Preservation Outline of Authorities and Information
NHLP sponsors an e-mail discussion group on preservation, and sends this group a periodic e-newsletter of significant developments. Here are the first two newsletters: NHLP Preservation e-News #1 (Nov. 2002), NHLP Preservation e-News #2 (Dec. 2002), and NHLP Preservation-News #3 (May 2003). If you have an ongoing interest in working on preservation of HUD assisted housing and would like to join the discussion group, send an e-mail with your contact information, including the name of any organization, to Amy Siemens <ASiemens@nhlp.org>. In October 2002, the Senate Subcommittee on Housing and Transportation held an oversight hearing with HUD officials concerning housing preservation. The National Housing Law Project testified at this hearing and submitted written testimony. The Subcommittee also posed written questions to HUD, and in January 2003 the agency provided written responses to these questions. (Note this is a large file.) Comments on Draft HUD Occupancy Handbook 4350.3 submitted by National Alliance of HUD Tenants (NAHT) and the Housing Justice Network/National Housing Law Project. Download in PDF WordPerfect or Microsoft Word format The text of the Draft HUD Handbook 4350.3: Occupancy Requirements of Subsidized Multifamily Housing Programs" is posted on this site here. . Prepayment of HUD-subsidized mortgages Description: In 1990, Congress enacted a federal preservation program designed to preserve federally assisted housing as affordable housing for low- and moderate-income households by providing financial incentives to owners and financing purchases by nonprofits and tenant organizations. Congress first authorized unrestricted prepayment of many federally-subsidized mortgages in 1996, and has provided "enhanced vouchers" to most affected residents through annual appropriations Acts and general authority enacted in 1999. Currently, owners must give 150 days advance notice of prepayment. While the Title VI Low-Income Housing Preservation and Resident Homeownership Act ("LIHPRHA") has not been repealed, Congress short-funded the program beginning in 1996 and zero-funded the program in FY ‘98, and this trend has continued up to the present, limiting its funding to replacement vouchers. For more information see: HUD Housing Programs: Tenants’ Rights and 1998 Supplement, Sec. 15.3.1. Statutes Pub. L. No. 105-276, §219, 112 Stat. 2461, 2487 (Oct. 21, 1998) (authority for prepayments of "eligible low-income housing" upon giving HUD, tenants and local government at least 150 days, but no more than 270 days written notice). [pdf] Section 250 of the National Housing Act, codified at 12 U.S.C. §1715z-15 (standards and procedures governing prepayments of other multifamily mortgages requiring HUD approval, usually those with other use restrictions). [wpd] Section 8(t) of the United States Housing Act, codified at 42 U.S.C. §1437f(t), enacted by Pub. L. No. 106-74, §538, 113 Stat.1122 (Oct. 20, 1999) (authority for enhanced vouchers, issued to eligible tenants after prepayment). For more on enhanced vouchers and amendments to this statute, see the Enhanced Vouchers section. [wpd] Note: While the Title VI Low-Income Housing Preservation and Resident Homeownership Act of 1990 ("LIHPRHA", codified at 12 U.S.C. §4101 et seq.) has not been repealed, Congress short-funded the program beginning in 1996 and zero-funded the program in FY ‘98, and this trend has continued up to the present. Note: While the Emergency Low-Income Housing Preservation Act of 1987 (referred to as "ELIHPA" or "Title II"), Pub. L. No. 100-242 §§ 261-263, 101 Stat. 1877 (1988), as amended by Pub. L. No. 100-628, §§ 1021-1027, 102 Stat. 3270 (1988), codified at 12 U.S.C.A. § 1715l Note ("Preservation of Low Income Housing") was replaced by LIHPRHA, the statute remains relevant because many owners executed preservation plans pursuant to its terms. Older statutes re prepayments:
