HUD Lawfully Denied CDBG Funds to County

Facts: A New York county that had been a recipient of Community Development Block Grant and other federal housing funds asked a court to review the final administrative determinations by HUD to withhold those funds from the county for the 2011, 2013, and 2014 fiscal years.

A condition to be eligible for federal housing grants is the promise to affirmatively further fair housing (AFFH)—that is, to identify, analyze, and take the steps necessary to overcome the barriers to fair housing choice. From 2000 to 2006, the county received more than $50 million in federal funds making its AFFH representations all along the way. In 2009, a U.S. District Court found that the county had failed to meet its AFFH obligations and that all of the county’s certifications that it had or would affirmatively further fair housing were “false or fraudulent.”

In 2009, the county decided to settle with HUD and enter into a consent decree or a binding federal court order. According to the settlement, the county was required to pay $8.4 million to the federal government. In addition, the county was required to pay $21.6 million into the county’s account with HUD. The settlement provided that HUD would make those funds available to the county for the development of new affordable housing units that will affirmatively further fair housing in the county. Specifically, the settlement included the county’s duty to ensure the development of at least 750 new affordable housing units within seven years of the settlement. Another significant component of the settlement was the appointment of a monitor to conduct compliance assessments every two years “to determine whether the county has taken all possible actions under” the settlement, “including, but not limited to . . ., if necessary, taking legal action.”

HUD withheld the funds at issue here because, in HUD’s view, the county failed to provide an accurate certification that the funds would be administered in conformity with the Fair Housing Act and to affirmatively further fair housing, as required by federal law. To affirmatively further fair housing, the county was required to produce an analysis of impediments (AIs) to fair housing choice in addition to offering appropriate actions to overcome the effects of any identified impediments. HUD determined that the AIs that the county produced to obtain the funds at issue here were not acceptable under the standards mandated by the federal laws and regulations that govern the grant programs: Despite HUD’s assistance, encouragement, and guidance, the county refused to provide an adequate assessment of the impediments that local zoning ordinances presented to fair housing choice within the county, and to adequately identify the actions it would take to overcome the effects of any such impediments.

HUD asked the court for a ruling in its favor on the ground that its denial of funds to the county was not arbitrary and capricious or otherwise in violation of HUD’s grant of statutory authority.

Ruling: A New York district court granted HUD’s request.

Reasoning: The court determined that HUD acted within its discretion and lawfully when it denied funds to the county. The court ruled that the county had an obligation to make accurate certifications and to produce adequate AIs in order to obtain the funds. The court also found that there is no basis on the administrative record to find that HUD has acted arbitrarily or capriciously. The court found that HUD has acted with clarity and patience, repeatedly explaining its grounds for rejecting inadequate AIs and offering both guidance and assistance. Over and over again, HUD has given the county opportunities to amend its AIs, roadmaps to assist it in doing so, and additional time to demonstrate a willingness to comply with federal law.

• County of Westchester v. HUD, July 2015

Editor’s Note: On July 16, HUD published the Affirmatively Furthering Fair Housing (AFFH) final rule in the Federal Register. The rule replaces the current Analysis of Impediments requirement with a new Assessment of Fair Housing requirement for HUD-participating jurisdictions. On the same date, HUD also published a notice announcing modifications it’s making to the Fair Housing Assessment Tool for local governments and soliciting comments on those revisions. The Assessment Tool is intended to help local governments complete their Assessment of Fair Housing (AFH), as required by the AFFH regulations. Program participants required to complete the AFH are states and local governments receiving Community Development Block Grant, HOME Investment Partnerships, Emergency Solutions Grants, and Housing Opportunities for Persons with AIDS formula funding, and public housing agencies.