Opinion ID: 3065171
Heading Depth: 3
Heading Rank: 1

Heading: The Federal Assisted Housing Program

Text: The federal government provides rental assistance for low and moderate income families, the elderly, and the disabled through what is known as “the section 8 program.” Congress added the section 8 program to the United States Housing Act of 1937 in 1974 by enacting the Housing and Community Development Act of 1974, Pub. L. No. 93-383, § 201(a), 88 Stat. 633, 662-66 (1974) (codified as amended at 42 U.S.C. § 1437f). The express congressional “purpose” of the section 8 program is “aiding low-income families in obtaining a decent place to live and . . . promoting economically mixed housing.” 42 U.S.C. § 1437f(a). The program is managed federally by HUD, and administered locally by public housing authorities (“PHA”). Section 8 tenants must sign a lease and pay a portion of their income toward rent. The remainder of the rent charge is paid by PHA pursuant to a housing assistance payment (“HAP”) contract between PHA and the owner, which mandates that a lease “shall be for a term of not less than [one] year,” id. § 1437f(o)(7)(A), shall “contain terms and conditions that . . . are consistent with State and local law,” id. § 1437f(o)(7)(B)(ii)(I), and “shall provide that during the term of the lease, the owner shall not terminate the tenancy except for serious or repeated violation of the terms and conditions of the lease, for violation of applicable Federal, State, or local law, or for other good cause,” id. § 1437f(o)(7)(C). There are two relevant variations of assisted housing tenant-based voucher subsidies. Under the standard housing choice voucher program, the voucher is portable. The tenant may choose to live in any property if the landlord agrees to accept the voucher and comply with the applicable regulations. The government subsidy is limited to the difference between the amount the family is required to contribute and BARRIENTOS v. 1801-1825 MORTON LLC 14429 the payment standard established by PHA based on fair market rents for the area. Id. § 1437f(o)(1)(B), (o)(2)(A)-(B). The second program is called the enhanced voucher program, a recent legislative creation aimed at keeping tenants in their homes despite changing market conditions. Beginning in the 1960s, the federal government subsidized and insured mortgage loans for the construction of housing for assisted tenants (“section 236 program”). See Housing and Urban Development Act of 1968, Pub. L. No. 90-448, §§ 201(a), 236(a)-(g), 82 Stat. 476, 498-503 (codified as amended at 12 U.S.C. § 1715z-1 (2000)). Owners of the housing were allowed to prepay their loans after twenty years, at which time they could exit the assisted housing program. 24 C.F.R. § 221.524(a)(ii) (1970). In the 1980s, Congress became concerned that a large proportion of assisted housing would disappear from the market when owners prepaid their section 236 loans. To prevent massive relocation and an inadequate supply of assisted housing, Congress passed a number of laws aimed at restricting the prepayment option. See Low Income Housing Preservation and Resident Homeownership Act of 1990, Pub. L. No. 101-625, § 601(a), 104 Stat. 4079, 4249 (1990); Emergency Low Income Housing Preservation Act of 1987, Pub. L. No. 100-242, Title II, 101 Stat. 1815, 1877-91 (1988). In 1999, however, Congress decided to take a different approach. It allowed landlords to prepay their mortgages but increased the available subsidy to fair market value so as to allow the subsidized tenants to remain in the same apartment after prepayment. See Pub. L. No. 106-74, § 538, 113 Stat. 1047, 1122-24 (1999) (currently codified as amended at § 1437f(t)).1 Thus, the enhanced voucher authority provides that “the assisted family may elect to remain in the same project in which the family was residing on the date” the loan was 1 Relevant amendments were enacted by the Military Construction Appropriations Act of 2001, Pub. L. No. 106-246, § 2801, 114 Stat. 511, 569 (2000), to clarify specifically that “the assisted family may elect to remain in the same project” to receive increased government assistance. 