Regulations: 24 C.F.R. Part 248, Subpart B (provides guidance on prepayment limitations, required notice, appraisals, plans of action, criteria for HUD approval of prepayment, incentives to extend low-income use, assistance for displaced tenants, and other issues relating to prepayment under the Title VI Low-Income Housing Preservation and Resident Homeownership Act of 1990 ("LIHPRHA", codified at 12 U.S.C. §4101 et seq.). Note: While the Title VI Low-Income Housing Preservation and Resident Homeownership Act of 1990 ("LIHPRHA", codified at 12 U.S.C. §4101 et seq.) has not been repealed, Congress short-funded the program beginning in 1996 and zero-funded the program in FY ‘98, and this trend has continued up to the present. Thus, while these regulations remain unchanged, they are essentially dormant until such time as Congress sees fit to re-fund the program. 24 C.F.R. Part 248, Subparts A and C are generally no longer relevant, but do provide guidance on prepayments and plans of action for those few owners to whom the Emergency Low Income Preservation Act of 1987 (Pub. L. No. 100-242 §§ 261-263, 101 Stat. 1877 (1988), as amended by Pub. L. No. 100-628, §§ 1021-1027, 102 Stat. 3270 (1988), codified at 12 U.S.C.A. § 1715l Note ("Preservation of Low Income Housing") applies. Note: No regulations exist for Pub. L. No. 105-276, §219, 112 Stat. 2461, 2487 (Oct. 21, 1998) or for Section 250 of the National Housing Act, codified at 12 U.S.C. §1715z-15. HUD Handbooks: 4350.6 Processing Plans of Action Under the Low-Income Housing Preservation and Resident Homeownership Act of 1990 (4/10/92, with changes through CHG-4 8/7/95). See note above regarding LIHPRHA implementation. While this handbook remains unchanged, it is not used so long as the preservation program is not funded. [HUD Handbooks may be accessed through <www.hudclips.org/sub_nonhud/cgi/hudclips.cgi> ] Notices and Other Administrative Issuances: HUD, Section 8 Renewal Policy Guide (Jan. 19, 2001) The document posted here is a version of the Guide as amended through November 2001. Check HUD's web site for any revisions. This guide explicitly supercedes notices H 99-36. HUD Notice H00-26, "Prepayment of Direct Loans on Section 202 and 202/8 Projects with Inclusion of FHA Mortgage Insurance Guidelines" (Dec. 11, 2000).[WPD] See Enhanced Voucher portion of this outline for notices related to the administration of these vouchers for tenants after prepayment. HUD Notice H 99-36 "Project-based Section 8 Contracts Expiring in Fiscal Year 2000", App. 3E (Dec. 29, 1999) (explicitly superceded by Section 8 Renewal Guide, above). HUD Notice H 99-8 "Revision to Notice H 98-34 (HUD) on Project-based Section 8 Contracts Expiring in Fiscal Year 1999" (May 27, 1999) (explicitly superceded by Section 8 Renewal Guide, above). [HUD Notices also may be accessed through <www.hudclips.org/sub_nonhud/cgi/hudclips.cgi> ] Websites: National Housing Law Project - www.nhlp.org National Housing Trust - www.nhtinc.org National Low-Income Housing Coalition Website - www.nlihc.org/marktomarket HUD - www.hud.gov/mfh/fha/pre. New HUD data on Section 8 projects (except Mod Rehabs) compiled from its various information systems is now available at: http://www.hud.gov/fha/mfh/mfhdiscl.html HUD’s Office of Multifamily Housing Assistance Restructuring (OMHAR) - www.hud.gov/omhar - has some data on project filings, rules and guidelines, PAEs, and other helpful information HUDClips - www.hudclips.org/sub_nonhud/cgi/hudclips.cgi . Website has the applicable statutes, regs, Notices, and guidelines Cases: Albany Apartments Tenants' Association v. Venneman (D. Minn., filed November 2001)Challenge to owner's prepayment of 515 loan after default where RHS failed to impose affordability restrictions required by statute. Complaint seeks to invalidate RHS regulations and alleges breach of RHS duty to affirmatively further fair housing. Defendant owners prevailed on motion for summary judgment in March 2003. Original owner has now sold property to a third party who claims to be a bona fide purchasor for value without notice of the litigation. Ayer v. Beta No. C-1-00346 (S.D. Ohio, filed May 1, 2000) (Owensville Manor) Challenge to owner's attempt to operate project as non-subsidized where RHS accelerated 515 loan and terminated operating subsidy. Resulting settlement preserved purchase by non-profit. Brighton Village v. Martinez C.A. NO. 00-CV-12311-GAO, sub nom. Brighton VIllage Nominee Trust v. Malyshev, 2004 WL 594974 (D.Mass. Mar. 23, 2004) Elderly and disabled project which prepaid its HUD-held mortgage in 1986 and opted-out of Section 8 in 1995, when regular vouchers were issued. Owner sued tenants in state court for nonpayment of rent when their vouchers did not cover the rents charged. Tenants filed third party complaint aginst HUD, which then removed case to federal court, challenging the prepayment as contrary to Section 250 of the National Housing Act, and