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May 21, 1975

Sadie E. COLE et al., Plaintiffs,
Carla A. HILLS et al., Defendants

Gesell, District Judge.

The opinion of the court was delivered by: GESELL

GESELL, District Judge.

 This class action was brought on behalf of the former tenants of a low-income, multi-family housing project which the Secretary of the Department of Housing and Urban Development decided to tear down. The facts are summarized in this Court's Findings of Fact and Conclusions of Law filed February 7, 1975, granting a preliminary injunction halting further demolition and permitting the tenants to return. Cole v. Lynn, 389 F. Supp. 99 (D.D.C.1975). The Government now moves to dismiss, or in the alternative for summary judgment, on the grounds that the Secretary's decision to demolish the project was a proper exercise of discretion. The defendants also seek to be relieved from certain portions of the Court's preliminary injunction.

 Defendants now attempt to justify as a proper exercise of discretion the Secretary's decision to demolish the project by arguing that the Secretary may not seek to preserve "housing for housing's sake" but must also give weight to his statutory duty to "eliminate blight." (Defendants' Memorandum in Support of Motion to Dismiss, 8-10). They argue that the project had become "blighted, vandalized, unattractive and unsafe" and that the area needed to be "revitalized" by the construction of single-family dwellings in accordance with the District of Columbia Government's master plan. *fn1"

 This argument, which makes explicit attitudes which were implicit in the contemporaneous decision documents, demonstrates that the Secretary has confused his role in slum clearance with his role in housing. Where Congress provided for slum clearance or urban renewal programs, that is the destruction of housing which is "serving an undisputed housing need," Cole v. Lynn, supra, 389 F. Supp. at 102, in the service of civic betterment, it required that at least as many low- and moderate-income housing units be created by the plan as are destroyed, unless the Secretary certifies that there is already a surplus of such housing in the area. 42 U.S.C. § 1455 (h). Because there is an acute housing shortage in the Washington area, the Secretary's decision to destroy this project, for what are now admitted to have been in part aesthetic reasons, has resulted in many of the tenants being forced into even more intolerable conditions. *fn2" To the extent the Secretary believed he could destroy this project on the grounds it had become a vertical slum without first determining that there was available in the area affordable replacement housing in comparable or better condition, not only for the individual tenants but for their economic class as a whole, he acted in derogation of the statutory scheme.

 This error was frankly acknowledged in oral argument when defendants' counsel maintained that although the project may appear to be serving a housing need in the city as a whole, when it is "dissected microscopically from the larger body" it can be seen to be "a blight." This kind of tunnel vision, which evaluates a project against the ideal of "safe, sanitary, decent" housing rather than in relation to the practical alternatives available, is capricious and arbitrary.

 The second ground advanced to defend the Secretary's decision is that he made a sound "business decision" in light of the prior history of the project. The Court has already held, Cole v. Lynn, supra, that the Secretary's decision was infected with several errors of statutory construction and, after re-examination, the Court adheres to its earlier holdings. Furthermore, there are disputed factual issues as to what factors actually influenced the Secretary's decision and in what degree. *fn3"

 According to the most recent estimates by HUD, upgrading the eight previously rehabilitated buildings containing 63 units to the standards of the housing code, and tearing down the two still standing which have not been rehabilitated, would cost only $139,000. (Staller Affidavit, May 14, 1975). Such expenditures are specifically permitted under § 207(l) of the National Housing Act, 12 U.S.C. § 1713(l). Congress contemplated that the Special Risk Insurance Fund would operate at a loss to be covered by appropriations. H.R.Rep.No. 1585, 90th Cong., 2d Sess. 13-14(1968). Unless there is a rational basis to believe more comparable units of housing can be provided by using the $139,000 to insure additional mortgages for new construction than by rehabilitating 63 existing units, the Secretary's "business decision" is unsound. The record indicates no such comparative analysis by HUD.

 In enacting 42 U.S.C. § 1441a(b) and (c) in August, 1974, Congress specifically found that HUD had "not directed sufficient attention and resources to the preservation of existing housing" and mandated a "greater effort" in that direction. There has been no showing that HUD's Property Disposition Handbook for Multifamily Properties, HM 4315.1 (Feb. 17, 1971), the operative source for staff decisions in this area, was changed in any way to reflect this explicit direction by Congress to concentrate more effort on saving existing housing. Moreover, HUD's analysts stopped with the conclusion that the project could not be operated profitably at fair market rents without an operating subsidy. Section 8(c)(1) of section 201(a) of Pub.L. 93-383, enacted August 22, 1974, a month before the final decision to demolish this project was made, specifically changed the law to provide that the Secretary might pay rent subsidies to individual tenants up to 20 percent in excess of fair market rentals. The conclusion that the project could not be operated was not, so far as this record shows, re-examined in the light of these new resources, nor has HUD seen fit to do so during the course of this litigation.

 The motion to dimiss will be denied, every indication in the record to date being that the Secretary's discretion has not been exercised in a rational manner.

 Experience has confirmed the Court's view that the ultimate destruction of the project through vandalism is certain, in spite of guards, unless the project is inhabited.

 The basis of the defendants' claim that it will cost $535,000 to restore the buildings, now inexplicably reduced to $139,000, has never been submitted to the Court. Moreover, HUD uses complete compliance with the housing code as its benchmark in generating cost estimates. This is substantially more than required by the Court's Order. No major rehabilitation is contemplated pendente lite, but only that HUD return the buildings to the minimally habitable conditions existing as of the time it evicted the tenants. On March 7, 1975, at defendants' instance, the Court specifically clarified its Order in open court to make clear that no repairs need be undertaken of units except those needed to house ...

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