OCTOBER TERM, 1992
Syllabus
CISNEROS, SECRETARY OF HOUSING AND URBAN DEVELOPMENT, ET AL.
v. ALPINE RIDGE GROUP ET AL.
CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE NINTH
CIRCUIT
No.92-551. Argued March 30, 1993-Decided May 3,1993
The so-called Section 8 housing program under the United States
Housing Act of 1937 (Housing Act) authorizes private landlords who
rent to lowincome tenants to receive "assistance payments" from the
Department of Housing and Urban Development (HUD) in an amount
calculated to make up the difference between the tenants' rent
payments and a "contract rent" agreed upon by the landlords and Hun
Section 1.9b of the latter parties' "assistance contracts" provides
that contract rents are to be adjusted annually by applying the
latest automatic adjustment factors developed by HUD on the basis
of particular formulas, while § 1.9d specifies that,
"[n]otwithstanding any other provisions of this Contract,
adjustments as provided in this Section shall not result in
material differences between the rents charged for assisted and
comparable unassisted units, as determined by the Government .... "
In the early 1980's, HUD began to conduct independent
"comparability studies" in certain real estate markets where it
believed that contract rents, adjusted upward by the automatic
adjustment factors, were materially higher than prevailing market
rates for comparable housing, and to use the private market rents
as an independent cap limiting assistance payments. In this
litigation, respondent Section 8 landlords allege that § 801 of the
Department of Housing and Urban Development Reform Act of 1989
(Reform Act)-which,
inter alia, authorizes HUD to limit
future automatic rent adjustments through the use of comparability
studies-violates the Due Process Clause of the Fifth Amendment by
stripping them of their vested rights under the assistance
contracts to annual rent increases based on the automatic
adjustment factors alone. In separate lawsuits, the District Courts
each granted summary judgment for respondents. The Court of Appeals
affirmed the judgments in a consolidated appeal.
Held: This Court need not consider whether § 801 of the
Reform Act unconstitutionally abrogated a contract right to
unobstructed formulabased rent adjustments, since respondents have
no such right. The assistance contracts do not prohibit the use of
comparability studies to impose an independent cap on such
adjustments. Indeed, § 1.9d's plain
11
language clearly mandates that contract rents "shall not" be
adjusted so as to exceed materially the rents charged for
"comparable unassisted units" on the private rental market,
"[n]otwithstanding" that § 1.9b might seem to require such a
result. This limitation is consistent with the Housing Act itself,
42 U. S. C. § 1437f(c)(2)(C). Moreover, it is clear that §
1.9d-which by its own terms clearly envisions some comparison of
assisted and unassisted rents-affords HUD sufficient discretion to
design and implement comparability studies as a reasonable means of
effectuating its mandate, since the section expressly assigns to
"the Government" the determination of whether material rent
differences exist. Respondents' contention that HUD's comparability
studies have been poorly conceived and executed, resulting in
faulty and misleading comparisons, is irrelevant to the question
whether HUD had contractual authority to employ such studies at
all. If respondents have been denied formula-based rent increases
based on shoddy comparisons, their remedy is to challenge the
particular study, not to deny HUD's authority to make comparisons.
Pp. 17-21.
955 F.2d
1382, reversed.
WHITE, J., delivered the opinion for a unanimous Court.
Michael R. Dreeben argued the cause for petitioners.
With him on the briefs were Solicitor General Starr, Acting
Solicitor General Wallace, Assistant Attorney General Gerson,
Deputy Solicitor General Roberts, Douglas Letter, Howard M.
Schmeltzer, and Barton Shapiro.
Warren J.
Daheim argued the cause for
respondents.
With him on the brief for respondent Alpine Ridge Group was
Donald W Hanford. Milton Eisenberg and
Leonard A. Zax
filed a brief for respondents Acacia Villa et al. *
*
Robert M. Weinberg and
Laurence Gold filed a
brief for the American Federation of Labor and Congress of
Industrial Organizations as
amicus curiae urging
reversal.
Briefs of
amici curiae urging affirmance were filed for
Charter Federal Savings Bank by
Thomas M. Buchanan; for the
National Association of Home Builders et al. by
Ronda L.
Daniels; for Southwind Acres Associates et al. by
Larry
Derryberry; and for Statesman Savings Holding Corp. et al. by
Charles J.
Cooper, Robert J.
Cynkar, and
Michael A. Carvin.
