Resources on Rural Rental Housing Preservation and Prepayment

News on Policy, Legislation, and Funding Levels

HAC post 5/22/12 on Rooflines blog, “What Does an Affordable Rural Rental Housing Strategy Look Like?”

News on Lawsuits and Links to Court Decisions

Goldammer v. United States, court decision, June 14, 2007. The U.S. Oregon District Court reconsidered its earlier ruling in light of the Ninth Circuit Court of Appeals decision of October 3, 2006 (below), and ruled that the prepayment violated the Emergency Low Income Housing Preservation Act of 1987 and that the tenants’ interest, in returning the property to the Section 515 program, outweighed the possible inconvenience and cost of undoing the illegal prepayment. In July 2007 the court should decide how the property will be returned to the Section 515 program.
Goldammer v. United States, court decision, Oct. 3, 2006. Owners of Section 515 properties in Oregon filed a quiet title action to remove RD’s mortgage after RD refused to accept prepayment. RD settled the suit and permitted the prepayment, believing that a Ninth Circuit Court of Appeals decision, Kimberly v. United States, allowed the owners to prepay. Tenants filed a new suit under the Administrative Procedures Act because RD did not follow its prepayment regulations. The Ninth Circuit held that tenants are entitled to sue to determine whether RD followed the law that restricts prepayments. It also held that Kimberly did not apply, and ordered a lower court, which had dismissed the suit, to hear the case. The decision could result in undoing the Oregon prepayment.
Franconia Associates v. U.S. — court decision, Aug. 30, 2004 The U.S. Court of Claims held that USDA breached its loan contracts by imposing prepayment restrictions and required the government to pay lost profits to the owners of 37 of the 41 projects involved in the case. Damages were calculated at an average of over $400,000 per project. The government, represented by the Department of Justice, has decided not to appeal the case.
Cienega Gardens v. United States — court decision, Aug. 29, 2005. The U.S. Court of Claims ruled that prepayment restrictions, including the Emergency Low Income Housing Preservation Act, caused a “taking” of HUD-insured rental properties and owners were entitled to damages.
Charleston Housing Authority v. USDA, court decision — Aug. 18, 2005. The Eighth Circuit Court of Appeals upheld the Emergency Low Income Housing Preservation Act, which restricts prepayments of Section 515 (and Section 514, not at issue in this case) mortgages made before December 15, 1989. It also held the owner’s plan to demolish a development with almost all African-American tenants violated the Fair Housing Act. For details, visit https://ruralhome.org/infoAnnouncements_RuralRentalPreservationLaw.php
Kimberly Associates v. U.S.A. — court decision, Dec. 12, 2002. The Ninth Circuit Court of Appeals allowed owners to avoid the USDA prepayment process by using a “quiet title” lawsuit under state law to have the prepayment restrictions removed from their property. In a later, unpublished decision, the Ninth Circuit concluded that the project’s tenants could not appeal the earlier decision. The court held that the tenants’ appeal was moot since the government and the property owner had entered into a settlement agreement. It announced its ruling in an unpublished memorandum decision that did not address the substantive issues of the case.

Background Information and Publications

USDA Resources

USDA’s Multi-Family Preservation and Revitalization webpage
USDA’s 3560 regulations for multifamily housing (PDF)
USDA’s handbooks accompanying the 3560 regs
Comprehensive Property Assessment prepared for USDA (PDF, released November 2004)

Links to Other Sites’ Preservation Resources

For more information about the Housing Assistance Council’s work on rental prepayment and preservation, contact Leslie Strauss, leslie@ruralhome.org, 202-842-8600 ext. 141.

Update in progress: June 6, 2012

Links