December 8, 2015.
April 22, 2016.
action commenced in the Boston Division of the Housing Court
Department on March 16, 2011.
motion to dismiss was heard by Jeffrey M. Winik, J.
The Supreme Judicial Court granted an application for direct
Ann E. Jochnick ( James M. McCreight with
her) for the plaintiffs.
Janet Steckel Lundberg for the defendants.
following submitted briefs for amici curiae:
John Cann, of Minnesota, for Sargent Shriver
National Center on Poverty Law & others.
Harry J. Kelly & Joshua S. Barlow for
Greater Boston Real Estate Board & others.
Joseph D. Rich & Thomas Silverstein, of
the District of Columbia, Oren M. Sellstrom, of California,
& Laura Maslow-Armand for Lawyers' Committee
for Civil Rights Under Law & another.
John J. McDermott, of Virginia, &
Eleftherios Papadopoulos for National Apartment
Association & another.
Esme Caramello, Louis Fisher, Erika Johnson, Aditya Pai,
& Katie Renzler for Fair Housing Center of
Greater Boston & others.
Roberta L. Rubin, Special Assistant Attorney
General, for Department of Housing and Community Development.
Gants, C.J., Spina, Cordy, Botsford, Duffly, Lenk, &
N.E.3d 397] Cordy, J.
case arises out of a decision made by the defendants, the
principals and owners of Burbank Apartments (Burbank), not to
renew Burbank's project-based Section 8 housing
assistance payments contract [48 N.E.3d 398] (HAP) with the
United States Department of Housing and Urban Development
(HUD) when its forty-year mortgage subsidy contract expired
on March 31, 2011. In lieu of those project-based subsidies,
the defendants opted instead to accept from its tenants
Section 8 enhanced vouchers, enabling tenants living in units
subsidized on a project basis to remain as tenants under an
alternative Federal housing program. See 42 U.S.C. §
plaintiffs, comprised of current and potential Burbank
tenants, complained that Burbank's decision violated
§ 3604 of the Federal Fair Housing Act (FHA or Title
VIII), 42 U.S.C. § § 3601 et seq. (2012), and the
Massachusetts antidiscrimination law, G. L. c. 151B, §
4, both by virtue of intentional discrimination as well as
disparate impact on members of otherwise protected classes of
citizens. In particular, the plaintiffs alleged that the
defendants' decision not to renew their HAP would have a
disproportionately negative effect on people of color, the
disabled and elderly, female-headed households, recipients of
public and rental assistance, and families with children
(collectively, members of protected classes).
March, 2011, the plaintiffs moved to enjoin the defendants
from allowing Burbank's project-based HAP to lapse; the
defendants demurred, and a Housing Court judge (motion judge)
denied the injunction. The plaintiffs filed an amended
complaint in June, 2011, which the defendants moved to
dismiss for failure to state a claim, pursuant to Mass. R.
Civ. P. 12 (b) (6), 365 Mass. 754 (1974), and oral arguments
were held on January 25, 2012. On December 31, 2014, the
motion judge granted the defendants' motion to dismiss.
The plaintiffs appealed.
plaintiffs' housing discrimination claims, based on the
theory of disparate impact, raise an issue of first
impression in Massachusetts concerning the relationship among
Section 8, the FHA, and the Massachusetts antidiscrimination
statute (together the fair housing statutes). Specifically,
can a private building owner's decision not to renew
participation in the project-based Section 8 subsidy program
in favor of tenant-based Section 8 subsidies be the basis of
a disparate impact claim when such decision was otherwise
permitted by both Federal and State statutes, as well as by
contract? And, if so, what are the pleading requirements for
making out such a claim?
comprehensive memorandum of decision and order, the motion
judge determined that a disparate impact claim under these
circumstances is not legally cognizable, and never reached
the second question. Subsequently, the United States Supreme
Court released its decision in Texas Dep't of Hous.
& Community Affairs v. The Inclusive Communities
Project, Inc., 135 S.Ct. 2507, 2525, 192 L.Ed.2d 514
(2015) ( Inclusive Communities ), holding that
such as this one, based on the theory of disparate impact are
generally cognizable under the FHA. We granted the
plaintiffs' application for direct appellate review to
consider their allegations in the context of the FHA, as well
as the potential for similar claims under Massachusetts
antidiscrimination law, and to examine the impact of the
Inclusive Communities decision.
affirm the decision of the motion judge granting the motion
to dismiss, although [48 N.E.3d 399] on somewhat different
grounds. We conclude that even where the property owner has
acted in accord with statute, regulation, and contract, a
disparate impact claim under the fair housing statutes can be
brought, subject to rigorous pleading requirements. The
plaintiffs in the present case, however, have not satisfied
1965, Congress, under the auspices of the National Housing
Act of 1934, approved a mortgage insurance program known as
§ 221(d)(3) of the National Housing Act, 12 U.S.C.
