Filed: Sep. 25, 2015
Latest Update: Mar. 02, 2020
Summary: 15-2294-cv Cty. of Westchester v. U.S. Dep’t of Hous. & Urban Dev. In the United States Court of Appeals for the Second Circuit AUGUST TERM 2015 No. 15-2294-cv COUNTY OF WESTCHESTER, Plaintiff-Appellant, v. UNITED STATES DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT, AND JULIAN CASTRO, AS SECRETARY OF HOUSING AND URBAN DEVELOPMENT, Defendants-Appellees. Appeal from the United States District Court for the Southern District of New York. Nos. 1:13-cv-2741, 1:15-cv-1992 Denise L. Cote, Judge. ARGUED:
Summary: 15-2294-cv Cty. of Westchester v. U.S. Dep’t of Hous. & Urban Dev. In the United States Court of Appeals for the Second Circuit AUGUST TERM 2015 No. 15-2294-cv COUNTY OF WESTCHESTER, Plaintiff-Appellant, v. UNITED STATES DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT, AND JULIAN CASTRO, AS SECRETARY OF HOUSING AND URBAN DEVELOPMENT, Defendants-Appellees. Appeal from the United States District Court for the Southern District of New York. Nos. 1:13-cv-2741, 1:15-cv-1992 Denise L. Cote, Judge. ARGUED: ..
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15‐2294‐cv
Cty. of Westchester v. U.S. Dep’t of Hous. & Urban Dev.
In the
United States Court of Appeals
for the Second Circuit
AUGUST TERM 2015
No. 15‐2294‐cv
COUNTY OF WESTCHESTER,
Plaintiff‐Appellant,
v.
UNITED STATES DEPARTMENT OF HOUSING AND
URBAN DEVELOPMENT, AND JULIAN CASTRO, AS
SECRETARY OF HOUSING AND URBAN DEVELOPMENT,
Defendants‐Appellees.
Appeal from the United States District Court for the
Southern District of New York.
Nos. 1:13‐cv‐2741, 1:15‐cv‐1992―Denise L. Cote, Judge.
ARGUED: SEPTEMBER 22, 2015
DECIDED: SEPTEMBER 25, 2015
Before: CABRANES, RAGGI, and WESLEY, Circuit Judges.
Appeal from a grant of summary judgment by the United
States District Court for the Southern District of New York (Denise
L. Cote, Judge), dismissing the County of Westchester’s challenge to
the decision of the United States Department of Housing and Urban
Development (“HUD” or “the Government”) to withhold funds
under Community Planning and Development Formula Grant
Programs. The County principally asserts that HUD’s withholding
of these funds violated the Administrative Procedure Act, 5 U.S.C.
§§ 701‐706 (“APA”), and two other statutory provisions—42 U.S.C.
§§ 12705 and 12711—that generally prohibit HUD’s interference
with local public policy. On July 21, 2015, the District Court entered
judgment in favor of defendants HUD and Julian Castro, Secretary
of HUD. Because HUD’s decision to withhold the funds did not
violate federal law, we AFFIRM the District Court’s judgment of
July 21, 2015. We also VACATE IN PART the temporary injunction
issued pendente lite by a motions panel of this Court on May 1, 2015.
HUD is authorized to reallocate the County’s FY 2013 funds
forthwith. As to the County’s FY 2014 funds, however, HUD is
directed to delay reallocating those funds until after the County
exhausts its right to seek further review of this decision.
ROBERT F. MEEHAN, Westchester County
Attorney (Linda M. Trentacoste, Adam
Rodriguez, and Justin R. Adin, on the brief),
Westchester County Attorney’s Office,
White Plains, NY, for County of Westchester,
Plaintiff‐Appellant.
2
DAVID J. KENNEDY (Benjamin H. Torrance,
on the brief), Assistant United States
Attorneys, for Preet Bharara, United States
Attorney for the Southern District of New
York, New York, NY, for U.S. Department of
Housing and Urban Development and Julian
Castro, Secretary of Housing and Urban
Development, Defendants‐Appellees.
PER CURIAM:
For nearly a decade, plaintiff‐appellant the County of
Westchester (the “County” or “Westchester”) has been engaged in
litigation with the United States Department of Housing and Urban
Development (“HUD” or “the Government”) over whether the
County has adequately analyzed—in its applications for HUD
funds—impediments to fair housing within the County’s
jurisdictions.1
1 The County applies for and administers HUD grants on behalf of the
Westchester Urban County Consortium, a collection of towns and villages that
have entered into a cooperation agreement to jointly apply for HUD funds
through the County. Cty. of Westchester v. U.S. Dep’t of Hous. & Urban Dev., Nos.
13 Civ. 2741 (DLC), 15 Civ. 1922 (DLC), 2015 WL 4388294, at *6 (S.D.N.Y. July 17,
2015). The municipalities of Mount Pleasant, Mount Vernon, New Rochelle,
White Plains, and Yonkers do not belong to the Consortium. Id. at *6 n.5. For ease
of reference, we refer to the County’s submissions on behalf of the consortium as
“the County’s” submissions.
3
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.2 Along with the Action Plan, the
County must certify that it will “affirmatively further fair housing”
(“AFFH”).3 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.”4
2 See 24 C.F.R. §§ 91.15, 91.220. HUD has recently adopted a
comprehensive overhaul of the regulations governing CPD grant application
requirements. See Affirmatively Furthering Fair Housing, 80 Fed. Reg. 42,272
(July 16, 2015) (to be codified at 24 C.F.R. pts. 5, 91, 92, 570, 574, 576, 903). But as
those amendments do not apply to the dispute here at issue, all citations to the
relevant regulations refer to the versions in effect prior to the amendments.
3 See 42 U.S.C. §§ 5304(b)(2), 12705(b)(15) (requiring certification that the
jurisdiction “will affirmatively further fair housing”); 24 C.F.R. § 91.225(a)(1). The
terms of art “fair housing” and “affirmatively further fair housing” are worth
explaining briefly. Congress passed the Fair Housing Act (“FHA”) in 1968 to
“provide, within constitutional limitations, for fair housing throughout the United
States.” 42 U.S.C. § 3601 (emphasis supplied); Pub. L. No. 90‐284, tit. VIII, § 801,
82 Stat. 73, 81 (1968). To this end, the FHA bans discrimination on the basis of
“race, color, religion, sex, familial status, or national origin” in connection with
the sale and rental of housing and other private real estate transactions. 42 U.S.C.
§§ 3604, 3605. The market for housing is therefore “fair” if it is free from
discrimination based on these protected characteristics. The Supreme Court
recently held that “disparate‐impact claims are cognizable under the [FHA].”
Tex. Dep’t of Hous. & Cmty. Affairs v. Inclusive Communities Project, Inc., 135 S. Ct.
2507, 2525 (2015).
4 24 C.F.R. § 91.225(a)(1).
4
In this appeal, the County challenges final administrative
determinations by HUD to withhold funds allocated to the County
under the Community Planning and Development Formula Grant
Programs (“CPD funds”)5 for fiscal years (“FY”) 2011, 2013 and
2014.6 The County’s principal argument is that the conditions that
HUD placed on the allocation of these CPD funds violated the
Administrative Procedure Act, 5 U.S.C. §§ 701‐706 (“APA”), and two
other statutory provisions—42 U.S.C. §§ 12705 and 12711—that
generally prohibit HUD’s intrusion into local public policy.7 In short,
the County asserts that HUD’s repeated rejection of the County’s
AIs turned on a factor—the substance of local zoning policies—that
HUD was not permitted to consider.
On July 17, 2015, the United States District Court for the
Southern District of New York (Denise L. Cote, Judge) granted
The three CPD programs at issue are: (1) the Community Development
5
Block Grant program (“CDBG”); (2) the Emergency Shelter Grant program
(“ESG”); and (3) the HOME Investment Partnership program (“HOME”).
6 The County’s first lawsuit, Cty. of Westchester v. U.S. Dep’t of Hous. &
Urban Dev., No. 13 Civ. 2741 (DLC) (filed Apr. 24, 2013), addressed only FY 2011
CPD funds. The County’s second lawsuit, Cty. of Westchester v. U.S. Dep’t of Hous.
& Urban Dev., No. 15 Civ. 1992 (DLC) (filed Mar. 17, 2015), addressed FY 2012,
2013, and 2014 CPD funds. The two lawsuits were consolidated on April 15, 2015,
and resolved by the District Court in the same final judgment, which is the
subject of this appeal. See 2015 WL 4388294, at *19 n.20. Because the FY 2012
funds were already reallocated to other jurisdictions, the County’s claims as to
these funds are moot. See id. at *19.
The County also stated claims under the Fifth Amendment to the U.S.
7
Constitution, but it has not pursued them on appeal.
5
defendants‐appellees’ motion for summary judgment, holding that
HUD’s decision was not arbitrary or capricious and that § 12705 and
§ 12711 did “not relieve the County of its obligation to make
accurate Certifications and to produce adequate AIs in order to
obtain CPD Funds.”8 As to these “Certifications,” the District Court
concluded that HUD acted within its authority in determining that
the County’s AIs had failed to assess the impediments to fair
housing choice caused by local zoning ordinances or to identify
actions the County would take to overcome these impediments.
