Court Won't Review HUD's Decision to Take Over Defaulting PHA

February 13, 2015

Facts: Under the Housing Act, HUD provides monetary assistance to PHAs for the development, operation, and maintenance of low-income housing. In exchange for the subsidy, PHAs must comply with federal regulations issued by HUD under the Housing Act. The terms of this grant agreement are set forth in Annual Contributions Contracts between HUD and the PHA.

Facts: Under the Housing Act, HUD provides monetary assistance to PHAs for the development, operation, and maintenance of low-income housing. In exchange for the subsidy, PHAs must comply with federal regulations issued by HUD under the Housing Act. The terms of this grant agreement are set forth in Annual Contributions Contracts between HUD and the PHA.

In this case, a PHA asked the court to terminate HUD’s control over it and to declare HUD’s 2013 transfer of the Section 8 voucher program illegal. In 1985, HUD determined that the PHA had substantially defaulted on its obligations. Accordingly, HUD elected to take possession of the PHA and the operation of its federally supported projects.

If a PHA substantially defaults on its obligation under such contract, the Housing Act grants HUD broad discretion to deal with the problematic PHA. For example, it authorizes HUD to: solicit proposals for alternative management of the housing or programs; petition certain courts for the appointment of a “receiver” of the PHA; and require the PHA to make other arrangements that are acceptable to HUD and in the best interest of housing program beneficiaries.

The Housing Act expressly prohibits judicial review of any decision that the Secretary makes under the section that gives HUD the broad discretion. Specifically, the act states: “A decision made by the Secretary under this paragraph shall not be subject to review in any court of the United States, or in any court of any State, territory, or possession of the United States [42 U.S.C. 1437d(j)(3)(E)].” HUD asked the court to dismiss the case.

Ruling: An Illinois district court granted HUD’s request and dismissed the case.

Reasoning: The court stated that the Housing Act unequivocally bars judicial review of decisions made under paragraph (3) of 42 U.S.C. 1437d(j)(3)(E). Accordingly, the court decided it couldn’t review HUD’s decision to take control of the PHA and has no authority to reverse that decision by “returning” control to the “Local Commissioners” as requested in the complaint.

  • City of East St. Louis v. HUD, January 2015

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