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Business Association of University City v. Landrieu

decided: August 5, 1981.

BUSINESS ASSOCIATION OF UNIVERSITY CITY, UNIVERSITY CITY BUSINESS ASSOCIATION, INC., CHERYL BETHEA, AND CEDAR PARK COMMUNITY DEVELOPMENT CORPORATION
v.
LANDRIEU, MOON, SECRETARY OF THE DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT, AND CITY OF PHILADELPHIA, AND REDEVELOPMENT AUTHORITY OF THE CITY OF PHILADELPHIA AND I.B.I.D. ASSOCIATES, RESIDENT ADVISORY BOARD, AND TENANT ACTION GROUP BUSINESS ASSOCIATION OF UNIVERSITY CITY AND UNIVERSITY CITY BUSINESS ASSOCIATION, INC., APPELLANTS



APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF PENNSYLVANIA (D.C. No. 80-03725)

Before Adams, Rosenn and Higginbotham, Circuit Judges.

Author: Higginbotham

Opinion OF THE COURT

Over the past two decades, Congress and several federal agencies have explored various policies for minimizing racial and economic segregation in American society. One such approach was recognized by this Court in Shannon v. HUD, 436 F.2d 809 (3d Cir. 1970). There, we held that the Civil Rights Act of 1968, 42 U.S.C. §§ 3601, 3608(d)(5) (1976), required the Department of Housing and Urban Development (HUD) to consider, before approving construction of proposed federally subsidized low income housing, its impact on racial concentration. The location of new housing, we observed, could lead to the "undue concentration of persons of a given race, or socio-economic group, in a given neighborhood," and thereby "have the "effect of subjecting persons to discrimination ... (or) ... substantially impairing accomplishment of the (integrative) object of the' " 1968 Civil Rights Act. Id. at 820. When reviewing locations for proposed low income housing, therefore, HUD was obligated to weigh the need for "desegregation of housing" through some institutionalized method. Id. at 821. Accord Otero v. New York City Housing Authority, 484 F.2d 1122 (2d Cir. 1973). In light of Shannon and the subsequent passage by Congress of the Housing and Community Development Act of 1974 (the Act), HUD has since promulgated regulations requiring its officials to consider, prior to the approval of a new low income housing project, the impact of the project on the concentration of racial and low income persons.

In this case, we are asked to review HUD's approval of a new low income project in light of these statutory and regulatory obligations. Because we find that HUD's decision was based on a consideration of the relevant factors and does not constitute an abuse of discretion, we will affirm the decision of the district court upholding HUD's approval.

I.

The Section 8 New Construction Program of the Housing and Community Development Act of 1974, 42 U.S.C. § 1437f(a) (1976) seeks to aid "lower income families in obtaining a decent place to live and (to promote) economically mixed housing." In Section 5301(c), Congress provided:

The primary objective of this chapter is the development of viable urban communities, by providing decent housing and a suitable living environment and expanded economic opportunities, principally for persons of low and moderate income.

The program stimulates construction by private developers of housing for low income families through a system of rent subsidies. Federal or state agencies normally provide low interest construction mortgages, underwritten by HUD, for private developers of approved construction projects for low income families.*fn1 After the project is built, HUD subsidizes the rental payments of the low income tenants under Section 8 up to a certain percentage of their income so they can afford housing which is at the same time economically profitable for the developer.*fn2

Although the actual rental subsidies are only extended after the housing is built and rented, the Section 8 program necessarily requires review and approval by HUD of a proposal before private or local government resources can be committed for construction. Under the administrative regulations, HUD normally advertises that it has available funds for sites in a particular geographic area. See 24 C.F.R. § 880.203 (1979).*fn3 Prospective developers submit for HUD's review their "preliminary proposals," which must detail the location, size, intended rents, along with other pertinent information concerning their proposed projects. See 24 C.F.R. § 880.205 et seq. (1979). The administrative regulations promulgated by HUD require its officials to review these proposals for compliance with technical, financial, fair-housing/equal opportunity, and environmental requirements. See §§ 880.208 et seq. (1979). Compliance with the regulations provide the basis for many of the claims by the plaintiffs in the present action, and are outlined below.