Accordingly, the District Court held that HUD was justified in its
conclusion that the County’s plan would not “affirmatively further
fair housing,” as required by HUD regulations and the Fair Housing
Act (“FHA”).9
Because we agree that HUD’s withholding of CPD funds did
not violate federal law, we AFFIRM the District Court’s judgment of
July 21, 2015.10 We also VACATE IN PART the temporary
2015 WL 4388294, at *1; see id. at *25.
8
See id. *27.
9
Due to the pending expiration of some of these funds, this appeal was
10
resolved on an expedited basis. As noted above, the County seeks review of
HUD’s decision to withhold CPD funds for FY 2011, 2013, and 2014. The FY 2012
funds have already been reallocated to other jurisdictions. See note 6, ante.
The congressional appropriation for the FY 2011 funds expired on
September 30, 2013. See Department of Defense and Full‐Year Continuing
Appropriations Act 2011, Pub. L. No. 112‐10, Div. B, Title I, § 1103, 125 Stat. 38,
103 (2011) (carrying forward previous appropriations bill’s limitation that CPD
funds are available to be allocated for two years after the designated fiscal year).
These funds, therefore, may not be reallocated to other jurisdictions, but they
6
injunction issued pendente lite by a motions panel of this Court on
May 1, 2015. HUD is authorized to reallocate the County’s FY 2013
funds forthwith. As to the County’s FY 2014 funds, however, HUD
is directed to delay reallocating those funds until after the County
exhausts its right to seek further review of this decision.
remain available to the County until September 2018. See 31 U.S.C. §§ 1552(a),
1553(a); Cty. of Westchester v. U.S. Depʹt of Hous. & Urban Dev., 778 F.3d 412, 417
n.8 (2d Cir. 2015) (explaining that after an appropriation expires, unallocated
funds remain in an “‘expired account,’ where they will ‘retain their fiscal year
identity . . . for that appropriation for an additional five fiscal years’”) (quoting 1
Gov’t Accountability Office, Principles of Federal Appropriations Law (GAO
Redbook) 5–67, 5–72 (3d ed. 2004)) (ellipsis in original). Accordingly, because
some of the FY 2011 funds remain available to satisfy obligations to the County,
the pending dispute over these funds is not moot. See note 45, post (noting that a
total of $752,844 remains from the County’s FY 2011 allocation).
The congressional appropriation for the FY 2013 funds expires on
September 30, 2015. See Consolidated and Further Continuing Appropriations
Act 2013, Pub. L. No. 113‐6, Div. F, Title I, § 1103, 127 Stat. 198, 412‐13 (2013).
Until then, HUD is able to reallocate the funds, which, according to HUD, total
approximately $5 million. We have therefore sought to resolve this case
expeditiously, in order to give HUD the flexibility—if it prevailed—to reallocate
the FY 2013 funds to other jurisdictions.
Finally, the congressional appropriation for the FY 2014 funds expires on
September 30, 2016. See Consolidated Appropriations Act 2014, Pub. L. No. 113‐
76, Div. L, Title 2, 128 Stat. 5, 613‐14 (2014). Therefore, if HUD wishes to
reallocate these funds—also totaling approximately $5 million—it must do so
before that date. As noted above and below, HUD is directed not to reallocate the
FY 2014 funds until the County exhausts its right to seek further review of this
decision.
7
BACKGROUND
In order to understand the current dispute between the
County and HUD, it is necessary to review the last decade of
litigation against the County.11
11 The federal government’s contentious relationship with Westchester
County goes back several decades. In December 1980, the United States filed suit
against the City of Yonkers (which is located in Westchester County) as well as
the Yonkers Community Development Agency (“CDA”) and the Yonkers Board
of Education (“Board”), alleging that they intentionally selected subsidized
housing sites in a manner that perpetuated residential racial segregation, which,
in turn, caused and perpetuated school segregation. In June 1981, after the
Yonkers Branch of the NAACP and one named plaintiff intervened on behalf of
themselves and all others similarly situated, the case was certified as a class
action. A 14‐month liability trial was held before Judge Leonard B. Sand of the
Southern District of New York in 1983 and 1984. Eighty‐four witnesses testified
over the course of 90 trial days, and the court received into evidence the
depositions of 38 additional witnesses and thousands of documents.
In November 1985, Judge Sand found the City and CDA liable for
housing segregation and the City and Board liable for school segregation. See
United States v. Yonkers Bd. of Educ., 624 F. Supp. 1276 (S.D.N.Y. 1985). Following
a series of remedial hearings, the district court ordered the City to undertake
several actions, including providing sites for 200 units of public housing in non‐
minority areas, and reallocating federal housing grants towards fostering the
development of low‐ and moderate‐income housing. The defendants appealed
the judgment, and in 1987, our Court concluded that the district court “properly
applied the appropriate legal principles, that its findings of fact [were] not clearly
erroneous, and that its remedial orders [were] within the proper bounds of
discretion.” See United States v. Yonkers Bd. of Educ., 837 F.2d 1181, 1184 (2d Cir.
1987). Accordingly, we affirmed the district court’s judgment in all respects.
On July 3, 2007, the district court approved a settlement agreement that
ended its supervision over implementing these Yonkers‐related remedial orders.
See No. 80 Civ. 6761 (LBS), Dkt. No. 2100 (S.D.N.Y. July 3, 2007).
8
I. The 2006 Litigation and Consent Decree
In April 2006, the Anti‐Discrimination Center of Metro New
York (“the relator”) filed a qui tam lawsuit alleging that the County
violated the False Claims Act12 by submitting “false” certifications to
HUD from 2000 to 2006 in order to obtain approximately $52 million
in housing grants. Under the relevant statutes and regulations, the
County, as a recipient of HUD funds, was required to certify to
HUD that it would “affirmatively further fair housing.”13 The relator
alleged that the County’s certifications were “false” within the
meaning of the False Claims Act because the County failed to
analyze impediments to fair housing or to develop strategies to
overcome these impediments, despite certifying to HUD that it had
done so.
During pretrial proceedings, the district court entered several
rulings in favor of the relator. On July 13, 2007, it denied the
County’s motion to dismiss, holding that relator had stated a claim
that the County violated the False Claims Act by falsely certifying
that it considered race when evaluating fair housing impediments
and corrective actions.14 On February 24, 2009, the district court held
12 31 U.S.C. §§ 3729‐33.
13 See 42 U.S.C. §§ 5304(b)(2), 12705(b)(15).
14 See U.S. ex rel. Anti‐Discrimination Ctr. of Metro N.Y., Inc. v. Westchester
Cty., 495 F. Supp. 2d 375 (S.D.N.Y. 2007) (holding that a jurisdiction that certifies
that it will affirmatively further fair housing as a condition to its receipt of
federal funds must consider the existence and impact of racial discrimination on
housing opportunities and choice).
9
that the County’s certifications to HUD were false within the
meaning of the False Claims Act, but it denied the relator’s motion
for summary judgment on the grounds that the County’s knowledge
that the certifications were “false” was a disputed issue of fact for
trial.15
On August 10, 2009, the Government intervened in the action
in place of the relator and, on the same day, presented the district
court with a consent decree that all parties—including the County—
agreed to enter.16
By settling the case and agreeing to the consent decree, the
County avoided the risk of paying treble damages of more than $150
million. Instead, the decree obligated the County to pay $30 million
to the United States—of which $21.6 million would be credited to
the County’s account with HUD—and to take numerous steps to
further “fair housing.”17 Most relevant here, the County agreed to
spend $30 million of its own funds—in addition to the $21.6 million
15 See U.S. ex rel. Anti‐Discrimination Ctr. of Metro N.Y., Inc. v. Westchester
Cty., 668 F. Supp. 2d 548 (S.D.N.Y. 2009) (denying cross‐motions for summary
judgment and reserving for trial on the County’s scienter).
See J.A. 353‐391 (“Stipulation and Order of Settlement and Dismissal”)
16
(“Consent Decree”).
17 Consent Decree ¶¶ 2–3.
10
in its HUD account—to build 750 units of affordable housing over
the following seven years.18 The County was required to
use all available means as appropriate to
achieve the [building of the 750 units],
including, but not limited to, developing
financial or other incentives for other
entities to take steps to promote [those]
objectives . . . , and conditioning or
withholding the provision of County funds
on actions that promote [those] objectives
. . . .19
The consent decree “anticipated that the County [would build these
750 units] by leveraging the funds that it is expending pursuant to
[the consent decree] with supplemental funds.”20 Moreover,
[i]n the event that a municipality does not
take actions needed to promote the
[building of the 750 units], or undertakes
actions that hinder [those] objectives . . . ,
the County shall use all available means as
appropriate to address such action or
inaction, including, but not limited to,
pursuing legal action.21
Consent Decree ¶ 7. 630 of these 750 units must be built in
18
municipalities that are less than three percent black and seven percent Hispanic.
19 Consent Decree ¶ 7(i).
20 Id.
21 Consent Decree ¶ 7(j).
11
Additionally, the consent decree required the County to
complete, within 120 days, an analysis of impediments to fair
housing choice (“AI”) “deemed acceptable by HUD.”22 The decree
specifically required that the AI
(b) identify and analyze, inter alia:
(i) the impediments to fair housing
within its jurisdiction, including
impediments based on race or
municipal resistance to the development
of affordable housing; [and]
(ii) the appropriate actions the County
will take to address and overcome the
effects of those impediments . . . .23
The County also agreed to “promote, through the County
Executive, legislation . . . to ban ‘source‐of‐income’ discrimination in
housing.”24 Such legislation prohibits landlords from refusing to rent
to a tenant because that tenant’s income comes from Social Security
22 Consent Decree ¶¶ 32, 32(b).
23 Consent Decree ¶ 32(b). These requirements mirror those imposed by
statute and regulation on all grant applicants, as discussed at notes 73 to 90, post,
and accompanying text.
