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Hayes v. Harvey

United States Court of Appeals, Third Circuit

October 18, 2017

THEODORE HAYES; AQEELA FOGLE, Appellants
v.
PHILIP E. HARVEY

          Argued January 18, 2017

         On Appeal from the United States District Court for the Eastern District of Pennsylvania (E.D. Pa. No. 2-15-cv-02617) District Judge: Honorable Nitza I. Quiñones Alejandro

          Michael Donahue, Esq. Rachel Garland, Esq. [ARGUED] George D. Gould, Esq.Counsel for Appellants.

          Susanna Randazzo, Esq. [ARGUED] Kolber & Randazzo Counsel for Appellee.

          James R. Grow, Esq. National Housing Law Project Counsel for Amicus Curiae.

          Before: FISHER, [*] HARDIMAN, and GREENAWAY, JR., Circuit Judges.

          OPINION

          FISHER, CIRCUIT JUDGE.

         In this appeal, we must decide whether the enhanced voucher provision of the United States Housing Act of 1937, 42 U.S.C. § 1437f(t), requires property owners to continuously renew enhanced-voucher tenancies. Theodore Hayes and Aqeela Fogle (the Hayes family) are a low-income family whose rent is subsidized by enhanced voucher assistance. Their eligibility to receive enhanced vouchers is contingent upon their continued tenancy in a unit currently owned by Philip E. Harvey. Toward the end of their most recent lease term, Harvey notified the Hayes family that he would not renew their lease. The Hayes family refused to vacate the premises, arguing that as enhanced-voucher tenants, they have an enforceable "right to remain" in their unit as long as it is offered for rental housing. The District Court disagreed and granted Harvey's motion for summary judgment. Because we conclude that the enhanced voucher provision does not obligate property owners to renew enhanced-voucher tenancies after the initial lease term, we will affirm.

         I. Background

         A. Statutory Background

         Since 1974, the federal government has provided rental assistance to low-income families through section 8 of the Housing Act, 42 U.S.C. § 1437f. Congress enacted section 8 with the express purpose of "aiding low-income families in obtaining a decent place to live and of promoting economically mixed housing." § 1437f(a). "[A] key means to that end is the creation of incentives for private owners to participate in the section 8 program." Barrientos v. 1801-1825 Morton LLC, 583 F.3d 1197, 1203 (9th Cir. 2009).

         Section 8 assistance is funded by the U.S. Department of Housing and Urban Development (HUD) and administered by local public housing agencies. 24 C.F.R. § 982.1(b)(1). Those agencies enter into Housing Assistance Payment (HAP) contracts with participating property owners. HAP contracts generally require that a lease between a property owner and tenant cover at least one year. 42 U.S.C. § 1437f(d)(1)(B)(i), (o)(7)(A). They also prohibit the property owner from "terminat[ing] the tenancy [during the term of the lease] except for serious or repeated violation of the terms and conditions of the lease, for violation of applicable Federal, State, or local law, or for other good cause." § 1437f(d)(1)(B)(ii), (o)(7)(C). Importantly, HAP contracts establish the maximum monthly rent a property owner may charge for each dwelling unit. § 1437f(c)(1)(A). A tenant's assistance is statutorily determined based on his or her household income, the unit's rent, and the rent for similar units in the market area (known as the payment standard). § 1437f(c)(3), (o)(2).

         There are two distinct assistance programs: project-based assistance and tenant-based assistance (or the Housing Choice Voucher program). Project-based assistance is provided directly to property owners-the subsidies are property-specific. Tenant-based assistance is provided directly to tenants-the subsidies are tenant-specific.

         In the 1990s property owners became eligible to opt out of project-based assistance programs. Congress and HUD sought to minimize tenant displacement, while also continuing to encourage property owner participation in section 8 programs. See Barrientos, 583 F.3d at 1203-05. So Congress enacted a notice requirement that prohibits a property owner from increasing rent or evicting tenants until he or she provides one year of written notice to HUD and the residing tenants that the HAP contract for project-based assistance will not be renewed. See § 1437f(c)(8). And the notice must inform tenants that "in the event of termination [HUD] will provide tenant-based rental assistance to all eligible residents, enabling them to choose the place they wish to rent, which is likely to include the dwelling unit in which they currently reside." § 1437f(c)(8)(A).

         But an ordinary voucher under tenant-based assistance does not cover a tenant's rent to the extent that it exceeds the applicable payment standard. § 1437f(o)(2)(B). And following a valid opt-out, property owners are no longer subject to limitations on what they may charge for rent. So to enable residents to "choose" to continue renting the "dwelling unit in which they currently reside, " § 1437f(c)(8)(A), Congress also enacted a new type of tenant-based assistance: enhanced voucher assistance, § 1437f(t).

