ON APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF PENNSYLVANIA (D.C. Civil No. 76-278).
Gibbons, Van Dusen, Circuit Judges, and Fisher,*fn* District Judge.
The appellants are low-income tenants in multifamily housing subject to a rent supplement contract between the landlord and the Department of Housing and Urban Development (HUD). They complain, on their own behalf and on behalf of all tenants similarly situated, that HUD is operating the rent supplement program illegally and to their disadvantage. HUD defends its administration of the program, claiming that it is implementing the intent of Congress. After certifying a limited class, the district court granted summary judgment in favor of HUD. We reverse.
I. THE RENT SUPPLEMENT PROGRAM
Section 101 of the Housing and Urban Development Act of 1965*fn1 established the rent supplement program. Under this program, the federal government makes rent supplement payments on behalf of certain low-income families to enable them to occupy housing units built by private nonprofit or limited dividend corporations and financed by mortgages, bearing interest at the market rate but insured by the Federal Housing Administration. The purpose of the program is to provide decent housing for low-income persons and to stimulate investment by the private sector in urban renewal.
The Act authorizes HUD to contract with eligible landlords to make annual payments for the housing of qualified tenants for a period not exceeding forty years.*fn2 With such a contract in hand, a housing developer can obtain mortgage financing, even if a sufficient number of tenants who can afford to pay fair market rentals cannot be found in the area. The Act provides:
The amount of the annual payment with respect to any dwelling unit shall not exceed the amount by which the fair market rental for such unit exceeds one-fourth of the tenant's income as determined by the Secretary [of HUD] pursuant to procedures and regulations established by him.*fn3
establish criteria and procedures for determining the eligibility of occupants and rental charges, including criteria and procedures with respect to periodic review of tenant incomes and periodic adjustment of rental charges.*fn4
There is also a more general authorization for rule making.*fn5
In the exercise of its authority, HUD has published regulations specifying eligible projects,*fn6 eligible housing owners,*fn7 and qualified tenants.*fn8 A regulation further specifies that
the rent supplement contract shall provide that the payment on behalf of a qualified tenant shall be that amount by which the rent approved by the [Federal Housing] Commissioner for the unit exceeds one-fourth of the tenant's income, or exceeds any welfare allowance for housing if such allowance is larger than one-fourth of the tenant's income.*fn9
Thus, although 12 U.S.C. § 1701s(d) says that the supplement shall not exceed the difference between one-quarter of the tenant's income and the approved rent, the quoted regulation specifies that the ...