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    Rev. Chester O. THOMPSON, Individually and on behalf of all others similarly situated, et al., Appellants, v. Walter WASHINGTON, Individually and as Commissioner of the District of Columbia and as “The Authority” of the National Capital Housing Authority Under Executive Order.
    No. 71-2049.
    United States Court of Appeals, District of Columbia Circuit.
    Argued Dec. 18, 1972.
    Decided Dec. 10, 1973.
    As Amended Dec. 20, 1973.

      Edward E. Schwab, Washington, D. C., for appellants.
    Dirk D. Snel, Atty., Dept, of Justice, of the Bar of the United States Supreme Court, pro hac vice, by special leave of the Court, with whom Kent Frizzell, Asst. Atty. Gen., and Edmund B. Clark, Atty., Dept, of Justice, were on the brief for appellee.
    Before BAZELON, Chief Judge, and TAMM and LEVENTHAL, Circuit Judges.
   LEVENTHAL, Circuit Judge:

This case is one of three related cases decided today which involve the procedural rights of tenants of housing, constructed under various provisions of the Federal housing legislation, prior to official approval of rent increases. In the case at bar, we hold that tenants of low-rent public housing are entitled not only to receive notice of proposed rent increases but also to participate in the process of official consideration of rent increases by making written presentations. In Marshall v. Romney, No. 71-1786, we hold that the same opportunities must be afforded tenants of low- and moderate-income housing constructed pursuant to § 221(d)(3) of the National Housing Act, with both FHA mortgage insurance and below-market-interest-rate loans. In Tenants’ Council of Tiber Island v. Lynn, No. 71-1931, we hold that the opportunity to participate need not be accorded tenants of housing constructed under § 220 of the Housing Act, as part of area redevelopment plans.

The case at bar is a class action for injunctive and declaratory relief, brought in 1969 by Chester H. Thompson on behalf of tenants ofapproximately 6000 rental units of the National Capital Housing Authority (NCHA). Plaintiff complained of failure to accord the tenants the procedural requisites for approval of the rental increases in low-rent public housing programs established under the United States Housing Act (Act) as amended, 42 U.S.C. 1401 et seq. The suit named as defendants “Mayor” Washington, Commissioner of the District of Columbia, and his Assistant, in their capacity as the members of the NCHA (see E.O. 11401, 33 F.R. 4559), certain NCHA subordinates, and the Secretary of the Department of Housing and Urban Development (HUD) and two subordinates. Plaintiffs sought to enjoin a major modification of the rent schedule approved by those officials, scheduled to become effective January, 1970. The plaintiff class consists of the majority of NCHA tenants, who pay according to a “graded rent” schedule, and does not include certain welfare recipients, elderly tenants, and others, paying so-called flat rents, who were not affected by this rental increase.

This is the second time this litigation has come before this court. In McKinney v. Washington, 143 U.S.App.D.C. 4, 442 F.2d 726, decided November 25, 1970, the court affirmed the denial of a preliminary injunction on the ground that appellants were unlikely to prevail on the merits. The case now comes before the court on appeal from the District Court’s order of October 15, 1971, granting the defendants’ motion to dismiss the amended complaint. The plaintiff class raises two distinct claims: (1) The summary procedures used by NCHA and HUD — wholly excluding notice to the tenants of the proposed rent increases (by NCHA), or opportunity for tenants to express views, or to present evidence in opposition, on review of rent-increase proposals (by HUD) — violate the Act and administrative due process. (2) A rent increase which is beyond “the financial reach of families of low income” violates the Act. The District Court dismissed the complaint on the grounds that it was a suit against the United States to which it had not consented, and failed to state a claim on which relief could be granted. We reverse the dismissal of the complaint and remand for further proceedings.

I. STATEMENT OF FACTS AND STATUTORY BACKGROUND

The program of low-rent public housing was established by the United States Housing Act of 1937. The legislation authorized a variety of Federal subsidies to Local Housing Authorities, such as the National Capital Housing Authority, to assist in the development and operation of the housing projects. When constructing new units of public housing, the LHAs float tax-free bonds, guaranteed by the Federal Government. The Federal Government also has the authority to make grants to LHAs in the form of annual contributions, including subsidies for certain categories of tenant families, for modernization and rehabilitation of projects, and for tenant services. In addition to grants, loans may be made for specified purposes. The local government also subsidizes the LHA by agreeing to accept Payment in Lieu of Taxes, through which the LHA gets an effective reduction in real estate and other local taxes.

The history of NCHA’s economic affairs in the 1960’s illustrates the current financial crisis generally affecting pub-

lie housing. Federal subsidies to LHAs in this period derived from an Annual Contributions Contract, which provided generally that the projects would be self-supporting, with operating expenses paid from income. During most of the 1960’s whatever operating deficits arose could be covered by “residual receipts” —past surpluses accumulated during prior successful years of operation. In 1968, however, HUD had to commit $7,000,000 to NCHA for the purpose of modernizing its projects.

In the years immediately preceding the requested rental increase of 1969, the NCHA was running operating deficits in its current budget and was required to spend $2.4 million in reserve funds to supplement income derived from rents. In October 1969, however, NCHA claimed exhaustion of its reserves. At the end of fiscal year 1969 (June 30) NCHA had an operating deficit of $910,000 and anticipated the deficit would grow. NCHA applied for a $900,000 loan from HUD, promising to repay the loan from future grants under § 10(a) of the Act, providing for special subsidies for large families and elderly tenants.

NCHA then applied to HUD for a 13-million administrative loan which HUD was authorized to grant under § 9 of the 1937 Act, as amended, 42 U.S.C. § 1409. The loan was intended to meet anticipated operating deficits in fiscal years 1970 and 1971. While this application for a loan was pending, HUD was reviewing the FY 1970 proposed budget submitted by NCHA in April 1969. Meanwhile NCHA, in order to reduce its projected deficit, had secured the agreement of District of Columbia officials to reduce further or eliminate payments in lieu of taxes. On June 27, 1969, HUD rejected the budget submitted because the expenditures projected exceeded the income anticipated. The crisis came to a head on July 22, 1969, when HUD notified NCHA by letter that approval of its budget, and considerations of its $3,000,000 loan application, was dependent on NCHA’s devising “a rent schedule that will produce sufficient income to assure the Authority’s attaining financial stability within the next few years.” NCHA responded by proposing a new graded rent schedule, approved by HUD on September 19, 1969, and announced by NCHA to tenants by a letter dated October 1, 1969. That rent schedule is the subject of this litigation.

