County Must Forfeit Affordable Housing Funds

Facts: For nearly a decade, Westchester County, N.Y., has been engaged in litigation with HUD over whether the county has adequately analyzed—in its applications for HUD funds—impediments to fair housing within the county’s jurisdictions.

To receive grants from HUD, an applying jurisdiction, like the county, must submit an annual “Action Plan” detailing how the jurisdiction will use the grants. Along with the Action Plan, the county must certify that it will “affirmatively further fair housing” (AFFH). Under HUD regulations, this means that the county must “conduct an analysis to identify impediments to fair housing choice within the jurisdiction” (an “analysis of impediments,” or “AI”) and promise to “take appropriate actions to overcome the effects of any impediments identified through that analysis.”

In this appeal, the county challenged final administrative determinations by HUD to withhold funds allocated to the county under the Community Planning and Development Formula Grant (CPD) Programs for fiscal years 2011, 2013, and 2014. The county’s principal argument was that the conditions that HUD placed on the allocation of these CPD funds violated the federal laws that generally prohibit HUD’s intrusion into local public policy. In short, the county asserted that HUD’s repeated rejection of the county’s AIs turned on a factor—the substance of local zoning policies—that HUD wasn’t permitted to consider.

Ruling: A Second Circuit Appeals Court ruled that HUD’s withholding of funds didn’t violate federal law.

Reasoning: In withholding funds under community planning and development formula grant programs, the court ruled that HUD didn’t make an arbitrary or capricious decision because HUD reasonably relied on detailed reports from a consent decree monitor in concluding that a county’s analysis of impediments to fair housing was inadequate. Because HUD based its decision on the inadequacy of the analysis and not on the zoning laws referenced therein, the court ruled that HUD didn’t violate the prohibition in federal law against conditioning funding on changes to local policies, including zoning laws. HUD adequately inspected the evidence and provided notice and opportunity for comment when it found the analysis substantially incomplete.

• County of Westchester v. HUD, September 2015