         Although it is a type of tenant-based assistance, enhanced voucher assistance has elements of both project-based and tenant-based assistance. Like tenant-based assistance, enhanced voucher assistance is tenant-specific and participating tenants are required to contribute a statutorily determined portion of their income. Compare § 1437f(o)(2) (ordinary voucher assistance), with § 1437f(t)(1) (enhanced voucher assistance). Like project-based assistance, enhanced voucher assistance is property-specific. § 1437f(t)(1)(B). Tenants are eligible to receive enhanced voucher assistance during any period in which they remain in the property they resided in on the date of the property owner's opt-out from a project-based program (the "eligibility event"). § 1437f(t)(2). Should the tenant move or make the voucher available to another family, his or her assistance converts to ordinary tenant-based assistance. § 1473f(t)(1)(C).

         The primary "enhancement" of the assistance is that an enhanced voucher covers the difference between the tenant's contribution and the rent, even if the rent exceeds 110 percent of the fair market rent for similar units in the area. See §1437f(t)(1)(B). In other words, enhanced voucher assistance is not limited by a payment standard.

         B. Factual Background

         In 1982, Florence Hayes and her family moved into 538B Pine Street, Philadelphia, Pennsylvania-a four-bedroom unit in a duplex owned by Pine Street Associates. Pine Street Associates entered into a HAP contract with the Philadelphia Housing Authority (PHA), which provided rental assistance under a project-based program for its tenants, including the Hayes family.

         On January 9, 2008, Pine Street Associates notified HUD and the Hayes family that when its HAP contract expired on January 17, 2009, it would not be renewed. Accordingly, on January 17, 2009, the Hayes family's assistance converted from project-based to tenant-based. The Hayes family elected to remain and chose to do so with enhanced voucher assistance.

         Later that year, Pine Street Associates sold 538 Pine Street free and clear of any impediments, encumbrances, liens, or restrictions, to Philip E. Harvey. Harvey entered into a HAP contract with the PHA and a related lease with the Hayes family, agreeing to accept enhanced vouchers toward their rental obligations. The HAP contract set the maximum rent for the unit at $2, 400 per month, exceeding the applicable payment standard of $1, 546 per month by $854. While under the ordinary voucher provision the Hayes family would have to cover the rent to the extent that it exceeded $1, 546, because they were eligible for enhanced voucher assistance, the PHA covered the $854 difference. The lease had an initial termination date of April 30, 2011, subject to automatic renewal for another one-year term.

         In February 2015, Florence Hayes passed away and Theodore Hayes (Florence Hayes's son) was processed as head of household. Soon after, Harvey notified the PHA and Theodore Hayes that he would not renew the HAP contract or the Hayes family's lease upon the natural expiration of the lease term, citing Florence Hayes's passing and his desire to renovate and have his daughter live in the unit. And on May 1, 2015, when that lease term expired, Harvey sent a notice to vacate.

         C. Procedural History

         The Hayes family responded to the notice to vacate by filing a complaint in the District Court seeking declaratory relief and an order enjoining Harvey from initiating eviction proceedings. They argued in the District Court, and maintain on appeal, that the Housing Act's enhanced voucher provision, 42 U.S.C. § 1437f(t), creates an enforceable right to remain in their unit. Alternatively, they argued that if Harvey may terminate their tenancy, he may only do so for "cause, " and his stated reasons do not constitute good cause. Harvey responded that because he never participated in a project-based program, he is bound only by the terms of the HAP contract and related lease and not subject to any additional requirements imposed by section 8. The parties filed cross motions for summary judgment. The District Court granted summary judgment in favor of Harvey, denied the Hayes family's motion for summary judgment, and denied their motion for a preliminary injunction as moot. 186 F.Supp.3d 427 (E.D. Pa. 2016). The court concluded that while Harvey was subject to the terms of section 8, the enhanced voucher provision did not provide the Hayes family an "unfettered and perpetual right to remain, " and so Harvey was not precluded from termination. Id. at 433- 34. The Hayes family appealed and, pending this appeal, the District Court granted an injunction preventing Harvey from evicting the Hayes family.

