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September 16, 1977

ROBERT C. EMBRY, JR., et al.

The opinion of the court was delivered by: HUYETT



 The Philadelphia Welfare Rights Organization (PWRO) has brought this suit seeking declaratory and injunctive relief against the Mayor of Philadelphia, the Director of the Philadelphia Office of Housing and Community Development, the Redevelopment Authority of Philadelphia and its Executive Director, the Secretary of the United States Department of Housing and Urban Development (HUD), and the Acting Area Director of the Philadelphia Area Office of HUD. Plaintiff alleges that the defendants have violated Title I of the Housing and Community Development Act of 1974, 42 U.S.C. §§ 5301-5317 (Title I) by failing to allocate sufficient funds to the benefit of low-income families under the Philadelphia Year III Community Development Block Grant Program. Defendants have all moved for summary judgment.

 The major issue in this case is whether Title I requires the City of Philadelphia (City) to allocate funds received for housing rehabilitation activities for the benefit of both low-income and moderate-income families in proportion to their percentage in the City's population. After careful consideration of the statutory background of Title I and the circumstances surrounding Philadelphia's application for funds under that Act, we have concluded that the approval of Philadelphia's Year III Community Development Block Grant application was not contrary to the provisions of Title I, and therefore grant defendants' motion for summary judgment.

 I. Summary of Title I

 Title I of the Housing and Community Development Act of 1974, 42 U.S.C. §§ 5301-5317, consolidates several former categorical programs providing housing and community development funds into a single block grant program. Grant amounts are calculated by a formula which considers three factors with respect to each applicant community: population, extent of poverty, and the extent of housing overcrowding. 42 U.S.C. § 5306(b). Congress identified the primary objective of Title I as the "development of viable urban communities, by providing decent housing and a suitable living environment and expanding economic opportunities, principally for persons of low and moderate income." 42 U.S.C. § 5301(c) (emphasis added).

 In order to receive funds under Title I, the grant applicant is required to submit an annual application to the Secretary of HUD. This application must contain a summary of a three-year Community Development Plan, in which "community development needs" are identified and a program designed to meet those needs is formulated. In addition, a Housing Assistance Plan must be submitted which surveys "the condition of the housing assistance needs of lower-income persons," specifies an annual goal "for the number of dwelling units or persons to be assisted," and states the general location of the proposed housing for lower-income people. 42 U.S.C. § 5304(a). The applicant must also certify to HUD's satisfaction that its Community Development Program has been designed to "give maximum feasible priority to activities which will benefit low- or moderate-income families or aid in the prevention or elimination of slums or blight." 42 U.S.C. § 5304(b)(2).

 Title I provides that the Secretary of HUD shall approve a grant application unless: (1) the applicant's description of community needs and objectives is "plainly inconsistent" with the "facts and data generally available," (2) "the activities to be undertaken are plainly inappropriate to meeting the needs and objectives identified by the applicant," or (3) "the Secretary determines that the application does not comply with the requirements of this chapter or other applicable law or proposes activities which are ineligible under this chapter." 42 U.S.C. § 5304(c). Any application submitted to HUD shall be deemed approved 75 days after receipt unless the Secretary informs the applicant of specific reasons for disapproval. 42 U.S.C. § 5304(e).

 II. Factual Background

 The pertinent factual background of this action is undisputed. On March 1, 1977, the City of Philadelphia submitted to HUD its Year III Community Development Block Grant (CDBG) application for $57,163,000 in federal funds. The application was reviewed by defendant Robert J. Clement, Acting Area Director of the Philadelphia Area Office of HUD, and, in addition, by the Regional and Central Offices of HUD. This intensified level of review was recommended by defendant Robert C. Embry, Assistant Secretary of Community Planning and Development of HUD, as a means of dealing with the numerous complaints filed by community groups objecting to the City's CDBG application.

 Among these complaints were the objections filed by the PWRO. The thrust of PWRO's objections, and the subject matter of this action, was that the City's CDBG application did not address sufficiently the needs of low-income families, especially with respect to the housing rehabilitation activities to be funded under Title I. PWRO contended that Title I required that the housing needs of low-income families be separately analyzed and that funds be targeted specifically to address those needs.

 HUD responded to the City's CDBG application by noting numerous problem areas, many of which were similar to the concerns voiced by the community groups. These concerns were set forth in detail in letters sent to the City, dated March 15, April 11, and May 3. (See Exhibits 2, 7). The City continually revised its application in an attempt to meet HUD's objections.

 HUD arranged to have a hearing at the Regional Offices on May 5, 1977, to deal with the various community grievances. Following the public hearing, HUD formally responded to the PWRO's complaints by letter dated May 13, 1977. With respect to PWRO's major objection, that the City's application failed to address the needs of low-income families in any significant way, the letter concluded:


The CDBG regulations do not require any distinction between low income and moderate income persons or areas. CD activities can benefit either or both groups. The definition of low or moderate income persons is "persons, or lower income persons" whose income does not exceed 80% of the median family income of the area as determined by the Secretary.

 (See Exhibit 15)

 On the same date as its formal reply to PWRO, HUD approved Philadelphia's CDBG application. The approval contained the following condition: "All rehabilitation loans and grants must principally benefit low or moderate income families and individuals or directly aid in the prevention or elimination of slums and blight." In addition, the approval letter specifically recommended that the City "develop and/or expand its efforts to meet the needs of low and moderate income renters." The Title I grant to be made to the City, as finally approved, consists of the following Housing Rehabilitation Activities: Loans and Grants 575 units LPA Rehabilitation 217 units Acquisition Subsidy/Rehabili- tation 175 units Community Sponsored Projects 40 units Rehab Loan Guarantees 150 units Investor/Owner Demonstration Units 50 units Gift Property 150 units Total 1457 units


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