12
JUSTICE WHITE delivered the opinion of the Court.
The question presented in this case is whether § 801 of the
Department of Housing and Urban Development Reform Act of 1989, 103
Stat. 2057, violates the Due Process Clause of the Fifth Amendment
by abrogating respondents' contract rights to certain rental
subsidies.
I A
In 1974, Congress amended the United States Housing Act of 1937
(Housing Act) to create what is known as the Section 8 housing
program. Through the Section 8 program, Congress hoped to "ai[d]
low-income families in obtaining a decent place to live," 42 U. S.
C. § 1437f(a) (1988 ed., Supp. III), by subsidizing private
landlords who would rent to lowincome tenants. Under the program,
tenants make rental payments based on their income and ability to
pay; the Department of Housing and Urban Development (HUD) then
makes "assistance payments" to the private landlords in an amount
calculated to make up the difference between the tenant's
contribution and a "contract rent" agreed upon by the landlord and
HUD. As required by the statute, this contract rent is, in turn, to
be based upon "the fair market rental" value of the dwelling,
allowing for some modest increase over market rates to account for
the additional expense of participating in the Section 8 program.
See § 1437f(c)(1).
The statute, as originally enacted, further provided that
monthly rents for Section 8 housing would be adjusted at least
annually as follows:
"(A) The assistance contract shall provide for adjustment
annually or more frequently in the maximum monthly rents for units
covered by the contract to reflect changes in the fair market
rentals established in the housing area for similar types and sizes
of dwelling
13
units or, if the Secretary determines, on the basis of a
reasonable formula.
"(C) Adjustments in the maximum rents as hereinbefore provided
shall not result in material differences between the rents charged
for assisted and comparable unassisted units, as determined by the
Secretary." 42 U. S. C. §§ 1437f(c)(2)(A) and (C) (1982 ed.).
The respondents in this case are private developers who entered
into long-term contracts with HUD-known as Housing Assistance
Payments (HAP) Contracts or "assistance contracts"-to lease newly
constructed apartment units to Section 8 tenants. Their contracts
established initial contract rents for each unit and provided,
consistent with the statutory authorization, that these rents would
be adjusted regularly, on the basis of a reasonable formula, to
keep pace with changes in rental values in the private housing
market. Section 109b of their contracts provides:
"b. Automatic Annual Adjustments
"(1) Automatic Annual Adjustment Factors will be determined by
the Government at least annually; interim revisions may be made as
market conditions warrant. Such Factors and the basis for their
determination will be published in the Federal Register ....
"(2) On each anniversary date of the Contract, the Contract
Rents shall be adjusted by applying the applicable Automatic Annual
Adjustment Factor most recently published by the Government.
Contract Rents may be adjusted upward or downward, as may be
appropriate; however, in no case shall the adjusted Contract Rents
be less than the Contract Rents on the effective date of the
Contract." App. to Brief for Petitioners 8a.
The Automatic Annual Adjustment Factors to which the contracts
refer are developed by HUD based upon market
14
trends recorded by the Consumer Price Index and the Bureau of
the Census American Housing Surveys.
Section 1.9d of the contracts, in part tracking the language of
§ 8(c)(2)(C) of the Housing Act, 42 U. S. C. § 1437f(c)(2)(C) (1988
ed., Supp. III), provides:
"d. Overall Limitation. Notwithstanding any other
provisions of this Contract, adjustments as provided in this
Section shall not result in material differences between the rents
charged for assisted and comparable unassisted units, as determined
by the Government; provided that this limitation shall not be
construed to prohibit differences in rents between assisted and
comparable unassisted units to the extent that such differences may
have existed with respect to the initial Contract Rents." App. to
Brief for Petitioners 8a-9a.
B
In the early 1980's, HUD began to suspect that the assistance
payments it was making to some landlords under the Section 8
program were well above prevailing market rates for comparable
housing. Accordingly, the agency began to conduct independent
"comparability studies" in certain real estate markets where it
believed that contract rents, adjusted upward by the automatic
adjustment factors, were materially out of line with market rents.
Under these studies, HUD personnel would select between three and
five other apartment buildings they considered comparable to the
Section 8 building and compare their rents. The private market
rents would then serve as an independent cap limiting the rent
payments HUD would make under the Section 8 contracts.
After several landlords brought suit, the Court of Appeals for
the Ninth Circuit ruled in 1988 that the standard assistance
contracts described above prohibited the use of comparability
studies as an independent cap on rents. In
Rainier View
Associates v.
