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November 27, 2013: RD Enjoined From Foreclosing on Rural Rental Housing Development
Rural Development (RD), operating as a receiver, has been managing Jandina Park Apartment, a 36 unit Section 515 rural rental housing development in McMinnville, Oregon for over 16 years. Twenty four of the households in the development are extremely low-income and are receiving RD Rental Assistance. In April 2013, RD advised the residents that it planned to foreclose on the property on September 5, 2013 because it had concluded that Jandina was no longer suitable for retention in the Section 515 program.
Represented by the Oregon Law Center, with assistance from NHLP, three Jandina residents successfully negotiated a postponement of the foreclosure to October 17, 2013, contending the agency had not met its obligations, set out in RD Handbooks, to inform the residents and seek their input with respect to the agency’s consideration of the continued suitability of maintaining the development in the Section 515 program and in assisting them to relocate to other affordable housing prior to formally making a suitability determination and commencing foreclosure. Due to the government’s October shutdown, the foreclosure was postponed to November 21, 2013. When the residents sought another postponement because their attorneys were unable to negotiate with RD during the shutdown, the agency refused. As a result, on October 24, the residents filed a class action complaint and a request for a preliminary injunction in the Oregon Federal District Court. Turner v. Vilsack, 2013 WL 6074114 (D.Or. Oct. 24, 2013).
The preliminary injunction motion sought postponement of the sale until RD properly considered the preservation of the development, complied with its obligations to involve residents in the project suitability determination, protected the residents against the loss of subsidized housing, and provided them with an opportunity to appeal the RD suitability decision as well as its decision to foreclose, which would terminate the residents’ subsidies.
On November 18, the Court ruled in the residents’ favor and issued a preliminary injunction precluding RD from foreclosing on the property. The court found that the plaintiffs met the 9th Circuit’s “burden of showing that there are serious questions going to the merits of their claims, [that] the balance of the equities tips sharply in their favor, [that] they are likely to suffer irreparable harm, and [that[ the injunction is in the public interest.” Op. at 4. The court decision is based on a number of significant legal and factual findings.
First, the court found that even though the plaintiffs’ claims were based on procedures set out in RD handbooks and not in formally adopted and binding regulations, the handbooks provide persuasive authority as general statements of agency practice and procedure and are entitled to deference in determining whether there are serious questions as to whether RD’s actions were arbitrary, capricious, or an abuse of discretion. Op. 4-5.
Second, the Court found that the defendants, in their opposition to the plaintiffs’ motion, had not submitted any data to support of their conclusions that Jandina was unsuitable for retention in the 515 program or that it was obsolete. It also questioned whether the agency met its obligations to find suitable alternative housing for all residents before a property is removed from the program.
Third, the Court also found that the plaintiffs had raised serious questions as to whether they received adequate notice of the agency’s suitability determination and whether they had an adequate opportunity to be heard with respect to both the suitability and foreclosure determinations.
Fourth, in balancing the equities of the parties, the Court found that the threat of homelessness and the threat of one of the plaintiffs losing custody of her children if she were displaced outweighed RD’s loss of $7,000 per month in operating Jandina.
Fifth, the court concluded that the plaintiffs are likely to suffer irreparable harm because they are unable to pay market rents in the area where Jandina is located. It soundly rejected RD’s argument that there are ample vacant units in other RD properties throughout Oregon to which the plaintiffs could move. It found that there are only 9 vacant units of RD housing within 35 miles of Jandina and that forcing “tenants to move far away from their families, friends, communities, places of worship, medical providers, and jobs in order to retain their subsidized housing [is not] a mere inconvenience.” Op. at 11.
Lastly, the court found that issuing of an injunction was in the public interest because there is a strong interest in ensuring that the RD programs are properly carried out to meet the purposes of National Housing Goals, 42 U.S.C. § 1441, “to wit, aiding low-income persons and families to obtain and remain in affordable, safe and sanitary housing.” Op. at 12.