The developers of proposals which are found by HUD officials to be conditionally acceptable submit "final proposals," which, if accepted, provide the basis of the final agreement between HUD and the developer, called an "Agreement to Enter Into a Housing Assistance Payments Contract." See 24 C.F.R. § 880.214 (1979). The Housing Assistance Payments Contract is entered into by HUD upon the successful completion of the project by the developer.

The administrative regulations relevant to the present appeal direct HUD officials to review site selections for their impact on the concentration of minority and low income families. Rule 24 C.F.R. § 880.112(c)(1) (1979) requires that:

The site shall not be located in: (1) an area of minority concentration unless (i) sufficient, comparable opportunities exist for housing for minority families, in the income range to be served by the proposed project, outside areas of minority concentration, or (ii) the project is necessary to meet overriding housing needs which cannot otherwise feasibly be met in that housing market area.*fn4

Further, Rule 24 C.F.R. § 880.112(d) (1979) mandates:

The site shall promote greater choice of housing opportunities and avoid undue concentration of assisted persons in areas containing a high proportion of low income persons.

The present case concerns HUD's approval under Section 8 of a bid to construct low income housing at a site in West Philadelphia (the development). The land is owned by the City of Philadelphia. The previous administration in Philadelphia, according to all parties, compiled a "dismal" record in the construction of low income units in non-impacted areas. In May of 1979, after several earlier threats, HUD withheld 21 million dollars in block grants until the City Administration submitted an acceptable strategy for constructing 448 subsidized units for low and moderate income family households in non-impacted areas, and construction on at least 100 of these units had begun. App. at 446-47. The land at issue in the present case, which was originally designated for commercial use under the City's comprehensive plan, was rezoned on March 15, 1979 for residential use and offered to HUD as an acceptable location for non-impacted low income housing. A private developer, I.B.I.D. Associates, supported by the Philadelphia Office of Housing and Urban Development, proposed to build 70 low-rise federally subsidized townhouses on the presently vacant block.

The lot is located near the Northwestern border of the campus of the University of Pennsylvania, between 39th and 40th Streets and between Market and Ludlow Streets. This places the site on the northern border of Census Tract 88, which contains the University of Pennsylvania Campus and a great deal of the University and middle class community that lives adjacent to the University in West Philadelphia. Although there is some disagreement in definition, much of what is commonly referred to as "University City" is contained within this tract. At the time of the 1970 census, which is admittedly dated, the tract only had a 8.5% black population and a total 13.9% non-white population. App. at 423. The same tract was not densely populated having only a 23.2% family population. There has been some commercial development on the northern portion of the tract in the past few years, especially along Market Street, which runs directly North of the site. Nevertheless, a significant portion of the land, razed in anticipation of future economic development, is currently vacant. The census tract immediately to the West had a 18.6% black population and a total of 23.7% non-white population when the 1970 census was taken. Id.

Although the proposed site is on the northern border of the University Campus and residential community, it abuts what both parties agree is a poorer and more racially impacted section of Philadelphia. Census Tract 91, whose southern border runs along Market Street across from the proposed site, encompassed a 65.3% minority population, at the time of the 1970 census. Census Tract 92, whose southern border begins along Market Street two blocks to the West of the proposed development, had a 98.4% minority population at the time of the 1970 census. Directly across Market Street from the site in Tract 91 lies a Section 8 subsidized 20-story housing project named University Square. It contains 448 rental units for the elderly and disabled with a 50% black population. App. at 184. Another subsidized low-rise rental apartment, named Center Post Village, is situated immediately to the North of University Square. Seventy-eight of the 84 families living in that housing are black. The project proposed for 39th and Market Streets is expected to house a population which is 50% black.

Officials at HUD reviewed the proposal for the development at 39th and Market Streets as to its impact on concentration of minority and low income residents and its environmental effects. The developer made modifications to provide parks and sound barriers so as to separate the project from some of its commercial neighbors, as the ...


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