the opt-out as illegal under then-applicable 42 U.S.C. Sec. 1437f(c)(9). Plaintiffs sought monetary relief for affected tenants who had to pay more with regular replacement vouchers until enhanced vouchers were issued in 2000 after the statute was changed to make them eligible. Tenants also opposed owner's motion to remand to state court. The trial court subsequently ruled that HUD violated both Section 250 and Section 1437f(c)(9), claims brought under the APA, and awarded financial restitution to the tenants under the APA's waiver of sovereign immunity. Burks v. Martinez (Civ No. 01-1482 JMR/FLN, D. Minn 2001)(Capitol Plaza) Tenants and community organization challenge HUD’s approval for prepayment of a 221(d)(4) mortgage as violation of Section 250 of the National Housing Act (12 USC § 1715z-15). Plaintiffs bring action pursuant to Administrative Procedure Act, and includes claim for HUD’s failure to affirmatively further fair housing. Cross motions for summary judgment and motion to dismiss pending. Byron Cases(Villa Grande and Rolling Heights) The owner of these two properties in Byron, Minnesota, seeks prepayment of the Section 515 financing and elimination of the affordability restrictions in the administrative process before RHS. The administrative decisions have split, allowing one property to prepay and denying another. These decisions are pending reconsideration by RHS. Cienega Gardens v. U.S. and associated casesCourt of Federal Claims cases involving contractual and takings claims arising out of federally assisted housing programs. Forty-two plaintiffs in Cienega were owners of low-income housing projects seeking redress when Emergency Low-Income Housing Preservation Act of 1987 (ELIHPA) nullified their option to prepay their federally-subsidized mortgages after 20 years. Cienega Gardens v. U.S., 38 Fed.Cl. 64 (1997). Lost rent is recoverable because government is liable for breach of contract, but damages issue is reserved.
Cienega Gardens v. U.S., 194 F.3d 1231 (Fed. Cir. 1998). Vacating 1997 decision and remanding for dismissal of breach of contract claims, court finds that requisite privity of contract did not exist between the Owners and HUD with respect to prepayment of the mortgage loans so as to make HUD liable to the Owners for breach of contract. Cienega Gardens v. U.S., 265 F.3d 1237 (Fed. Cir. 2001). Owners appealed summary judgment following 1998 decision. Court holds that:
Cienega Gardens v. U.S., 331 F.3d 1319 (Fed. Cir. 2003). On remand from 2001 decision, summary judgment was granted for government. Owners appealed. Court holds:
Independence Park Apartments v. U.S., 61 Fed.Cl. 692 (2004). After remand for trial of the owners' taking claims and for reinstatement of original damages award to the model plaintiffs, with the possibility of adjustment, Court severs claims of the model plaintiffs and holds:
In Sacramento, California, a tenant association and non-profit affordable housing coalition brought suit to enforce state law that requires owners to give one years’ advance notice for prepayment of HUD Section 236 financing. State law also requires that the City be provided notice, and the City sought to intervene. The California Superior Court issued a preliminary injunction against prepayment until the owner complied with the requirements of state law, rejecting the owner's federal preemption arguments. Subsequently, after the federal appelllate decisions in Forest Park II and Topa Equities, the owner moved to dissolve the injunction. After further briefing, the court refused, again finding no preemption, holding that LIHPRHA Section 232 did not apply to properties that did not participate in the now-defunct LIHPRHA program and prepay under other statutory authority, despite their technical eligibility for LIHPRHA. Claim for attorney fees was settled. Community Stabilization Project v. Cuomo 199 F.R.D. 327 (D.Minn., 2001.), 31 Fed.Appx. 340, 2002 WL 272313 (8th Cir. Feb 27, 2002). (Carey Apartments) City of St. Paul, MN, purchased then proposed demolition of a project with mortgage formerly HUD-held but sold in 1994, after prepayment of 221(d)(3) BMIR mortgage; claims for violation of Section 250, 12 USC 1715z-15, 12 U.S.C. § 1701z-11(k)(1) (permitting mortgage sales by HUD only "on terms at least as advantageous" to tenants as the terms when HUD-held), and Fair Housing Act "affirmatively furthering duty". District court opinion granted defendants’ motion to dismiss due to lack of standing, 199 F.R.D. 327 (D.Minn., 2001.). The project was demolished after stay pending appeal denied by 8th Cir.; appeal dismissed as moot. DBSI/TRI IV L.P. et al v. USA DBSI/TRI IV LP et al v. USA (D. Or filed Oct. 27, 1998)The owners of six Oregon developments, managed by the same entity that managed the properties involved in the Kimberly and Atwood-Leisman litigation, initiated a suit against RHS seeking the right to prepay their loans. As in Atwood-Leisman, the parties agreed to defer consideration of the case until the Court of Appeals for the Ninth Circuit decided the Kimberly case. Subsequent to the Idaho district court’s Atwood-Leisman decision, the parties entered into a settlement agreement that extended to both the Idaho and Oregon projects. That agreement provided that the developments would be sold to nonprofit or public entities. But if such sales could not be consummated, the owners had a right to prepay their loans. In Oregon, the owner-plaintiffs and RHS could not agree on the appraisals for the developments. Concurrently, DBSI quieted title and prepaid two of the loans while threatening to prepay the remaining four. In response, residents of all six developments moved to intervene in the quiet title litigation, but the applicants' motion was denied by the court on September 15, 2004. On appeal, the denial was affirmed by the 9th Circuit, finding the residents' interests were sufficiently protected by their claims in Goldammer et al v. Veneman, the resident's own suit filed in district court.
The residents are represented by the Oregon Law Center. Orginally assigned to Magistrate Judge Jelderks, the matter was later moved to Judge Anna J. Brown's calendar (who also handles the Goldammer case). Forest Park II v. Hadley Civil No. 02-480 (MJD/SRN) (D. Minn. 2002), rev'd by 336 F.3d 724 (8th Cir. 2003). Owner sought to prepay a HUD Section 236 mortgage under recent federal prepayment authority (PL 105-276, Sec. 219) without giving the required notice under Minnesota law. Owner sued government entities and tenants regarding the prepayment, seeking declaratory relief. Tenants obtained an injunction against prepayment, based on failure to comply with the state notice law. The District Court further held that federal law does not preempt the state notice statute. On the owner's appeal to the Eighth Circuit, the appellate court reversed, finding the state law preempted both expressly by LIHPRHA and impliedly under conflict preemption principles. Goldammer, et al v. Veneman Goldammer v. Veneman (D. Or. Slip Copy, 2005 WL 1307698, D. Or., May 26, 2005), rev'd sub nom. DBSI/TRI IV Ltd. P’ship v. U.S., 465 F.3d 1031 (9th Cir. 2006)The owners of six Oregon developments, managed by the same entity that managed the properties involved in the Kimberly and Atwood-Leisman litigation, initiated a suit against RHS seeking the right to prepay their loans. As in Atwood-Leisman, the parties agreed to defer consideration of the case until the Court of Appeals for the Ninth Circuit decided the Kimberly case. Subsequent to the Idaho district court’s Atwood-Leisman decision, the parties entered into a settlement agreement that extended to both the Idaho and Oregon projects. That agreement provided that the developments would be sold to nonprofit or public entities. But if such sales could not be consummated, the owners had a right to prepay their loans. In Oregon, the owner-plaintiffs and RHS could not agree on the appraisals for the developments. Concurrently, DBSI quieted title and prepaid two of the loans while threatening to prepay the remaining four. In response, residents of all six developments sought to intervene in the quiet title litigation, DBSI v. USA (D. Or. filed Oct. 27, 1998).
Simultaneously, the same residents initiated an action against RHS challenging, under the Administrative Procedures Act, RHS’s acceptance of prepayment offers for two loans and its intent to accept prepayment on the remaining four loans. The resident-plaintiffs asserted that RHS violated numerous laws by approving prepayment on the 6 projects and accepting Section 515 loan prepayments and releasing security in the two projects. The residents, who were facing imminent rent increases from the new owner of the two projects, asserted that the non-compliant prepayments illegally abrogated their ELIHPA rights. The Oregon Law Center represents the residents in both cases.
