No Escape from Section 8

According to federal law, landlord participation in the “Section 8″ program, which provides housing subsidies for low-income tenants, is voluntary. In a variety of ways, New York statutes regulating the landlord-tenant relationship have attempted to restrict the right of landlords to stay out of the “Section 8″ program. Landlords have challenged each of these regulatory measures, and have almost invariably lost. In the most recent of these, Tapia v. Successful Management Corp. (Supreme Ct., N.Y. Cty, 7/20/09; NYLJ 7/28/09, p. 34., col. 1), the landlord challenged the application of two separate regulatory measures, and the result was familiar: the court upheld the regulations.

The Voluntary Nature of Section 8

The Housing and Community Development Act of 1974 marked the genesis of the Section 8 program, which provides vouchers to eligible low-income individuals toward rent for privately owned apartments. Landlord participation was always voluntary, but in 1987, Congress enacted two provisions that restricted the right of landlords to exit from the Section 8 program. First, a “take-one take-all” provision, 42 USC sec. 1437(f)(t), provided that a landlord who entered into a rental agreement with at least one Section 8 tenant could not use Section 8 status as a basis for refusing to rent to another Section 8 tenant. Second, an “endless lease” provision, 42 USC sec. 1437(f)(d)(1)(B)(ii), provided that a landlord could not refuse to renew the lease of a Section 8 tenant except for good cause. These restrictions made participation in Section 8 unattractive for many landlords.

In 1996, however, Congress repealed both requirements. The Senate Committee Report issued in connection with the amendments emphasized that these burdensome requirements deterred landlords from participating in the program. The Report also emphasized that the goal of the amendments was not to sanction discrimination, but to eliminate disincentives to landlord participation. S. Rep. 104-195 (1995).

Rosario

After repeal of the endless lease and take-one, take-all provisions, some New York landlords who had previously participated in Section 8 programs sought to withdraw. Rent-stabilized tenants, however, invoked a provision of the Rent Stabilization Law to prevent that result. Many Section 8 leases included a lease addendum prescribed the HUD providing expressly that the landlord was leasing the unit for occupancy with assistance through the Section 8 program. Landlord explicitly agreed that tenant would not be liable for the Section 8 program of the rent. When landlord tried to withdraw from the Section 8 program at the expiration of the lease term, tenants relied on 9 NYCRR sec, 2522.5(b)(1), which requires rent-stabilized landlords to provide renewal leases, and also requires that the leases be “on the same terms and conditions as the expired lease.” Tenants argued that landlords who included a Section 8 lease addendum in the original lease were required to include the same addendum in the renewal lease.

In Rosario v. Diagonal Realty, LLC, 8 N.Y. 3d 755, the Court of Appeals agreed. In a 2007 opinion by Judge Pigott, the court held that the “same terms and conditions” included the Section 8 addendum. The court also rejected landlord's argument that federal law pre-empted any New York provision that limited a landlord's right to withdraw from the program. The court concluded that the 1996 amendments were designed only to remove any federal deterrents to landlord participation in the Section 8 program, but not to prevent the states from enacting regulations that would prohibit discrimination against a Section 8 voucher holder.

In Rosario, the Court of Appeals could have, but did not, rely on the landlord's assent as a basis for overcoming federal pre-emption. That is, a rent-stabilized landlord knew that any renewal lease would, under New York law, require the same terms and conditions as the initial lease, and nevertheless signed an initial lease including the Section 8 addendum. As a result, the court could have held that landlord had voluntarily, by contract, subjected himself to an “endless lease” requirement. On this theory, the court would not have had to decide whether federal law pre-empted state legislation. But the court's language was broader, and emphasized that nothing in the federal statute prevented state anti-discrimination legislation.

Subsequent Law

In Rosario, tenant had participated in the Section 8 program from the inception of the tenancy. What if tenant had entered the tenancy without participation, and later sought to use Section 8 vouchers. The rent regulation stabilization provision relied upon by tenant in Rosario would not necessarily have been available. Two other enactments, however, are now available to tenants. First, for landlords who hold J-51 tax abatements, the City's Administrative Code now prevents landlords from denying dwelling accommodations based on “participation in ' a governmentally funded housing assistance program.” NYC Administrative Code, sec. 11-243(k). Second, in 2008, the New York City Council, over Mayor Bloomberg's veto, enacted Local Law 10, which prohibits discrimination in rental of housing “because of any lawful source of income.”