To understand the nature of the rent increases some explanation of the graded rent structure is needed. The schedule sets rent primarily on the basis of family income and family size. Family size is taken into account indirectly by providing different rents for different sized dwelling units. Gradation with respect to family income can be illustrated by the structure of rents for a one bedroom apartment under the new rent schedule. The minimum rent for that apartment is $40 per month, while the maximum is $110 per month. The minimum rental calculates to 26% of an annual income of $1800, and a tenant family with that income is entitled to the minimum rental, but it calculates to 48% of the income of a family with, say, $1000 annual income.

Submissions by the parties furnish contradictory information as to the precise impact of the new rent schedule on tenants. For example, appellants assert that the average amount of increase is $23.17 per month for the 6,000 units affected (Reply Br. 3), while the Government brief (p. 6) claims the increase is $11.16 per unit month. We cannot resolve such matters on the record before us, particularly since neither the Government nor the District Court developed its legal position on the basis of such factual refinements. On a motion to dismiss we must accept the averments of the complaint, that NCHA’s proposed rent increases (between $10 and $44 per month) amount to between 17 and 38% of the previous rent (par. 7), and that the new rents are beyond the financial means of plaintiffs. Appellants assert (Br. 13) that the increased rents force many members of plaintiff class to fore-go basic necessities of life.

Plainly, the NCHA faced a difficult situation in 1969, a situation shared by most LHAs at that time. In view of operating deficits under the existing rent schedule the only alternative ' to increased Federal subsidies was an increase in rents (unless economies which would reduce project expenses could be discovered).

In December, 1969, Congress enacted an amendment to the 1937 Housing Act, known as the Brooke Amendment, setting a rent ceiling at 25% of family income. It authorized HUD to pay additional annual contributions to “make up the amount by which the proportionate share of operating and maintenance expenses attributable to a public housing unit exceeds 25 percent of the tenant’s income.” Although the Government asserts in its brief that the NCHA is now complying with this ceiling limitation, and that the applicability of the Brooke Amendment is not posed in this litigation, we may note that Congress has not appropriated enough money to cover operating deficits. Thus LHAs, faced with operating deficits but unable to raise rents, may see the specter of bankruptcy. It may be that LHAs could stave off disaster by increasing average income levels, and perhaps maximum income levels, of the families admitted to public housing, but such a course has unwelcome consequences. We advert to these factors not as points for decision by this court, but as matters supplying context and perspective for the issues tendered to us by this case. Finding no merit in the Government’s claim of sovereign immunity, we proceed to examine the specific claims raised in this litigation.

II. JURISDICTION AND STANDING

Jurisdiction of this action lies under 28 U.S.C. § 1361, in view of the claim that NCHA or HUD has a duty under law to afford plaintiffs a hearing before passing on proposed rent increases. See Langevin v. Chenango Court, Inc., 447 F.2d 296, 300 (2d Cir. 1971) and Hahn v. Gottlieb, 430 F.2d 1243, 1245 n. 1 (1st Cir. 1970), holding jurisdiction based on section 1361 proper in suits by § 221(d)(3) tenants seeking a hearing before FHA prior to rent increase. See also Peoples v. United States Department of Agriculture, 138 U.S.App.D.C. 291, 294-295, 427 F.2d 561, 564-565 (1970).

Since the suit is brought against an officer of the Federal Government, it is distinguishable from an action against a private landlord, claiming denial of due process in the eviction process, where jurisdiction may require an additional element of state action. Compare McQueen v. Druker, 438 F.2d 781 (1st Cir. 1971) and Colon v. Tompkins Square Neighbors, 294 F.Supp. 134 (S.D.N.Y.1968) with McGuane v. Chenango Court, Inc., 431 F.2d 1189 (2d Cir. 1970).

We also find standing, under the standards established in Ass’n of Data Processing Service Organizations v. Camp, 397 U.S. 150, 90 S.Ct. 827, 25 L.Ed.2d 184 (1970) and Barlow v. Collins, 397 U.S. 159, 90 S.Ct. 832, 25 L.Ed.2d 192 (1970). The approval and imposition of the rent increase supplies the adversariness and ripeness required for constitutional standing. There is injury in fact. The claim asserted is “arguably” within the zone of interest protected by the Housing Act, Hahn v. Gottlieb, supra, in view of the provision establishing the goal of “a decent home” for every citizen, 42 U.S.C. § 1441 (1970), and of §§ 1 and 2 of the Housing Act of 1937, 42 U.S.C. § 1401-02, which indicate that the purpose of public housing is to make housing available to “families of low income.”

III. TENANTS’ RIGHT TO HEARING BY WRITTEN PRESENTATIONS

A. The Statutory Interest Underlying Plaintiffs’ Hearing Claim

The plaintiffs claim that they are entitled to an opportunity to be heard before their rents for public housing are increased. They assert that the right to be heard arises from the Housing Act and from the mandate of the Due Process clause.

We begin by assessing the definition and scope of plaintiffs’ interest under the statute. Examination of the statute is necessary even to resolve plaintiffs’ claim that a hearing is constitutionally required, for the mandate of the Due Process Clause is triggered by the deprivation of some “interest” created by law. In Goldberg v. Kelly, the Court noted that welfare benefits are a matter of “statutory entitlement for persons qualified to receive them.” 397 U.S. 254, 262, 90 S.Ct. 1011, 1017, 25 L.Ed.2d 287 (1970) (emphasis added). Although the right-privilege distinction may have limited utility, there must be an interest to which due process protection will attach. Here the source of that interest, if any, is the Housing Act.

The “Declaration of Policy” contained in Section 1 of the 1937 Housing Act, 42 U.S.C. § 1401 (1970), provides:

It is declared to be the policy of the United States to promote the general welfare of the Nation by employing its funds and credit ... to alleviate present and recurring unemployment and to remedy the unsafe and insanitary housing conditions and the acute shortage of decent, safe, and sanitary dwellings for families of low income, in urban, rural nonfarm, and Indian areas, that are injurious to the health, safety, and morals of the citizens of the Nation.

Section 1401 further provides that, in the first instance, responsibility is to vest in local public housing agencies for “administration of the low-rent housing program, including responsibility for the establishment of rents and eligibility requirements (subject to the approval of the [Federal Housing] Authority), with due consideration to accomplishing the objectives of this chapter while effecting economies.”

Section 1402 then provides that:

(1) The term “low-rent housing” means decent, safe, and sanitary dwellings within the financial reach of families of low income, and developed and administered to promote serviceability, efficiency, economy, and stability, and embraces all necessary appurtenances thereto. The dwellings in low-rent housing shall be available solely for families of low income. . [I]ncome limits for occupancy and rents shall be fixed by the public housing agency and approved by the Authority after taking into consideration (A) the family size, composition, age, physical handicaps, and other factors which might affect the rent-paying ability of the family, and (B) the economic factors which affect the financial stability and solvency of the project. ... (2) The term “families of low income” means families (including elderly and displaced families) who are in the lowest income group and who cannot afford to pay enough to cause private enterprise in their locality or metropolitan area to build an adequate supply of decent, safe, and sanitary dwellings for their use. .