On the basis of 9th Circuit’s Kimberly decision, the district court granted summary judgment denying the residents' efforts to enforce ELIHPA under the APA against RHS. Court held that ELIHPA is not a sovereign act and therefore RHS did not violate law by accepting prepayment. The resident's appealed the case to the 9th Circuit and won a reversal of the summary judgment. The case was remanded to the district court to consider the residents' claims. Good Haven Prepayment Committee v. Good Street Charitable Foundation No. DV99-07915 (N.D. Tex, 1999) Challenge to prepayment by nonprofit owner as violation of the regulatory agreement and Section 250 (12 U.S.C. §1715z-15). Includes demand letter and application for TRO. Parties settled the litigation pursuant to a consent decree which required the owner to provide a number of tenant protections including: priority in admission to voucher holders, retaining the same admission criteria prior to prepayment, and limiting rent increases and any additional security deposits. Kenneth Arms Tenant Association v. Martinez 2001 U.S. Dist. LEXIS 11470, No. Civ. S-01-832 LKK/JFM (E.D.Ca. order July 3, 2001) Court preliminarily enjoined a proposed prepayment of 236 BMIR mortgages and termination of Section 8 project-based contract. The decision was based primarily on violation of state law, Cal. Gov't Code Secs. 65863.10 and 65863.11. The court found no federal preemption of state statute, determined HUD has no duty to enforce state law, and dismissed HUD. Kimberly Associates v. United States 98-0083-S-LMB (Order on Quiet Titile, Dec. 12, 2002) In December of 2002, the Idaho District Court granted a quiet title judgment owner of a Section 515 building after the Rural Housing Service (RHS) refused prepayment, in accordance with the Emergency Low Income Housing Preservation Act of 1987 (ELIHPA). The District Court held that ELIHPA was not a sovereign act and therefore inapplicable to the quiet title action, that RHS may not refuse prepayment under Idaho law, and that the owner was entitled to quiet title to the property. The District Court also denied an intervention motion by two residents, who appealed the denial. The Ninth Circuit issued a stay on sale of the property or changing the terms of tenancy, pending ruling on intervention. On May 3, 2004, the Ninth Circuit heard oral arguments, on behalf of resident Doe and the owners, regarding the denial of intervention and the merits of the case (No. 02-36165). In an unpublished memoradum on July 22, 2004, the Court dimissed the resident's appeals as moot in consideration of the settlement agreement between the owners and the government. Kukui Gardens Association v. JacksonCurrent residents of Honolulu, Hawaii property seek to prevent owner from prepaying its HUD-insured mortgage and selling the property to a private party. Plaintiffs seek declaratory and injunctive relief to challenge HUD’s prepayment policy and enjoin the application of the policy to the property under Section 250(a) of the National Housing Act of 1937 (12 U.S.C. §1715z-15), the U.S. Housing Act (12 U.S.C. §1701t) and the Fair Housing Act (42 U.S.C. §3608(3)(5). Before a ruling was issued, the parties agreed to a settlement whereby approximately half of the units would be sold to a preservation purchaser.