24 Consent Decree ¶ 33(g).
12
benefits or from state or federal public assistance programs, such as
“Section 8.”25
Finally, the consent decree provided for the appointment of a
monitor to oversee compliance, to recommended additional actions
needed to ensure compliance, and to assess “whether the County
has taken all possible actions to meet its obligations . . . including
. . . promoting inclusionary and other appropriate zoning by
municipalities by offering incentives, and, if necessary, taking legal
action.”26 The appointment of the monitor was to last “for so long as
the County’s obligations” under the consent decree “remain
unsatisfied.”27 The consent decree also created a dispute resolution
process whereby the parties could submit grievances for the monitor
to resolve.28
25 Section 8 refers to a well‐known program administered by HUD, which
provides low‐income housing assistance in the form of vouchers. See Salute v.
Stratford Greens Garden Apartments, 136 F.3d 293, 296 (2d Cir. 1998).
26 Consent Decree ¶ 15.
27 Consent Decree ¶ 10.
Consent Decree ¶ 14. The consent decree provided for judicial review of
28
the monitor’s decisions:
Within ten (10) business days of receipt of the Monitor’s
report and recommendation, the County or the Government may
seek additional review from the magistrate judge assigned to this
case; otherwise, the Monitor’s resolution shall be final, binding
and non‐appealable. Should the County or the Government seek
such additional review from the assigned magistrate judge, the
relevant provisions of the Federal Rules of Civil Procedure, the
13
II. 2011 Litigation
The August 2009 consent decree settled all False Claims Act
charges stemming from the County’s applications for HUD funding
from 2000 to 2009. Since 2009, however, the County has continued to
apply for CPD funds. The present dispute concerns HUD’s rejection
of the County’s post‐consent decree applications for funding.
Specifically, this litigation concerns HUD’s decision to withhold the
County’s CPD funds for FY 2011, 2013, and 2014.29
The County first challenged HUD’s withholding of its CPD
funds for FY 2011. As noted above, the consent decree required the
County to make efforts to ban “source‐of‐income discrimination.” In
2009, the County’s Board of Legislators debated a bill to meet this
obligation. The County Executive at the time, Andrew Spano, sent
letters to advocacy organizations expressing support for the pending
bill, and to the leadership of the County Board of Legislators
encouraging them to pass the bill. Although the Board failed to pass
the legislation in 2009, an identical bill was reintroduced in 2010. On
June 14, 2010, the Board passed a slightly modified version of the
Local Rules and the Court’s Individual Rules governing reports
and recommendations from a magistrate judge shall apply.
Consent Decree ¶ 14(d). The district court appointed as monitor James E.
Johnson of Debevoise & Plimpton LLP.
It is not apparent from the record whether the County received CPD
29
funding for FY 2010. The County’s CPD funds for FY 2012, however, were
withheld and reallocated to other jurisdictions. See note 6, ante.
14
bill, but, on June 25, 2010, the newly elected County Executive,
Robert Astorino, vetoed it.
Under the consent decree, the County’s revised AI was due on
December 8, 2009. After HUD granted several of the County’s
extension requests, the County submitted a revised AI on July 23,
2010. On December 21, 2010, HUD rejected the revised AI in a six‐
page letter to the County, in which HUD described actions the
County could take to make its AI acceptable, including identifying
the steps it would take to ban “source‐of‐income” discrimination
and to overcome “exclusionary zoning practices.” In April 2011,
having not received a revised AI, HUD notified the County that it
intended to reject the County’s FY 2011 “certification” that the
County would “affirmatively further fair housing.”30
On July 11, 2011, the County submitted another revised AI,
which HUD also rejected. By letter dated July 13, 2011, HUD rejected
the County’s proposed AI because it “did not incorporate the
Corrective Actions” that HUD had earlier specified, including
“promotion of source‐of‐income legislation or plans to overcome
exclusionary zoning practices.”31 HUD therefore rejected the
County’s AI and disapproved its FY 2011 Action Plan “as
substantially incomplete.” Accordingly, HUD officially notified the
County that it intended to withhold the funds allocated to the
County for FY 2011.
30 J.A. 113.
31 J.A. 124‐25.
15
HUD’s withholding of FY 2011 funds prompted the referral of
two issues to the monitor. On November 14, 2011, the monitor found
that: (1) the County breached its obligation to promote source‐of‐
income legislation; and (2) the County was required to analyze the
effect of zoning ordinances in its AI.32 On December 7, 2011, the
County objected to the monitorʹs findings and sought review from
Magistrate Judge Gabriel W. Gorenstein.
On March 16, 2012, Magistrate Judge Gorenstein sustained the
County’s objection to the monitor’s report in part, concluding that
the County Executive’s veto of the source‐of‐income legislation did
not constitute a breach of the consent decree.33 Specifically, he held
that the County Executive’s obligation to promote the legislation did
not obligate the County Executive to sign the bill once the Board of
Legislators passed it.
However, Magistrate Judge Gorenstein overruled the
County’s other objections. Specifically, the County had challenged
the monitor’s conclusion that the County was required (1) to specify
a strategy to overcome exclusionary zoning practices, and (2) to
identify the types of zoning practices that would, if not remedied by
United States ex rel. Anti‐Discrimination Ctr. v. Westchester Cty., No. 06
32
Civ. 2860 (DLC), 2011 WL 7563042, at *1 (S.D.N.Y. Nov. 14, 2011) (“2011 Report”).
The monitor’s first finding was later mooted by the County’s adoption of
“source‐of‐income” legislation. See note 45, post.
See United States ex rel. Anti‐Discrimination Ctr. of Metro N.Y., Inc. v.
33
Westchester Cty., No. 06 Civ. 2860 (DLC) (GWG), 2012 WL 917367, at *7 (S.D.N.Y.
Mar. 16, 2012).
16
the municipality, prompt the County to pursue legal action. With
respect to these objections, Magistrate Judge Gorenstein ruled in
favor of HUD, concluding that the County was required to analyze
the effect of zoning laws in its AI. Accordingly, Magistrate Judge
Gorenstein held that the monitor and HUD could require the
County to explain how it intended to persuade its municipalities to
remove exclusionary zoning practices, and what steps it would take
if a municipality refused. The County did not appeal this aspect of
the Magistrate Judge’s ruling.34
The United States did, however, appeal his ruling concerning
“source‐of‐income” legislation. On May 3, 2012, the district court
reversed this aspect of the ruling, agreeing with the monitor that the
County Executive’s veto of the source‐of‐income legislation was a
breach of the consent decree.35
On April 5, 2013, we affirmed the May 3, 2012 order of the
district court,36 holding that: (1) the district court had jurisdiction
over enforcement and interpretation of the consent decree; (2) the
County breached its duty under the consent decree to promote
source‐of‐income legislation through its County Executive; (3) the
After neither party objected to the Magistrate Judge’s rulings as to the
34
zoning issues, the district court adopted them on appeal. See United States ex rel.
Anti‐Discrimination Ctr. of Metro N.Y., Inc. v. Westchester Cty., No. 06 Civ. 2860
(DLC), 2012 WL 1574819, at *11 (S.D.N.Y. May 3, 2012).
35 Id.
See United States ex rel. Anti‐Discrimination Ctr. of Metro N.Y., Inc. v.
36
Westchester Cty., 712 F.3d 761 (2d Cir. 2013).
17
consent decree continued to bind successive elected County officials;
(4) the “unmistakability doctrine”37 did not apply to interpretation of
the consent decree; (5) the consent decree did not strip the County of
any essential attribute of sovereignty; and (6) the consent decree did
not violate the Constitution’s Guarantee Clause.38
III. The 2013 Litigation
As noted above, the monitor’s report in November 2011 found
that the County was required to analyze the effect of zoning
ordinances in its AI.39 Specifically, the monitor concluded that
37 The unmistakability doctrine is a rule of contract construction that
provides that in a contract with a sovereign government, “an ambiguous term of
a grant or contract [will not] be construed as a conveyance or surrender of
sovereign power.” United States v. Winstar Corp., 518 U.S. 839, 878 (1996). We held
that the unmistakability doctrine of contract construction did not apply to the
interpretation of the consent decree, because the decree unambiguously required
the County to encourage passage of the source‐of‐income legislation, which
necessarily precluded the County Executive’s veto of a bill passed by County
Board. 712 F.3d at 772‐73. Because the County expressly agreed to take specific
action related to this legislation, the County was not “incidentally disabled” from
undertaking any sovereign acts. Id.
The Guarantee Clause, U.S. Const. art. IV, § 4, states that the “United
38
States shall guarantee to every State in this Union a Republican Form of
Government.” We held that the County’s claim under the Guarantee Clause was
a nonjusticiable political question and, even if it was not, that the County failed
to present any evidence that it was deprived of a republican form of government.
See 712 F.3d at 774‐75.