These provisions make it clear that rent limitation is the prime feature of these programs, and that the purpose of public housing is to make housing available to the “families of low income.” The very premise of the program is that the rents will be substantially lower than those obtainable in the private market; otherwise public housing would not be necessary. While the NCHA and HUD have discretion under §§ 1401 and 1402 to determine the levels and structure of rents in public housing, these agencies must be guided by the general directive that the rents be “within the financial reach of families of low income.”

B. Tenants’ Claim of Right to Hearing

In providing for controlled rents, Congress plainly intended to create a benefit in favor of tenants to enjoy subsidized housing at less than market price. The Housing Act is silent on the question whether Congress intended to provide the tenant beneficiaries with procedural rights to assert further their interests during the process of rent-fixing by LHAs. We uphold the tenants’ claim of a right to be heard, as set forth in Section E of this opinion, finding such rights in the statute, albeit by implication rather than express provision. While a disposition on statutory grounds sometimes allows a court to bypass constitutional questions, the statutory interpretation advanced in the present case is based in material degree on the strength of the plaintiffs’ constitutional contentions, leading us to perform “our duty in the interpretation of federal statutes to reach a conclusion which will avoid serious doubt of their constitutionality.” Richmond Co. v. United States, 275 U.S. 331, 346, 48 S.Ct. 194, 198, 72 L.Ed. 303 (1928). Our ruling avoids a decision on the constitutional claims, in furtherance of the settled practice of the Federal courts to construe Federal statutes to avoid troublesome constitutional issues. But we approach the statutory question in the light of our consideration of the constitutional issues, to which we now turn.

C. The Due Process Issues

Justice Brennan’s opinion in Goldberg v. Kelly, 397 U.S. 254, 90 S.Ct. 1011, 25 L.Ed.2d 287 (1970), holding that welfare benefits could not be terminated without a hearing, and Justice Harlan’s opinion in Boddie v. Connecticut, 401 U.S. 371, 91 S.Ct. 780, 28 L.Ed.2d 113 (1971) , holding the requirement of a filing fee for indigents applying for divorce a violation of due process, have brought new focus to the due process right to be heard. More recently, with the decision in Fuentes v. Shevin, 407 U.S. 67, 92 S.Ct. 1983, 32 L.Ed.2d 556 (1972), which held summary replevin violative of due process, commercial practices once thought unassailable have come under attack.

The right-privilege distinction, once the touchstone for confining the protection of due process, has given way to a more flexible approach.

Under the current Supreme Court doctrine, the existence and extent of due process procedural requirements turn upon consideration of three factors, which may, but need not, be interrelated: (1) the nature of the forum through which the Government acts; (2) the source of the “interest” of the citizen upon which Government action impinges; (3) the extent, in fact, of the deprivation which the Government action occasions.

1. Nature of forum.

The core of due process as a right to be heard was originally rooted in the judicial forum, where it has been vigilantly supervised to assure that the opportunity given is a reality and not a gesture. Due process safeguards the civilizing function of the law, and is recognition that “[t]he right to sue and defend in the courts is the alternative of force.” Chambers v. Baltimore & O. R. Co., 207 U.S. 142, 148, 28 S.Ct. 34, 35, 52 L.Ed. 143 (1907). The importance of courts in the resolution of disputes in a civilized society is the bone structure of the opinion in Boddie v. Connecticut, 401 U.S. 371, 91 S.Ct. 780, 28 L.Ed.2d 113 (1971), where the Court held the requirement of filing fees in divorce cases to violate' due process when it barred would-be litigants from “the only forum effectively empowered to settle their disputes.” 401 U.S. at 377, 91 S.Ct. at 785.

While many procedural due process cases involve the judicial process, the principles are fully applicable to any executive or administrative forum entrusted with determinations of significant rights. That was held as long ago as Londoner v. City of Denver, 210 U.S. 373, 28 S.Ct. 708, 52 L.Ed. 1103 (1908), where the duty of making street improvement assessments and apportioning of taxes was vested in a board of equalization. The Court held that notice and hearing by the board were required before the tax was irrevocably fixed, although “[m]any requirements essential in strictly judicial proceedings may be dispensed with . . ..” 210 U.S. at 386, 28 S.Ct. at 714. Application of due process protection to executive and administrative action has followed from recognition of the basic principle that “the constitutional right to be heard is a basic aspect of the duty of government to follow a fair process of decisionmaking.” Fuentes v. Shevin, supra, 407 U.S. at 80, 92 S.Ct. at 1994. This due process principle has vitality for executive and administrative determinations. See, e. g., Slochower v. Board of Higher Education, 350 U.S. 551, 76 S.Ct. 637, 100 L.Ed. 692 (1956); Goldberg v. Kelly, supra.

2. Source of interest.

The scope of due process protection also takes into account the source of the interest for which the citizen asserts the protection. It has long been clear that the protected interests include those interests in personal liberty and property nurtured at common law. See Windsor v. McVeigh, 93 U.S. 274, 23 L.Ed. 914 (1876). Protection of property interests has never been in doubt, but the extent of the protection has recently been extended. See Sniadach v. Family Finance Corp., 395 U.S. 337, 89 S.Ct. 1820, 23 L.Ed.2d 349 (1969) (wage garnishment); Fuentes v. Shevin, supra (summary repossession). And Wisconsin v. Constantineau, 400 U.S. 433, 437, 91 S.Ct. 507, 27 L.Ed.2d 515 (1971) establishes that a person’s interest in his own reputation merits procedural due process protection.

Sound analysis and authoritative precedent conjoin to make it clear that the zone of interests protected by due process procedural requirements includes interests created by statute in favor of a generally-defined class.

It is the essence of law to define what interests or values are entitled to legal protection, as compared with moral, ethical or voluntary sanctions of approval, and that the discharge of this quintessential function of the law rests not only in those evolving the scope of the common law but in the duly elected legislatures who may, within the limits set by constitutional restraints, enlarge on or supplant common law rules and protections.

As for precedent, it suffices to call the roll of the prominent decisions of the past decade: Sherbert v. Verner, 374 U.S. 398, 83 S.Ct. 1790, 10 L.Ed.2d 965 (1963) (unemployment compensation); Speiser v. Randall, 357 U.S. 513, 78 S.Ct. 1332, 2 L.Ed.2d 1460 (1958) (tax exemption); Goldberg v. Kelly, supra (welfare benefits); Bell v. Burson, 402 U.S. 535, 91 S.Ct. 1586, 29 L.Ed.2d 90 (1972) (drivers’ licenses); Department of Agriculture v. Murry, 413 U.S. 508, 93 S.Ct. 2832, 37 L.Ed.2d 767 (June 25, 1973) (food stamps).

