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In the Matter of the Application for a Rental Increase at Zion Towers Apartments (HMFA #2)

344 N.J. Super. 530, 782 A.2d 956 (App. Div. 2001)

LEASES; RENTAL ASSISTANCE—The New Jersey Mortgage Finance Agency acts only in an advisory role with respect to HUD decisions concerning allowable rent increases; consequently a court will not review the Agency’s advice because that advice does not constitute a final agency action.

A large apartment complex was owned by a sponsor that was a non-profit corporation. Its tenants were primarily low-income families. It was financed, subsidized, and regulated pursuant to the National Housing Act. HUD provided funding and mortgage subsidiaries as part of its Rental Assistance Payment program and HUD approval was required for rent increases for most of the tenants. The primary responsibility for administration of the program was delegated to the New Jersey Housing and Mortgage Finance Agency (HFMA). Approval of rent increases requires an elaborate procedure, one part of which is a review of the rental increase application by the HMFA. Each recommendation is then sent to HUD. The tenant asserted that HFMA’s recommended approval of a rental increase was arbitrary and capricious and in contravention of governing regulations. The Appellate Division, however, held that HFMA’s recommendation did not constitute a final agency approval and therefore was not appealable. Further, the Court believed that even if it were appealable, “principles of comity and federalism” required it to abstain. Simply put, rent increases could not be effectuated without HUD’s approval. Therefore, the interim determination of HMFA was merely advisory and agency action taken on such a basis would not constitute a “final agency action,” and would not be subject to appeal as of right. Consequently, the Court declined to review HMFA’s recommendation. Further, even if such a conclusion was not compelled, the Court believed that it would be improper to interfere with federal administrative decision making. The Court thought that the tenant’s attack on the rent increase approval was in effect an indirect challenge to HUD’s final approval and therefore it refrained “from interfering with the administration of HUD’s task pursuant to its legislative mandate.”

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