In Kosoglyadov v. 3130 Brighton Seventh, LLC, 54 AD3d 822, the Second Department held that the J-51 provision required landlords who received abatements to accept Section 8 vouchers even from existing tenants who had not received J-51 benefits at the inception of their tenancy. In Kosoglyadov, however, the original lease had indicated that landlord would accept Section 8 vouchers even though landlord had not actually accepted those vouchers. As a result, the court could have, but did not, rely on the argument that landlord had voluntarily agreed to an endless lease regulation, eliminating any pre-emption claims.

Two cases decided this year, both in New York County Supreme Court, have dealt with the application of both the J-51 law and Local Law 10. In Timkovsky v. 56 Bennett, LLC, 23 Misc.3d 997, Justice Emily Goodman faced an argument from landlords that the two statutes require them to accept vouchers from: 1) prospective tenants; and 2) from current tenants if, and only if, landlord had previously agreed to accept a Section 8 voucher from that tenant ' the situation in Kosoglyadov. Judge Goodman rejected that construction of the statute, concluding that it would lead to absurd results, and that it was inconsistent with statutory language that prohibits discrimination against “any person” based on source of income.

In Tapia, landlords took the same position, with the same result. Justice Marcy Friedman held that the two statutes apply equally to prospective and current statutes. In addressing landlord's pre-emption argument, however, Justice Friedman had to deal with the First Department's 2008 opinion in Mother Zion Tenant Association v. Donovan, 55 AD3d 333, where the court held invalid a 2005 statute providing that owners of “assisted rental housing,” including Section 8 and Mitchell Lama, housing, could not withdraw from such a program without providing tenant one year's notice and providing tenants a right of first opportunity to purchase the building at an appraised price. Justice Friedman concluded in Tapia, as had the Appellate Division in Mother Zion, that repeal of the endless lease provision did not pre-empt application of state rent regulation laws of general applicability, because Congress expressly contemplated that such state and local regulations would continue. Mother Zion was distinguishable because the 2005 statute was targeted at a small group of landlords ' those who participated in Section 8 and other assisted housing programs ' the statute was pre-empted by federal law.

The consequence of this series of cases is that unless the United States Supreme Court takes a different position on the federal pre-emption issue, New York landlords are likely to have little success in escaping from the Section 8 program.

Stewart E. Sterk is the Editor-in-Chief of this newsletter. The author would like to thank Jenna Bernstein, Cardozo '10, for invaluable research assistance.

According to federal law, landlord participation in the “Section 8″ program, which provides housing subsidies for low-income tenants, is voluntary. In a variety of ways, New York statutes regulating the landlord-tenant relationship have attempted to restrict the right of landlords to stay out of the “Section 8″ program. Landlords have challenged each of these regulatory measures, and have almost invariably lost. In the most recent of these, Tapia v. Successful Management Corp. (Supreme Ct., N.Y. Cty, 7/20/09; NYLJ 7/28/09, p. 34., col. 1), the landlord challenged the application of two separate regulatory measures, and the result was familiar: the court upheld the regulations.

The Voluntary Nature of Section 8

The Housing and Community Development Act of 1974 marked the genesis of the Section 8 program, which provides vouchers to eligible low-income individuals toward rent for privately owned apartments. Landlord participation was always voluntary, but in 1987, Congress enacted two provisions that restricted the right of landlords to exit from the Section 8 program. First, a “take-one take-all” provision, 42 USC sec. 1437(f)(t), provided that a landlord who entered into a rental agreement with at least one Section 8 tenant could not use Section 8 status as a basis for refusing to rent to another Section 8 tenant. Second, an “endless lease” provision, 42 USC sec. 1437(f)(d)(1)(B)(ii), provided that a landlord could not refuse to renew the lease of a Section 8 tenant except for good cause. These restrictions made participation in Section 8 unattractive for many landlords.

In 1996, however, Congress repealed both requirements. The Senate Committee Report issued in connection with the amendments emphasized that these burdensome requirements deterred landlords from participating in the program. The Report also emphasized that the goal of the amendments was not to sanction discrimination, but to eliminate disincentives to landlord participation. S. Rep. 104-195 (1995).

Rosario

After repeal of the endless lease and take-one, take-all provisions, some New York landlords who had previously participated in Section 8 programs sought to withdraw. Rent-stabilized tenants, however, invoked a provision of the Rent Stabilization Law to prevent that result. Many Section 8 leases included a lease addendum prescribed the HUD providing expressly that the landlord was leasing the unit for occupancy with assistance through the Section 8 program. Landlord explicitly agreed that tenant would not be liable for the Section 8 program of the rent. When landlord tried to withdraw from the Section 8 program at the expiration of the lease term, tenants relied on 9 NYCRR sec, 2522.5(b)(1), which requires rent-stabilized landlords to provide renewal leases, and also requires that the leases be “on the same terms and conditions as the expired lease.” Tenants argued that landlords who included a Section 8 lease addendum in the original lease were required to include the same addendum in the renewal lease.

