Like most housing authorities running public housing programs, the Minneapolis Public Housing Authority (MPHA) has to work very hard to make their funds stretch far enough to provide the quality public housing their tenants deserve, in light of chronic underfunding by Congress. That’s why MPHA officials were thrilled with word from HPP of the recent final settlement of their money damages lawsuit against the Department of Housing and Urban Development (HUD). The $2.4 Million settlement will go a long way to benefitting MPHA’s low income residents.
The beginning of this story with a happy ending came in 1998. In that year, HUD invited MPHA to join the “Moving to Work” Demonstration Program (MTW). This was a program which, among other things, provided local housing authorities like MPHA greater flexibility in managing funding under various HUD programs. To reassure PHAs about participating in MTW, both the statute and the contract between MPHA and HUD provided that the amount of assistance received by the MPHA would not be diminished by participating in the MTW program. In other words, MPHA would be treated no less favorably financially under the MTW program than if they had remained in the regular Public Housing program.
Fast forward to 2012. The HUD Appropriations Act that year provided that as a cost saving measure, HUD was directed to recapture from PHAs
“excess” operating reserves, on the theory that PHAs didn’t really need these excess funds. The Act also provided that in the event reserve level data was lacking HUD could make a pro rata reduction for such PHAs, based on the excess reserves of peer agencies. HUD decided to define reserves exceeding those necessary to cover four months of operating expenses as “excess” which needed to be recaptured, and began to recapture these funds.
In MPHA’s case, it had no excess reserve funds, that is, its operating reserves totaled less than four months of operating expenses for its public housing program. Thus, if it had simply been participating in the regular Public Housing program, it would have suffered no HUD recapture because it had no excess reserves. However, because MPHA participated in the MTW program, it became subject to a different standard established by HUD for MTW agencies. MPHA’s reserves were reduced based on the average reductions of MPHA’s peers, other PHAs participating in MTW, regardless of the fact that MPHA had no actual excess reserves whereas other MTW agencies did have excess reserves. Thus, MPHA’s participation in MTW caused a recapture of funds which would not have happened had they remained in the regular Public Housing program, to the tune of $2.8 million.
After repeated requests to HUD to reconsider fell on deaf ears, MPHA came to HPP for help. With the assistance of the Minneapolis law firm Eckland & Blando, HPP filed a damages lawsuit in the federal Court of Claims on behalf of MPHA against HUD. The lawsuit alleged that HUD had violated the anti-discrimination clauses of both the MTW contract it had with MPHA, and the MTW statute, in its application of the 2012 Appropriations Act recapture provisions. After several months, discussions of some very complex legal and financial issues, HPP lawyers convinced the HUD and Department of Justice (DOJ) lawyers that the federal government’s legal position was weak. Not long after, HUD and DOJ agreed to settle the case for 85% of what the MPHA had sought, resulting in a judgment for MPHA for $2.4 million.
A special thanks to the Twin Cities Family Housing Fund, which provided money to finance the lawsuit for MPHA.