The significance of statutory protection is illuminated by the denial of procedural rights in the case of interests that have not been secured by statute, or authoritative regulation. In Board of Regents v. Roth, the Court declined to attach due process guarantees to the refusal to renew the one-year contract of a professor at a public university. 408 U.S. 564, 578, 92 S.Ct. 2701, 33 L.Ed.2d 548 (1972). The opinion, however, stresses the related consideration of lack of significant deprivation, and we move to that element.

3. Extent of deprivation.

What constitutes a deprivation of constitutional significance remains an abiding question. Long ago Mr. Justice Frankfurter expressed the view that a “grievous loss” triggered due process protection, Joint Anti-Fascist Refugee Committee v. McGrath, 341 U.S. 123, 168, 71 S.Ct. 624, 95 L.Ed. 817 (1951), and this phrase has been echoed in later opinions. See, e. g., Goldberg v. Kelly, 397 U.S. at 262-263, 90 S.Ct. 1011, 25 L.Ed.2d 287. At least where the Government’s judicial machinery is used, any deprivation that cannot be characterized as de minimis is likely to require some form of notice and hearing. Fuentes v. Shevin, supra, 407 U.S. at 88-90, 92 S.Ct. 1983, 32 L.Ed.2d 556.

In examining the extent of deprivation, the Court has looked at the deprived party’s ability to recover from it, at alternatives and self-help available. Where alternative avenues are not easily opened, the Court has been more ready to regard the deprivation as sufficiently serious to warrant the imposition of a right to be heard. Thus in the employment context, for example, dismissal from a tenured job, or one carrying de facto tenure, a unique right to continued employment, not easily duplicated in the private sector, has called into play the right to some kind of hearing. In contrast stand Roth and Cafeteria Workers, where the Court declined to extend procedural due process guarantees to discharged employees who were deemed to be realistically free to seek similar employment elsewhere.

The extent of deprivation has a qualitative and not a mere quantitative character. In the case of the poor, deprivations that may seem modest to the bulk of society may take on the character of “grievous loss” identified as a core factor in providing procedural protections. This feature of the law has been prominent in those cases which have overturned long settled practices by which commercial interests used summary legal procedures that had particularly weighty consequences in situations involving the poor. Sniadach v. Family Finance Corp., 395 U.S. 337, 89 S.Ct. 1820, 33 L.Ed.2d 349 (1969); Fuentes v. Shevin, 407 U.S. 67, 92 S.Ct. 1983, 32 L.Ed.2d 556 (1972).

D. Constitutional Issues in the Housing Context

We turn now to the cases that have considered the due process hearing issues in a housing context.

The first cases decided by the circuit courts of appeals have involved housing for low- and middle-income families, owned by private landlords, but subsidized under § 221(d)(3) of the National Housing Act, 12 U.S.C. § 1715l, by federal mortgage insurance assistance and the provision of mortgages at below market interest rates. In Hahn v. Gottlieb, 430 F.2d 1243 (1970), the First Circuit rejected the tenants’ assertion that they were entitled to a hearing before the Federal Housing Administration approved rent increases proposed by the landlord. Although the court noted that it regarded the potential injury to tenants as insubstantial, it was most troubled by the rigidity which would be introduced into the rent-approval procedure if the court imposed “a formal hearing, the right to cross-examine adverse witnesses, and an impartial decision-maker, who must state the reasons for his decision . . ..” 430 F.2d at 1248.

The tenants before us make a more modest request, not for a hearing with all the trappings of adjudication, but simply for “a fair opportunity to present their objections to any requested rental increases and to rebut any presentation made by the owner.” We believe the proper course to follow in appraising the constitutional claim here is to consider first whether due process requires that the tenants be given some opportunity to be heard, and if some hearing is required, then to flesh out its characteristics after due consideration of the exigencies of the administrative process. See Davis, Administrative Law Treatise § 7.01 at 407-08 (1958).

In Langevin v. Chenango Court, Inc., 447 F.2d 296 (1971), the Second Circuit also rejected the claim that tenants of § 221(d) housing were entitled to a hearing before rent increases. For Judge Friendly, writing for the majority, the crucial fact was that the FHA was not increasing the rent but merely approving the landlord’s proposal ; he regarded the Government involvement as insufficient to call forth due process protection. 447 F.2d at 301. Dissenting Judge Oakes found the distinction between Government increase and Government approval immaterial and went on to conclude that provisions for rent control in FHA regulations gave the tenants an interest worthy of due process protection.

The most recent decision, and the one that, like the case at bar, involved public housing, is Burr v. New Rochelle Municipal Housing Authority, 479 F.2d 1165 (2d Cir. 1973), in which tenants of a municipal public housing project asserted the right to a hearing before the housing authority imposed across-the-board rent increases. The Second Circuit, without dissent, held that the tenants were constitutionally entitled to present views to the Authority opposing the increases before they became effective. The court relied on Escalera v. New York City Housing Authority, 425 F.2d 853 (2d Cir.), cert. denied 400 U.S. 853, 91 S.Ct. 54, 27 L.Ed.2d 91 (1970) which had held that tenants in municipal housing projects were entitled to an adjudicative hearing prior to a decision to refuse to renew their leases. Thus, the Second Circuit seems to have distinguished between public housing and FHA-assisted private housing, a distinction this court declined to make earlier in this litigation when it was forecasting likely development of the law.

Our own analysis of due process principles and precedents underscores the strength of the Second Circuit’s result in Burr, without, however, retaining the Second Circuit’s contrary approach in Langevin. These are the primary elements of our analysis:

1. The injury alleged by plaintiff-tenants in this case presents a substantial deprivation — the inability to pay the increased rentals or to find satisfactory substitute housing. While the tenants may be able to bear the burden of higher rentals by foregoing other purchases, the plaintiffs allege that this would cause them to forego necessities, reducing their welfare below a tolerable minimum. This, they argue, is exactly the situation Congress intended to alleviate by establishing a housing program for low-income families.

2. The interest which the plaintiffs have in obtaining adequate, decent housing is one conferred by the Housing Act. The scheme of rent control in public housing projects and annual Federal contributions to public housing projects, reviewed in Section A, supra, was designed to benefit low-income tenants. It differs in technique but not in ultimate objective from the benefit at issue in Goldberg v. Kelly, an income supplement to needy families. In the public housing program, Congress has chosen to reduce the price which needy families must pay for shelter, an essential commodity. In each case, an improvement in family welfare was the intended result.