United States, 848 F.2d
988, the Court of
15
Appeals reasoned that HUD, having contracted to increase rents
automatically each year based upon a reasonable formula (the second
of the two alternative approaches permitted by §8(c)(2)(A) of the
Housing Act, see
supra, at 12-13), could not thereafter
limit those increases by means of a market survey (the first of the
two statutory alternatives). "Having made its choice," the court
wrote, "HUD cannot now change its mind." 848 F. 2d, at 991.
After this Court denied certiorari to review the
Rainier
View decision, 490 U. S. 1066 (1989), HUD made clear its
intention not to adhere to that decision's interpretation of its
contracts outside the Ninth Circuit. Faced with the prospect of
inconsistent application of Government contracts depending solely
upon geography, Congress attempted to resolve the matter through
amendments to the Housing Act in late 1989. Section 801 of the
Department of Housing and Urban Development Reform Act (Reform
Act), 103 Stat. 2057, amended §8(c)(2)(C) of the Housing Act to
provide explicitly that HUD may limit automatic rent adjustments in
the future through the use of independent comparability studies. In
an apparent compromise, however, the same section also sought to
restore to Section 8 project owners a portion of the automatic rent
adjustments they had been denied through the use of comparability
studies prior to the enactment of the 1989 amendments. The
amendments thus offered Section 8 project owners a partial
retroactive remedy for lost rent attributable to comparability
studies while at the same time affirming HUD's authorization to
employ such studies to cap future rent adjustments.1
1 Section 8(c)(2)(C) of the Housing Act, as amended by § 801 of
the Reform Act, now provides: "(C) Adjustments in the maximum rents
under subparagraphs (A) and (B) shall not result in material
differences between the rents charged for assisted units and
unassisted units of similar quality, type, and age in the same
market area, as determined by the Secretary. In implementing the
limitation established under the preceding sentence, the Secretary
shall establish regulations for conducting comparability
16
C
In this litigation, respondents have alleged that § 801 of the
Reform Act violates the Due Process Clause of the Fifth Amendment
by stripping them of their vested rights under
studies for projects where the Secretary has reason to believe
that the application of the formula adjustments under subparagraph
(A) would result in such material differences. The Secretary shall
conduct such studies upon the request of any owner of any project,
or as the Secretary determines to be appropriate by establishing,
to the extent practicable, a modified annual adjustment factor for
such market area, as the Secretary shall designate, that is
geographically smaller than the applicable housing area used for
the establishment of the annual adjustment factor under
subparagraph (A). The Secretary shall establish such modified
annual adjustment factor on the basis of the results of a study
conducted by the Secretary of the rents charged, and any change in
such rents over the previous year, for assisted units and
unassisted units of similar quality, type, and age in the smaller
market area. Where the Secretary determines that such modified
annual adjustment factor cannot be established or that such factor
when applied to a particular project would result in material
differences between the rents charged for assisted units and
unassisted units of similar quality, type, and age in the same
market area, the Secretary may apply an alternative methodology for
conducting comparability studies in order to establish rents that
are not materially different from rents charged for comparable
unassisted units. If the Secretary or appropriate State agency does
not complete and submit to the project owner a comparability study
not later than 60 days before the anniversary date of the
assistance contract under this section, the automatic annual
adjustment factor shall be applied. The Secretary may not reduce
the contract rents in effect on or after April 15, 1987, for newly
constructed, substantially rehabilitated, or moderately
rehabilitated projects assisted under this section (including
projects assisted under this section as in effect prior to November
30,1983), unless the project has been refinanced in a manner that
reduces the periodic payments of the owner. Any maximum monthly
rent that has been reduced by the Secretary after April 14, 1987,
and prior to November 7, 1988, shall be restored to the maximum
monthly rent in effect on April 15, 1987. For any project which has
had its maximum monthly rents reduced after April 14, 1987, the
Secretary shall make assistance payments (from amounts reserved for
the original contract) to the owner of such project in an amount
equal to the difference between the maximum monthly rents in effect
on April 15, 1987, and the reduced maximum monthly rents,
multiplied by the number of months
17
the assistance contracts to annual rent increases based on the
automatic adjustment factors alone. In separate lawsuits, the
United States District Courts for the Western District of
Washington and the Central District of California each granted
summary judgment for respondents. The Court of Appeals for the
Ninth Circuit, in a consolidated appeal, affirmed both judgments.
