National Housing Law Project Housing Law Bulletin

A unanimous New Jersey Supreme Court recently held that a New Jersey statute that prohibits landlords from refusing to rent or lease an apartment because of the source of the tenant’s income or source of the rent payment precludes a landlord from refusing to accept Section 8 assistance on behalf of a tenant to whom the landlord currently rents an apartment. Franklin Tower One v. N.M, No. A-159-97 (N.J. Mar. 23, 1999)./1/ The decision upheld an appeal court’s ruling which had reversed a district court decision that the New Jersey statute did not apply to Section 8 vouchers and that, even if it did, it was preempted by federal law.

The case arose in 1996 when a 65-year-old tenant, who had resided in an 18-unit private apartment complex since 1991, became eligible for Section 8 assistance from the West New York Housing Authority. The resident tendered her Section 8 voucher to the landlord who refused to accept it because it had not previously participated in the program and did not want to become entangled in its bureaucracy. When the tenant refused to pay her full rent, the landlord sought to evict her, alleging nonpayment of rent. The trial court held that the landlord was not required to accept the voucher because the New Jersey statute does not prohibit landlords from refusing to accept them. It also held that because federal law made participation in the Section 8 program voluntary, it preempted New Jersey’s law. The trial court issued judgment for the landlord and ordered the tenant to pay rent. The tenant filed an appeal and the Appellate Division reversed. The landlord then appealed the decision to the New Jersey Supreme Court.

Before the Supreme Court, the landlord, supported by briefs from the major state and national associations of both private and federally financed landlords, argued, first, that the New Jersey statute did not apply to Section 8 vouchers and, second, even if it did, that it was impliedly preempted by federal statute which, according to the landlord, was intended to make participation in the Section 8 program voluntary. The New Jersey Supreme Court rejected both arguments.

The New Jersey statute at issue provides that:

No person, firm or corporation or any agent, officer or employee thereof shall refuse to rent or lease any house or apartment to another person because of the source of any lawful income received by the person or the source of any lawful rent payment to be paid for the house or apartment./2/

The statute’s legislative history states that its purpose was to "prohibit[ ] a landlord from refusing to rent to a person merely because of objections to the source of the person’s lawful income."/3/ In a press release accompanying the signing of the legislation, the governor of New Jersey stated that the law’s purpose was "to protect from housing discrimination . . . tenants receiving governmental rental assistance."/4/

The New Jersey Supreme Court held that the state statute was clearly applicable to the Section 8 program.

The plain language of the statute, the legislative history, and our state’s important policy of providing protection for low-income tenants all support the conclusion that the statute encompasses Section 8 vouchers. We find it highly unlikely that the Legislature, having demonstrated its strong commitment to the protection of tenants from unjustified evictions, would have intended to permit the eviction of an exemplary tenant solely for the reason that the federal government has found her qualified to participate in the Section 8 housing program./5/

In reaching its conclusion with respect to New Jersey’s statute, the court distinguished Knapp v. Eagle Property Management Corp., 54 F.3d 1272 (7^th Cir. 1995), wherein the Court of Appeals held that a landlord’s refusal to accept Section 8 rental vouchers did not violate Wisconsin’s Open Housing Act, which prohibits landlords from discriminating in housing on the bases of a tenant’s lawful source of income. The court found that New Jersey’s statute prohibited discrimination not only on the basis of source of income, the sole criterion under Wisconsin law, but also source of lawful rent payment./6/

Moving to the heart of the landlord’s argument — that federal provisions making the landlord’s participation in the Section 8 program voluntary preempt state provisions mandating participation in the program — the court did not question the fact that landlords’ participation in the section 8 program was intended to be voluntary. It noted that several courts have interpreted the statutory provisions granting landlords authority to select tenants to mean that landlords are not obligated to participate in the program and that, by leaving management decisions to the landlord, Congress intended to encourage participation in the program. The court found support for the position in the statutory history of the so-called "take one, take all" provision first adopted by Congress in 1987. That provision made it unlawful for an owner already participating in the program from rejecting a prospective tenant because of that tenant’s status as a Section 8 recipient. While Congress intended the provision to increase the availability of housing for Section 8 recipients, it subsequently concluded that it was having the unintended effect of discouraging landlords from accepting their first Section 8 tenant. It therefore suspended the provision in 1996 and repealed it in 1998. The court noted that, in repealing the provision, Congress did not believe that it would adversely affect assisted households because "protections will be continued under State . . . and local laws."/7/