In Rosario v. Diagonal Realty, LLC , 8 N.Y. 3d 755, the Court of Appeals agreed. In a 2007 opinion by Judge Pigott, the court held that the “same terms and conditions” included the Section 8 addendum. The court also rejected landlord's argument that federal law pre-empted any New York provision that limited a landlord's right to withdraw from the program. The court concluded that the 1996 amendments were designed only to remove any federal deterrents to landlord participation in the Section 8 program, but not to prevent the states from enacting regulations that would prohibit discrimination against a Section 8 voucher holder.

In Rosario, the Court of Appeals could have, but did not, rely on the landlord's assent as a basis for overcoming federal pre-emption. That is, a rent-stabilized landlord knew that any renewal lease would, under New York law, require the same terms and conditions as the initial lease, and nevertheless signed an initial lease including the Section 8 addendum. As a result, the court could have held that landlord had voluntarily, by contract, subjected himself to an “endless lease” requirement. On this theory, the court would not have had to decide whether federal law pre-empted state legislation. But the court's language was broader, and emphasized that nothing in the federal statute prevented state anti-discrimination legislation.

Subsequent Law

In Rosario, tenant had participated in the Section 8 program from the inception of the tenancy. What if tenant had entered the tenancy without participation, and later sought to use Section 8 vouchers. The rent regulation stabilization provision relied upon by tenant in Rosario would not necessarily have been available. Two other enactments, however, are now available to tenants. First, for landlords who hold J-51 tax abatements, the City's Administrative Code now prevents landlords from denying dwelling accommodations based on “participation in ' a governmentally funded housing assistance program.” NYC Administrative Code, sec. 11-243(k). Second, in 2008, the New York City Council, over Mayor Bloomberg's veto, enacted Local Law 10, which prohibits discrimination in rental of housing “because of any lawful source of income.”

In Kosoglyadov v. 3130 Brighton Seventh, LLC, 54 AD3d 822, the Second Department held that the J-51 provision required landlords who received abatements to accept Section 8 vouchers even from existing tenants who had not received J-51 benefits at the inception of their tenancy. In Kosoglyadov, however, the original lease had indicated that landlord would accept Section 8 vouchers even though landlord had not actually accepted those vouchers. As a result, the court could have, but did not, rely on the argument that landlord had voluntarily agreed to an endless lease regulation, eliminating any pre-emption claims.

Two cases decided this year, both in New York County Supreme Court, have dealt with the application of both the J-51 law and Local Law 10. In Timkovsky v. 56 Bennett, LLC, 23 Misc.3d 997, Justice Emily Goodman faced an argument from landlords that the two statutes require them to accept vouchers from: 1) prospective tenants; and 2) from current tenants if, and only if, landlord had previously agreed to accept a Section 8 voucher from that tenant ' the situation in Kosoglyadov. Judge Goodman rejected that construction of the statute, concluding that it would lead to absurd results, and that it was inconsistent with statutory language that prohibits discrimination against “any person” based on source of income.

In Tapia, landlords took the same position, with the same result. Justice Marcy Friedman held that the two statutes apply equally to prospective and current statutes. In addressing landlord's pre-emption argument, however, Justice Friedman had to deal with the First Department's 2008 opinion in Mother Zion Tenant Association v. Donovan , 55 AD3d 333, where the court held invalid a 2005 statute providing that owners of “assisted rental housing,” including Section 8 and Mitchell Lama, housing, could not withdraw from such a program without providing tenant one year's notice and providing tenants a right of first opportunity to purchase the building at an appraised price. Justice Friedman concluded in Tapia, as had the Appellate Division in Mother Zion, that repeal of the endless lease provision did not pre-empt application of state rent regulation laws of general applicability, because Congress expressly contemplated that such state and local regulations would continue. Mother Zion was distinguishable because the 2005 statute was targeted at a small group of landlords ' those who participated in Section 8 and other assisted housing programs ' the statute was pre-empted by federal law.

The consequence of this series of cases is that unless the United States Supreme Court takes a different position on the federal pre-emption issue, New York landlords are likely to have little success in escaping from the Section 8 program.

Stewart E. Sterk is the Editor-in-Chief of this newsletter. The author would like to thank Jenna Bernstein, Cardozo '10, for invaluable research assistance.