Source: https://supreme.justia.com/cases/federal/us/508/10/
Timestamp: 2019-04-24 08:39:36+00:00

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The so-called Section 8 housing program under the United States Housing Act of 1937 (Housing Act) authorizes private landlords who rent to lowincome tenants to receive "assistance payments" from the Department of Housing and Urban Development (HUD) in an amount calculated to make up the difference between the tenants' rent payments and a "contract rent" agreed upon by the landlords and Hun Section 1.9b of the latter parties' "assistance contracts" provides that contract rents are to be adjusted annually by applying the latest automatic adjustment factors developed by HUD on the basis of particular formulas, while § 1.9d specifies that, "[n]otwithstanding any other provisions of this Contract, adjustments as provided in this Section shall not result in material differences between the rents charged for assisted and comparable unassisted units, as determined by the Government .... " In the early 1980's, HUD began to conduct independent "comparability studies" in certain real estate markets where it believed that contract rents, adjusted upward by the automatic adjustment factors, were materially higher than prevailing market rates for comparable housing, and to use the private market rents as an independent cap limiting assistance payments. In this litigation, respondent Section 8 landlords allege that § 801 of the Department of Housing and Urban Development Reform Act of 1989 (Reform Act)-which, inter alia, authorizes HUD to limit future automatic rent adjustments through the use of comparability studies-violates the Due Process Clause of the Fifth Amendment by stripping them of their vested rights under the assistance contracts to annual rent increases based on the automatic adjustment factors alone. In separate lawsuits, the District Courts each granted summary judgment for respondents. The Court of Appeals affirmed the judgments in a consolidated appeal.
language clearly mandates that contract rents "shall not" be adjusted so as to exceed materially the rents charged for "comparable unassisted units" on the private rental market, "[n]otwithstanding" that § 1.9b might seem to require such a result. This limitation is consistent with the Housing Act itself, 42 U. S. C. § 1437f(c)(2)(C). Moreover, it is clear that § 1.9d-which by its own terms clearly envisions some comparison of assisted and unassisted rents-affords HUD sufficient discretion to design and implement comparability studies as a reasonable means of effectuating its mandate, since the section expressly assigns to "the Government" the determination of whether material rent differences exist. Respondents' contention that HUD's comparability studies have been poorly conceived and executed, resulting in faulty and misleading comparisons, is irrelevant to the question whether HUD had contractual authority to employ such studies at all. If respondents have been denied formula-based rent increases based on shoddy comparisons, their remedy is to challenge the particular study, not to deny HUD's authority to make comparisons. Pp. 17-21.
Michael R. Dreeben argued the cause for petitioners.
With him on the briefs were Solicitor General Starr, Acting Solicitor General Wallace, Assistant Attorney General Gerson, Deputy Solicitor General Roberts, Douglas Letter, Howard M. Schmeltzer, and Barton Shapiro.
Warren J. Daheim argued the cause for respondents.
* Robert M. Weinberg and Laurence Gold filed a brief for the American Federation of Labor and Congress of Industrial Organizations as amicus curiae urging reversal.
Briefs of amici curiae urging affirmance were filed for Charter Federal Savings Bank by Thomas M. Buchanan; for the National Association of Home Builders et al. by Ronda L. Daniels; for Southwind Acres Associates et al. by Larry Derryberry; and for Statesman Savings Holding Corp. et al. by Charles J. Cooper, Robert J. Cynkar, and Michael A. Carvin.
The question presented in this case is whether § 801 of the Department of Housing and Urban Development Reform Act of 1989, 103 Stat. 2057, violates the Due Process Clause of the Fifth Amendment by abrogating respondents' contract rights to certain rental subsidies.
In 1974, Congress amended the United States Housing Act of 1937 (Housing Act) to create what is known as the Section 8 housing program. Through the Section 8 program, Congress hoped to "ai[d] low-income families in obtaining a decent place to live," 42 U. S. C. § 1437f(a) (1988 ed., Supp. III), by subsidizing private landlords who would rent to lowincome tenants. Under the program, tenants make rental payments based on their income and ability to pay; the Department of Housing and Urban Development (HUD) then makes "assistance payments" to the private landlords in an amount calculated to make up the difference between the tenant's contribution and a "contract rent" agreed upon by the landlord and HUD. As required by the statute, this contract rent is, in turn, to be based upon "the fair market rental" value of the dwelling, allowing for some modest increase over market rates to account for the additional expense of participating in the Section 8 program. See § 1437f(c)(1).
units or, if the Secretary determines, on the basis of a reasonable formula.
"(C) Adjustments in the maximum rents as hereinbefore provided shall not result in material differences between the rents charged for assisted and comparable unassisted units, as determined by the Secretary." 42 U. S. C. §§ 1437f(c)(2)(A) and (C) (1982 ed.).
"(2) On each anniversary date of the Contract, the Contract Rents shall be adjusted by applying the applicable Automatic Annual Adjustment Factor most recently published by the Government. Contract Rents may be adjusted upward or downward, as may be appropriate; however, in no case shall the adjusted Contract Rents be less than the Contract Rents on the effective date of the Contract." App. to Brief for Petitioners 8a.
trends recorded by the Consumer Price Index and the Bureau of the Census American Housing Surveys.