§ 1715l(d)(3) (2012). See 12 U.S.C. § 1701s(a).
Pursuant to § 221(d)(3), which was " designed to
assist private industry in providing housing for low and
moderate income families and displaced families," 12
U.S.C. § 1715l(a), HUD can offer below market interest
rate (BMIR) mortgage loans to private property owners in
exchange for an agreement from those owners to provide
affordable housing. See 12 U.S.C. § 1715l(d)(3). The
regulatory agreements, and the attached mortgages, may have
up to forty-year terms, 12 U.S.C. § 1701s(a), but permit
the owners to opt to pay down those mortgages and withdraw
from the program after twenty years. 12 U.S.C. §
Section 8 housing program was enacted in 1974 for the
purpose of " aiding low-income families in obtaining a
decent place to live and of promoting economically mixed
housing." 42 U.S.C. § 1437f(a). See Figgs
v. Boston Hous. Auth., 469 Mass. 354, 362, 14 N.E.3d
229 (2014); Feemster v. BSA Ltd.
Partnership, 471 F.Supp.2d 87, 91 (D.D.C. 2007),
aff'd, 548 F.3d 1063, 383 U.S.App.D.C. 376 (D.C. Cir.
2008). Housing assistance through Section 8 is obtained
through either " tenant-based" or "
project-based" subsidies. 24 C.F.R. § 982.1(b)(1)
(2015). Both forms are funded by the Federal government and
administered by State or local public housing agencies
(PHAs). See 42 U.S.C. § 1437f(a); 24 C.F.R. §
982.1(a)(1). For project-based assistance, the " rental
assistance is paid for families who live in specific housing
developments or units." 24 C.F.R. § 982.1(b)(1).
Tenant-based assistance, on the other hand, is appurtenant to
the tenant, and the " assisted unit is selected by the
family," so that the tenant may opt to " rent a
unit anywhere ... in the jurisdiction of a PHA that runs a
voucher program." Id. See 42 U.S.C. §
1437f(r); 24 C.F.R. § § 982.353(a) (2010),
982.355(a) (2015). After Congress enacted the Section 8
program in 1974, many of the units built with the assistance
of the § 221(d)(3) [48 N.E.3d 400] mortgage program were
transferred to project-based Section 8 rent subsidies,
including many of those at Burbank. See Feemster,
1987, and in response to subsequent concerns that owners
operating under § 221(d)(3) regulatory agreements were
opting to pay down their mortgages early and opt out of the
Section 8 program, see Franconia Assocs. v.
United States, 536 U.S. 129, 136, 122 S.Ct. 1993,
153 L.Ed.2d 132 (2002), citing H. R. Rep. No. 100-122, at 53
(1987) (interpreting 1994 version of 42 U.S.C. §
1472[c][B]), Congress enacted the Emergency Low-Income
Housing Preservation Act of 1987 (ELIHPA) to provide
incentives for continued participation by property owners.
Franconia Assocs., supra, citing 42 U.S.C. §
1472(c)(4)(B) (1994 & Supp. V). Congress also later
provided further protection for tenants, including
eligibility for tenant-based vouchers on the expiration of a
project-based HAP. 12 U.S.C. § 4113 (2012). Pursuant to
that statute, where an owner opted to terminate or
discontinue project-based subsidies, low income tenants in
the units previously subject to that program automatically
would be eligible for Section 8 mobile vouchers, see 12
U.S.C. § 4113(a), and, in some instances, enhanced
ers. See 12 U.S.C. § 4113(f). Further, property owners
opting out of project-based subsidies -- but continuing to
maintain the property for residential rental occupancy -- are
required to accept the tenant-based Section 8 subsidies for
which their tenants were automatically eligible. 12 U.S.C.
2009, the Legislature enacted cognate legislation, G. L. c.
40T (c. 40T), which addresses the rights and obligations of
owners operating with project-based Section 8 subsidies. See
G. L. c. 40T, § 1. See also St. 2009, c. 159, § 1.
Like the equivalent Federal statutes, c. 40T provides
substantive protections for tenants previously occupying
units covered by project-based subsidies. See, e.g., G. L. c.
40T, § § 2 ( b ), 7. See also 42 U.S.C.
