The opinion of the court was delivered by: RAMBO
The United States Housing Act (USHA) of 1937, as amended by § 201 et seq., of the Housing and Community Development Act of 1974, 42 U.S.C. § 1437 et seq., provides for financial assistance from the federal government to state and local governments to remedy the unsafe and unsanitary housing conditions, as well as housing shortages, of low income families. Section 8 of the USHA of 1937, as amended, 42 U.S.C. § 1437f, authorizes the Secretary of Housing and Urban Development (HUD) to enter into annual contribution contracts with Public Housing Agencies (PHA), such as Defendant Housing Authority of the City of York, (YHA) who, in turn, may enter into contracts to make assistance payments to owners of existing projects on behalf of low income tenants. Every application submitted to HUD by a PHA must be accompanied by an administrative plan. Pursuant to 24 C.F.R. § 882.204(b)(3)(i) (1979), the administrative plan shall include:
Sub-section (b)(3)(ii) lists the functions that should be addressed in the administrative plan, which include outreach to eligible families, determination of family eligibility, and selection of families.
HUD regulations establish, inter alia, two criteria which must be met for an applicant to be considered eligible for assistance under the program: the applicant must qualify as a family (24 C.F.R. § 812.1, et seq. (1979)), and their annual income must fall within the designated income limits for the area. 24 C.F.R. § 889.101, et seq. (1979). The regulations further provide that a PHA may establish additional criteria in determining applicant eligibility for participation in the program subject to the provision that the criteria be reasonably related to program objectives and receive approval of HUD as part of the PHA's administrative plan. 24 C.F.R. § 882.209(a)(3) (1979).
Defendant YHA, as part of its criteria for determining eligibility to Section 8 housing, adopted a policy of denying participation in the housing assistance program to individuals who owe debts to the YHA arising out of their prior occupancy in YHA projects. The relevant portion of this policy statement, which is embodied in Section II(a)(4) of the statement, reads as follows: "Applicants who are former tenants of the Housing Authority and have vacated owing the Authority monies will not be considered eligible for participation until such monies are paid in full." This statement of policy was part of the YHA's administrative plan submitted to and approved by HUD and was in effect at the times in question.
When the housing authority determines that an applicant is eligible to participate in the Section 8 housing program, it issues a certificate of family participation. In the case sub judice, plaintiff Vandermark's application for a certificate of family participation was approved on January 3, 1978. She was notified to appear on January 12, 1979 for an enrollment interview. On January 5, 1979, Vandermark was advised that her application was being withdrawn because she allegedly owed a debt of $ 194.30 to the YHA arising out of her occupancy of a YHA owned public housing unit in 1975. Plaintiff Handy applied to the Section 8 programs on December 22, 1978. Her name was placed on the waiting list but was withdrawn 14 days later when she was notified that a debt she allegedly owed to the YHA prevented her application from being processed.
The plaintiffs seek injunctive relief, a declaratory judgment, damages and such other equitable relief as the court may grant. The basis for their claim is four-fold:
1. That YHA's policy of excluding otherwise eligible families from Section 8 housing programs on the basis of alleged indebtedness to YHA violates the U. S. Housing Act and federal regulations governing the Section 8 program;
2. That HUD's approval of YHA's "indebtedness" policy constituted rule making without the benefit of the notice and publication procedures mandated by the Administrative Procedure Act (APA), 5 U.S.C. §§ 551 et seq., and is, therefore, in violation of the APA and plaintiffs' right to due process of law.
3. That the "indebtedness" policy violates plaintiffs' right of substantive due process under the fourteenth amendment; and
4. That YHA's "indebtedness" policy violates plaintiffs' right to equal protection under the fourteenth amendment.
Defendants filed a motion to dismiss or in the alternative for summary judgment and plaintiffs filed a cross-motion for summary judgment.
In order to effect the stated purpose of providing low income housing under 42 U.S.C. §§ 1437 et seq., Congress specifically recognized the need to vest the maximum amount of power and responsibility with the local public agencies to promote efficient management of the programs. This was expressly stated in 42 U.S.C. § 1437, encaptioned Declaration of Policy, which states in pertinent part: "It is the policy of the United States . . ., to vest in local public housing agencies the maximum amount of responsibility in the administration of their housing programs." Consistent with this declaration of policy, HUD, through its regulations, vested in the local housing authorities the right to make reasonable policy decisions not specifically authorized in the USHA. Specifically, 24 C.F.R. § 882.209(f) (1979) provides, "If an applicant is determined by the PHA to be ineligible on the basis of income or family composition, or for any other reason . . . ." (emphasis added). This provision clearly indicates that income and family composition were not to be the only criteria used in determining eligibility for Section 8 housing. Further, 24 C.F.R. § 882.204(b)(1)(i)(c) (1979) provides that an equal opportunity ...