"d. Overall Limitation. Notwithstanding any other provisions of this Contract, adjustments as provided in this Section shall not result in material differences between the rents charged for assisted and comparable unassisted units, as determined by the Government; provided that this limitation shall not be construed to prohibit differences in rents between assisted and comparable unassisted units to the extent that such differences may have existed with respect to the initial Contract Rents." App. to Brief for Petitioners 8a-9a.
In the early 1980's, HUD began to suspect that the assistance payments it was making to some landlords under the Section 8 program were well above prevailing market rates for comparable housing. Accordingly, the agency began to conduct independent "comparability studies" in certain real estate markets where it believed that contract rents, adjusted upward by the automatic adjustment factors, were materially out of line with market rents. Under these studies, HUD personnel would select between three and five other apartment buildings they considered comparable to the Section 8 building and compare their rents. The private market rents would then serve as an independent cap limiting the rent payments HUD would make under the Section 8 contracts.
Appeals reasoned that HUD, having contracted to increase rents automatically each year based upon a reasonable formula (the second of the two alternative approaches permitted by §8(c)(2)(A) of the Housing Act, see supra, at 12-13), could not thereafter limit those increases by means of a market survey (the first of the two statutory alternatives). "Having made its choice," the court wrote, "HUD cannot now change its mind." 848 F. 2d, at 991.
the assistance contracts to annual rent increases based on the automatic adjustment factors alone. In separate lawsuits, the United States District Courts for the Western District of Washington and the Central District of California each granted summary judgment for respondents. The Court of Appeals for the Ninth Circuit, in a consolidated appeal, affirmed both judgments. Alpine Ridge Group v. Kemp, 955 F.2d 1382 (1992). Refusing to reconsider its earlier holding in Rainier View, supra, the court first reaffirmed that the assistance contracts prohibited HUD from capping rents based on independent comparability studies. See 955 F. 2d, at 1384-1385. The court then held that Congress' attempt to authorize such caps through the Reform Act unconstitutionally deprived respondents of their "vested property interest in formula-based rent adjustments pursuant to their section 8 contracts." Id., at 1387.
We granted certiorari, 506 U. S. 984 (1992), and now reverse.
We begin our analysis of respondents' due process claim with the assistance contracts. Because we find that those contracts do not prohibit the use of comparability studies to impose an independent cap on the formula-based rent adjustments, our analysis ends there as well.
that the reduced maximum monthly rents were in effect." 42 U. S. C. § 1437f(c)(2)(C) (1988 ed., Supp. III). HUD has now published proposed regulations governing the future use of comparability studies, as required by this provision. See 57 Fed. Reg. 49120 (1992).
require such a result. This limitation is plainly consistent with the Housing Act itself, which provides that "[aJdjustments in the maximum rents," whether based on market surveys or on a reasonable formula, "shall not result in material differences" between Section 8 rents and the rents for comparable housing on the private market. 42 U. S. C. § 1437f(c)(2)(C) (1988 ed., Supp. III).
In its Rainier View decision, the Court of Appeals read § 1.9d's "overall limitation" as empowering HUD only to make prospective changes in the automatic adjustment factors where it discovered that those factors were producing materially inflated rents; under the court's view, § 1.9d would not permit "abandonment of the formula method whenever application of the formula would result in a disparity between section 8 and other rents." 848 F. 2d, at 991. But this reading of the contract-under which Section 8 project owners could demand payment of materially inflated rents until the Secretary could publish revised automatic adjustment factors aimed at curing the overpayment-is almost precisely backwards. It would entitle project owners to collect the formula-based adjustments promised by § 1.9b notwithstanding that those adjustments were resulting in the sort of material differences in rents prohibited by § 1.9d.
2 The Rainier View court also suggested that HUD's own regulations had interpreted the assistance contracts as barring adjustments to contract rents independent of the published factors. The court quoted 24 CFR § 888.204 (1987), which states that the agency" 'will consider establishing separate or revised Automatic Annual Adjustment Factors for [a] particular area' " if project owners can demonstrate that application of the formula would result in Section 8 rents substantially below market rents for comparable units. See 848 F. 2d, at 991. Although this regulation is certainly consistent with respondents' view of the contracts, we do not believe that it is inconsistent with our understanding of the contracts' plain language: The regulation acknowledges revision of the adjustment factors as a means of remedying material differences in rents but it does not foreclose corrective adjustments independent of the factors.
In sum, we think that the contract language is plain that no project owner may claim entitlement to formula-based rent adjustments that materially exceed market rents for comparable units. We also think it clear that § 1.9d-which by its own terms clearly envisions some comparison "between the rents charged for assisted and comparable unassisted units"-affords the Secretary sufficient discretion to design and implement comparability studies as a reasonable means of effectuating its mandate. In this regard, we observe that § 1.9d expressly assigns to "the Government" the determination of whether there exist material differences between the rents charged for assisted and comparable unassisted units. Because we find that respondents have no contract right to unobstructed formula-based rent adjustments, we have no occasion to consider whether § 801 of the Reform Act unconstitutionally abrogated such a right.
3 Petitioners acknowledge that "[a] comparability study must ... satisfy requirements of administrative reasonableness and 'is reviewable under administrative law principles.''' Reply Brief for Petitioners 16, n. 23 (quoting Sheridan Square Partnership v. United States, 761 F. Supp. 738, 745, n. 3 (Colo. 1991)).
Alpine Ridge Group et al.

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