14430 BARRIENTOS v. 1801-1825 MORTON LLC prepaid, and that the government will pay the difference between “rent for the dwelling unit” and the tenant’s required contribution “during any period the family makes such an election and continues to so reside” even as “rent may be increased from time-to-time.” 42 U.S.C. § 1437f(t)(1)(B). As evidenced by the congressional statement of purpose, Congress and HUD have been perennially concerned about making assisted housing available and affordable, and a key means to that end is the creation of incentives for private owners to participate in the section 8 program. In legislation enacted in 1974, Congress protected tenants from arbitrary eviction by giving the local PHA the “sole right to give notice to vacate” and to evict the tenant. Housing and Community Development Act of 1974, Pub. L. No. 93-383, § 201(a), 88 Stat. 633, 664 (1974); see also Swann v. Gastonia Hous. Auth., 675 F.2d 1342, 1345 n.2 (4th Cir. 1982). In response to owner complaints about this additional burden, HUD proposed in 1978 that Congress harmonize the private and assisted markets by eliminating PHA approval where “State or local law governing evictions affords adequate tenant protection.” Hearings Before the Subcomm. on Hous. & Cmty. Dev. of the Comm. on Banking, Fin. & Urban Affairs, 95th Cong. 66-67 (1978) (statement of Patricia Harris, HUD Sec’y). Congress refused, noting that “adoption of the proposal would leave section 8 tenants to rely on state and municipal laws for protection, and the committee does not feel that HUD has provided ample information on the extent to which this protection would be sufficient.” S. Rep. No. 95871, at 15 (1978), reprinted in 1978 U.S.C.C.A.N. 4773, 4788. To ameliorate the burden on owners within the bounds of existing law, HUD issued a proposed regulation that required PHA to proceed with issuance of the eviction notice in accordance with State and local law as long as grounds to do so existed. 45 Fed. Reg. 72,697, 72,697-99 (Nov. 30, 1980). In 1981, HUD again proposed that Congress remove the PHA approval requirement and legislate that state and local BARRIENTOS v. 1801-1825 MORTON LLC 14431 law govern assisted tenants’ procedural and substantive rights. Hearings Before the Subcomm. on Hous. & Cmty. Dev. of the Comm. on Banking, Fin. & Urban Affairs, 97th Cong. 459 (1981). While the Senate agreed to eliminate the PHA requirement and make “procedural and substantive rights of the assisted tenant[s] . . . the same as those applicable to nonsubsidized tenants” in order to “encourage more owners to participate,” S. Rep. No. 97-139 (1981), reprinted in 1981 U.S.C.C.A.N. 396, 552, the House—apparently unsure that state and local law would provide sufficient protection—did not. Congress reached a compromise later that year by eliminating the PHA approval requirement but explicitly amending the Senate’s version to add that “the owner shall not terminate the tenancy except for serious or repeated violation of the terms and conditions of the lease, applicable State, local or Federal law, or for other good cause.” H.R. Rep. No. 97-208, at 694-95 (1981) (Conf. Rep.), reprinted in 1981 U.S.C.C.A.N. 1010, 1053 (codified as amended at 42 U.S.C. § 1437f(d)(1)(B)(ii)). This new condition barring owners from evicting a tenant mid-lease or from refusing to renew a lease without cause became known as the “endless lease” requirement. HUD issued an interim implementing rule in 1982, withdrawing its earlier regulation permitting termination on thirty days’ notice, and specifying that good cause was needed to terminate a tenancy mid-lease or to refuse to renew. 47 Fed. Reg. 33,497, 33,498 (Aug. 3, 1982). It excused the owner from the “good cause” requirement if it wished to withdraw a unit from the section 8 program at the end of the lease term. Id. at 33,499. Finally, it expressly refused to define “good cause,” providing that “[a]pplication of the statutory standards to particular cases should be determined by the courts” on a case-by-case basis. Id. HUD’s final rule, issued in 1984, continued to require “good cause” for all mid-lease terminations and nonrenewals. 