Magistrate Judge Gorenstein overruled the County’s objection to this
39
ruling, and the County did not appeal. See note 34, ante, and accompanying text.
18
[t]he County should, at a minimum, assess
the impact of each of the following zoning
practices or explain why the analysis of the
listed practices . . . would not be helpful to
understanding the impact of the zoning
ordinances taken as a whole:
Restrictions that limit or prohibit
multifamily housing development;
Limitations on the size of a development;
Limitations directed at Section 8 or other
affordable housing, including limitations
on such developments in a municipality;
Restrictions that directly or indirectly
limit the number of bedrooms in a unit;
Restrictions on lot size or other density
requirements that encourage single‐
family housing or restrict multifamily
housing; and
Limitations on townhouse development.40
Therefore, since 2012, HUD has considered the requirement that the County’s AI
include the effect of zoning policies to be law of the case.
2011 Report, 2011 WL 7563042, at *7. The monitor went on to direct the
40
County to (1) “develop a clear strategy that encourages compliance by municipal
governments . . . [and] explain[s] how [the County] intends to persuade
municipalities to follow [its] recommendations and what additional steps, if any,
19
After the monitor issued his report in November 2011—and
while litigation before the district court and this Court was
pending—the County submitted a series of zoning analyses to HUD,
all of which were rejected. Specifically, HUD informed the County
that, in its view, the County’s submissions contained flawed data
analysis, failed to address whether zoning practices were
exclusionary under state and federal law, and lacked adequate
strategies for bringing about changes to problematic zoning
practices in some of the County’s municipalities.
On March 25, 2013, HUD notified the County that it intended
to reallocate the $7.4 million it had withheld in FY 2011 funds.41
Because the congressional appropriation for these funds was set to
expire on September 30, 2013, HUD gave the County until April 25,
it will take if those recommendations are not followed”; (2) “[d]evelop a process
for notifying municipalities of zoning issues that hinder the County’s obligations
under the Settlement and changes that must be made, and if not made, the
consequences of municipalities’ failure to make them”; (3) “[d]evelop a process
to involve municipal decision‐makers in consultation regarding changes in
zoning and land use restrictions”; and (4) “[p]rovide a description of how these
requirements will be included in future contracts or other written agreements
between the County and municipalities.” Id. at *7‐8. The monitor also expressed
“the view that litigation is a powerful lever the County may exercise to bring
municipal governments into compliance, and that the County must identify the
types of zoning practices that would, if not remedied by the municipality, lead
the County to pursue legal action.” Id. at *9.
J.A. 236‐38. The breakdown was approximately $5.4 million in CDBG
41
funds, $1.7 million in HOME funds, and $400,000 in ESG funds. See 2015 WL
4388294, at *13 n.10.
20
2013 to submit an acceptable AI and Action Plan to address
“exclusionary zoning.”
One day before this deadline, the County submitted a revised
AI and filed suit against HUD in federal court, asserting that HUD’s
denial of the County’s CPD funds for FY 2011 was a violation of the
APA and 42 U.S.C. § 12711.42 As relief, the County requested that the
court: (1) enjoin HUD’s reallocation of the County’s FY 2011 grant
funds; (2) declare that HUD’s rejection of its FY 2011 AI and Action
Plan violated the APA and § 12711; and (3) order HUD to approve
the County’s FY 2011 submission for CPD funds.43
On August 14, 2013, Judge Cote granted HUD’s motion to
dismiss the complaint in its entirety. As to the APA claims, the
district court ruled that HUD’s rejection of the County’s submissions
was an act “committed to agency discretion by law,” see 5 U.S.C.
42 Section 12711 states:
Notwithstanding any other provision of this subchapter or
subchapter II of this chapter, the Secretary shall not establish any
criteria for allocating or denying funds made available under
programs administered by the Secretary based on the adoption,
continuation, or discontinuation by a jurisdiction of any public
policy, regulation, or law that is (1) adopted, continued, or
discontinued in accordance with the jurisdictionʹs duly
established authority, and (2) not in violation of any Federal law.
See Cty. of Westchester v. U.S. Dep’t of Hous. & Urban Dev., No. 13 Civ.
43
2741 (DLC) (filed Apr. 24, 2013).
21
§ 701(a)(2), and thus not subject to judicial review.44 The district
court also concluded that the County failed to state a claim under
§ 12711.45
On February 18, 2015, we affirmed the dismissal (as moot) of
claims relating to funds that had been reallocated to other
jurisdictions, but vacated the district court’s dismissal of claims
relating to funds—exclusively under the HOME program—that had
not yet been reallocated.46 We concluded that the district court erred
in dismissing the County’s APA claims as to these funds, because
the statutes governing HUD’s administration of the HOME program
provided meaningful standards against which to judge HUD’s
exercise of discretion and, thus, HUD’s actions were not “committed
to agency discretion by law” and could be reviewed by the courts.
See Cty. of Westchester v. U.S. Dep’t of Hous. & Urban Dev., No. 13 Civ.
44
2741 (DLC), 2013 WL 4400843, at *3 (S.D.N.Y. Aug. 14, 2013).
The County appealed this ruling and, on August 20, 2013, sought a
45
temporary restraining order and preliminary injunction. HUD agreed not to
obligate funds to other jurisdictions until a panel of this Court considered the
County’s application. On September 25, 2013, we denied the application for a
stay. See Cty. of Westchester v. U.S. Depʹt of Hous. & Urban Dev., 531 F. App’x 178
(2d Cir. 2013) (summary order). We also dismissed as moot the County’s appeal
from the dismissal of its § 12711 claim—which had been based on the failure to
adopt “source‐of‐income” legislation—because, by that time, the County had
passed such legislation. Id. HUD subsequently reallocated the majority of the
County’s FY 2011 grant allocation before the appropriation expired on September
30, 2013. Of the approximately $7.4 million initially allocated to the County, all
but $752,844 was reallocated.
46 See Westchester v. U.S. Dep’t of Hous. & Urban Dev., 778 F.3d 412 (2d Cir.
2015).
22
Accordingly, we affirmed the district court’s order of dismissal
insofar as it dismissed as moot claims for funds that had been
reallocated to other jurisdictions, vacated the order insofar as it
dismissed claims for the remaining $752,844 in HOME funds that
had not been reallocated, and remanded the cause to the district
court for further proceedings.
IV. The Monitor’s Zoning Analysis
While proceedings concerning the FY 2011 funds were
pending, the monitor prepared two reports on the impact of zoning
laws in Westchester County.47
The first of these reports, filed on September 13, 2013,48
analyzed the zoning codes of the municipalities in the County under
state and federal law—applying Berenson v. Town of New Castle, 38
N.Y.2d 102 (1975), and Huntington Branch, NAACP v. Town of
47 The County asserts that the monitor lacks authority to conduct such an
analysis. However, as Magistrate Judge Gorenstein stated in 2012, the monitor is
required under the consent decree to “conduct an assessment of the County’s
efforts and progress related to the obligations set forth in [the consent decree],
particularly those described in paragraph 7,” and “the Monitor ‘may consider
any information appropriate’ that will help him ‘determine whether the County
has taken all possible actions to meet its obligations under this [consent decree],
including, but not limited to . . . promoting inclusionary and other appropriate
zoning by municipalities by offering incentives, and, if necessary, taking legal
action.’” 2012 WL 917367, at *7 (quoting Consent Decree ¶ 15). The County did
not appeal this ruling, and the district court adopted it. See 2012 WL 1574819, at
*11; see also note 34, ante, and accompanying text.
48 See J.A. 404‐64.
23
Huntington, 844 F.2d 926 (2d Cir.), aff’d in part, 488 U.S. 15 (1988). The
state‐law Berenson standard considers whether zoning practices are
“exclusionary” based on socioeconomic status.49 The federal
Huntington standard considers whether facially neutral zoning laws
have a discriminatory impact on racial and ethnic minorities.50
In its various AIs submitted to HUD, the County concluded
that there was no evidence of exclusionary zoning in any of the 31
eligible municipalities in Westchester County.51 HUD concluded that
Under Berenson, a municipality’s zoning statute is examined as a whole
49
to determine whether it fosters “a balanced and integrated community.”
Berenson, 38 N.Y.2d at 109. The analysis consists of two prongs: (1) the
municipality must “provide[ ] a properly balanced and well[‐]ordered plan for
the community,” id. at 110; and (2) municipalities must consider, weigh, and
balance both local and regional housing needs due to the effect that zoning
ordinances may have on areas outside the municipality, see id.
50 Under Huntington, a zoning code is presumptively exclusionary if it
(1) restricts multifamily or two‐family housing to districts with
disproportionately large minority populations; or (2) disparately impacts
minorities by restricting the development of housing types disproportionately
used by minority residents. “Once a plaintiff has made a prima facie showing of
discriminatory effect, a defendant must present bona fide and legitimate
justifications for its action with no less discriminatory alternatives available.”
Huntington, 844 F.2d at 939; but see Inclusive Communities, 135 S. Ct. at 2523 (“A
plaintiff who fails to allege facts at the pleading stage or produce statistical
evidence demonstrating a causal connection cannot make out a prima facie case
of disparate impact.”); id. (“Zoning officials . . . must often make decisions based
on a mix of factors, both objective (such as cost and traffic patterns) and, at least
to some extent, subjective (such as preserving historic architecture).”).
