Inspection Regulations Rationally Related to HUD’s Housing Goals

Facts: Owners of a project-based Section 8 site sued HUD to challenge regulations that provide standards for “decent, safe, and sanitary” low-income housing. Under Section 8 of the Housing Act of 1937, HUD provides housing assistance through both “project-based assistance,” where HUD enters into contracts with property owners to subsidize designated dwellings, and “tenant-based assistance,” where HUD gives vouchers for tenant-selected dwellings. In 1998, HUD published prospective new regulations to adopt “uniform physical condition standards” and ensure that HUD housing is “decent, safe, and sanitary.” The proposed new inspection regulations applied to project-based assistance but not to tenant-based assistance.

HUD adopted the new regulations after a period of notice and comment. In 1999, HUD issued a second proposed rulemaking listing the administrative processes for the new inspection regulations. After a period of notice and comment, HUD finalized the administrative processes regulations and its inspection software and guidebook.

The owners asked the court to declare the inspection regulations as arbitrary, especially since they established different standards for the tenant-based and project-based categories. A district court dismissed the owners’ case, and the owners appealed.

Ruling: The U.S. Court of Appeals agreed with the lower court’s ruling.

Reasoning: Under Section 8 of the Housing Act, Congress has tasked HUD with developing and maintaining public low-income housing. Congress defined “low-income housing” as “decent, safe, and sanitary” dwellings, but it failed to define “decent, safe, and sanitary.” Congress, however, has explicitly delegated to HUD the power to “make such rules and regulations as may be necessary to carry out [HUD’s] functions, powers, and duties.” Given this express grant of authority, the court found that HUD has the authority to develop regulations interpreting “decent, safe, and sanitary.” Now, for the regulations to be arbitrary, HUD would have had to rely on factors that Congress didn’t intend it to consider.

Here, HUD promulgated new rules through a notice and comment process, explaining both the purpose of the rules and the decision to apply the rules only to project-based housing. In their complaint, the owners pointed to nothing to suggest that HUD failed to consider an aspect of the problem or offered an implausible explanation. The court ruled that the new inspection regulations bear a reasonable relationship to HUD’s stated goals of maintaining “decent, safe, and sanitary” dwellings. Therefore, HUD’s regulations are not arbitrary and capricious.

• Valentine Properties Assocs. v. HUD, October 2012