49 Fed. Reg. 12,215, 12,231 (March 29, 1984). In addressing 14432 BARRIENTOS v. 1801-1825 MORTON LLC owners’ comments about the creation of a “ ‘perpetual tenancy’ terminable only for cause,” HUD noted that it “shares the concern that [the new requirement] could reduce the desire of private landlords to offer units for rental under the program,” but that “the program options open to [HUD] must accord with the 1981 statutory prohibition of a termination of tenancy in section 8 existing housing other than for statutory good cause grounds.” Id. It further indicated its desire to keep “[t]enancy requirements . . . as simple as possible, with minimal demands on the owner beyond the normal requirements of an unsubsidized tenancy.” Id. at 12,233. Finally, it indicated “that a comp[re]hensive regulatory definition of good cause . . . is neither possible nor desirable,” and, therefore, “[t]he good cause category should remain open to case by case determination by the courts.” Id. However, for the first time, HUD chose to provide “examples of ‘other good cause,’ ” including among them “a business or economic reason for termination of the tenancy (such as . . . desire to rent the unit at a higher rental).” Id. at 12,233-34. This definition is currently codified at 24 C.F.R. § 982.310(d)(1)(iv), the federal regulation before us. In 1994, the National Apartment Association commissioned a report by Abt Associates on assisted housing (“Abt Report”). It recommended “making the Section 8 process as similar to regular market operations as possible” by eliminating the “good cause” requirement for nonrenewal and retaining protections provided to all renters in the local jurisdiction. Thereafter, landlord groups pushed for the adoption of the Abt Report’s recommendations, including the elimination of the “endless lease” provision, claiming that “[s]ection 8 families should get all the protections that their nonsubsidized friends and neighbors receive but no greater protections.” Hearing on H.R. 2406 Before Subcomm. on Hous. & Cmty. Opportunity of Comm. on Banking, Fin. & Urban Affairs, 1995 WL 602577 (Oct. 13, 1995) (testimony of Christina L. Garcia, Vice President of Wildwood Mgmt. Group, Inc.). BARRIENTOS v. 1801-1825 MORTON LLC 14433 HUD’s 1995 final rule provides that the “good cause” requirement applies “during the term of the assisted lease,” but not “after a termination of the assisted lease,” 60 Fed. Reg. 34,660, 34,673 (July 30, 1995), and emphasizes that its regulation strikes a “reasonable balance between the interest of the assisted tenant and the owner” because “the lease protects the tenant against arbitrary and ungrounded termination by the owner,” while “the owner is not locked in, but may terminate the tenant for lease violation or other good cause,” including a “business or economic reason,” id. at 34,674. In 1996, Congress repealed the “endless lease” provision by eliminating the “good cause” requirement for nonrenewal, though it retained the requirement for termination of a tenancy during the term of the lease. Pub. L. No. 104-134, § 203(c)(2), 110 Stat. 1321, 1321-281 (1996). In 1998, Congress made the 1996 changes permanent. Pub. L. No. 105276, §§ 545, 549(a), 112 Stat. 2461, 2596-604, 2607-09 (1998). The current governing statute provides that “during the term of the lease, the owner shall not terminate the tenancy except for serious or repeated violation of the terms and conditions of the lease, for violation of applicable Federal, State, or local law, or for other good cause.” 42 U.S.C. § 1437f(o)(7)(C). In 1999, HUD issued final implementing regulations, leaving its definition of “good cause” unchanged. 64 Fed. Reg. 56,894 (Oct. 21, 1999). Thus, the relevant HUD regulation currently provides that “ ‘[o]ther good cause’ . . . may include, but is not limited to . . . [a] business or economic reason for termination of the tenancy (such as sale of the property, renovation of the unit, or desire to lease the unit at a higher rental).” 24 C.F.R. § 982.310(d)(1)(iv). The regulations also provide that “[d]uring the initial lease term, the owner may not terminate the tenancy for ‘other good cause,’ . . . based on . . . a business or economic reason,” id. § 982.310(d)(2), and that the initial lease term must be at least one year, id. § 982.309(a)(1). 14434 BARRIENTOS v. 1801-1825 MORTON LLC