U.S. Appeals Court Backs HUD on Fair Housing Funding

John Jordan | November 2015

Astorino Claims Vindication on Zoning

NEW YORK—While Westchester County government officials say a recent ruling by the United Stats Court of Appeals for the Second Circuit offered “a major vindication” for the county’s position concerning local zoning and home rule, the court in fact sided with the U.S. Department of Housing and Urban Development on whether the agency can reallocate millions of dollars in Community Development Block Grant (CDBG) funding originally earmarked for Westchester.

The U.S. Court of Appeals ruled on Sept. 25th that HUD could reallocate approximately $10 million in CDBG housing funds originally granted to Westchester County. The case stems from multiple rejections of the county’s Analysis of Impediments to fair housing in connection with a $51.6-million fair housing case settlement in 2009 that requires the county to build 750 units of affordable housing. The county’s AIs have been repeatedly rejected by court appointed Housing Monitor James Johnson and HUD.

The court ruled that HUD could continue to withhold from Westchester County approximately $750,000 in CDBG funds remaining from fiscal year 2011, and reallocate federal housing funds from fiscal year 2013 and 2014. Westchester County stated the 2013 funds amount to approximately $5 million. The appeals court, however, ordered HUD to delay the reallocation of Westchester’s 2014 funding “until after the County exhausts its right to seek further review of this decision.”

Westchester County announced in May 2014 that it would no longer seek CDBG funds under HUD’s Community Planning and Development Formula Grant Programs and fund affordable housing projects on its own in response to HUD’s decision to reallocate the county’s fair housing funding.

The U.S. Appeals Court for the Second Circuit ruled on Sept. 25, “This case resolves a narrow question: May HUD require a jurisdiction that applies for CPD funding to analyze whether local zoning laws will impede the jurisdiction’s mandate to ‘affirmatively further fair housing?’ Because HUD may impose such a requirement on jurisdictions that apply for CPD funds, and because the decision to withhold Westchester County’s CPD funds in this case was not arbitrary or capricious, we conclude that HUD’s action complied with federal law.”

The court also stated in its ruling, “It bears emphasizing that this decision does not mean that any of Westchester County’s municipalities violated the Fair Housing Act or engaged in discrimination on the basis of race. We merely conclude that HUD’s decision—in the context of providing federal funds—to require the County to redo its zoning analysis and to develop strategies to overcome impediments to fair housing did not violate federal law. In short, there has been no finding, at any point, that Westchester actually engaged in housing discrimination.”

It is that portion of the court’s ruling that Westchester County government officials see as vindication for its fight for local zoning and home rule with HUD. In a press release, Westchester County Executive Rob Astorino stated, “This is a big victory for Westchester County. This vindicates our fight to protect home rule and local zoning. The issue with HUD and the monitor has never been about race or access to housing. There is no place for discrimination in Westchester or any place else. But by the same token, there needs to be checks on the federal government’s ability to use its power and money to reshape our communities.”

HUD Regional Administrator Holly Leicht released a statement in response to the appeals court ruling, which stated, “Contrary to Westchester County’s assertion last week that it prevailed in its most recent action against the U.S. Department of Housing and Urban Development, the U.S. Court of Appeals for the Second Circuit in fact determined that, because HUD is mandated by the Fair Housing Act to proactively eradicate housing discrimination and because restrictive zoning practices may violate this Act, HUD has the authority to require prospective grantees to analyze their local zoning laws for discriminatory impact, and to reject those analyses when they are inadequate.”

She continued, “The Court further ruled that HUD had the right to withhold funding from Westchester County when the department determined that the County’s zoning ‘analysis,’ which amounted to a collection of unsupported boilerplate conclusions that no municipality’s zoning laws posed an impediment to affirmatively furthering fair housing with respect to race, was not supported by available data. In reaching this decision, the Court acknowledged that HUD provided the County written detailed explanations of its decision and gave the County multiple opportunities to make changes and resubmissions, but the County refused to do so.”

Housing Monitor Johnson had no comment on the ruling by the U.S. Court of Appeals for the Second Circuit. What is still to be decided is if the county will be subject to any penalties in connection with its non-compliance with the federal housing court settlement.

In May of this year in his Supplemental Report Regarding Implementation of the Stipulation and Order of Settlement and Dismissal for the 2014 Calendar Year” filed with the U.S. District Court for the Southern District of New York, the housing monitor stated that the county could face penalties of “$30,000 from the first day of non-compliance (first month) and $60,000 for each month of continued non-compliance.”

In a court filing in July of this year, the U.S. Attorney for the Southern District charged that the county violated terms of the 2009 housing case settlement and should face penalties, according to a report in the Journal News. A spokesman for County Executive Rob Astorino, at the time termed the court filing “harassment.”

The Court of Appeals concluded its Sept. 25th ruling by leaving open for negotiation or further court action other issues not addressed in its recent decision. “We leave for future litigation the question of how HUD can enforce the consent decree against the County, now that the County no longer plans to seek additional federal funds. We also leave it to the district court in a future case to consider what steps the County can or must take to end further supervision over its housing policies, pursuant to this consent decree,” the court stated. “In so doing, the district court should be mindful of the teaching of the Supreme Court that courts should apply a ‘flexible standard’ to deciding whether “a significant change in facts or law warrants revision of [a consent] decree.”

John Jordan
Editor, Real Estate In-Depth