In This Issue

• Are Minority Business Plans Lawful?
• Section 8 Assistance and Family Members
  • The Ohio Experience
  • On the Other Hand
• Can Section 8 Tenancy with a Relative be Allowed?
• HQS Violations and Section 8 Assistance Termination

Are Minority Business Plans Lawful?

Lawrence F. Feheley

Many PHAs have considered and/or adopted Minority Business plans, designed to increase minority participation in PHA contracts and expenditures. A recent appellate court decision in Ohio, while not involving a PHA, casts doubt on the legality of many of these plans.

In Cleveland Construction, Inc. v. City of Cincinnati, 2006-Ohio-6452 (Ham. Co. 2006), the City had a “Small Business Enterprise” program, whereby bidders for construction contracts were evaluated on the basis of a “good faith effort” to meet the City’s proposed SBE participation goal (which in this instance was 35%). The qualified SBE subcontractors were essentially minority subcontractors. The bid of the Cleveland Construction Company was not accepted because of its failure to achieve the 35% SBE participation. They sued.

The appeals court ruled that the SBE bid criterion was unconstitutional, even though it called only for good faith efforts and not rigid quotas. The court found that the requirement “pressured or encouraged” contractors to hire minority subcontractors, which constituted an unconstitutional racial preference.       

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Section 8 Assistance and Family Members

The Ohio Experience

Melinda Smith participated in the Section 8 voucher program in Hamilton County, Ohio, administered through the Hamilton County Department of Community Development. She lived in the unit with her two minor sons. In July, 2000, when the police found that the children had been left alone in deplorable conditions, the two boys were removed and placed in the custody of their grandmother. Thereafter, the two boys returned to live with their mother, even though custody was not returned to her. When the State learned the boys were living with their mother, in April, 2003, they were returned once again to the grandmother. The boys then stayed with Ms. Smith on weekends, holidays, and during the summer.

When Smith completed her application for Section 8 assistance, she listed the two boys as family members and she was approved for a two-bedroom unit. Her only source of income was Social Security benefits for one of her sons who was disabled. When the Social Security Administration notified her that she was not entitled to the disability benefits because she did not have custody of the son, she went to the PHA to report a diminished change in her household income. When the PHA learned that she did not have custody of the boys, it terminated her Section 8 assistance because she had listed the sons as household members. Ms. Smith appealed her termination to the Ohio Court of Common Pleas.

The County defended on the ground that HUD Regulations, 24 C.F.R. §982.552, provide that a PHA may terminate assistance if any member of the family has “committed fraud, bribery, or any other corrupt criminal act” in connection with a federal housing program. Since Smith fraudulently claimed her sons were living with her, in order to live in a larger unit and receive a higher rent subsidy, the PHA argued the termination was justified.

The Court of Appeals for Hamilton County disagreed. The court ruled that it would not allow a termination of assistance “for any and all errors arising from the failure to submit true or complete information.” Instead, in order to terminate assistance the tenant must have acted “fraudulently” in listing her sons as household members. In this case, the court found that no fraud was proven:

“Because neither the federal regulations nor DCD’s administrative plan specifically define the meaning of a household member or family composition, we are only left with the general guidelines of Section 982.201, Title 24, C.F.R. and the code’s requirement that “no other person [i.e., nobody but members of the assisted family] may reside in the unit.” Under this section, a family can include a single person or a group of persons including a child or children. The code does not distinguish between children who spend time between two households, as the case may be with divorced parents, nor does it require that an adult have legal custody of a child for the child to be considered a household member. But the code does state that “a child who is temporarily away from the home because of placement in foster care is considered a member of the family.” Based on these regulations, we are convinced that it was perfectly reasonable for Smith to have listed her children as household members because they spent weekends, holidays, and summers with her.”

Since there was no proof of fraud in this case, the Court ruled that the PHA did not have the right to terminate the Section 8 voucher assistance. [Smith v. Hamilton County, 2007-Ohio-1725 (Ham. Co. 2007)].

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On the Other Hand

A similar case arose in Massachusetts. In that case, the PHA terminated a tenant’s Section 8 voucher because she did not report her husband as a family member or his income as family income. Gammons v. Mass. Dept. of Housing and Comm. Dev., 2007 WL 1385704 (D. Mass. 2007). However, unlike the Ohio case, this case did not appear to be an innocent or justifiable failure to provide information.

In the Gammons case, the PHA had evidence that the tenant’s husband lived in the unit, he listed the tenant’s address as his address on his driver’s license, the husband’s bills were sent to the tenant’s address, and the tenant had a joint bank account with her husband. Nonetheless, the tenant claimed that her husband did not live with her.

The PHA determined that the tenant falsified her family composition and family income. The federal court, reviewing the PHA findings and applying a deferential standard of review, ruled that the PHA properly terminated the Section 8 assistance.

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Can Section 8 Residency with a Relative be Allowed?

HUD Regulations prohibit a Section 8 tenant from using the assistance payment to rent from a blood relative who also lives in the assisted unit. 24 C.F.R. §982.615(b). That prohibition seems to be fairly straightforward and unambiguous. However, as is the case in many situations, the clear mandate may not suffice where a disability is involved.

In Garcia v. Washington Dept. of Housing Services, 2006 WL 897987 (D. Ore. 2006), a Section 8 tenant sought a reasonable accommodation in the form of a waiver from the rule to allow him to lease a unit from his brother. The tenant suffered from schizophrenia, and he claimed that he had to live with his brother because (a) the tenant required assistance and the voucher was the only way he could compensate his brother for his housing and care, and (b) without rental assistance his brother could not afford to live with and care for the tenant. The PHA denied his accommodation request on the ground that the HUD Regulations prohibit the living arrangement. However, the HUD Regulations also provide that the PHA may approve such a living arrangement if the PHA “determines that approving the unit would provide reasonable accommodation for a family member who is a person with disabilities.” 24 C.F.R. §982.306(d).

The Court essentially ruled that the Fair Housing Act, 42 U.S.C. §3604, which requires accommodation of the disabled, trumps the HUD Regulations. Therefore, a PHA has an “affirmative obligation” to make a reasonable accommodation in order to allow a disabled tenant to live in an assisted unit, even if it means modifying or making an exception to administrative rules and policies.

[Source: Housing Development Reporter, Current
Developments, 4/24/2006 issue, pp. 280-281].

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HQS Violations and Section 8 Assistance Termination

How much does a PHA have to consider “mitigating circumstances” when terminating a Section 8 tenant’s assistance for breach of HQS standards? According to an appellate court in Massachusetts, the PHA does not have to take mitigating factors into account. Carter v. Lynn Housing Authority, 66 Mass. App. Ct. 117 (Mass. App. 2006).

In this case the PHA notified the tenant that Section 8 assistance was to be terminated for violation of HQS standards and damage to the housing unit. After the termination was upheld in the PHA’s hearing process, the tenant appealed to the state court. The trial court ruled that the PHA was required to consider other factors in making the assistance termination decision, such as “the seriousness of the case, the culpability of individual family members, mitigating circumstances related to the disability of a family member and the effects of termination of assistance on other family members.” The trial court ordered that the assistance be reinstated.

The appellate court did not agree. The appeals court relied on HUD Regulations, which require assisted families to comply with HQS, and which require PHAs to take prompt and vigorous action when the standards are violated. Although the PHA “may” consider other factors beyond the HQS violations, it is not required to do so. 24 C.F.R. §982.552.

[Source: Housing Development Reporter, Current
Developments, 5/8/2006 issue, p. 312].

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