These 31 municipalities are Ardsley, Bedford, Briarcliff Manor,
51
Bronxville, Buchanan, Cortlandt, Croton‐on‐Hudson, Dobbs Ferry, Eastchester,
Harrison, Hastings‐on‐Hudson, Irvington, Larchmont, Lewisboro, Mamaroneck,
Mount Pleasant, New Castle, North Castle, North Salem, Ossining, Pelham,
24
these AIs were inadequate for various reasons, including that they
used inaccurate data, conducted flawed analysis concerning whether
zoning laws within the County were exclusionary, and failed to
propose strategies for overcoming exclusionary zoning laws in
certain municipalities.
The purpose of the monitor’s 2013 report was to assess
whether the County was correct that none of its 31 eligible
communities had exclusionary zoning laws, or whether HUD was
correct that the County’s analysis was flawed, inaccurate, and
incomplete. The monitor concluded:
Twenty‐four out of 31 municipalities
provide opportunities to develop affordable
housing and four of these municipalities
have zoning codes that provide sufficient
opportunities for affordable housing to meet
regional need and are exemplary in terms of
their efforts to provide opportunities for
affordable housing. Seven municipalities,
however, have restrictions on multifamily
housing and other sources of affordable
housing that would meet the definition of
exclusionary under the Berenson line of
cases. Additionally, some municipalities,
whether likely to be deemed exclusionary
under Berenson or not, have evidence that
Pelham Manor, Pleasantville, Pound Ridge, Rye, Rye Brook, Scarsdale, Somers,
Tarrytown, Tuckahoe, and Yorktown. J.A. 473‐74.
25
limitations on multifamily zoning might
have a disparate impact on certain minority
groups, suggesting that they might be
deemed exclusionary under Huntington.
Therefore, the County’s conclusion that
exclusionary zoning does not exist
anywhere in Westchester is not supported
by its own data.52
The seven municipalities that the monitor concluded “had
zoning ordinances that limited affordable housing or made the
development of affordable housing practically infeasible” were
Croton‐on‐Hudson, Harrison, Lewisboro, Mamaroneck, Ossining,
Pelham Manor, and Pound Ridge.53 After the report was issued,
however, each of these municipalities met with the monitor, and
three of them—Mamaroneck, Ossining, and Pound Ridge—were
removed from the list. As the monitor later explained, Mamaroneck
“adopted the model zoning ordinance, expanded the allowance of
multifamily housing, and approved the construction of ten
affordable housing units.”54 Ossining and Pound Ridge also “made
considerable progress in reforming their zoning codes to expand
opportunities for the development of affordable housing.”55
52 J.A. 456‐57.
53 J.A. 1045 (applying the two‐prong analysis of Berenson, 38 N.Y.2d at
102).
54 J.A.1045‐46.
55 J.A.1046.
26
On September 8, 2014, the monitor issued another report.56
The 2013 report had mostly analyzed whether the jurisdiction’s
zoning codes were socioeconomically exclusionary under Berenson.
The 2014 report focused on whether the jurisdiction’s zoning codes
had a discriminatory impact on racial and ethnic minorities under
Huntington. The monitor concluded:
Of the 31 eligible municipalities, 25
municipalities neither perpetuated racial
and ethnic clustering by restricting
multifamily or affordable housing to
districts with a disproportionately large
minority population nor disparately
impacted the countywide minority
household population by restricting the
development of housing that minority
residents disproportionately use in violation
of the Huntington standard.
Prima facie evidence of Huntington
violations did exist, however, with respect
to six municipalities. The evidence shows
that these municipalities either restricted as‐
of‐right multi‐ or two‐family housing
development to districts with
disproportionately high minority household
populations or restricted the development
56 See J.A. 465‐588. The District Court did not consider the 2014 report to
be part of the administrative record because it post‐dated the HUD decisions
challenged by the County in this litigation. See 2015 WL 4388294, at *26 n.26.
27
of housing types disproportionately used by
minorities. The next step for these
municipalities is to present evidence that,
despite the impact on minority residents,
their zoning ordinances were furthering a
legitimate, substantial governmental
interest and no alternative would achieve
that interest with less discriminatory effect.
The [m]onitor looks forward to engaging
with these six municipalities in the future.57
The six municipalities that the monitor concluded had zoning codes
that were presumptively exclusionary under Huntington were
Harrison, Larchmont, Lewisboro, North Castle, Pelham Manor, and
Rye Brook.58
On October 24, 2014, the Government sent a letter to the
monitor—with a copy sent to the County—which stated that the
County’s adoption of the monitor’s 2013 and 2014 reports would
satisfy its obligation to submit an acceptable AI.59 Specifically, the
Government stated that the submission of these reports “would
satisfy the County’s obligation to identify zoning ordinances that act
as impediments to fair housing, as required by the [consent decree],
57 J.A. 587‐88.
58 J.A. 474.
59 J.A. 589‐92.
28
42 U.S.C. §§ 5304(b)(2) and 12705(b)(15), 24 C.F.R. § 91.225(a)(1), and
by HUD’s Fair Housing Planning Guide.”60
The County declined to adopt the monitor’s reports or to
incorporate any of the findings of the reports into its own future AIs.
V. This Case
On February 3, 2015, HUD advised the County that its failure
to receive a grant for FY 2012 had resulted in the termination of its
qualification as a Community Development Block Grant (“CDBG”)
urban county and HOME participating jurisdiction, and that until it
requalified, it was ineligible to receive CPD funds.61 This termination
also affected the remainder of the County’s FY 2013 and FY 2014
funds under the CDBG and HOME programs, and HUD advised the
County that it would proceed to reallocate these funds as well.62 The
County’s total allocation for FY 2013 and FY 2014 was
approximately $10 million.
60 J.A. 589.
See J.A. 78. HUD had previously notified the County of its rejection of
61
the County’s FY 2012 certification and disapproval of the 2012 Action Plan. On
April 23, 2014, HUD informed the County that it was reallocating its FY 2012
funds, which totaled approximately $5.2 million. See id. The County did not take
any legal action to prevent reallocation of these funds, which, as of September 30,
2014, were obligated to other jurisdictions. Id.
On May 9, 2014, the County informed HUD that it would not be seeking
requalification under the CPD programs for the FY 2015 to FY 2017 period. See
id.; 2015 WL 4388294 at *2 n.3, *18.
62 See J.A. 78.
29
On March 17, 2015, the County filed its second lawsuit, which
primarily sought to enjoin the reallocation of FY 2013 and FY 2014
CPD funds.63 The case was deemed related to the 2013 litigation and
assigned to Judge Cote.
On March 19, 2015, HUD informed the County that its FY
2013 and FY 2014 CPD Funds could be “obligated” to other
jurisdictions as early as April 3, 2015.64 That same day, the County
filed a motion for a preliminary injunction to prevent HUD from
disbursing the County’s CPD Funds for FY 2013 and FY 2014 to
other jurisdictions.65 On March 27, 2015, the District Court denied
the motion for a preliminary injunction from the bench, concluding
that the County had failed to establish “irreparable harm” or
“likelihood of success on the merits.”66 The District Court ordered an
expedited schedule for the underlying merits litigation, whereby the
parties would submit their cross‐motions for summary judgment by
May 22, 2015.
See Cty. of Westchester v. U.S. Dep’t of Hous. & Urban Dev., No. 15 Civ.
63
1992 (DLC) (filed Mar. 17, 2015). The County abandoned its claims for FY 2012
CPD funds and all lead‐paint grant funds, which were reallocated before this
lawsuit. See 2015 WL 4388294 at *20 & n.21.
64 J.A. 83.
At a hearing on March 27, 2015 before Judge Cote, the Government
65
explained that these funds were already in the process of being reallocated to
other jurisdictions—the CDBG funds to other municipalities in the region,
including New York, Yonkers, and Mount Vernon, the HOME funds to
approximately 588 other municipalities, and the ESG funds to the State of New
York for use within the County. See J.A. 632‐33.
66 J.A. 655‐59.
30
On March 30, 2015, the County appealed the District Court’s
denial of its motion for a preliminary injunction. On April 3, 2015,
the County filed a motion with this Court for an injunction pending
appeal and for a Temporary Restraining Order (“TRO”). On April
20, 2015, this Court granted the County’s request for a TRO pending
resolution of its motion.67 On May 1, 2015, a motions panel of this
Court granted the County’s motion and enjoined HUD from
obligating the FY 2013 or FY 2014 funds at issue during the
pendency of the County’s appeal from the denial of the preliminary
injunction.68
On July 17, 2015, while the County’s appeal from the denial of
the preliminary injunction was pending, the District Court resolved
the case on the merits, granting HUD’s motion for summary
judgment and dismissing the County’s complaints in their entirety.69
Because both sides agreed that this final judgment mooted the
County’s then‐pending appeal, we dismissed that appeal, but left in
place an injunction pending resolution of the appeal from the
District Court’s July 21, 2015 final judgment.70 This appeal then
followed.
See No. 15‐979‐cv, Dkt. No. 34 (“HUD shall not reallocate the County’s
67
entitlement [to] FY 2013 and FY 2014 CPD Funds pending resolution of the
County’s motion.”).
68 See No. 15‐979‐cv, Dkt. No. 39.
See 2015 WL 4388294, at *6. As noted above, the two complaints
69
resolved by the District Court were No. 13 Civ. 2741 and No. 15 Civ. 1992.