         II. Jurisdiction and Standard of Review

         The District Court had jurisdiction under 28 U.S.C. § 1331. During the pendency of this appeal, Theodore Hayes moved out of the premises and the PHA processed Aqeela Fogle (Theodore Hayes's niece) as the head of household. Under Article III of the Constitution, our "exercise of judicial power depends upon the existence of a case or controversy." Rendell v. Rumsfeld, 484 F.3d 236, 240 (3d Cir. 2007) (quoting Intn'l Bhd. of Boilermakers v. Kelly, 815 F.2d 912, 914 (3d Cir. 1987)). "Article III demands that an actual controversy persist throughout all stages of litigation." Hollingsworth v. Perry, 133 S.Ct. 2652, 2661 (2013) (internal quotation marks omitted). When evaluating mootness we ask "whether changes in circumstances that prevailed at the beginning of the litigation have forestalled any occasion for meaningful relief." Rendell, 484 F.3d at 240 (internal quotation marks omitted). Because Theodore Hayes no longer resides in the unit, he does not have a personal stake in the outcome of this suit and we do not have jurisdiction to hear his claims. However, since Fogle still resides in the unit and, until she moves, is eligible for enhanced voucher assistance, there remains an occasion for meaningful relief. Thus, we are satisfied that the case remains a justiciable controversy under Article III.

         Our jurisdiction exists under 28 U.S.C. § 1291. Our review of the District Court's order granting summary judgment is de novo. Massie v. U.S. Dept. of Hous. & Urban Dev., 620 F.3d 340, 347 (3d Cir. 2010). We will affirm if, viewing the evidence in the light most favorable to the nonmoving party, "there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(a).

         III. Discussion

         The Hayes family argues that, as enhanced-voucher tenants, they have a right to remain in unit 538B because they have not moved since the unit was converted from project-based to tenant-based assistance, they have not provided the voucher to another family, the property continues to be offered as rental housing, and Harvey does not have cause to terminate their tenancy. Unless and until any of the above circumstances change, they assert Harvey must continually renew their lease. Harvey, on the other hand, argues that because he purchased the property "free and clear, " he is not subject to section 8's terms and conditions and is under no obligation to renew their lease. We conclude that the manner in which Harvey purchased the property is not dispositive. Harvey's rights and duties under the section 8 program are set forth in the HAP contract and related lease.[1] However, for the reasons that follow, we conclude that federal law does not impose on property owners a requirement of cause to terminate enhanced-voucher tenancies through nonrenewal.

         This appeal presents an issue of statutory interpretation, so we start with an examination of the statute's plain language. See Rosenberg v. XM Ventures, 274 F.3d 137, 141 (3d Cir. 2001). If the statutory language is unambiguous, and the "literal application of the statute" will not "produce a result [either] demonstrably at odds with the intentions of its drafters" or "so bizarre that Congress could not have intended it, " we need not consider the statutory purpose or legislative history. Doe v. Hesketh, 828 F.3d 159, 167 (3d Cir. 2016) (internal quotation marks omitted).

         A. The Opt-out Provision

         We begin with section 8 of the Housing Act, 42 U.S.C § 1437f, because the Hayes family initially received project-based assistance to rent unit 538B from Pine Street Associates. Since Pine Street Associates opted out of a project-based program, we look to the Housing Act's opt-out provision, § 1437f(c)(8).[2] In addition to imposing specific obligations on HUD and the property owner, the opt-out provision clearly contemplates the property owner having a right to terminate an assisted tenancy at some point following a valid opt-out from a project-based program.

         First, subparagraph (A) makes clear that an opting out property owner must provide notice of his or her intention not to renew the HAP contract to HUD and to the affected tenants, and that following termination of the HAP contract, HUD will provide tenant-based assistance to the affected tenants. See § 1437f(c)(8)(A). Although the forthcoming tenant-based assistance provides affected tenants with the financial means to "choose the place they wish to rent, which is likely to include the dwelling unit in which they currently reside, " nothing in § 1437f(c)(8)(A) obligates the property owner to renew expired leases. Second, subparagraph (B) provides, "the owner may not evict the tenants or increase the tenants' rent payment until such time as the owner has provided the notice [of opt-out] and 1 year has elapsed." § 1437f(c)(8)(B). But it is silent on a property owner's termination rights following that notice period.

         The parties do not dispute both that Pine Street Associates satisfied its obligations under the opt-out provision and that the Hayes family's assistance converted to tenant-based assistance. Because termination of a HAP contract for project-based assistance is a qualifying "eligibility event" for enhanced voucher assistance, see § 1437f(t)(2), we look next to § 1437f(t), the enhanced voucher provision.