File includes:
Lifgren v. Yeutter 767 F. Supp. 1473 (D. Minn. 1991) Statutory challenge to RHS Section 515 prepayment based on failure of FmHA to give an offer to extend low income use, improper promulgation of FmHA regulations, and failure to provide adequate tenant notice and tenant protections against rent increases; court decision upholding statutory restrictions on prepayment, and ordering reinstatement of loan. (Includes pleadings from both plaintiffs and defendants.) Oxford Resident's Council v. Deepwater Investment LLC. No. 98-2-28244-4 SEA (Wash. Sup. Ct., filed November 25, 1998) Challenge to prepayment of 221(d)(3) loan and proposed termination of Section 8 contract based on Washington State notice law and Fair Housing claims. Includes settlement agreement for partial extension of project-based Section 8 contract, and right of first refusal for city to purchase project. Real Estate Board of New York, Inc. v. City Council of the City of New York No. 114459 (NY Supreme Court decided Apr. 11, 2007) The Real Estate Board of New York sought a declaratory judgment finding that NYC’s preservation law, Local Law 79, was void due to preemption by state and federal law. File includes:
Roman v. Jackson Tenants of a NYC project-based Section 8 property brought suit to prohibit HUD from allowing the owner to prepay the mortgage and sell the property. Tenants also sought a declaration that HUD failed in its duties to ensure they received proper notice of intended prepayment and opt-out. This case was settled at an early stage in the proceedings. Rubanenko v. Martinez (Bryte Gardens) Tenants and homeless family challenge prepayment of Section 236 financing based on violation of Section 250 of the National Housing Act (12 USC 1715z-15) which limits HUD's discretion to approve prepayment, and challenge to owner's prepayment based on violation of state notice law. Also includes claim that HUD failed to publish its policy to allow a Use Agreement to substitute for Section 250 requirements, and due process claim based on inadequate notice of prepayment. The District Court denied plaintiffs' motion for preliminary injunction, then dismissed all claims, and plaintiffs declined to pursue an appeal. The Ninth Circuit Court of Appeals denied intervention on appeal by other tenants. Tinney v. Venneman CV-02-C-2062-M(Riverbend or Riverside Coves) Owner sought to prepay Section 515 RHS and had an administrative hearing with RHS in which the hearing officer allowed prepayment. Tenants sued in federal district court in Alabama. Owners moved to dismiss and tenants moved for preliminary injunction. After briefing, case settled with order to remand to RHS for administrative re-hearing. Topa Equities v. City of Los Angeles No. CV 00-10455 GHK (RNBx) (C.D. Ca. April 8, 2002) (Order on preemption issue), aff'd, 342 F.3d 1065 (9th Cir. 2003).Owner brought suit to challenge application of local rent control law to former § 236 project that was prepaid, based on federal preemption provision of 42 U.S.C. § 4122 (LIHPRHA § 232). Pleadings include review of legislative history. In a useful decision on the issue, the District Court reviewed the legislative history and found that there was neither express nor implied preemption of the local rent control law. The Ninth Circuit Court of Appeals affirmed, although using different reasoning. While finding LIHPRHA § 232 "extant," it ruled that the local law did not violate that provision because it did not "restrict or inhibit" prepayment and was a "law of general applicability" exempted by the terms of § 232. The Ninth Circuit also ruled that there was no conflict preemption because there was no federal policy to assure unrestricted market rents after prepayment. Good Haven Apartments (Dallas, TX, challenging prepayment by nonprofit owner as violation of Section 250, other statutory and Fair Housing Act claims?) Gillanders v. Smith, No. S-86-867 (E.D. Ca. filed 1986) (statutory and Fair Housing challenge to FmHA prepayment) (Clearinghouse No. 41,556). State and Local Resources: Since federal laws no longer guarantee preservation of federally assisted use-restricted properties, states and localities have provided further protections for these properties through supplemental laws and policies. See the State and Local Initiatives portion of this outline. Articles: "HUD Multifamily Inventory Awaits Decisions," 27 HOUSING LAW BULLETIN 139 (Sept. 1997). "House and Senate Settle on HUD Funding for FY 1998," 27 HOUSING LAW BULLETIN 156 (Oct. 1997). "Why Does the Section 8 Budget Estimate Keep Changing?", 28 HOUSING LAW BULLETIN 80 (May 1998). "Preservation Crisis Mounts: HUD and Congress Respond" 29 HOUSING LAW BULLETIN 67 (April 1999). "HUD Issues Guidance for FY 2000 Enhanced Vouchers," 30 HOUS. L. BULL. 64 (May 2000). "Senate Considers New Preservation Legislation," 30 HOUS. L. BULL. 103 (July 2000). "HUD Issues Final Rule on Tenant Organizing," 30 HOUS. L. BULL. 113 (Aug. 2000). "California Adopts Improved Notice Requirements for Federal Housing Conversions," 31 HOUS. L. BULL. 14 (Jan. 2001). "Fair Housing Litigation to Prevent the Loss of Federally Assisted Housing: The Duties of Public Housing Authorities and Project Owners (Part One)," 31 HOUS. L. BULL. 73 (April 2001). "Fair Housing Litigation to Prevent the Loss of Federally Assisted Housing: The Duties of Public Housing Authorities and Project Owners (Part Two)," 31 HOUS. L. BULL. 157 (July/Aug.2001). "Opt-out and Prepayment of Four Section 8 Properties Preliminarily Enjoined," 31 HOUS. L. BULL. 180 (July/Aug.2001). |
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