802 F.3d 413
2d Cir.2015Background
- Westchester County agreed to a 2009 consent decree resolving False Claims Act claims; the decree required the County to submit an HUD‑acceptable Analysis of Impediments (AI) and to promote policies (e.g., source‑of‑income legislation) to increase affordable housing.
- HUD repeatedly rejected Westchester’s post‑decree AIs (FY2011, FY2013, FY2014), finding flawed data, inadequate analyses of municipal zoning, and lack of plans to overcome identified impediments; HUD notified Westchester it would withhold/reallocate CPD funds (CDBG, ESG, HOME) if AIs remained unacceptable.
- A court‑appointed monitor produced detailed 2013 and 2014 reports concluding several municipalities had exclusionary zoning under state (Berenson) and/or federal (Huntington) standards; HUD relied on those reports in rejecting the AIs.
- Westchester sued under the Administrative Procedure Act and 42 U.S.C. §§ 12705 and 12711, arguing HUD unlawfully conditioned funding on changes to local zoning and local policy substance, and that HUD’s denials were arbitrary and capricious.
- District Court granted HUD summary judgment; the Second Circuit affirmed, holding HUD permissibly required an adequate AI (including zoning analysis), that its denials were not arbitrary or capricious, and that HUD did not unlawfully condition funds on changing municipal policies.
- Relief/administration: the court affirmed judgment for HUD, vacated in part a temporary injunction, authorized HUD to reallocate FY2013 funds immediately, and delayed FY2014 reallocation pending exhaustion of Westchester’s further review rights.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| May HUD reject a jurisdiction’s funding application for an inadequate AI that fails to analyze zoning as a potential impediment to fair housing? | Westchester: HUD exceeded authority by forcing consideration of local zoning substance and effectively requiring policy changes. | HUD: Statutes/regulations require AIs that identify impediments (including zoning) and plans to overcome them; HUD may reject inadequate or inaccurate AIs. | Held: HUD may require and reject inadequate AIs that fail to analyze zoning impacts; denial was not arbitrary or capricious. |
| Did HUD violate §12705/§12711 by conditioning funds on changes to local public policy (zoning)? | Westchester: HUD’s demands functionally coerced local policy changes, contravening statutory bars on allocating/denying funds because of local policy. | HUD: HUD did not condition funds on adoption/continuation/withdrawal of specific local policies; it required analysis and plans to address impediments. | Held: HUD did not violate §§12705/12711 because it sought accurate AIs and plans, not direct conditioning on specific policy adoption. |
| Were HUD’s denials arbitrary and capricious under the APA? | Westchester: HUD’s rejections were unjustified and relied on improper considerations and monitor reports. | HUD: Denials were supported by monitor’s empirical/legal analyses and by administrative record; County had multiple opportunities to cure deficiencies. | Held: Denials were neither arbitrary nor capricious; HUD provided reasoned explanations and relied on record evidence. |
| Were HUD’s “Special Assurances” unlawful conditions on funding? | Westchester: Assurances (e.g., adopting monitor conclusions, pursuing municipal zoning changes) improperly coerced policy change. | HUD: Special Assurances were offered as one way to satisfy deadlines and were not the basis for withholding funds. | Held: Court did not find HUD conditioned funds on these assurances; proposing them did not violate §§12705/12711 (court declined to decide counterfactual). |
Key Cases Cited
- Texas Dep’t of Hous. & Cmty. Affairs v. Inclusive Communities Project, 135 S. Ct. 2507 (2015) (disparate‑impact claims cognizable under the Fair Housing Act; zoning can have segregative effect)
- Huntington Branch, N.A.A.C.P. v. Town of Huntington, 488 U.S. 15 (1988) (facially neutral zoning laws may violate fair housing where they have discriminatory effects)
- Berenson v. Town of New Castle, 38 N.Y.2d 102 (1975) (New York state standard for socioeconomic exclusionary zoning analysis)
- United States v. Yonkers Board of Education, 624 F. Supp. 1276 (S.D.N.Y. 1985) (history of federal intervention addressing housing segregation in Westchester area)
- South Dakota v. Dole, 483 U.S. 203 (1987) (Congress may condition receipt of federal funds on compliance with statutory directives)
- Rufo v. Inmates of Suffolk Cty. Jail, 502 U.S. 367 (1992) (standard for modifying or ending consent decrees)