§ 1437f(c)(8)(B). Also consonant with Federal law,
however, c. 40T does not restrict owners from prepaying their
mortgages or opting out of their subsidy contracts after
doing so. See G. L. c. 40T, § 2 ( a ) ("
Nothing herein shall prohibit the owner from taking actions
to terminate an affordability restriction" ).
distinctions between project-based and tenant-based subsidies
(and among the various tenant-based subsidies themselves) are
not insignificant. Generally, all Section 8 tenants
contribute a portion of their income to the rent based on an
income indicator, amounting to the higher of thirty per cent
of their monthly adjusted income or ten per cent of their
monthly gross income. See 42 U.S.C. § §
1437a(a)(1), 1437f(o)(2)(A). There are, however, variations
on the general scheme depending on the subsidy program,
including who is responsible for determining a unit's
rental price. For project-based entities, the PHA is
responsible for setting rental prices for specific units. See
24 C.F.R. § § 983.301 (2014), 983.302
prices for tenants holding tenant-based vouchers, on the
other hand, are negotiated between the owner and the tenant.
24 C.F.R. § 982.506 (1999). The Secretary of HUD sets a
" payment standard" applicable to the units
selected by the tenant, based on the fair market rental [48
N.E.3d 401] value of the unit, and in accordance with HUD
regulation. See 42 U.S.C. § 1437f(o)(1)(A)-(B). Where
the rent established in negotiation between the owner and the
tenant exceeds the established payment standard, the PHA will
pay only the difference between the income indicator and the
standard, as opposed to the rental value, meaning that
holders of tenant-based vouchers may be subject to paying a
greater portion of their income than tenants living in
project-based units. See id. at §
Enhanced vouchers, a more protective variation on the
tenant-based subsidy, insulate holders from these rent
variances, as their rent payments are still determined based
on the difference between the income indicator and the rent,
even if that rent exceeds the payment standard. Id.
at § 1437f(t)(1)(B). In either tenant-based subsidy
scenario, however, the rental value negotiation between an
owner and tenant-based subsidy holder is subject to PHA
approval, meaning that PHAs can opt not to approve a rental
agreement and refuse to pay the subsidy if the PHA determines
that the rent is not " reasonable." See 24 C.F.R.
§ 982.507 (2014); 42 U.S.C. § 1437f(o)(10)(B).
Because rents are established by the PHA under the
project-based subsidy program, tenants living in
project-based units are not subject to any reasonableness
Factual and procedural background.
seven named plaintiffs in the amended complaint are an
amalgamation of current Burbank tenants, prospective tenants,
and organizations that represent the interests of other
Burbank tenants and more prospective Burbank residents in the
community. The four individual plaintiffs, En Ci Guan,
Richard Webster, Byron Alford, and Satisha Cleckley, are all
members of protected classes. Prior to the defendants'
decision not to renew their Section 8 HAP, Guan and Webster
lived in units supported by Section 8 project-based
subsidies. Alford was a resident of a Burbank unit not
supported by the Section 8 project-based subsidy, and
Cleckley was a nontenant who had sought to apply for an
apartment at Burbank. Neither Alford nor Cleckley was ever in
receipt of the project-based subsidy. The individual
plaintiffs claimed that the decision to allow the
project-based subsidy to lapse discriminates against current
Burbank tenants and potential Burbank tenants in the Fenway
community. The three organizational plaintiffs, Burbank
Apartments Tenant Association, made up of tenants who reside
at Burbank; the Massachusetts Coalition for the Homeless, a
nonprofit corporation that works with homeless individuals
and families; and the Fenway Community Development
Corporation, a nonprofit corporation devoted to enhancing
diversity in the Fenway neighborhood, alleged that the loss
of low income housing at Burbank would harm the neighborhood.
The defendants are the principals and owners of
N.E.3d 402] Burbank is a scattered site 173-unit rental
development located in the Fenway neighborhood of Boston.
Beginning in 1970, the defendants began renovation of Burbank
with the assistance of a federally insured and subsidized
§ 221(d)(3) BMIR mortgage loan. See 12 U.S.C. §
1715l(d)(3). Pursuant to their regulatory agreement with HUD,
the defendants were obligated to lease the Burbank apartments
to low or moderate income families for " so long as the
contract of mortgage insurance continues in effect." The
defendants' mortgage was to be fully paid by April 1,
2011, with prepayment of the mortgage permitted as of April
1982, the eligible tenants occupying Burbank's units
began to receive support from project-based Section 8
subsidies. Sixty-seven of the 173 units were
designated as project-based Section 8 units.
defendants opted not to prepay their loan in 1991. Instead,
they signed an ELIPHA use agreement in 1994,
specifying that HUD " shall not require the [defendants]
to renew or extend any assistance contract beyond [April 1,
2011,] and shall not subject the [defendants] to more onerous
requirements than those which exist under the Section 8
program." The use agreement remained in effect for the
balance of the HAP.
2010, the defendants provided a one-year notice of expiration
to HUD and the ...