The opinion of the court was delivered by: Joyce Hens Green, District Judge.
MEMORANDUM OPINION AND ORDER
Plaintiffs Charlotte Housing for the Elderly ("Charlotte"),
Clinton Housing for the Elderly ("Clinton"), Monroe Housing for
the Elderly ("Monroe"), and Rocky Mount Housing for the Elderly
("Rocky Mount") are business partnerships that own and operate
housing developments in North Carolina. All four properties
share the same management company, namely Godley Management. The
that they should have received a payment and a rent adjustment
under Section 801 of the United States Housing Act,
42 U.S.C. § 1437f. Plaintiffs allege several claims against defendants
United States Department of Housing and Urban Development
("HUD") and the Secretary of HUD, Andrew Cuomo, including
violations of the Administrative Procedure Act ("APA"), breach
of contract, and mandamus. Both plaintiffs and defendants have
filed motions for summary judgment. The Court finds that HUD did
not wrongly withhold payment, and that HUD correctly determined
that plaintiffs are not eligible for a rent adjustment.
Accordingly, plaintiffs' motion for summary judgment is denied,
and summary judgment is granted in favor of the defendants.
In the late 1970's and early 1980's the four plaintiff
partnerships entered "Housing Assistance Payment Contracts"
("HAPs") pursuant to Section 8 of the Housing Act,
42 U.S.C. § 1437. Charlotte's contract was with the Charlotte Housing
Authority ("CHA"), while the other three plaintiffs entered
contracts with HUD. CHA was a public housing authority that
received HUD funding under Section 8, and in turn awarded
assistance to Charlotte.
A. Section 8 and Section 801
The Section 8 program was created to subsidize private
landlords renting to low income tenants. Under the program, a
"contract rent" was established for each unit, and HUD made
assistance payments to compensate owners for the difference
between the contract rent and the amount a tenant was actually
able to pay. See 42 U.S.C. § 1437f(c). The contract rent was
to be comparable to the rent charged for unassisted units. In
order to maintain a correct rate for contract rent, HUD was to
make yearly adjustments under either a "reasonable formula" to
be devised by HUD, or by comparing the contract rent to rental
rates in the same housing area. See id. § 1437f(c)(2)(A) &
HUD promulgated regulations under which an Annual Adjustment
Factor (AAF) would be applied to contract rents once per year if
the owner so requested, thereby increasing the contract rent.
24 C.F.R. § 880.609(a) & 888.200 et seq. Each year, HUD published
the AAF in the Federal Register, and upon request would adjust
the contract rent by multiplying it by the AAF. For example, the
adjustment for a unit with a rent of $100 during a year in which
the AAF equaled a 5 percent increase would result in a contract
rent of $105 for the next year:
In the 1980's, HUD became concerned that the AAF adjustments
were increasing contract rents above the local rental rates.
Thus, HUD began to conduct independent comparability studies of
area rents, and used those rental rates as a cap on contract
rates in that housing area. See Cisneros v. Alpine Ridge
Group, 508 U.S. 10, 14, 113 S.Ct. 1898, 123 L.Ed.2d 572 (1993).
Landlords subsequently brought suit against HUD, and the Ninth
Circuit ruled that the use of comparability studies to cap
contract rents was unauthorized. See Rainier View Associates v.
United States, 848 F.2d 988 (9th Cir. 1988).
In response, Congress enacted Section 801 of the Department of
Housing and Urban Development Reform Act, 103 Stat. 2057, which
amended Section 8(c)(2)(C) of the Housing Act. Section 801 made
clear HUD's authority to conduct independent comparability
studies, but also placed certain requirements on the studies,
and directed HUD to establish standards by which the studies
would be conducted. More importantly for this case, Section 801
included a provision through which landlords could be given a
lump sum in compensation for the lost rent, see § 801(a), and
a provision which permitted a one-time adjustment to contract
§ 801(d), in order to bring them closer to the level they should
have reached by that point in time. The plaintiffs' claims
involve both of these provisions.*fn1
Congress intended the lump sum retroactive payment and the
one-time rent adjustment to restore owners to approximately the
place they would have been had HUD calculated rent adjustments
according to the AAF adjustment formula throughout the
1980's.*fn2 In section 801 Congress established a new formula
for calculating AAF adjustments, which was used only for the
purpose of making retroactive calculations to supplement the
adjustments made in the 1980's. The section 801 calculation
multiplies the AAF by the contract rent minus the portion of the
rent attributable to debt service (the mortgage payment).*fn3
For example, if rent for a unit was $100, the AAF was 1.05, and
the debt service on the unit was $10, rent for the subsequent
year would be $104.50.
(1.05) ($100 − $10) $10 ? $104.50*fn4
Owners were eligible to receive the difference between the
contract rent adjustments as calculated under the section 801
formula and the contract rent adjustments they actually
received. Thus, if an owner should have received the $5 increase
in rent shown in the section 8 sample calculation provided
earlier, but had received only a $2 increase, the owner would be
eligible to receive $2.50 as a lump sum retroactive
The one-time adjustment provided in § 801(d) incorporates the
§ 801(a) AAF adjustment formula described above. Section 801(d)
provides that, upon request, the rent shall become the greater
of the contract rent already approved for that year, or the
contract rent as calculated by the § 801 AAF adjustment formula.
iii. Implementing Subsections of Section 801
Congress authorized HUD to promulgate implementing regulations
in § 801(e), and in 1991 HUD's regulations were codified at
24 C.F.R. § 888.301 et seq. ("1991 regulations"). The 1991
regulations required owners to request the lump sum retroactive
payment and the one-time rent adjustment within 60 days of the
mailing of an eligibility notice ...