is taking or intends to take to eliminate vacancies in public housing developments. The vacancy reduction strategy outlined in the CHA's 1989 COP sought to lower the CHA's overall vacancy rate by targeting for rehabilitation one high-rise development--Rockwell Gardens--and Senior Housing developments. As of December 1988 the vacancy rate at Rockwell Gardens and Senior Housing was 11.6% and 9.0%, respectively. Meanwhile, Horner was one of only two developments at which the CHA projected a loss of occupied units in 1989. In fact, out of the approximately 450 units the CHA projected to become vacant in 1989, about half were Horner units.
In April 1989 HUD's Regional Administrator, Gertrude Jordan, informed the CHA that her office had reviewed the 1989 COP and forwarded the plan to Headquarters for review. Ms. Jordan wrote that her office accepted the plan "with great reluctance . . . because we do not feel that proper emphasis has been placed on vacancy reduction efforts." The Regional Administrator stated that unless the CHA "seized the opportunity to reduce vacancies at an early time, the Authority will reach the point of no return." In addition, Ms. Jordan wrote that her office's acceptance of the 1989 COP "is conditioned on our understanding that the next COP submission will reflect a formidable increase in occupancy projected for the year 1990." In June 1989 the Regional Administrator notified the CHA that HUD had approved the 1989 COP.
The CHA's 1991 COP, which HUD Headquarters approved, concentrated on reducing vacancies in family developments with vacancy rates of over 20%. The COP stated the CHA's intention to "bring on line" 1,150 vacant units in the Wells, Taylor, ABLA, Cabrini and Horner developments by the end of 1991. Of the 1,150 vacant units the CHA intended to bring on line, 349 were to be Horner units. The CHA assembled three vacancy reduction crews to accomplish this repair effort. The crews were to be disbursed from development to development until all repairs were completed. At the end of 1991 only 33 Horner units had been brought on line--316 fewer than projected in the 1991 COP.
The CHA submitted its 1992 COP to HUD in October 1991. The CHA planned to restore 1,675 units to occupancy. The 1992 vacancy reduction strategy focused on eight high-rise developments at which the CHA intended to restore 1,500 units. Of these 1,500 units, only 100 were located in the Horner developments. All of the other seven developments had lower vacancy rates than Horner, yet all but one were scheduled to have more units brought on line.
The CHA twice revised its 1992 vacancy reduction strategy. The first revision lowered the number of units to be restored from 1,675 to 914. Under the second revised plan, HUD and the CHA agreed the CHA would reduce vacancies by 1,658 in family and senior developments and by 104 in other developments. Of the 1,658 units, 139 were to be located in the Horner developments.
B. Annual Operating Subsidies
HOP provides annual operating subsidies to all public housing administrations. The amount of HUD's annual subsidy is determined by the difference between the housing authority's projected expenses and projected operating income, which is generated primarily by dwelling rental income. The more rent an authority collects, the greater its operating income and the smaller the amount of subsidy it receives from HUD to cover projected expenses. Unless the housing authority has a COP approved by HUD, the authority must use 97% as its projected occupancy percentage for computing its projected operating income. But with an approved COP, the authority can use as its projected occupancy percentage either its actual occupancy percentage or its yearly authority-wide occupancy goal that HUD approved in the COP, whichever is greater.
By approving the CHA's COPS in 1987-1991, HUD allowed the CHA to compute its projected operating income without using the 97% projected occupancy percentage. Instead, HUD permitted the CHA to use its actual occupancy percentages for computing its projected operating income in 1987 (87%) and 1988 (84%). For 1989, 1990 and 1991, HUD approved the CHA's use of its yearly authority-wide occupancy goals, which were 83%, 83% and 85%, respectively.
HUD rejected the CHA's request for a waiver of the 97% projected occupancy percentage requirement for 1992. In a letter to the CHA, HUD Assistant Secretary Schiff outlined HUD's reasons for the rejection. The letter stated that "operating subsidies should be used to support housing already occupied by low-income families, not to perpetuate long-term vacancies or provide extra subsidies to vacant units undergoing modernization." It also said that by allowing the CHA to include such vacant units in its operating subsidy calculations, HUD had already provided the CHA with an additional $ 33 million in operating subsidies between 1987 and 1991. The letter noted that HUD's previous waivers "have shown to be an ineffective mechanism for stabilizing and reducing vacancy rates."
The CHA appealed Assistant Secretary Schiff's decision, asking defendant Cisneros' predecessor, Jack Kemp, to allow the CHA to use the 84% projected occupancy percentage to calculate the 1992 operating subsidy. Eventually, the CHA and HUD reached an agreement under which the CHA could use an 87% projected occupancy percentage for the purpose of operating subsidy computation. HUD allowed the CHA to reduce the projected occupancy percentage by excluding from the computation three categories of vacant units: (1) those for which the CNA has applied for, but not received, modernization funding and on-schedule modernization units; (2) those that the CHA intended to restore to occupancy during 1992; and (3) those occupied under the CHA's Homeless Initiative Demonstration Program. The downward adjustment of the projected occupancy percentage resulted in an increase in the amount of operating subsidy the CHA would receive.
Under a revised plan submitted to HUD in September 1992, the CHA excluded 1,750 currently vacant units from the 97% projected occupancy percentage. These were units for which the CHA had applied for modernization funding, but which HUD did not have the resources to fund. About 25% of the 1,750 units were located at Horner. As of mid-1992, the CHA had never requested modernization funds from HUD for the Horner developments. Furthermore, as of September 1992 HUD had never approved any modernization funds for Horner. Since that time, however, the CHA has earmarked funds for repair and modernization at the Horner developments.
C. Physical Condition of the Horner Developments
The CHA has stated in its own written materials that "in the opinion of many residents, staff and housing activists," Horner "is the authority's most troubled development . . .," and "one of the most distressed public housing properties in the nation." In January 1991 the conditions at Horner included: non-functioning elevators, darkened hallways, lobbies and stairwells, broken, boarded-up and leaking windows, broken trash chutes and common areas cluttered with refuse, missing exit, stairway and fire escape signs, broken or missing stairwell doors, defective stairwell handrails, treads and landings, presence of human and animal waste in public areas and open, vacant apartments, broken screen doors and windows, numerous vacant units and abandoned laundry rooms with open or missing doors. Many of the enumerated conditions violate the City of Chicago Building Code. In September 1992 these same conditions existed at Horner.
On October 18, 1991 and April 24, 1992, HUD personnel conducted unannounced inspections at two different buildings in the Horner developments. During the inspections, HUD personnel observed, among other things: broken windows, mice and roach infestation, exposed electrical wires, missing hallway doors, two inches of standing water in a basement and elevator code violations. Additionally, the CHA itself inspected 687 occupied units in all 21 buildings in the Horner developments to determine whether the units complied ...