         B. The Enhanced Voucher Provision

         The enhanced voucher provision first states that unless explicitly provided for in 42 U.S.C § 1437f(t)(1)(A)-(D), "[e]nhanced voucher assistance . . . shall be voucher assistance under subsection (o)." § 1437f(t)(1). The threshold question is therefore whether § 1437f(t)(1) limits property owners' nonrenewal rights. If it does not, we look to nonrenewal under the ordinary voucher's termination provision, § 1437f(o)(7)(C). We note at the outset that nothing in the enhanced voucher provision explicitly speaks to termination generally, much less to termination in the context of nonrenewal.

         It is undisputed that subparagraphs (A) and (D) do not limit property owners' nonrenewal rights. They provide that an assisted family "shall pay as rent no less than the amount the family was paying on the date of the eligibility event, " § 1437f(t)(1)(A), unless the family's income "declines to a significant extent, " § 1437f(t)(1)(D).

         The parties dispute whether subparagraph (B) creates a right to remain, and if it does, whether and to what extent that right is enforceable against property owners. They also dispute whether subparagraph (C) exhausts the ways that an assisted family loses its eligibility to receive enhanced voucher assistance.

         Subparagraph (B) speaks to HUD's obligation to provide the assisted family with the financial means to remain in the event that the family elects to do so. It states in relevant part:

[T]he assisted family may elect to remain in the same project in which the family was residing on the date of the eligibility event for the project, and if, during any period the family makes such an election and continues to so reside, the rent for the dwelling unit of the family in such project exceeds the applicable payment standard established pursuant to subsection (o) of this section for the unit, the amount of rental assistance provided on behalf of the family shall be determined using a payment standard that is equal to the rent for the dwelling unit (as such rent may be increased from time-to-time) . . . .

         § 1437f(t)(1)(B). The language "the assisted family may elect to remain" plainly does not limit property owners' nonrenewal rights. Our dissenting colleague, however, suggests that it does, because "extending this right to a tenant necessarily limits the rights of a landlord: if a statute guarantees tenants hot water, it also limits a property owner's right not to install hot water plumbing." Dissenting Op. at 4. This analogy is inapt. The statute does not guarantee the tenant an unconditional right to remain at the property. Rather, it guarantees the tenant the financial support necessary to pay a higher rent if the lease is renewed. Nowhere does the statute require the landlord to renew the tenant's lease indefinitely.

         We recognize that a "statute should be construed to give effect to all its provisions, so that no part will be inoperative or superfluous, void or insignificant, " Corley v. United States, 556 U.S. 303, 314 (2009), that § 1437f(c)(8)(A) already provides a right to remain during the year following a property owner's notice of opt-out from a project-based program, and that § 524(d) of the Multifamily Assisted Housing Reform and Affordability Act of 1997, Pub. L. No. 105-65, tit. V, subtit. A, 111 Stat. 1344, 1408-09 (codified as amended at 42 U.S.C. § 1437f note), already obligates HUD to provide enhanced vouchers to eligible families. Still, for the reasons that follow, we do not believe that declining to require property owners to continuously renew enhanced-voucher tenancies renders the "may elect" language superfluous or otherwise meaningless.

         We need not read past § 1437f(t)(1)(B)'s plain language to identify its role in the statutory scheme. Following the initial notice year, § 1437f(c)(8)(A) obligates HUD to provide assistance "enabling [the assisted family] to choose the place they wish to rent, which is likely to include the dwelling unit in which they currently reside." § 1437f(c)(8)(A). But if the post-opt-out rent for the "unit in which they currently reside" exceeds the payment standard under § 1437f(o)(1)(B), how can tenants be assured that HUD will meet its obligation under § 1437f(c)(8)(A)? Enter subparagraph (B) of the enhanced voucher provision, § 1437f(t)(1)(B). It obligates HUD to provide the assisted family with the financial means to remain after the notice period even if the required assistance exceeds the ordinary voucher's payment standard. The rent becomes its own unit-specific payment standard. Hence the term "enhanced voucher." In order for an assisted family to actually benefit from that assistance, § 1437f(t)(1)(B) necessarily requires that enhanced vouchers be credited toward their rental obligations. This ensures that, so long as the family remains eligible under § 1437f(t)(1)(C), they may exercise their election to remain without being required to pay more than their statutorily prescribed portion of the rent. It makes their election to remain meaningful.[3]

         We next turn to subparagraph (C), which states in relevant part:

[S]ubparagraph (B) . . . shall not apply and the payment standard for the dwelling unit occupied by the family shall be determined in accordance with subsection (o) [the ordinary voucher provision] if-(i) the assisted family moves, at any time, from such project; or (ii) the voucher is made available for use by any family ...

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