3. Notwithstanding the substantiality of the tenants’ interest and the seriousness of the alleged deprivation, a due process right to be heard would be inappropriate if the process of rent increases were such that tenants could make no contribution relevant to decision-making. The propriety of affording due process protection requires an assessment of the issues presented for decision when rent increases are sought and the capacity of tenants to present material relevant to resolution.

The Housing Act, 42 U.S.C. § 1402, prescribes the following factors to be considered in setting rents: “(A) the family size, composition, age, physical handicaps, and other factors which might affect the rent-paying ability of the family, and (B) the economic factors which affect the financial stability and solvency of the project.” Inclusion of the tenants’ ability to pay as one factor to be considered means that tenants can make some material contribution to the process of fixing rents. Tenants may also be able to supply relevant information about the “economic factors,” which would include the landlord’s factor costs, the level of services which generate them, and the alternative sources of income which affect the project’s balance sheet. Moreover, tenants may make innovative suggestions for compromising competing interests. When landlords seek rent increases, the issue is not necessarily limited to that increase vel non. Potential modifications of a proposed rent schedule may relate, for example, to differentials based on family status and size. In this case, the tenants sought to persuade NCHA to defer rental increases to the summer months, when they could be borne more easily by families with seasonally-employed wage-earners.

It is thus apparent that we regard the due process claim of a public housing tenant to a hearing prior to government approval of rent increases as posing a substantial constitutional question.

E. Existence and Nature of Tenants’ Statutory Right to Hearing Prior to Approval of Rent Increases

We hold that the tenants of public housing constructed under the National Housing Act are entitled under that statute to an opportunity to be heard before rents are increased.

Our discussion of constitutional issues in the previous section of this opinion has not resulted in a constitutional ruling, but it has informed our construction of the statute. We have already adverted to the doctrine of interpretation that avoids serious questions as to the constitutionality of Federal statutes. Furthermore, our construction of the Act furthers its purpose to provide public housing tenants with satisfactory and secure shelter, by surrounding the benefit with such procedural protection as comports with basic fairness, discerned in the light of the contemporary regulatory climate. By declining to place our holding on constitutional grounds, however, we preserve an opportunity for Congress to reexamine the issue, and to restructure opportunities for tenant participation so as to comport with what it regards as administrative necessity, without inhibition by this ruling. Congress may, after thorough examination, conclude that tenant participation must yield to other interests. In that event, we may eventually be compelled to decide the constitutional question. For now, however, we believe that predicating the tenants’ right to participate on the statute represents a sound approach.

Having concluded that the tenants have a right to be heard, we turn now to such specific considerations as the timing, forum, and specific methods of tenant participation. The fleshing out of these requirements, like the determination of a due process right itself, begins with a weighing of “the precise nature of the government function involved as well as of the private interest that has been affected by governmental action.” Cafeteria & Restaurant Workers Union v. McElroy, 367 U.S. 886, 895, 81 S.Ct. 1743, 1748, 6 L.Ed.2d 1230 (1961), cited with approval in Goldberg v. Kelly, 397 U.S. 254, 263, 90 S.Ct. 1011, 25 L.Ed.2d 287 (1970).

The interest of the tenants in participation is substantial, since they face grievous loss in a rent increase — even one that is small in absolute dollar amount. However, because the number of tenants potentially involved is quite large, we must be careful to shape procedures to protect the tenants’ interests that avoid their becoming unduly bur-densome.

1. Timing and forum

Tenants might make their case in one or both of two forums — before NCHA or HUD. Under the statutory scheme, the local housing authority takes the initiative in most matters of project management. The LHA draws up its

own budget and proposes rent increases which are then submitted to HUD for review. The local housing authority is familiar with the details of project operations. Its staff is likely to have more contact with tenants and their representatives than that of HUD. Thus the local housing authority is the more appropriate initial forum for the tenant. Allowing the tenants to present their views first to the local housing authority gives them an opportunity to influence the preparation of proposals at an early stage, before important issues have been foreclosed and objection has become a futile gesture.

Presentation of the tenants’ views before the local authority has the added advantage that submissions by the tenants will become part of the record which the LHA submits to HUD for review, thereby allowing HUD an opportunity to make a more informed decision. This approach is congruent with that of the Fourth Circuit in Appalachian Power Co. v. EPA, 477 F.2d 495 (4th Cir. 1973), approving a procedure for EPA approval of a state implementation plan under § 110 of the Clean Air Act. No hearings were held by EPA but it consulted hearings held at the state level in reaching its decision whether to approve the state plan.

Once the LHA decision is reached, HUD should permit tenants to submit expeditiously any objections to the LHA decision, so that HUD may be fully informed of tenant views. Ordinarily, at least, this will not constitute a right to present new evidentiary material to HUD.

2. Procedures

In several prior cases, tenants coupled their demand for a right to be heard with the assertion that only an adjudicative hearing — replete with cross-examination, discovery, and inspection of evidence — would suffice. The courts, understandably troubled by such expansive claims, shied away from requiring hearings altogether. See Hahn v. Gottlieb, supra. The Second Circuit however, while holding in Burr v. New Rochelle Municipal Housing Authority, supra, that tenants have a right to be heard prior to rent increases, has limited the tenants’ role to filing written objections to proposed increases after due notice is given. The court concluded that evidence in a rent increase proceeding would consist largely of technical financial data, evidence which could be most easily grasped in written form and for which the protection of spontaneous testimony was unnecessary.

Most of the eases which established a due process right to' hearing were concerned with individualized determinations — suspension or revocation of licenses, termination of statutory benefits to individuals, dispossession of property. In those cases individual hearings, with some oral presentation, were well nigh indispensable to the airing of the critical questions. Where, as here, the issues involved affect a class of citizens, there is a need to impose some limits to keep the proceeding manageable. While it is impossible to anticipate all the issues which could be raised in a rent-increase dispute, tenants are most likely to be concerned with the landlord’s costs, level of services, alternative sources of revenue, and tenants’ ability to pay increased rent. On these matters, we believe, tenants will have adequate opportunity to express their views if they are afforded a hearing of the type prescribed by the Administrative Procedure Act for rule-making proceedings: an opportunity to make written presentations. We note that an opportunity of this sort has been held to protect the interests of claimants under a variety of circumstances. See, e. g., United States v. Florida East Coast Railway, 410 U.S. 224, 93 S.Ct. 810, 35 L.Ed.2d 223 (1973); FCC v. WJR, 337 U.S. 265, 247-276, 69 S.Ct. 1097, 93 L.Ed. 1353 (1949).