70 See No. 15‐979‐cv, Dkt. Nos. 90, 100; No. 15‐2294‐cv, Dkt. No. 13.
31
DISCUSSION
The broader dispute between the County and HUD implicates
many “big‐picture” questions. Beyond prohibiting direct
discrimination based on race or other protected categories, what
must a jurisdiction do to “affirmatively further fair housing”? What
is the difference, if any, between furthering “fair” housing and
furthering “affordable” housing? How much control may HUD
exert over local policies, which, in its view, impede the creation of
“fair” or “affordable” housing? And if conflicts of this sort between
HUD and local governments are to be avoided, is the simplest
solution to avoid applying for federal funds in the first place?
This appeal, however, presents a much narrower question:
May HUD reject a jurisdiction’s application for funding because it
determines that the jurisdiction’s analysis of impediments fails to
adequately consider the potential exclusionary impact of the
jurisdiction’s zoning laws?71 Because the answer to this narrow
question is yes, we affirm the District Court’s judgment.
Or to put it another way: can a local government that applies for HUD
71
grants avoid complying with the conditions imposed by HUD? The answer—as
many local governments have discovered to their sorrow, in a variety of settings
involving federal grants and contracts—is no. See generally Richard B. Cappalli,
Rights and Remedies Under Federal Grants (Bureau of National Affairs 1979).
32
In the sections that follow, we first describe the relevant
statutory requirements and then analyze the County’s challenge to
HUD’s action under the APA and §§ 12705 and 12711.72
I. Statutory Framework
The County challenges HUD’s withholding of Community
Planning and Development Formula Grant Program (“CPD”) funds
distributed under three different programs: the Community
Development Block Grant (“CDBG”) program, the Emergency
Solutions Grant (“ESG”) program, and the HOME Investment
Partnerships program (“HOME”). The authorizing statutes for these
three programs incorporate the Fair Housing Act by reference.
The CDBG program was established under the Housing and
Development Act of 197473 to promote the “development of viable
urban communities, by providing decent housing and a suitable
living environment and expanding economic opportunities,
Before the District Court, HUD argued in the alternative that it could
72
withhold CPD funds because the County breached the consent decree. As noted
above, the consent decree obligated the County to provide an AI by December
2009 that HUD deemed acceptable. Because we conclude that HUD’s
withholding of the County’s CPD funds did not violate federal law, we decline to
reach or decide whether HUD could also withhold these funds solely because the
County breached the consent decree. We note, however, that nothing in the
consent decree purports to give HUD any broader authority to reject future grant
applications than already provided by statute. See note 97, post, and
accompanying text.
73 42 U.S.C. §§ 5301‐5321 (“CDBG statute”).
33
principally for persons of low and moderate income.”74 Jurisdictions
applying for CDBG grants must certify—“to the satisfaction of the
Secretary”—that they meet six criteria.75 As relevant here, applicants
must certify that “the grant will be conducted and administered in
conformity with the Civil Rights Act of 1964 and the Fair Housing
Act, and [that] the grantee will affirmatively further fair housing.”76
The ESG program was initially authorized as the “Emergency
Shelter Grants” program by the Stewart B. McKinney Homeless
Assistance Act of 1987, but was modified to its current form by the
Homeless Emergency Assistance and Rapid Transition to Housing
(HEARTH) Act of 2009.77 The principal purpose of the program is
“to provide funds for programs to assist the homeless, with special
emphasis on elderly persons, handicapped persons, families with
children, Native Americans, and veterans.”78 Although the ESG
program does not have any independent certification requirements,
a grantee may only receive ESG funds if it also receives funds under
74 Id. § 5301(c).
75 See id. § 5304(b).
Id. § 5304(b)(2) (internal citations omitted). See note 3, ante, on the
76
statutory term of art “affirmatively further fair housing,” or AFFH.
42 U.S.C. §§ 11371‐11378 (“ESG statute”); see Pub. L. No. 111–22, 123
77
Stat. 1632, 1663 (2009); Pub. L. No. 100–77, 101 Stat. 482 (1987).
78 Id. § 11301(b)(3).
34
the CDBG program.79 Accordingly, eligibility for ESG also turns on
certifying that a “grantee will affirmatively further fair housing.”80
Finally, funding under the HOME program is allocated under
the Cranston‐Gonzalez National Affordable Housing Act of 1990.81
The objective of HOME grants is to “improve housing opportunities
for all residents of the United States, particularly members of
disadvantaged minorities, on a nondiscriminatory basis.”82 Like
CDBG and ESG applicants, HOME applicants must certify “that the
jurisdiction will affirmatively further fair housing.”83
Each of these grant programs requires an applying jurisdiction
to submit to HUD a comprehensive “housing affordability strategy”
in accordance with 42 U.S.C. § 12705.84 Section 12705(b) lists twenty
components of a housing strategy, two of which are relevant here.
First, § 12705(b)(4) requires grantees to
explain whether the cost of housing or the
incentives to develop, maintain, or improve
affordable housing in the jurisdiction are
affected by public policies, particularly by
79 See id. § 11373(a).
80 See id. § 5304(b)(2).
81 42 U.S.C. §§ 12701‐12714, 12741‐12756; see Pub. L. No. 101–625, 104 Stat.
4079 (1990).
82 Id. § 12702(3).
83 Id. § 12705(b)(15).
84 See id. §§ 5304(c), 12746.
35
policies of the jurisdiction, including tax
policies affecting land and other property,
land use controls, zoning ordinances,
building codes, fees and charges, growth
limits, and policies that affect the return on
residential investment, and describe the
jurisdiction’s strategy to remove or ameliorate
negative effects, if any, of such policies . . . .85
Second, grantees must certify “that the jurisdiction will affirmatively
further fair housing.”86
The requirement to “affirmatively further fair housing” is
identical under HOME and CDBG—and, by extension, ESG.87 The
certification that a jurisdiction will affirmatively further fair housing
is a “written assertion, based on supporting evidence,” that “will be
deemed to be accurate . . . unless the Secretary determines otherwise
after inspecting the evidence and providing due notice and
opportunity for comment.”88 By regulation, the mandate to
“affirmatively further fair housing” requires the grantee to “conduct
an analysis to identify impediments to fair housing choice within the
jurisdiction, take appropriate actions to overcome the effects of any
impediments identified through that analysis, and maintain records
85 Id. § 12705(b)(4) (emphases supplied).
86 Id. § 12705(b)(15).
See note 3, ante, on the statutory term of art “affirmatively further fair
87
housing,” or AFFH.
88 42 U.S.C. § 12704(21).
36
reflecting the analysis and actions in this regard.”89 Moreover,
grantees under all three programs must recertify each year that they
are fulfilling their obligation to “affirmatively further fair
housing.”90
II. HUD’s Action Did Not Violate Federal Law
In this case, HUD determined that the AIs submitted by the
County in support of its applications for FY 2011, 2013, and 2014
funds were inadequate, because they failed to accurately analyze
impediments to fair housing, including certain zoning laws.
Accordingly, HUD rejected the County’s certification that it would
“affirmatively further fair housing,” and withheld the County’s
funds under all three programs.91
89 24 C.F.R. § 91.225(a)(1).
90 42 U.S.C. § 12708(a)(1); 24 C.F.R. § 91.15(b)(1).
91 We held in our February 2015 decision that the County is entitled to
judicial review of HUD’s decision to deny funding under the HOME statute. See
778 F.3d at 419‐20. Here, the District Court concluded in its final judgment that
the County is also entitled to judicial review of HUD’s decision to deny funding
under the CDBG and ESG statutes. For purposes of this appeal, we assume
without deciding that the District Court was correct, and that the County is
entitled to judicial review of HUD’s decisions regarding the allocation of funds
under all three programs. We are confident in this assumption because the
statutory limits on HUD’s authority identified in our February 2015 decision—
§ 12705(c) and § 12711—apply to all three grant programs. See 42 U.S.C.
§§ 5304(c), 12746.
37
The County asserts that HUD’s decision to withhold these
funds violated the APA and two other statutory provisions—
§§ 12705 and 12711. We address each claim in turn.92
A. The APA
Under the APA, a reviewing court must uphold agency action
unless it is “arbitrary, capricious, an abuse of discretion, or
otherwise not in accordance with law.”93 Under this “deferential
standard of review,” we “may not substitute our judgment for that
of the agency.”94 The scope of review under this standard is narrow
because “a court must be reluctant to reverse results supported by a
weight of considered and carefully articulated expert opinion.”95 An
agency decision will thus only be set aside if it
has relied on factors which Congress had
not intended it to consider, entirely failed to
consider an important aspect of the
problem, offered an explanation for its
decision that runs counter to the evidence
before the agency, or is so implausible that
We review a district court’s grant of summary judgment de novo.
92
Natural Res. Def. Council, Inc. v. U.S. Food & Drug Admin., 710 F.3d 71, 79 (2d Cir.
2013).
93 5 U.S.C. § 706(2)(A).
Guertin v. United States, 743 F.3d 382, 385‐86 (2d Cir. 2014) (internal
94
quotation marks and alterations omitted).
Fund for Animals v. Kempthorne, 538 F.3d 124, 132 (2d Cir. 2008) (internal
95
quotation marks and alterations omitted).
