[665 NE2d 1059, 643 NYS2d 19]

#### In the Matter of Mary Richardson, Appellant, v Commissioner of New York City Department of Social Services et al., Respondents.

Argued March 27, 1996;

decided April 25, 1996

*36POINTS OF COUNSEL

*April A. Newbauer*and *Collin D. Bull,*New York City, for appellant.

I. Respondents’ denial of an emergency grant to prevent the eviction of appellant’s family was arbitrary, capricious and contrary to law. *(Matter of Kelly v Bane,*192 AD2d 236; *Anderson v Regan,*53 NY2d 356; *People v Craig,*78 NY2d 616; *Price v Price,*69 NY2d 8; *Matter of Evans v Newman,*71 AD2d 240, 49 NY2d 904; *Matter of New York Life Ins. Co. v State Tax Commn.,*80 AD2d 675, 55 NY2d 758; *Townsend v Swank,*404 US 282; *Carleson v Remillard,*406 US 598; *King v Smith,*392 US 309; *Matter of Bryant v Lavine,*49 AD2d 673.) II. Respondents’ policy and practice of conditioning eligibility for an Emergency Home Relief grant on an unpublished rule of future financial ability violates the State Administrative Procedure Act. *(People v Cull,*10 NY2d 123; *Matter of Krauskopf v Perales,*139 AD2d 147, 74 NY2d 730; *Two Assocs. v Brown,*127 AD2d 173; *Matter of MFY Legal Servs. v Dudley,*67 NY2d 706; *Matter of Biondo v New York State Bd. of Parole,*60 NY2d 832.) III. The State respondent’s decision denying petitioner an emergency rent arrears grant is not supported by substantial evidence. *(Matter of Dreher v Smith,*65 AD2d 572.)

*Dennis C. Vacco, Attorney-General,*New York City *(Robert F. Bacigalupi, Victoria A. Graffeo*and *Ronald P. Younkins*of counsel), for Commissioner of New York State Department of Social Services, respondent.

I. The State Commissioner’s assessment of petitioner’s ability to repay the grant is consistent with Social Services Law § 131-w and 18 NYCRR 370.3 (b). *(Childs v Bane,*194 AD2d 221, 83 NY2d 760; *Matter of Howard v Wyman,*28 NY2d 434; *Matter of Bates v Toia,*45 NY2d 460; *Matter of Bernstein v Toia,*43 NY2d 437; *Matter of Allstate Ins. Co. v Libow,*106 AD2d 110, 65 NY2d 807; *City of New York v Blum,*121 Misc 2d 982; *Hope v Perales,*83 NY2d 563.) II. The Court below correctly held that the State Commissioner’s decision was based on substantial evidence. *(Matter of Baumes v Lavine,*38 NY2d 296; *Matter of Ayanfodun v Sobol,*207 AD2d 304.) III. The State Commissioner’s assessment of petitioner’s ability to meet the repayment agreement does not *37violate the State Administrative Procedure Act. *(Matter of Krauskopf v Perales,*139 AD2d 147, 74 NY2d 730; *Matter of Cordero v Corbisiero,*80 NY2d 771; *Matter of Bernstein v Toia,*43 NY2d 437; *Matter of Bates v Toia,*45 NY2d 460.)

*Paul A. Crotty, Corporation Counsel*of New York City *(John Hogrogian*and *Pamela Seider Dolgow*of counsel), for Commissioner of New York City Department of Social Services, respondent.

I. The Court below correctly confirmed the holding of the State Department of Social Services that the City Department of Social Services had correctly denied petitioner’s application for an Emergency Home Relief grant to pay her rent arrearages. Ability to repay such a grant is an eligibility requirement for such assistance. Furthermore, the determination of the State Department of Social Services was based on substantial evidence. *(Rent Stabilization Assn. v Higgins,*83 NY2d 156; *Matter of Versailles Realty Co. v New York State Div. of Hous. & Community Renewal,*76 NY2d 325; *Childs v Bane,*194 AD2d 221, 83 NY2d 760; *Matter of Kelly v Bane,*192 AD2d 236; *Matter of Fineway Supermarkets v State Liq. Auth,*48 NY2d 464; *Lovelace v Gross,*80 NY2d 419; *Matter of Bernstein v Toia,*43 NY2d 437; *Hope v Perales,*83 NY2d 563; *300 Gramatan Ave. Assocs. v State Div. of Human Rights,*45 NY2d 176; *Matter of Collins v Codd,*38 NY2d 269.) II. The Court below correctly confirmed the holding of the State Department of Social Services that the City Department of Social Services had correctly denied petitioner’s application for an emergency assistance to families grant to pay her rent arrearages. The determination of the State Department of Social Services was based on substantial evidence. *(Matter of Baumes v Lavine,*38 NY2d 304; *Matter of Ayanfodun v Sobol,*207 AD2d 304.)

*John C. Gray, Jr.,*Brooklyn, and *Marc Cohan*for Brooklyn Legal Services Corporation B, *amicus curiae.*

I. Respondents’ interpretation of 18 NYCRR 370.3 (b) (5) is not supported by the language of the regulation or the statute. *(Matter of Kelly v Bane,*192 AD2d 236; *Matter of Robinson v Perales,*166 AD2d 594; *Matter of Bryant v Lavine,*49 AD2d 673; *Matter of Bevins v Perales,*141 AD2d 955; *Matter of Speed v Blum,*97 Misc 2d 163; *Stone v Agricultural Ins. Co.,*76 Misc 2d 1021; *Fuller v Nassau County Dept. of Social Servs.,*77 Misc 2d 677; *Tucker v Toia,*43 NY2d 1; *McCain v Koch,*117 AD2d 198.) II. The State respondent violated the State Administrative Procedure Act by adding an eligibility rule not contained in the statute or the *38regulation. *(Matter of Robinson v Perales,*166 AD2d 594; *Two Assocs. v Brown,*127 AD2d 173; *Matter of Sunrise Manor Nursing Home v Axelrod,*135 AD2d 293.)