We have on occasion voiced the view that basic considerations of fairness may under exceptional circumstances require oral submissions even in a legislative-type proceeding. E.g., American Airlines v. CAB, 123 U.S.App.D.C. 310, 317, 359 F.2d 624, 631-632 (en banc 1966), cert. denied, 385 U.S. 843, 87 S.Ct. 73, 17 L.Ed.2d 75 (1966); Walter Holm & Co. v. Hardin, 145 U.S.App.D.C. 347, 449 F.2d 1009 (1971). Conceivably there may be instances of rent increase proceedings when the dictates of fairness will require an opportunity for limited oral presentations and perhaps the right to pose questions submitted through the hearing officer. Congress, of course, is free to provide expressly for such a proceeding or to authorize HUD or a LHA to structure a hearing

in which tenants would testify. For the present, however, we require only written submissions, and conceive of oral presentation, if available at all, as the exception rather than the rule.

We hold that tenants of NCHA are entitled by the Housing Act to notice of proposed rent increases and an opportunity to respond in writing before rent increase proposals are forwarded to HUD for approval. Since no such opportunities were afforded the tenants here, the judgment of the District Court must be reversed.

IV. THE CLAIM THAT RENTS

“BEYOND FINANCIAL REACH” ARE UNAUTHORIZED

Appellants’ second claim on appeal is that HUD was legally obligated by statute to increase its annual contributions to NCHA to cover the operating deficit rather than requiring NCHA to increase rents. Appellants point to 42 U.S.C. § 1402(1), that “ ‘low-rent housing’ means decent, safe, and sanitary dwellings within the financial reach of families of low income . . ..” The rent in-

creases, say appellants, will put public housing beyond the financial reach of at least some low-income tenants.

There is no doubt that HUD has authority to use annual contributions to meet operating deficits. Section 1410(a) of the Housing Act provides that HUD “may make annual contributions to public housing agencies to assist in achieving and maintaining the low-rent character of their housing projects.” This language gives HUD authority to subsidize operating deficits, as well as interest for LHA bondholders. But although HUD has had authority to use annual contributions to subsidize operating deficits, funds appropriated by Congress have not been sufficient to make this a realistic possibility. We see nothing compelling HUD to use annual contributions to subsidize deficits.

The Housing Act has never prescribed income limits for eligibility of low income tenants. Prior to 1969, § 1402(1) provided that

income limits for occupancy and rents shall be fixed by the public housing agency and approved by the Authority after taking into consideration (A) the family size, composition, age, physical handicaps, and other factors which might affect the rent-paying ability of the family, and (B) the economic factors which affect the financial stability and solvency of the project.

Plainly, there are no income limits for occupants here. Nor did the statute, at the time of these increases, impose any ceiling for rents in public housing. The Brooke Amendment set such a limit for the first time — providing that rents “may not exceed one-fourth of the family’s income, as defined by the Secretary” —but this provision is not applicable to the 1969 rent increase before us.

In the absence of any statutory provision defining income limits for eligible families or imposing rent ceilings, it is difficult to make the claim that HUD was prohibited from increasing the rents and thereby causing some low-income families to forego purchasing this housing. Appellants rely on the general language of § 1402(1) (A) that low rent housing be “within the financial reach of families of low income.” But this general language must be read together with the language requiring HUD to set rents in view of “the financial stability and solvency of the project.” Section 1402 simply states the competing objectives of improving the welfare of low-income families, on the one hand, and of conserving resources on the other. The statute entrusts to the discretion of HUD the reconciliation of these competing objectives in their particular applications. Lacking sufficient operating subsidies, local housing authorities could well face bankruptcy by refusing to raise rents. Tenants have not alleged' that there were sufficient funds available, and on this record HUD’s decision to avoid this result cannot be held beyond its statutory power.

A wholly different controversy would be presented if it were alleged that sufficient appropriated funds were available to avoid rent increases, but were wrongfully bypassed or ignored. The issues raised by such an “impoundment” should not be considered in the absence of clear cut allegations and a record, and if that is the controversy that appellants have in mind meaningful amendment of pleadings and tender of proof would be required. That would provide an opportunity for the Government to make a focused response, perhaps to show that the allegedly unspent funds were spent, or earmarked, or were in the course of being shaped for disbursement under plans or programs that would be jeopardized by acceptance of plaintiffs’ claims.

Similarly, plaintiffs would have to supplement and update their pleadings if they wish to present the contention that the rent schedules under attack were in violation of the Brooke Amendment. The case was presented on the theory that the schedules were illegal when set, and we cannot on our own reconstitute the pleadings to allege that the rent ceilings, however lawful when set, became illegal when they were maintained after the passage of the Brooke Amendment.

* * *

For the reasons set forth in Section III E of this opinion, the judgment of the District Court is reversed and the case is remanded for further proceedings not inconsistent with this opinion.

So ordered.

      . 42 U.S.C. § 1401 et seq., as amended (Supp.1973).

      . See National Institute for Education in Law and Poverty, Handbook on Housing Law, eh. IV, Pt. II, at 5-9 (1971).

      . 42 U.S.C. § 1410(a) (1970).

      . 42 U.S.C. § 1415(12). In addition to payments made under the annual contributions contract, special subsidies are authorized for the elderly, handicapped families, or families displaced by urban renewal or a low-rent housing project.

      . 42 U.S.C. § 1411 (1970) provides for “Capital grants in assistance of low rentals.” See, Low-rent Housing, The Modernization Program Handbook, RHA 7485.1 (June 1969).

      . 42 U.S.C. § 1415(10) (1970). These services consist of counseling on such problems as money management and job referrals.

      . 42 U.S.C. § 1409 (1970).

      . See 42 U.S.C. § 1413(c) (1970).

      . See R. Pozen, The Financing of Local Housing Authorities: A Contract Approach for Public Corporations, 82 Yale L.J. 1208 (1973). The District of Columbia has been allowed to participate in the low-rent housing program from its inception as if the District were a state, 42 U.S.C. § 1402(12). Therefore, the Alley Dwelling Act, 5 D.C. Code §§ 103-116 (1973), empowers the National Capital Housing Authority to accept funding and operate low-rent housing projects.

      . See R. Pozen, note 9 supra at 1208.

      . Affidavit of Lawrence M. Cox, Assistant Secretary for Renewal and Housing Assistance, HUD, filed Oct. 30, 1969, with Dkt. Entry 17.

      . Affidavit of Edward Aronov, Secretary and Executive Director of the National Capital Housing Authority, filed Oct. 30, 1969, with Dkt. Entry 17); Letter to tenants of NCHA, from Montería Ivery, Sr., Acting Executive Director, filed October 30, 1969, with Dkt. Entry 17).

      . Cox Affidavit, supra note 11.

