PHA Must Compensate Owner for Cost of Submitting Comparability Study

October 31, 2010

Facts: Two site owners sued the Illinois Housing Development Authority (IHDA), alleging that IHDA breached its housing assistance payments (HAP) contracts by: failing to increase contract rents or by raising contract rents by less than the amount called for in the HAP contracts; reducing the automatic Annual Adjustment Factor (AAF) by .01 for units occupied by the same family in consecutive years; and requiring the submission of rent comparability studies without compensating the owners for the costs incurred in the submission of those studies.

Facts: Two site owners sued the Illinois Housing Development Authority (IHDA), alleging that IHDA breached its housing assistance payments (HAP) contracts by: failing to increase contract rents or by raising contract rents by less than the amount called for in the HAP contracts; reducing the automatic Annual Adjustment Factor (AAF) by .01 for units occupied by the same family in consecutive years; and requiring the submission of rent comparability studies without compensating the owners for the costs incurred in the submission of those studies.

Ruling: The court ruled in favor of one of the owners on the issue of increasing rents, but against the other one. The court ruled against both owners on the issue of the AAFs. Finally, the court ruled in favor of one owner and against the other on the issue of compensation for the submission of a rent comparability study.

Reasoning: The court concluded that IHDA had breached one of the HAP contracts by not automatically adjusting rents on each anniversary date. IHDA had not increased contract rents at that site since 2002, the court noted. However, regarding the other HAP contract, the court reasoned that the essential meaning of the provision in the contract was to provide rent adjustments annually on the contract anniversary date. But since the owner didn't request a rent adjustment from 2003 through 2009, IHDA was not obligated to adjust contract rents annually, and therefore cannot be liable for failing to adjust the contract rents during those years.

On the issue of the .01 reduction in AAFs for non-turnover units, the court concluded that IHDA didn't violate the HAP contracts of either owner. While the contracts require that HUD publish in the Federal Register AAFs and “the basis for their determination,” nothing in the contracts requires factual findings or a demonstration that costs are lower for holdover residents.

On the issue of rent comparability studies, one of the owners didn't present any evidence showing that it submitted a rent comparability study during the agreed statutory period, while the other did. Therefore, that owner is entitled to be compensated for the cost of the study.

  • Greenleaf v. Illinois Housing Development Authority, September 2010

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