OPINION OF THE COURT

Levine, J.

In March 1993 petitioner applied to respondent New York City Department of Social Services for emergency assistance for the payment of rent arrears under the Emergency Assistance to Families with Children (EAF) *(see,*Social Services Law § 350-j) and Emergency Home Relief (EHR) *(see,*Social Services Law § 131-w) programs. She and her minor child occupied a two-bedroom apartment in New York City at a monthly rental of $380. For a period ending June 1992, she had been receiving public assistance which included a shelter allowance of $250 a month paid directly to her landlord. The landlord obtained judgments for rent arrears in November 1992 and April 1993 aggregating over $5,000. Although petitioner had obtained employment by the time the judgments were entered, she was able only partly to satisfy, and eviction was imminent.

Respondent New York City Department of Social Services nonetheless denied her application for assistance and she applied for and was granted an emergency fair hearing by the State Department of Social Services. Upon completion of the fair hearing, respondent State Commissioner of Social Services upheld the denial of EAF and EHR benefits. The basis for approving the denial of EHR assistance was petitioner’s admitted financial inability to repay the grant of the assistance she needed to pay all rent arrears owing on the judgments within 12 months. Petitioner then brought this CPLR article 78 proceeding in which, in her amended petition, she challenged only the determination regarding the denial of EHR assistance. Upon transfer from Supreme Court, the Appellate Division denied the amended petition and dismissed the proceeding (215 AD2d 211). We granted petitioner leave to appeal and now reverse, annul the determination and remit the matter for a redetermination.

Respondents seek to justify the denial of EHR assistance to petitioner, based upon her inability to repay the grant within 12 months, as a reasonable interpretation of the governing statute and implementing regulation. Social Services Law § 131-w authorizes the payment of rent and other shelter arrears to persons not eligible for other forms of assistance:

> *39"who are without income or resources immediately available to meet the emergency need, whose gross household income does not exceed one hundred twenty-five percent of the federal income official poverty line and who sign a repayment agreement agreeing to repay the assistance in a period *not to exceed 12*months” (emphasis supplied).

The section directs the State Department of Social Services to promulgate implementing regulations to "establish standards for the contents of repayment agreements and * * * to ensure that assistance is provided only in emergency circumstances”.

The regulations adopted by the State Department of Social Services (18 NYCRR 370.3 [b]) condition entitlement to shelter arrears assistance on the applicant’s demonstrating an ability to pay prospective shelter expenses, and not owing any past due amounts under any previous repayment agreement (18 NYCRR 370.3 [b] [5]). Regarding the content of repayment agreements, the regulation requires that such agreements "set forth a schedule of payments that will *assure repayment within the 12-month*period” *(id.*[emphasis supplied]).

Concededly, neither the EHR statute nor its implementing regulation expressly authorizes a welfare agency to condition eligibility for assistance on the applicant’s demonstration of an ability to repay the grant within 12 months. Furthermore, in the instant case, the State Commissioner’s argument is unavailing that imposing that eligibility standard here was a reasonable interpretation of the State agency’s own regulation, entitled to judicial deference. For, in the notice and comment period while adoption of the regulation was pending, State Department of Social Services expressly interpreted 18 NYCRR 370.3 (b) (5) to impose "no requirement * * * that a social services district consider an applicant’s ability to repay a grant to be used for rent arrears before making the grant”. In the State Commissioner’s fair hearing ruling on petitioner’s application, no explanation was advanced for this departure from the initial interpretation of the regulation, nor was any such explanation offered in respondent Commissioner’s answer or other papers in opposition to the petition.

Absent a reasoned explanation for abandonment of the State Social Services Department’s expressed original reading of the regulation at the time of promulgation and adoption here of a diametrically opposite interpretation, the agency’s change of position was arbitrary and capricious and cannot stand.

> *40"From the policy considerations embodied in administrative law, it follows that when an agency determines to alter its prior stated course it must set forth its reasons for doing so. Unless such an explanation is furnished, a reviewing court will be unable to determine whether the agency has changed its prior interpretation of the law for valid reasons, or has simply overlooked or ignored its prior decision * * *. Absent such an explanation, failure to conform to agency precedent will, therefore, require reversal on the law as arbitrary” *(Matter of Field Delivery Serv. v Roberts,*66 NY2d 516, 520).

The United States Supreme Court similarly held in *Gardebring v Jenkins*(485 US 415, 430) that an administrative agency’s interpretation of its own regulation is not to be followed if an "alternative reading is compelled by the regulation’s plain language or *by other indications of the Secretary’s intent at the time of the regulation’s promulgation”*(emphasis supplied).

For all the foregoing reasons, the order of the Appellate Division should be reversed, with costs, and the matter remitted to Supreme Court, New York County, with directions to remand to the State Department of Social Services for further proceedings in accordance with this opinion.

Chief Judge Kaye and Judges Simons, Titone, Bellacosa, Smith and Ciparick concur.

Order reversed, with costs, and matter remitted to Supreme Court, New York County, with directions to remand to the State Department of Social Services for further proceedings in accordance with the opinion herein.