      . Letter of June 26, 1969, from Thomas IV. Fletcher, Deputy Mayor-Commissioner, District of Columbia to Edward Aronov, filed October 30, 1969, with Dkt. Entry 17.

      . Letter of June 27, 1969 from Robert Lifsliin, Acting Director, Tenant and Operations Services Division, HUD, to Edward Aronov, filed October 30, 1969.

      . Letter from Vincent A. Marino, Assistant Regional Administrator for Housing Assistance, HUD, to Edward Aronov, filed October 30, 1969, with Dkt. Entry 17.

      . The new rent schedule was embodied in NCHA Order No. 69-18 which replaced Order No. 69-10, issued on May 16, 1969.

      . The revised rent schedule is at JA 30-32. This represented the only change in the graded rent structure since 1962. A copy of the 1962 graded rent schedule is in the record, as filed December 2, 1969, with Dkt. Entry 34.

      . This calculation reflects no special assistance from IIUD to reduce the impact of the rent increase. The record is silent regarding special assistance.

      . It should be noted, without importing any conclusion or ruling by this court on the matter, that the complaint relies on 42 U.S.C. § 1402(1), which provides that rent shall be fixed and approved only after considering factors affecting ability of each individual tenant family to pay, and quotes NCHA Regulations ¶ 4531.21, 23, as providing that rents are set at amounts “the low-income part of the population . . . can afford to pay” so that “no family pays more than a fair share of its income for rent.” The amended complaint alleges, par. 13, that the rent schedules do not maintain a rent-income ratio of 1 to 5 as between maximum rent for a particular unit and net family income of a family eligible to occupy it. The Government brief asserts (p. 5) that the new rent schedule takes up between 20% and 30% of family income, but that assertion is based upon an assumed correspondence between the income levels of families and the size of the units they occupy. The plaintiff’s memorandum filed in the District Court on October 31, 1969, asserts that NCHA’s own figures, in its 1967 Annual Re-Examination, show 341 families with incomes below $1,000, some in units of 2 bedrooms for which the minimum monthly rent was then $33 and is now $44 — figures that amount to 40% and 52%, respectively, of a $1,000 annual income.

      . Pub.L. 91-152, 83 Stat. 379 (1969), see. 213.

      . H.Rep.No.91-740, 91st Cong., 2d Sess. 31 (1969).

      . Brief of Appellees at 6.

      . See R. Pozen, note 9 supra, at 1208-09.

      . We think the defense of sovereign immunity raised by the Government is precluded by our disposition in Knox Hill Tenant Council v. Washington, 145 U.S.App.D.C. 122, 448 F.2d 1045 (1971) which held there was no sovereign immunity from a claim against NCHA alleging failure to observe statutory, contractual, and regulatory obligations.

      . 28 U.S.C. § 1361 (1970) provides as follows :
      The district court shall have original jurisdiction of any action in the nature of mandamus to compel an officer or employee of the United States or any agency thereof to perform a duty owed to the plaintiff.

      . The suits against private landlords in which the sufficiency of state involvement has been questioned have been brought under the Civil Bights Act, 28 U.S.C. § 1343(3).

      . See Burr v. New Rochelle Municipal Housing Authority, 479 F.2d 1165 (2d Cir. 1973); King v. New Bochelle Municipal Housing Authority, 442 F.2d 646 (2d Cir.) cert. denied, 404 U.S. 863, 92 S.Ct. 113, 30 L.Ed.2d 107 (1971) (low-income persons perceived as beneficiaries of public housing).

      . See, e. g., United States v. Rumely, 345 U.S. 41, 45, 73 S.Ct. 543, 97 L.Ed. 770 (1953); Crowell v. Benson, 285 U.S. 22, 62, 52 S.Ct. 285, 76 L.Ed. 598 (1932); Lucas v. Alexander, 279 U.S. 573, 577, 49 S.Ct. 426, 73 L.Ed. 851 (1929); United States v. Jin Fuey Moy, 241 U.S. 394, 401, 36 S.Ct. 658, 60 L.Ed. 1061 (1916); United States v. Delaware & Hudson Co., 213 U.S. 366, 408, 29 S.Ct. 527, 53 L.Ed. 836 (1909).

      . Compare Adams v. Egley, 338 F.Supp. 614 (S.D.Cal., 1972) (California Commercial Code Section 9-503, 9-504 invalidated) with Lebowitz v. Forbes Leasing and Financing Corporation, 456 F.2d 979 (1972), cert. denied, 409 U.S. 843, 93 S.Ct. 42, 34 L.Ed.2d 82 (1972).

      . See Graham v. Richardson, 403 U.S. 365, 374, 91 S.Ct. 1848, 29 L.Ed.2d 534 (1972) ; Board of Regents v. Roth, 408 U.S. 564, 571, 92 S.Ct. 2701, 33 L.Ed.2d 548 (1972).

      . In invalidating a procedure for notice only by publication to absent beneficiaries of a common trust fund, Justice Jackson said for the court in Mullane v. Central Hanover Tr. Co.:
      “Many controversies have raged about the cryptic and abstract words of the Due Process Clause but there can be no doubt that at a minimum they require that deprivation of life, liberty or property by adjudication be preceded by notice and opportunity for hearing appropriate to the nature of the case.
      But when notice is a person’s due, process which is a mere gesture is not due process. The means employed must be such as one desirous of actually informing the absentee might reasonably adopt to accomplish it.” 339 U.S. 306, 313-315, 70 S.Ct. 652, 656-657, 94 L.Ed. 865 -(1950).

      . See 407 U.S. at 81, 92 S.Ct. at 1994:
      The requirement of notice and an opportunity to be heard raises no impenetrable barrier to the taking of a person’s possessions. But the fair process of decision-making that it guarantees works, by itself, to protect against arbitrary deprivation of property. For when a person has an opportunity to speak up in his own defense, and when the State must listen to what he has to say, substantively unfair and simply mistaken deprivations of property interests can be prevented. It has long been recognized that “fairness can rarely be obtained by secret, one-sided determination of facts decisive of rights. [And n]o better instrument 'as been devised for arriving at truth than to give a person in jeopardy of serious loss notice of the case against him and opportunity to meet it.” Joint Anti-Fascist Refugee Committee v. McGrath, 341 U.S. 123, 170-172, 71 S.Ct. 624, 647, 95 L.Ed. 817 (Frankfurter, J., concurring).