Alpine Ridge Group v. Kemp,
955 F.2d
1382 (1992). Refusing to reconsider its earlier holding in
Rainier View, supra, the court first reaffirmed that the
assistance contracts prohibited HUD from capping rents based on
independent comparability studies. See 955 F. 2d, at 1384-1385. The
court then held that Congress' attempt to authorize such caps
through the Reform Act unconstitutionally deprived respondents of
their "vested property interest in formula-based rent adjustments
pursuant to their section 8 contracts."
Id., at 1387.
We granted certiorari, 506 U. S. 984 (1992), and now
reverse.
II
We begin our analysis of respondents' due process claim with the
assistance contracts. Because we find that those contracts do not
prohibit the use of comparability studies to impose an independent
cap on the formula-based rent adjustments, our analysis ends there
as well.
In our view, respondents' claimed entitlement to formulabased
rent adjustments without regard to independent comparisons to
private-market rents is precluded by the plain language of the
assistance contracts. To be sure, § 1.9b(2) of those contracts
provides that the contract rents "shall be adjusted [annually] by
applying the applicable Automatic Annual Adjustment Factor most
recently published by the Government." Section 1.9d of the
contracts, however, im-
that the reduced maximum monthly rents were in effect." 42 U. S.
C. § 1437f(c)(2)(C) (1988 ed., Supp. III). HUD has now published
proposed regulations governing the future use of comparability
studies, as required by this provision. See 57 Fed. Reg. 49120
(1992).
18
poses what is labeled an "[o]verall [l]imitation" on the
formula-based adjustments provided by § 109b. It provides that
"[nJotwithstanding any other provisions of this Contract,
adjustments as provided in this Section shall not result in
material differences between the rents charged for assisted and
comparable unassisted units, as determined by the Government"
(emphasis added). As we have noted previously in construing
statutes, the use of such a "notwithstanding" clause clearly
signals the drafter's intention that the provisions of the
"notwithstanding" section override conflicting provisions of any
other section. See
Shomberg v.
United States,
348 U. S. 540,
547-548 (1955). Likewise, the Courts of Appeals generally have
"interpreted similar 'notwithstanding' language ... to supersede
all other laws, stating that '''[a] clearer statement is difficult
to imagine."'"
Liberty Maritime Corp. v.
United
States, 289 U. S. App. D. C. 1, 4,
928 F.2d
413, 416 (1991) (quoting
Crowley Caribbean Transport,
Inc. v.
United States, 275 U. S. App. D. C. 182, 184,
865 F.2d
1281, 1283 (1989) (in turn quoting
Illinois National
Guard v.
FLRA, 272 U. S. App. D. C. 187, 194,
854 F.2d
1396, 1403 (1988))); see also
Bank of New England Old
Colony, N.
A. v.
Clark, 986
F.2d 600, 604 (CA1 1993);
Dean v.
Veterans Admin.
Regional Office, 943 F.2d
667, 670 (CA6 1991), vacated and remanded on other grounds, 503
U. S. 902
(1992); In re FCX, Inc., 853
F.2d 1149, 1154 (CA4 1988), cert. denied
sub nom. Universal
Cooperatives, Inc. v.
FCX, Inc., 489 U. S. 1011 (1989);
Multi-State Communications, Inc. v.
FCC, 234 U. S.
App. D. C. 285, 291,
728 F.2d
1519, 1525, cert. denied, 469 U. S. 1017 (1984);
New Jersey
Air National Guard v.
FLRA, 677 F.2d
276, 283 (CA3), cert. denied
sub nom. Government
Employees v.
New Jersey Air National Guard, 459 U. S.
988 (1982). Thus, we think it clear beyond peradventure that § 109d
provides that contract rents "shall not" be adjusted so as to
exceed materially the rents charged for "comparable unassisted
units" on the private rental market-even if other provisions of the
contracts might seem to
19
require such a result. This limitation is plainly consistent
with the Housing Act itself, which provides that "[aJdjustments in
the maximum rents," whether based on market surveys or on a
reasonable formula, "shall not result in material differences"
between Section 8 rents and the rents for comparable housing on the
private market. 42 U. S. C. § 1437f(c)(2)(C) (1988 ed., Supp.
III).
