Preliminary Injunction Orders HUD to Proceed with Small Area Fair Market Rents

The U.S. District Court for the District of Columbia recently granted a preliminary injunction against HUD. The court ruled that that HUD didn’t have the authority or compelling reasons to suspend implementation of the use of Small Area Fair Market Rents (Small Area FMRs or SAFMRs) for two years in 23 metropolitan areas. SAFMRs reflect rents for U.S. Postal ZIP codes, while traditional fair market rents (FMRs) reflect a single rent standard for an entire metropolitan region. The intent of SAFMRs is to provide voucher payment standards that are better aligned with neighborhood-scale rental markets, resulting in relatively higher subsidies in neighborhoods that have higher rents but greater opportunities, and providing relatively lower subsidies in neighborhoods that have lower rents and higher concentrations of voucher households. The primary goal of SAFMRs is to help households use vouchers in areas of higher opportunity and lower poverty, thus reducing voucher concentrations high-poverty areas.

Concluding that HUD’s suspension was “arbitrary and capricious,” the court ordered HUD to immediately reinstate the final rule published on Nov. 16, 2016, that required public housing agencies in those 23 metro areas to implement Small Area FMRs on Jan. 1, 2018.

The case came about when HUD suspended the SAFMR rule on Aug. 11, 2017, in a Memorandum from Secretary Ben Carson that was not provided to the public, as well as through an Aug. 11, 2017, email that was distributed only to the PHAs in the 23 metro areas.

Five civil rights organizations representing three plaintiffs sued HUD over the suspension, asserting that suspension of the Small Area FMR rule was unlawful because HUD failed to follow Administrative Procedure Act (APA) rules requiring public comment and because HUD failed to provide sufficient justification for the suspension as specified in the SAFMR rule. 

In the decision, the judge wrote, “The APA generally requires a federal agency engaged in rulemaking to engage in notice and comment procedures.” The court concluded, “HUD, however, did not delay the Rule’s implementation through notice and comment. Thus, HUD’s action was lawful only if another source of authority empowered HUD to delay the Rule’s implementation without notice or comment. HUD asserts that [the SAFMR final rule at] 24 CFR §888.113(c) conferred such authority. HUD is wrong.”