Finding, however, that participation in the Section 8 program was intended to be voluntary does not address the issue of whether the statute preempts local law. According to the court, "pre-emption is not to be lightly presumed," and "the historic police powers of the States [are] not to be superseded by [federal law] unless that was the clear and manifest purpose of Congress."/8/ Congress may explicitly express its intent to preempt state law, or it may be inferred where the federal legislation is so comprehensive that it creates the inference that Congress intended to leave no room for state regulation in the area. It may also be found under two circumstances where state law actually conflicts with federal law: first, where compliance with both federal and state regulation is a physical impossibility; or, second, where a state law stands as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress./9/

Applying each of these preemption criteria to the statute at issue, the court found nothing in the statutory framework of the Section 8 program that explicitly preempts state legislation requiring landlords to honor Section 8 vouchers./10/ Nor did it find the federal statute so comprehensive as to create an inference that Congress intended that there be no state regulation. To the contrary, the court found that the Section 8 program contemplates substantial state participation, and it was not persuaded that the provisions of the Section 8 program and the New Jersey statute could not be harmonized./11/

The court also did not find the New Jersey statute an obstacle to the goals and purposes of the Section 8 program. It observed that the voluntary nature of the program is not at the heart of the federal scheme.

The inference that the program is voluntary derives only from one section of the statute that permits landlords to screen potential tenants, and no language in that provision implies that a landlord’s right to screen tenants includes the right to reject tenants solely on the basis that they are qualified for governmental rental assistance. Nothing in the statute, however, mandates that landlord participation in the Section 8 program be voluntary, nor is there any provision that prohibits states from mandating participation./12/

The court found support in this conclusion in the history of the "take-one, take-all" provision which was repealed only because of its unintended effect. "The goal of Congress, however, has always been to assist in providing housing to low-income families."/13/ That goal, the court concluded, is shared by the State of New Jersey with its strong public policy of protecting low-income tenants from discrimination and unjustified evictions. Thus, the court found that the New Jersey anti-discrimination statute at issue in this case, neither conflicts with nor frustrates the objectives of Congress in enacting the Section 8 program./14/

In so finding, the court rejected the landlord’s claims that participation in the program was overly burdensome. It noted that New Jersey landlords are already regulated in a variety of ways and that the additional burdens imposed by the Section 8 program, some of which were removed by the 1998 Act, did not add substantially to those burdens. Indeed, the court found that to permit a landlord to decline participation in the Section 8 program in order to avoid the "bureaucracy" of the program would create the risk that "[i]f all landlords . . . did not want to ‘fill out the forms’ then there would be no Section 8 housing available."/15/

In a concluding dictum, the court signaled that its decision was not intended to apply narrowly to only those cases where the tenant was already residing in the apartment when she became eligible for Section 8 assistance. The New Jersey statute "makes no distinction between existing tenants and prospective tenants. It simply prohibits discrimination based on a tenant’s source of income or the source of a tenant’s lawful rent payments."/16/

Notes

1    The case is now reported at 157 N.J. 602, 725 A.2d 1104 (1999).

2    N.J.S.A. 2A:42-100.

3    Franklin Tower One v. N.M., slip op. at 2.

4    Id. at 3.

5    Id. at 20-21.

6    Id. at 21.

7    Id. at 12, citing S. REP. NO. 21, 105th Cong., 2d Sess. (1997) at 86.

8    Franklin Tower One v. N.M., slip op. at 16 (citations omitted).

9    Id. at 16-17.

10    Id. at 21.

11    Id. at 22.

12    Id. at 22 (citations omitted). 

13    Id.

14    Id. at 22-23.

15    Id. at 24 (citations omitted).

16    Id. at 26.

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