38
it could not be ascribed to a difference in
view or the product of agency expertise.96
The relevant agency action here was HUD’s decision to reject
the County’s AIs for FY 2011, 2013, and 2014, and to withhold the
CPD funds allocated to the County for all three years. Before 2006—
when the qui tam action was filed—HUD had for decades approved
the County’s applications for CPD funds without any objection.
However, once the District Court ruled, in connection with the qui
tam case, that HUD’s submissions were false as a matter of law, the
County unexpectedly faced the prospect of severe financial
penalties—more than $150 million. The County Executive at the time
chose to settle the case and to sign the consent decree.
But nothing in that consent decree purports to give HUD
authority to impose conditions on the County’s future CPD grant
applications beyond those governing all applicants under the
relevant statutes and regulations. Rather, as discussed at notes 16 to
28, ante, and accompanying text, the consent decree largely involves
a promise to construct 750 new affordable housing units and a series
of promises peripheral to that goal. The County also promised to
submit an adequate AI within 120 days of the consent decree, and
failure to do so could, therefore, constitute both a breach of the
consent decree and grounds for rejection of its future CPD grant
applications. But many of the promises the County made in the
Bechtel v. Admin. Review Bd., 710 F.3d 443, 446 (2d Cir. 2013) (quoting
96
Nat’l Assoc. of Home Builders v. Def. of Wildlife, 551 U.S. 644, 658 (2007)).
39
consent decree, such as the promise to promote “source‐of‐income”
legislation, are independent of the requirements for CPD grant
eligibility. To the extent HUD has identified the County’s failure to
satisfy these independent consent‐decree requirements to support its
rejection of County grant applications,97 HUD may well have
overstepped the bounds of its statutory authority.
That said, we need not definitively decide whether, or to what
degree, HUD may have overstepped statutory grounds in denying
County grant applications, because HUD has consistently explained
that its primary justification for such rejections has been that the
County’s AIs contained inadequate analysis and reached
conclusions—that no municipality’s zoning laws are exclusionary
under state or federal law—unsupported by the record.
We are obliged under the APA to uphold agency action unless
it is “arbitrary, capricious, an abuse of discretion, or otherwise not in
accordance with law.”98 And we agree with the District Court that
HUD’s decision to reject the AIs associated with the County’s
applications for FY 2011, 2013 and 2014 funds did not rise to such a
See, e.g., J.A. 124 (July 13, 2011 letter from HUD rejecting the County’s
97
FY 2011 CPD applications, stating: “The revised AI . . . does not meet the
Settlement’s requirements for an acceptable AI . . . [because it does not] address
deficiencies regarding promotion of source‐of‐income legislation or plans to
overcome exclusionary zoning practices. . . . Therefore, HUD is . . . disapproving
the County’s FY 2011 Action Plan as substantially incomplete.”).
98 5 U.S.C. § 706(2)(A).
40
level. Because exclusionary zoning can violate the FHA,99 and
because HUD is required to further the policies of that statute,100 it
was reasonable for HUD to require the County to include in its AI
an analysis of its municipalities’ zoning laws. Moreover, in
concluding that the County’s zoning analysis was flawed and
incomplete, HUD reasonably relied on detailed reports from the
monitor, which examined the relevant laws and analyzed the
empirical data, and which refuted the County’s conclusion that no
municipality had ordinances that were exclusionary under state or
federal law. Whenever HUD rejected an AI submitted by the
County, it provided a written explanation grounded in the
evidentiary record, and it gave the County multiple opportunities to
make changes and to resubmit a revised AI.101 We therefore
conclude that HUD’s decision to withhold and then reallocate the
99 See Inclusive Communities, 135 S. Ct. at 2521‐22 (noting that the FHA
“was enacted to eradicate discriminatory practices” within the housing sector,
“includ[ing] zoning laws and other housing restrictions that function unfairly to
exclude minorities from certain neighborhoods without any sufficient
justification”).
See, e.g., 42 U.S.C. § 3608(e)(5) (requiring HUD to “administer the
100
programs and activities relating to housing and urban development in a manner
affirmatively to further the policies of [the FHA]”).
101 See J.A. 266‐67 (April 23, 2014 letter summarizing HUD’s past rejections
of the County’s AIs and HUD’s offers of assistance); see also 24 C.F.R.
§ 91.500(b)(3) (defining a “substantially incomplete” plan as one “for which a
certification is rejected by HUD as inaccurate, after HUD has inspected the
evidence and provided due notice and opportunity to the jurisdiction for
comment”).
41
County’s CPD funds was neither arbitrary nor capricious within the
meaning of the APA.
Accordingly, we affirm the District Court’s judgment insofar
as it dismissed the claim that HUD’s action violated the APA.
B. Sections 12705 and 12711
The County’s arguments under § 12705 and § 12711 fare no
better. These two provisions generally preclude HUD from
requiring a jurisdiction to change its local policies—including its
zoning laws—in order to qualify for CPD funding. According to the
County, HUD’s decision to withhold the CPD funds at issue was a
thinly veiled attempt to induce the County to force its municipalities
to change their zoning laws. Specifically, the County claims that two
demands by HUD were improper: (1) that the County change the
conclusions in its AIs concerning the exclusionary impact of
municipal zoning laws; and (2) that its AIs identify the steps the
County would take to ensure its municipalities changed any
exclusionary zoning laws.
Under § 12705(c)(1), HUD may only disapprove of the
housing strategy of an applying jurisdiction if it concludes that
(A) the housing strategy is inconsistent with
the purposes of [the] Act, or
(B) the information described in subsection (b)
of this section has not been provided in a
substantially complete manner. For the
purpose of the preceding sentence, the
42
adoption or continuation of a public policy
identified pursuant to subsection (b)(4) of this
section shall not be a basis for the Secretary’s
disapproval of a housing strategy.102
The cross‐referenced paragraph, § 12705(b)(4), requires grantees’
housing strategies to explain how certain factors, including “zoning
ordinances,” affect “the cost of housing or the incentives to develop,
maintain, or improve affordable housing in the jurisdiction.”103
Section 12705(c) thus provides that the continuation or
adoption of local zoning ordinances may not form the basis for
HUD’s disapproval of a jurisdiction’s housing strategy.
Section 12711 similarly prohibits HUD from denying funds based on
“the adoption, continuation, or discontinuation by a jurisdiction of
any public policy, regulation, or law that is (1) adopted, continued, or
discontinued in accordance with the jurisdiction’s duly established
authority, and (2) not in violation of any Federal law.”104
The County is therefore correct that HUD may not—under
either § 12705 or § 12711—condition funding on changes to local
42 U.S.C. § 12705(c)(1) (emphasis supplied).
102
Id. § 12705(b)(4).
103
Id. § 12711 (emphasis supplied); see also S. Rep. No. 101‐316, at 40
104
(1990), reprinted in 1990 U.S.C.C.A.N. 5763, 5806 (“[T]he Committee bill does not
permit HUD (1) to disapprove of a housing strategy because of HUD’s
disagreement with any policies identified under section [12705(b)(4)] or (2) to
require a change in any such policy as a prerequisite to allocation of assistance
under this or another Act.”).
43
policies, including zoning laws. But that is not what HUD did here.
HUD did not at any point tell the County that its CPD funds would
only be released if certain municipalities in the County changed their
zoning 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. As the Supreme Court recently stated, challenges to
zoning laws and other housing restrictions “that function unfairly to
exclude minorities from certain neighborhoods without any
sufficient justification . . . reside at the heartland of disparate‐impact
[fair housing] liability.”105 No federal law requires HUD to accept a
jurisdiction’s AI, particularly if HUD concludes that the analysis on
which the AI is based is unreliable or methodologically unsound.
Rather, the statute requires that a jurisdiction’s certification to HUD
be accurate and based on “supporting evidence,”106 and HUD is
permitted to reject a housing strategy as “substantially incomplete”
if it decides that the AI and the associated certification are flawed or
inaccurate.107
Inclusive Communities, 135 S. Ct. at 2521‐22; see also Huntington v.
105
Huntington Branch, N.A.A.C.P., 488 U.S. 15, 16‐18 (1988) (per curiam) (invalidating
zoning law preventing construction of multifamily rental units).
106 42 U.S.C. § 12704(21).
107 See 24 C.F.R. § 91.500(b) (giving HUD the authority to “disapprove a
plan or a portion of a plan” if it determines that the supporting certification is
“inaccurate”).
44
Here, HUD rejected the County’s AI because the County
reached the same boilerplate conclusion for every municipality—
namely, that the local zoning laws did not have a disparate impact
on minorities and did not pose an impediment to affirmatively
furthering fair housing with respect to race. HUD determined that
this repetitive conclusion for each municipality was not supported
by the available data and did not reflect an adequate disparate
impact analysis, because,
[a]s the County itself acknowledges,
Restrictive Practices exist in these
municipalities that have the effect of
limiting the availability of affordable
housing. Such limitations may in fact have
an exclusionary effect based on race,
national origin, or familial status, which the
data supports. The [County’s] refusal to
acknowledge any connection between
zoning restrictions that affect the
availability and location of affordable
housing and fair housing protections
directly challenges the Court’s rulings on
the matter and the [consent decree] itself.
HUD therefore cannot accept the County’s
Zoning Submission. Thus, the County’s AI
remains unacceptable.108
J.A. 261‐62 (HUD’s August 9, 2013 letter to the County) (footnote
108
omitted).
