Civil Rights Groups Sue HUD Over Suspension of Small Area FMR Rule

Five civil rights organizations representing three plaintiffs sued HUD because it suspended for two years implementation of the Small Area Fair Market Rent rule (see Memo, 8/21/17). As the organizations explain in the complaint, the suspension of the Small Area FMR (or SAFMR) rule is unlawful because HUD failed to follow Administrative Procedure Act (APA) rules requiring public comment and failed to provide sufficient justification for the suspension according to the SAFMR rule. The lawsuit also alleges that HUD’s action violates its duty under the Fair Housing Act of 1968 to spend federal funds in a way that affirmatively furthers fair housing, rather than increasing racial segregation and concentrated poverty. The plaintiffs seek a court order requiring HUD to implement the new SAFMR rule on January 1, 2018 as previously scheduled.

SAFMRs reflect rents for U.S. Postal ZIP Codes, while traditional FMRs reflect a single rent standard for an entire metropolitan region. The intent is to provide Housing Choice Voucher payment standards that are better aligned with neighborhood-scale rental markets, resulting in relatively higher subsidies in neighborhoods with higher rents and greater opportunities and lower subsidies in neighborhoods with lower rents and higher concentrations of voucher households. A goal of Small Area FMRs is to reduce voucher concentrations in high poverty areas by helping households use vouchers in areas with lower poverty, better schools, and more amenities such as full-service grocery stores.

The final SAFMR rule was published on November 16, 2016 (see Memo, 11/21/16) after a year and a half rulemaking process that included multiple rounds of comments (see Memo, 6/8/15, 6/20/16). The final rule would only require public housing agencies (PHAs) in 23 metro areas to use Small Area FMRs.

The five organizations are the NAACP Legal Defense and Educational Fund, Inc. (LDF), the Relman, Dane & Colfax PLLC law firm, the Poverty & Race Research Action Council (PRRAC), the Lawyers’ Committee for Civil Rights Under Law, and the Public Citizen Litigation Group. The plaintiffs are Crystal Carter from Hartford and Tiara Moore from Chicago, and the Open Communities Alliance, a Hartford nonprofit that helps voucher households move to higher opportunity areas.

The lawsuit is being brought under the APA because the SAFMR rule was suspended without following APA notice and comment requirements, and because HUD did not provide, as the SAFMR rule requires, the “documented determination that such action is warranted.” The SAFMR rule authorizes a temporary suspension due to a presidentially declared disaster a sudden influx of displaced households needing permanent housing, or other “events” as determined by HUD. The complaint claims that this provision does not authorize a wholesale suspension of the Small Area FMR start date, and that HUD did not cite a documented event that caused an adverse rental housing market condition, as described in the preamble to the final rule.

HUD gave three reasons for the suspension in letters to PHAs in the 23 metropolitan areas set to implement SAFMRs:

1. HUD’s failure to provide guidance to PHAs.
2. Comments submitted by industry groups in response to HUD’s request for input regarding Executive Order 13777 (see Memo, 3/6, 5/8 and 6/19).
3. The need to study an interim report (see Memo, 8/21) of a demonstration project involving the use of SAFMRs by five PHAs (see Memo, 11/30/12), which did not entail metro-wide use of SAFMRs.

In response to those three “events,” the complaint asserts that:

1. HUD and the PHAs in the 23 metro areas had sufficient time to prepare for implementation of Small Area FMRs by January 1, 2018 because of the lengthy rulemaking process.
2. HUD’s request for ideas in response to Executive Order 13777 was published on May 15, 2017, well after the rule was issued, and did not pertain to Small Area FMRs. In addition, HUD’s action was based solely on industry group comments and did not give others an opportunity to weigh in on the issue. Consequently, the suspension was arbitrary and capricious.
3. In the preamble to the final rule, HUD considered and rejected comments that it wait for full results of the demonstration before issuing a final rule. Also, the interim study of the five-PHA demonstration does not contain any information that undermined HUD’s conclusions when it issued the rule or otherwise justifies the rule’s suspension. Rather, the interim report indicates that SAFMRs result in more families using vouchers in high opportunity areas.

The complaint notes that a primary objective of the voucher program is to enable low income households to live throughout metropolitan areas, thereby avoiding high concentrations of poverty and racial segregation. HUD’s suspension of the SAFMR rule will disproportionately hurt non-white households who make up the majority of voucher households in most of the 23 metro areas. Therefore, the lawsuit asserts that suspension of the Small Area FMR rule violates HUD’s obligation under the Fair Housing Act of 1968 to affirmatively further fair housing because HUD is choosing to distribute vouchers in a manner that HUD itself has found to perpetuate racial segregation. The complaint also alleges that the suspension will have an adverse disparate impact on African American and Latino households.

The impact of the suspension on the two plaintiff households is described in the complaint. Ms. Crystal Carter, a home health aide, is an African American with five children who has a voucher in Hartford, Connecticut. Taking advantage of an “Open Choice” regional school integration program, she has enrolled her three youngest children in school in Simsbury, a predominately white town with high-performing schools and very little poverty. However, to continue to keep her children in that school, Ms. Carter can only live in Simsbury or Hartford. She has not been able to find suitable housing in Simsbury, in large part due to the way regular FMRs are calculated. If Small Area FMRs were implemented, she could use a voucher at a home renting for up to $1,940, instead of the Harford metro-wide FMR of $1,620.

Tiara Moore, a bus aide for Chicago Public Schools, is an African American living in Chicago with her 11-month old daughter and an uncle. She recently secured a voucher based on the metro-wide FMR valued at $1,207 per month. Ms. Moore would like to live near her mother in suburban DuPage County, which has better schools. Her regular voucher is not sufficient to rent a two-bedroom apartment in DuPage County. If Small Area FMRs were implemented, depending on Zip codes, her voucher would be worth between $1,300 and $1,770.

Read the complaint at: http://bit.ly/2zRFzN1