County Claims Major Victory in Court Over HUD– US Court of Appeals Says HUD Actions Are Reviewable by the Courts

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WPCNR WESTCHESTER LAW JOURNAL. From the Westchester County Department of Communications. February 18, 2015 (EDITED):

As County Legislature Chair Michael Kaplowitz informed WPCNR earlier this afternoon in a statement, the U.S. Court of Appeals for the Second Circuit has rejected claims by the Department of Housing and Urban Development that HUD’s actions are not reviewable by the courts.

Westchester County Executive Robert P. Astorino had argued that “HUD acted in an arbitrary and capricious manner” when it began withholding federal funds from the county in 2011.

The appeals court vacated a lower court ruling and held that HUD’s actions are “subject to judicial review.”

Astorino said this was vindication for the county. “A lot of people asked, why are we fighting HUD?” Astorino said. “Today’s decision is a clear statement that the county was right to defend local zoning.”

“The Second Circuit’s ruling is a major victory for due process against an aggressively overreaching federal bureaucracy,” Astorino said. “Just like everyone else, HUD has to follow the law. In this case, HUD was making up its own rules. That’s not right and the court has now made it very clear that actions by HUD are subject to judicial review.”

The case stems from HUD’s decision to start withholding Community Development Block Grants (CDBG) and other federal funds based on what the agency claimed was its “discretionary” power. But the appeals court rejected HUD’s arguments, pointing to a number of statutes limiting the agency’s authority.

“We conclude that the statutes governing HUD’s administration of the relevant grants provide meaningful standards constraining HUD’s exercise of discretion and that HUD’s actions are thus subject to judicial review,” the decision states, adding, “The agency’s adoption of regulations that might appear to give the agency unfettered discretion does not act to nullify the meaningful standards which exist in the statue.”

Central to the county’s case was overreach by HUD. HUD had hoped to pressure the county to dismantle local zoning by withholding the federal grants. Astorino resisted, saying such actions went beyond not only the terms of the settlement but also violated the home rule provisions of the New York State Constitution.

In a critical part of the decision, the appeals court noted that HUD did not have the right to reject the county’s housing strategy or withhold funding on the basis of “land use controls [and] zoning ordinances …  that may affect the development of affordable housing in the jurisdiction.”

The case now goes back to U.S. District Court and Judge Denise Cote.

In terms of recovering the money, the county’s options are limited. Of the more than $7 million withheld by HUD in 2011, all but about $750,000 have been reallocated by the agency to other jurisdictions. The court ruled that once HUD reallocated the funds, the county’s claim to them became moot. HUD is still withholding 2013 and 2014 grants of more than $10 million, which the county will pursue.

Under the terms of the affordable housing settlement reached by former County Executive Andrew Spano and HUD in 2009, Westchester County agreed to spend “at least” $51.6 million to ensure the development of 750 fair and affordable housing units (rental and home ownership) and to market the units not just to Westchester residents, but to minority households in surrounding counties, including New York City, as well.

Five years into the settlement, the county is in full compliance. The county finished 2014 with 454 units with financing (450 was the benchmark) and 406 units with building permits (350 was the benchmark). All 31 communities have identified potential sites and 223 units are occupied.


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