45
As HUD made clear in this letter, the basis for its rejection of
the County’s AI was not that the County’s municipalities failed to
change their zoning laws. It was that HUD determined—based on its
own review of the laws and the data, as well as the monitor’s
reports—that the County’s zoning analysis was flawed, inaccurate,
and incomplete. Because HUD did not deny CPD funds to the
County based on the “adoption, continuation or discontinuation” of
a zoning ordinance by any municipality, it did not violate either
§ 12705 or § 12711.109
Once a jurisdiction requests CPD funds, HUD may require the
jurisdiction to analyze how the zoning laws of its municipalities may
impede the overall effort to “affirmatively further fair housing.” To
the extent that the analysis identifies such laws as impediments to
fair housing, HUD may also require that the jurisdiction develop a
109 The Government also argues that “Section 12705 restricts HUD’s
consideration of zoning policies that affect the cost or affordability of housing, but
that HUD’s concern in this case was whether zoning affects fair housing—that is,
whether those policies had a segregative effect.” Gov. Br. 21 (emphases
supplied). In short, the Government’s argument is that HUD did not violate
§ 12705, because it did not consider how Westchester’s zoning laws affected
“affordable” housing, only how they affected “fair” housing. It is apparent,
however, that “affordable” housing and “fair” housing are frequently related
concepts—or, to put the point another way, that a lack of “affordable” housing in
a given jurisdiction may “disparately impact” racial minorities. In any event,
because we conclude for other reasons that HUD’s actions did not violate
§§ 12705 and 12711, we need not address this alternative argument.
46
strategy to “overcome the effects of [those] impediments.”110 Had
the County undertaken an adequate analysis of impediments to fair
housing that identified certain zoning ordinances as problematic, the
County may well have been able to design a strategy to overcome
the negative effects of those ordinances short of seeking full repeal,
though we need not decide the point here. In any event, it is well
settled that Congress may “further broad policy objectives by
conditioning receipt of federal moneys upon compliance by the
recipient with federal statutory and administrative directives.”111
And “if a party objects to a condition on the receipt of federal
funding, its recourse is to decline the funds.”112 As the Supreme
Court stated in a different context, “the receipt of federal funds . . . is
a consensual matter: the . . . grantee weighs the benefits and burdens
before accepting the funds and agreeing to comply with the
conditions attached to their receipt.”113
Here, Congress has charged HUD with using its grant
programs to eradicate practices—such as exclusionary zoning—that
are contrary to the advancement of what its governing statutes and
See 24 C.F.R. § 91.225(a)(1) (requiring, as part of the obligation to
110
affirmatively further fair housing, that jurisdictions identify “appropriate actions
to overcome impediments identified” in the AI).
South Dakota v. Dole, 483 U.S. 203, 206 (1987) (internal quotation marks
111
omitted).
Agency for Int’l Dev. v. Alliance for Open Soc’y Int’l, Inc., 133 S. Ct. 2321,
112
2328 (2013).
Guardians Ass’n v. Civil Service Comm’n, 463 U.S. 582, 596 (1983)
113
(plurality).
47
regulations define as “fair housing.”114 As a condition for the
distribution of millions of dollars in CPD funds, HUD required the
County to analyze whether the zoning laws in some of its
municipalities were exclusionary and, if so, to develop a plan to
encourage these municipalities to change their laws. When the
County did not comply to HUD’s satisfaction, HUD withheld the
County’s funding. We agree with the District Court that this
decision did not violate either § 12705 or § 12711.
In urging otherwise, the County argues that HUD was
required to approve its AI because it was “substantially complete.”
Under § 12705(c)(1), HUD must approve an otherwise acceptable
housing strategy within 60 days of receipt so long as it is
“substantially complete.” However, HUD has the authority to
“disapprove a plan or a portion of a plan if it is . . . substantially
incomplete,” and an example of such a plan is one “for which a
certification is rejected by HUD as inaccurate, after HUD has
inspected the evidence and provided due notice and opportunity to
the jurisdiction for comment.”115 Because we agree with the District
Court that HUD had sufficient grounds to conclude that the
114 See 42 U.S.C. § 3608(e)(5) (requiring HUD to “administer the programs
and activities relating to housing and urban development in a manner
affirmatively to further the policies of [the FHA]”); see also Inclusive Communities,
135 S. Ct. at 2521‐22 (noting that discriminatory practices under the FHA
“include zoning laws . . . that function unfairly to exclude minorities from certain
neighborhoods without any sufficient justification”).
24 C.F.R. § 91.500(b) (emphasis supplied).
115
48
County’s housing strategy was substantially incomplete, we reject
the County’s claim that HUD violated § 12705(c)(1) in this regard.
Nor are we persuaded by the County’s argument that the four
so‐called “Special Assurances” HUD requested from the County in
its August 9, 2013 and July 18, 2014 letters violated §12705 or
§ 12711.116 While these requested promises did include commitments
(1) to adopt the monitor’s conclusions that certain municipalities had
exclusionary zoning ordinances, and (2) to seek removal of those
ordinances, including through litigation if necessary, the County’s
refusal to satisfy the Special Assurances was not the basis for HUD’s
withholding of CPD funds. Rather, HUD had already denied the
County’s grant applications based on the inadequate analysis
discussed above and was facing imminent deadlines to reallocate the
funds at issue before the relevant appropriations expired. Thus, to
assist the County in meeting application requirements before these
hard deadlines, HUD stated that if the County agreed to the Special
Assurances, HUD would approve the County’s application. We do
not understand HUD to have required the Special Assurances as a
necessary condition of obtaining CPD funds. Rather, HUD offered
the Special Assurances as a possible avenue by which the County
could satisfy the grant requirements. Thus, because HUD does not
appear to have conditioned the County’s CPD funds on the
County’s agreement to the Special Assurances, we conclude that
HUD did not violate § 12705 or § 12711 by proposing them. We need
J.A. 259‐65 & 74, respectively.
116
49
not address the counterfactual question of whether HUD would
have violated those statutory provisions if it had conditioned the
County’s CPD funds on these assurances.
Accordingly, we affirm the District Court’s judgment insofar
as it dismissed the County’s claim that HUD’s action violated
§ 12705 and § 12711.
CONCLUSION
This case resolves a narrow question: May HUD require a
jurisdiction that applies for CPD funding to analyze whether local
zoning laws will impede the jurisdiction’s mandate to “affirmatively
further fair housing”? Because HUD may impose such a
requirement on jurisdictions that apply for CPD funds, and because
the decision to withhold Westchester County’s CPD funds in this
case was not arbitrary or capricious, we conclude that HUD’s action
complied with federal law.
It bears emphasizing 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.
50
As a consequence of this decision, HUD is authorized to
reallocate Westchester’s CPD funds for FY 2013 and, eventually, for
FY 2014, and to continue withholding the roughly $750,000 in funds
remaining for FY 2011. As noted above, the County has indicated
that it will no longer seek CPD funds for FY 2015 to FY 2017. In
response to an Order we issued on August 28, 2015, the Government
stated that the County’s decision not to apply for future funds does
not affect any continuing obligations under the consent decree,
including the requirement that the County submit an AI deemed
acceptable by HUD.117 We leave for future litigation the question of
how HUD can enforce the consent decree against the County, now
that the County no longer plans to seek additional federal funds. We
also leave it to the district court in a future case to consider what
steps the County can or must take to end further supervision over its
housing policies, pursuant to this consent decree. In so doing, the
district court should be mindful of the teaching of the Supreme
Court that courts should apply a “flexible standard” to deciding
whether “a significant change in facts or law warrants revision of [a
consent] decree,”118 as well as our recent observation in another
See Gov. Br. 56‐59.
117
Rufo v. Inmates of Suffolk Cty. Jail, 502 U.S. 367, 393 (1992). As the
118
Supreme Court more recently held, a district court
must exercise its equitable powers to ensure that when the objects
of the decree have been attained, responsibility for discharging the
State’s obligations is returned promptly to the State and its
officials. As public servants, the officials of the State must be
presumed to have a high degree of competence in deciding how
best to discharge their governmental responsibilities. A State, in
51
context that “[a]t some point in time this litigation has to be
ended.”119
* * *
In sum, we AFFIRM the District Court’s judgment of July 21,
2015, and VACATE IN PART the temporary injunction issued
pendente lite by a motions panel of this Court on May 1, 2015.
HUD is authorized to reallocate the County’s FY 2013 funds
forthwith. As to the County’s FY 2014 funds, however, HUD is
directed to delay reallocating those funds until after the County
exhausts its right to seek further review of this decision.
the ordinary course, depends upon successor officials, both
appointed and elected, to bring new insights and solutions to
problems of allocating revenues and resources. The basic
obligations of federal law may remain the same, but the precise
manner of their discharge may not. If the State establishes reason
to modify the decree, the court should make the necessary
changes; where it has not done so, however, the decree should be
enforced according to its terms.
Frew ex rel. Frew v. Hawkins, 540 U.S. 431, 442 (2004).
119 Bridgeport Guardians, Inc. v. Delmonte, 602 F.3d 469, 476 (2d Cir. 2010);
see also id. (“Except in highly unusual circumstances, it is the business of cities,
not federal courts or special masters, to run police departments.”).
52
