The opinion of the court was delivered by: GESELL
This suit involves the constitutionality under the Supremacy Clause
of the District of Columbia rent control ordinance
as it applies to housing projects that are federally insured under § 220 of the National Housing Act.
Plaintiffs contend that the local law is invalid because there has been a federal preemption of the authority to regulate rents in such projects. Both sides have moved for summary judgment, and the question has been fully briefed and argued. Although the Department of Housing and Urban Development (HUD) has been notified of this litigation, it has not entered an appearance. Finding no genuine issue as to any material fact, the Court deems the matter appropriate for summary judgment, and grants the defendants' motion.
Section 220 of the National Housing Act was designed "to aid in the elimination of slums and blighted conditions and the prevention of the deterioration of residential property . . . ."
The statute seeks to accomplish these goals by attracting private investors through a system of federally guaranteed mortgages. Tenants' Council of Tiber Island -- Carrollsburg Square v. Lynn, 162 U.S.App.D.C. 61, 497 F.2d 648, 650 (1973), cert. denied, 419 U.S. 970, 95 S. Ct. 235, 42 L. Ed. 2d 186 (1974). In insuring such mortgages, the Secretary of HUD is empowered to "require such mortgagor to be regulated or restricted as to rents or sales, charges, capital structure, rate of return and methods of operation . . . ."
Pursuant to this authorization, the Secretary has promulgated the following regulation:
(e) Rents and charges. No charge shall be made by the mortgagor for the accommodations, facilities or services offered by the project in excess of those approved by the Commissioner in writing prior to the opening of the project for rental. In approving such charges and in passing upon applications for changes, consideration will be given to the following and similar factors:
(1) Rental income necessary to maintain the economic soundness of the project.
(2) Rental income necessary to provide reasonable return on the investment consistent with providing reasonable rentals to tenants.
Consonant with this regulation, the Secretary entered into an agreement with the plaintiffs that reads in pertinent part:
4(a) Owners shall make dwelling accommodations and services of the project available to occupants at charges not exceeding those established in accordance with a schedule approved in writing by the Commissioner . . . .
Thus, whatever may be the Secretary's authority, he has undertaken only to establish maximum rents.
Regulation 74-20 was enacted by the District of Columbia Council pursuant to the District of Columbia Rent Control Act of 1973,
and was approved by Mayor Walter E. Washington on August 1, 1974. It sets maximum rents for housing in the District of Columbia, the amount of the maximum for any given unit being equal to 112.32% of the rent charged on February 1, 1973.
However, the Regulation recognizes that the landlord is entitled to "a reasonable return from such housing accommodations," and authorizes the District of Columbia Housing Rent Commission to "make such individual adjustments . . . of the maximum rent ceilings as may be necessary to correct hardships of [sic] other inequities . . . ."
Both sides agree that Regulation 74-20 applies to § 220 federally insured housing projects, and that the ceiling rental presently set under the Regulation (absent any hardship adjustment) is less than the maximum approved for the plaintiffs' project by the Secretary. But "this difference poses, rather than disposes of the problem" under the Supremacy Clause, Florida Lime & Avocado Growers, Inc. v. Paul, 373 U.S. ...