In its
Rainier View decision, the Court of Appeals read §
1.9d's "overall limitation" as empowering HUD only to make
prospective changes in the automatic adjustment factors where it
discovered that those factors were producing materially inflated
rents; under the court's view, § 1.9d would not permit "abandonment
of the formula method whenever application of the formula would
result in a disparity between section 8 and other rents." 848 F.
2d, at 991. But this reading of the contract-under which Section 8
project owners could demand payment of materially inflated rents
until the Secretary could publish revised automatic adjustment
factors aimed at curing the overpayment-is almost precisely
backwards. It would entitle project owners to collect the
formula-based adjustments promised by § 1.9b not
withstanding
that those adjustments were resulting in the sort of material
differences in rents prohibited by § 1.9d.
Reading § 1.9d's "overall limitation" as allowing rent caps
based on comparability studies does not, as the
Rainier View
court supposed, "render the formula method authorized by the
statute and elected in the contract a nullity."
Ibid. The
rent adjustments indicated by the automatic adjustment factors
remain the presumptive adjustment called for under the contract. It
is only in those presumably exceptional cases where the Secretary
has reason to suspect that the adjustment factors are resulting in
materially inflated rents that a comparability study would ensue.
Because the automatic adjustment factors are themselves geared to
reflect trends in the local or regional housing market,
theoretically it should not be often that the comparability studies
would
20
suggest material differences between Section 8 and privatemarket
rents.2
Respondents assert that "the automatic adjustment provision was
a central provision of the HAP Contracts and that the owners would
not have signed contracts that expressly contained the
[comparability] provision HUD asks the Court to imply." Brief for
Respondents Acacia Village et al. 22. They urge us to eschew any
interpretation of the contracts that would allow the displacement
of the "automatic" adjustments for which they bargained by a
"project-by-project comparability process" that "would leave
[project owners] at the mercy of minor HUD officials." Brief for
Respondent Alpine Ridge Group 30-31. At bottom, many of
respondents' arguments in support of the decision below seem to
circle back to their vigorous contention that HUD's comparability
studies have been poorly conceived and executed, resulting in
faulty and misleading comparisons. But the integrity with which the
agency has carried out its comparability studies is an entirely
separate matter from its contractual authority to employ such
studies at all. Even if it could be demonstrated that HUD's studies
have been unreliable, this would in no way suggest that the
contract forbids HUD to cap rents based on accurate and fair
comparability studies. If respondents have been denied
formula-based rent in-
2 The
Rainier View court also suggested that HUD's own
regulations had interpreted the assistance contracts as barring
adjustments to contract rents independent of the published factors.
The court quoted 24 CFR § 888.204 (1987), which states that the
agency" 'will consider establishing separate or revised Automatic
Annual Adjustment Factors for [a] particular area' " if project
owners can demonstrate that application of the formula would result
in Section 8 rents substantially below market rents for comparable
units. See 848 F. 2d, at 991. Although this regulation is certainly
consistent with respondents' view of the contracts, we do not
believe that it is inconsistent with our understanding of the
contracts' plain language: The regulation acknowledges revision of
the adjustment factors as a means of remedying material differences
in rents but it does not foreclose corrective adjustments
independent of the factors.
21
creases based on shoddy comparisons, their remedy is to
challenge the particular study, not to deny HUD's authority to make
comparisons.3
In sum, we think that the contract language is plain that no
project owner may claim entitlement to formula-based rent
adjustments that materially exceed market rents for comparable
units. We also think it clear that § 1.9d-which by its own terms
clearly envisions some comparison "between the rents charged for
assisted and comparable unassisted units"-affords the Secretary
sufficient discretion to design and implement comparability studies
as a reasonable means of effectuating its mandate. In this regard,
we observe that § 1.9d expressly assigns to "the Government" the
determination of whether there exist material differences between
the rents charged for assisted and comparable unassisted units.
Because we find that respondents have no contract right to
unobstructed formula-based rent adjustments, we have no occasion to
consider whether § 801 of the Reform Act unconstitutionally
abrogated such a right.
III
For these reasons, the judgment of the Court of Appeals for the
Ninth Circuit is
Reversed.
3 Petitioners acknowledge that "[a] comparability study must ...
satisfy requirements of administrative reasonableness and 'is
reviewable under administrative law principles.''' Reply Brief for
Petitioners 16, n. 23 (quoting
Sheridan Square Partnership
v.
United States, 761 F. Supp. 738, 745, n. 3 (Colo.
1991)).
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