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Affordable Housing Law Upheld

Image Credit: NYS Association for Affordable Housing.

Image Credit: NYS Association for Affordable Housing.

Association of developers and contractors of affordable housing claimed that local law on prequalification and disclosure violated their constitutional rights. On September 24, 2012, the City Council passed Local Law 44, which required the Department of Housing Preservation and Development to create a public website disclosing the scope and location of publicly-funded affordable housing projects as well as complaints about developers, contractors and subcontractors involved in the project. The website must also list which developers, contractors and subcontractors were designated “prequalified” or “disqualified” along with the selection criteria for the designation. A participating developer, contractor and subcontractor must provide quarterly salary reports if it has an annual gross revenue of at least $2.5 million or it is a principal owner of another entity and together have an aggregate annual gross revenue of at least $2.5 million. The failure to provide the quarterly reports disqualified the developer, contractor or subcontractor from being designated as prequalified.

On September 4, 2013, the New York State Association for Affordable Housing along with a group of contractors and subcontractors sued the City Council in New York County Supreme Court. The Association claimed that Local Law 44 was unconstitutional because it was preempted by state law; that publishing the complaints violated due process rights; and that requiring corporations and companies, but not individuals, to aggregate their annual gross revenue for purpose of the quarterly reporting violated equal protections rights.

On September 29, 2014, the Supreme Court dismissed the complaint. On June 2, 2016, the Supreme Court, Appellate Division, First Department affirmed the lower court’s decision. The appellate court ruled that the Council had the authority to pass thFire local law and rejected the claim that the local law violated the constitutional rights of the Association’s members.

The First Department ruled that State statutes did not preempt the entire field, but merely created a “framework for the financing of affordable housing projects” while “delegating operational functions to local municipalities.” Nor was there a direct conflict with State statutes; the local law did not limit access to financing from HPD, and the salary reports and prequalification procedure did not directly conflict with any State statute or State right.

With respect to publishing complaints, the First Department applied the “stigma plus” standard. The court ruled that the Association members failed to show they were stigmatized as HPD had not yet published any consumer complaints. The stigma plus standard requires that a publication of defamatory material cause a stigma and an additional injury in order to violate due process rights. With respect to the equal protection claim, the court ruled that distinguishing between corporations and individuals protected small business from the costs of salary reporting and was a constitutionally sufficient reason for the distinction.

N.Y. State Assn. for Affordable Hous. v. Council of the City of N.Y., 2016 NY Slip Op 04320 Decided June 2, 2016 Appellate Division, First Department.

By: Rebecca Ruffer (Rebecca is a student at New York Law School, Class of 2018).