Court Opinion

ID: 9457233
Source: CourtListenerOpinion
Date Created: 2023-08-04 20:16:45.446944+00
Date Added: 2024-06-11T17:35:16.586736
License: Public Domain

OAKES, Circuit Judge
(dissenting):
I respectfully dissent. The majority opinion very persuasively disposes of the issues of district court and appellate jurisdiction, statutory rights to a hearing and indeed of judicial review. I disagree only with that portion of the opinion which denies the tenants in an FHA assisted (by mortgage insurance for long-term low-interest mortgages) housing project a fair administrative hearing, as a matter of due process of law.1 To my mind, a tenant in a project financed with the use of public funds at subsidized interest rates should stand in no worse shoes than the tenants in, say, city housing authority projects. Escalera v. New York City Housing Authority, 425 F.2d 853 (2d Cir.), cert. denied, 400 U.S. 853, 91 S.Ct. 54, 27 L.Éd.2d 91 (1970). The distinction advanced by the majority, that here the Government did not itself increase the rents but simply allowed the landlord to institute an increase, is to me a distinction without a difference. Cf. Evans v. Newton, 382 U.S. 296, 86 S.Ct. 486, 15 L.Ed.2d 373 (1965) (private park with municipal purpose subject to equal protection clause); Public Utilities Comm’n of District of Columbia v. Pollak, 343 U.S. 451, 462, 72 S.Ct. 813, 96 L.Ed. 1068 (1952) (regulation of District of Columbia bus company by Congressional agency subjects company’s *305radio broadcasting service Amendment). to Fifth
Another distinction, equally without substance, is that the Escalera, case involved a state public housing project, while this is federal. See Public Utilities Comm’n of District of Columbia v. Poliak, supra. Similarly, eviction because of inability to pay higher rent here is no different from eviction for having a dog in violation of project rules in Escalera ; one supporting affidavit submitted below was from a former tenant who had to move because of a 10 per cent rent increase. Appellant’s App. pp. 27-28. Nor is there any substantial difference here from Escalera on the basis that some of the tenants here are those who have incomes too high for public low-rent housing, in view of the Congress’s concern for “the realization as soon as feasible of the goal of a decent home and a suitable living environment for every American family,” Housing Act of 1949 § 2, 42 U.S.C. § 1441 (1964), reaffirmed by the Housing and Urban Development Act of 1968 § 2, 12 U.S.C. § 1701t.2
The FHA regulations give the FHA supervisory powers during the life of an insured mortgage through a regulatory agreement or otherwise. 24 C.F.R. § 221.529. Specifically as to rents the regulations require consideration to “the following and similar factors”:'
(1) Rental income necessary to maintain the economic soundness of the project;
(2) Rental income necessary to provide a reasonable return on the investment consistent with providing reasonable rentals to tenants. 24 C.F.R. 221.531(c) (emphasis supplied).
The FHA insuring manual, by which the agency’s own procedures for processing a landlord’s application for a rental increase are to be governed, calls for “shelter rents * * * at levels that will provide reasonable charges to tenants and a fair return to the mortgagor, and proper maintenance of equipment and services to be provided by the landlord” (emphasis supplied). Project Mortgage Servicing, Part C, §§ 64205.2 and 64205.2 (c). The basic regulatory agreement between the landlord and the FHA calls for rent control by the FHA. Provision 4, FHA Form No. 1730 (Rev. Oct. 1969).3
*306Decent housing in the United States is, to the extent that due process may be required, just as basic and integral a part of life and liberty as opportunities for employment, Greene v. McElroy, 360 U.S. 474, 79 S.Ct. 1400, 3 L.Ed.2d 1377 (1959), for education, Slochower v. Board of Higher Education, 350 U.S. 551, 76 S.Ct. 637, 100 L.Ed. 692 (1956), or for welfare benefits, Goldberg v. Kelly, 397 U.S. 254, 90 S.Ct. 1011, 25 L.Ed.2d 287 (1970). While the urgency of the national housing crisis is known by all and denied by none, the relation between shelter, poverty, urban problems and hence life and liberty is very clear. See, e. g., Legislative History, Housing and Urban Development Act of 1970 (P.L. 91-609), 3 U.S.C.Cong. & Adm. News 5582 (1970). Accordingly I believe that the tenants at Chenango Court ought at least to be afforded the minimum procedural fairness afforded by notice of the proposed rent increase and a meaningful hearing at which they would have an opportunity to present their complaints, if any, of the unreasonableness of the proposed rents,4 any failure of the landlord to maintain equipment and services required of him 5 under the basic lease and Regulatory Agreement, as well as to confront and cross-examine witnesses substantiating the landlord’s financial case for a rent increase.6 See Goldberg v. Kelly, supra,. This is not to propose any inflexible full-scale hearing in the form of a judicial or quasi-judicial trial. Cafeteria & Restaurant Workers Union Local 473, A.F.L.-C.I.O. v. Mc-Elroy, 367 U.S. 886, 895, 81 S.Ct. 1743, 6 L.Ed.2d 1230 (1961). Rather, once the principle of affording minimal due process is established, sufficient safeguards to permit full administrative review are not that difficult to establish. Ratepayers to a public utility are entitled to question the individual financial situation of the business regulated, as well as to make proof of inadequate service provided. Petition of New England Tel. & Tel. Co., 115 Vt. 494, 66 A.2d 135 (1949),7 just as the utility itself is permitted to contest regulatory action, as a matter of due process of law. Ohio Bell Tel. Co. v. Public Utilities Comm’n, 301 U.S. 292, 304, 57 S.Ct. 724, 81 L.Ed. 1093 (1937). See Jordan v. American Eagle Fire Ins. Co., 83 U.S.App.D.C. 192, 169 F.2d 281, 287-289 (1948).
Like the tenants here, to paraphrase the majority opinion, to utility rate payers it makes no difference whether the Government itself increases the rates or permits the utility to increase them. Arguments as to landlord financial problems and agency administrative inconvenience seem to me beside the point. “There can be no compromise on the footing of convenience or expediency, or because of a natural desire to be rid of harassing delay, when that minimal requirement [of the right to a hearing as a rudiment of ‘fair play’] has been neglected or ignored.” Ohio Bell Tel. Co. v. Public Utilities Comm’n, supra, 301 U.S. at 305, 57 S.Ct. at 731.
*307Moreover, without a hearing at which the tenants might question the landlord’s case, it is difficult to see how the FHA may make an informed decision. This the majority opinion points out in conceding unhappiness at the “brushoff” claimed by the plaintiffs here. It suggests a procedure both “to aid the FHA” and also to make a decision to grant a rent increase “more acceptable” to the tenants. Such a procedure, I think, is required by constitutional law 8 once the status of a tenant in an FHA assisted project is examined closely. I do not believe that Escalera v. New York City Housing Authority, supra, should so lightly be distinguished away. Hahn v. Gottlieb, 430 F.2d 1243 (1st Cir. 1970), is different from this case to the extent that there tenants were permitted to present to the FHA evidence on construction defects and the reasonableness of the landlord’s rate of return, 430 F.2d at 1245; the “legislative”-“ad judicative” reasoning of Hahn, 430 F.2d at 1248, is rightly discarded by the majority here. I would decline to follow it and would follow Escalera and accordingly reverse and remand.

