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Media Alerts - Cty. of Westchester v. U.S. Dep't of Hous. & Urban Dev.--Second Circuit
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September 27, 2015
  Cty. of Westchester v. U.S. Dep't of Hous. & Urban Dev.--Second Circuit
Headline: Second Circuit Holds that HUD's Withholding of Funds from Westchester County for 2011, 2012, and 2014 Did Not Violate Federal Law, but that HUD Must Delay Its Reallocation of the 2014 Funds Until the County Exhausts its Right of Further Review

Area of Law: Housing/Administrative

Issue Presented: Whether HUD was entitled to withhold funds from Westchester County on grounds that the county - in its analysis of impediments to fair housing - failed to adequately consider the potential exclusionary impact of its various municipalities' zoning laws.

Brief Summary: This appeal arose from a long-running conflict between Westchester County and the United States Department of Housing and Urban Development ("HUD"). The conflict began in 2006, when the Anti-Discrimination Center of Metro New York alleged that Westchester had falsely certified to HUD - in order to obtain housing grants - that it would "affirmatively further fair housing," when in fact it was failing to analyze impediments to fair housing or to develop strategies to overcome those impediments. In 2009, Westchester and HUD reached a settlement whereby, among other things, Westchester agreed to take numerous steps to promote "fair housing," including building 750 units of affordable housing over the next seven years, doing an analysis of impediments to fair housing in the county, passing a ban on "source of income" discrimination by landlords, and working with a monitor to oversee compliance. After this settlement was reached, Westchester continued to apply for HUD funds. HUD, however, has withheld these funds on grounds that Westchester did not satisfy all of these conditions. This particular appeal focused on whether HUD could reject Westchester's application on the basis of its determination that Westchester's analysis of fair housing impediments had failed to adequately consider the potential exclusionary impact of its different municipalities' zoning laws. The Second Circuit held that HUD could do so, explaining that "because exclusionary zoning can violate the FHA [Fair Housing Act], and because HUD is required to further the policies of that statute, it was reasonable for HUD to require the County" to include such an assessment in its analysis. The court further held that HUD must wait to reallocate Westchester's potential 2014 funds until Westchester exhausted its right for further review.

Extended Summary: In 2006, the Anti-Discrimination Center of Metro New York brought an action alleging that Westchester County had filed false claims from 2000-2006 in order to obtain nearly $52 million in federal housing grants. Its lawsuit claimed that although Westchester had certified that it would affirmatively further fair housing, and that it had analyzed impediments to fair housing and/or developed strategies to overcome them, the county had actually failed to do so.

In 2009, Westchester and HUD reached a settlement that obligated Westchester to pay back $30 million to the federal government, as well as to spend $30 million of the county's own money to build 750 affordable housing units over the next seven years. The settlement decree also required Westchester to provide HUD with an analysis of impediments to fair housing within 120 days, provided for a monitor to be put in place to ensure compliance, and to promote - a through county legislation - a ban on "source-of-income" discrimination (i.e., legislation making it illegal for owners to refuse to rent to a tenant because that tenant's income comes from Social Security or public assistance programs).

After 2009, Westchester continued to apply for funds from HUD, but its application was denied for several reasons. The instant appeal focused on HUD's decision to deny Westchester's application for funding on the basis of its determination that Westchester's analysis of fair housing impediments had failed to adequately consider the potential exclusionary impact of its various municipalities' zoning laws. (Westchester had concluded that there was no evidence of exclusionary zoning in any of the 31 eligible municipalities in Westchester County; by contrast, the monitor had concluded that certain municipalities had zoning that was socioeconomically exclusionary and/or had a discriminatory impact on racial and ethnic minorities.)

The United States District Court for the Southern District of New York rejected Westchester County's challenge to HUD's determination, and the Second Circuit affirmed. As the court explained, under the Administrative Procedure Act (APA), a reviewing court must uphold agency action unless it is arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with the law. Here, the court held that HUD's decision had been in accordance with the Fair Housing Act, and neither arbitrary nor capricious, given that exclusionary zoning can violate the FHA and that the monitor had produced detailed reports that refuted Westchester's contention that no municipalities had exclusionary zoning ordinances.

The Second Circuit also rejected Westchester's argument that HUD had violated two statutory provisions that prohibit HUD from requiring jurisdictions to change their zoning laws to qualify for funding. The court explained that HUD had never told Westchester that it would receive funds only if its municipalities actually changed their laws. "Instead, HUD required the County to assess and analyze whether certain zoning laws in the jurisdiction impeded fair housing and, if so, to identify a plan to overcome the effects of such impediments," the court wrote. The court described Westchester as having "reached the same boilerplate conclusion for every municipality," and that HUD had "determined that this repetitive conclusion for each municipality" was not supported by the evidence.

The court emphasized, however, that "this decision does not mean that any of Westchester County's municipalities violated the Fair Housing Act or engaged in discrimination on the basis of race. We merely conclude that HUD's decision - in the context of providing federal funds - to require the County to redo its zoning analysis and to develop strategies to overcome impediments to fair housing did not violate federal law. In short, there has been no finding, at any point, that Westchester actually engaged in housing discrimination."

Panel: Cabranes, Raggi and Wesley

Argument Date: 9/22/15

Date of Issued Opinion: 9/25/15

Docket Numbers: 13-cv-2741, 15-cv-1992

Decided: Affirmed, Temporary Injunction Vacated in Part

Case Alert Author: Gavin Michael Strube

Counsel: Robert F. Meehan, Westchester County Attorney for Plaintiff-Appellant County of Westchester and David J. Kennedy, Assistant United States Attorney for the Southern District of New York for Defendant-Appellee U.S. Dep't Hous. & Urban Dev.

Author of Opinion: Per Curiam

Case Alert Circuit Supervisor: Emily Waldman

    Posted By: Emily Waldman @ 09/27/2015 08:51 PM     2nd Circuit  

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