. “Limited distribution” project sponsors also receive governmental assistance by tax advantages. Internal Revenue Code of 1954 §§ 167(b), 167(c), 1231, 1250.

. In connection with the § 221(d) (3) [12 U.S.C. § 17152(d) (3)] program here involved, the Senate Committee on Banking and Currency had the following to say:
For families with incomes that do not permit home-ownership at current construction costs and at market interest rates, but who have incomes too high for public low-rent housing, this section of the bill would also establish a new program of FHA-insured, long-term, low-interest-rate mortgage loans for moderate-rental housing. Existing institutions available to help achieve the national housing policy of “a decent home and suitable living environment for every American family * * * ” are inadequate. It is evident that families of low- and moderate-income cannot be housed decently, within the foreseeable future, unless new programs for this purpose are fostered by the Federal Government, or by State and local governments, or by all levels of government. S.Rep. No. 281, 87th Cong., 1st Sess. (1961).

. “4. The Owners covenant and agree that:
(f) The rent charged for each unit shall not exceed the upper limit of the range shown for such type of unit on the rental schedule approved in writing by the Commissioner, and shall include the reasonable use of all utilities shown on said schedule, but in no event shall the total gross monthly rents for all dwelling units exceed the gross monthly dwelling income for all units approved by the Commissioner on the rental schedule;
(g) No increase will be made in the amount of the gross monthly dwelling income for all units as shown on the rental schedule unless such increase is approved by the Commissioner, who will at any time entertain a written request for an increase properly supported by substantiating evidence and within a reasonable time shall:
(1) Approve a rental schedule that is necessary to compensate for any net *306increase, occurring since the last approved rental schedule, in taxes (other than income taxes) and operating and maintenance expenses over which Owners have no effective control, or (2) Deny the increase stating the reasons therefor; sjs * s¡s :js $ s}s s»s >>

. One of the plaintiffs, a 74 year old widow living on a fixed income, had her one bedroom apartment rent raised from $109 to $125 per month, with FHA approval. Appellant’s App. pp. 26-27.

. There have apparently been numerous sewer backups and overflows despite City Code enforcement and tenant complaints. Appellant’s App. p. 51.

. The tenants here were not even permitted to examine any of the landlords’ submissions to the FHA. Appellant’s App. pp. 49-51.

. A fair return to investors (or landlords) is not necessarily fair to consumers (or tenants). FPC v. Natural Gas Pipeline Co., 315 U.S. 575, 62 S.Ct. 736, 86 L.Ed. 1037 (1942). See also Bluefield Water Works & Improvement Co. v. Pub. Serv. Comm’n of West Virginia, 262 U.S. 679, 692, 43 S.Ct. 675, 67 L.Ed. 1176 (1923) ; Barnes, The Economics of Public Utility Regulation 293; Pub. Util. Comm’n v. New England Tel. & Tel. Co., P.U.R. C 207 (1926).

. When the appellate court is unhappy at the procedure below but nevertheless affirms, one is reminded of Judge Frank’s happy phrase: “ ‘The deprecatory words we use in our opinions on such occasions are purely ceremonial.’ ” Frank, J., dissenting in United States v. Antonelli Fireworks Co., 155 F.2d 631, 661 (2d Cir. 1946).