      . Exclusivity of the government benefit was most clearly presented in Boddie v. Connecticut, supra, in which the Court viewed the state as “monopolizing” the means by which the parties could adjust the marital relationship. See 401 U.S. at 374, 91 S.Ct. 780. More recent decisions indicate that the Court will not regard alternatives to receipt of a government benefit unavailable simply because the benefit is more attractive or convenient. In United States v. Kras, 409 U.S. 434, 93 S.Ct. 631, 34 L.Ed.2d 626 (1973), the Court upheld a filing fee for bankruptcy cases, stating that “the government’s control over the establishment, enforcement, or dissolution of debts [is notl nearly so exclusive as Connecticut’s control over the marriage relationship in Boddie.” 409 U.S. at 445, 93 S.Ct. at 638.

      . Slochower v. Board of Education, supra, (public college professor dismissed from an office held under tenure provisions) and Perry v. Sindermann, 408 U.S. 593, 92 S.Ct. 2694, 33 L.Ed.2d 570 (1973) (de facto tenure arising through implied promise of continued employment).

      . Board of Regents v. Roth, 408 U.S. 564, 575, 92 S.Ct. 2701, 2708, 33 L.Ed.2d 548 (1972), where Mr. Justice Stewart for the majority stated: “Hence, on the record before us, all that clearly appears is that the respondent was not rehired for one year at one University. It stretches the concept too far to suggest that a person is deprived of ‘liberty’ when he simply is not rehired in one job but remains as free as before to seek another,” citing Cafeteria Workers v. McElroy, 367 U.S. 886, 895-896, 81 S.Ct. 1743, 6 L.Ed.2d 1230 (1961).

      . Sniadach involved garnishment, almost exclusively used against poor, which can “drive a wage-earning family to the wall”, 395 U.S. at 342, 89 S.Ct. at 1823. Fuentes involved summary replevin of household goods.

      . See 430 F.2d at 1247.

      . The court relied on this fact to distinguish earlier cases, such as Escalera v. New York Housing Authority, 425 F.2d 853 (2d Cir.), cert. denied, 400 U.S. 853, 91 S.Ct. 54, 27 L.Ed.2d 91 (1970), which had held that tenants in public housing are entitled to a hearing before their leases are terminated for breach of project regulations. The landlords in these cases were the government housing agencies.

      . Other decisions were in accord with Escalara. See, e. g., Caulder v. Durham Housing Authority, 433 F.2d 998 (4th Cir.), cert. denied, 401 U.S. 1003, 91 S.Ct. 1228, 28 L.Ed. 2d 539 (1971); Ruffin v. Housing Authority of New Orleans, 301 F.Supp. 251 (E.D.La.1969).

      . McKinney v. Washington, supra, p. 628.

      . While many of the recent due process decisions have involved decisions about the status, rights, or obligations of single individuals, the determination which emerges from the governmental process under scrutiny here is not so individualized. We do not, however, regard this difference as determinative. We believe the correct approach is to ascertain whether tenants can make relevant contribution to the issues presented for decision, notwithstanding the fact that they apply to a potentially large class. Compare BiMetallic Investment Company v. State Bd. of Equalization, 239 U.S. 441, 36 S.Ct. 141, 60 L.Ed. 372 (1915) with Joint Anti-Fascist Refugee Committee v. McGrath, 341 U.S. 123, 167, 71 S.Ct. 624, 95 L.Ed. 817 (1951) (Frankfurter, J., concurring).
      In BiMetallic Investment Company v. State Bd. of Equalization, supra, which held that taxpayers had no right to a hearing before execution of the agency’s order to increase the valuation of taxable property, Mr. Justice Holmes said that “[w]here a rule of conduct applies to more than a few people it is impracticable that every one should have a direct voice in its adoption.” 239 U.S. at 445, 36 S.Ct. at 142. But there the Court perceived the agency to be engaged in making general policy, of such a nature that the petitioners had no legitimate contribution. As Mr. Justice Frankfurter said, concurring in Anti-Fascist Refugee Committee v. Mc-Grath, 341 U.S. at 167, 71 S.Ct. at 646, the BiMetallic holding stands for the proposition that “when decisions of administrative officers in execution of legislation turn exclusively on considerations similar to those on which the legislative body could itself have acted summarily, notice and hearing may not be commanded by the Constitution.”

      . We agree with Judge Friendly that these matters constitute “adjudicative” rather than “legislative” facts, to use the distinction proposed by Professor Davis, Administrative Law Treatise § 7.02 at 413 (1958). Compare Langevin v. Chenango Court, Inc., 447 F.2d 296 (2d Cir. 1971) with Hahn v. Gottlieb, 430 F.2d 1243 (1st Cir. 1970).

      . Since 1959, the 1937 Housing Act has provided that “the maximum amount of responsibility in the administration of the low-rent housing program, including responsibility for the establishment of rents . . .” should be vested in local public housing agencies. 42 U.S.C. § 1401 (1970). Until 1959 rents in public housing were administratively fixed at 20% of tenant’s income by HUD’s predecessors, and the 1959 Housing Act, 73 Stat. 680, § 503(a) increased discretion of the local authorities by delegating to them rent decisions. See H.Rep.No.86, 86th Cong., 1st Sess. 32-33, 155 1959).

      . Although it is true that in this case HUD first suggested a rent increase, the details of the proposal were the initial responsibility of the NCHA.

      . See Goldberg v. Kelly, supra, in which the Court emphasized that presentation of opposing views at an early stage is particularly important.

      . In Appalachian Power Co. v. EPA, supra, the court found Congressional intent to avoid the delay of a subsequent and authority to remand for EPA to hear further evidence. 477 F.2d at 504.

      . There may be need, as well, for cross-examination by interested parties, at least if the proceeding involves specific issues of critical importance that cannot be adequately ventilated under a written statement procedure. Compare International Harvester Co. v. Ruckelshaus, 155 U.S.App.D.C. 411, 478 F.2d 615, 629-631 (1972) with id. at 650-652 (concurring opinion).

      . See E. Gellhorn, Public Participation in Administrative Proceedings, 81 YALE L.J. 359, 376-83. Fears of administrative impracticability tend to be overstated, as then Judge Burger noted in Office of Communication of United Church of Christ v. FCC, 123 U.S.App.D.C. 328, 340, 359 F.2d 994, 1006 (1966). Ad hoe rules of procedure can generally be devised to keep a hearing manageable under foreseeable contingencies — such as a congestion of witnesses or an unanticipated impasse.

      . This language was amplified by the 1969 Brooke Amendment, inapplicable to this case.

      . The Brooke Amendment of 1969, which took effect after this litigation began, placed a ceiling on the annual contributions to a project, irrespective of their purpose. Amendments added in 1972 abolished the ceiling, since funds were authorized specifically for financing operating deficits. P.L. 92-503, 86 Stat. 906, sec. 3. Congress increased by $150 million the authority of HUD to enter into annual contribution contracts, and the Senate Report stated:
      The new authority may be used by the Secretary either to finance additional public housing units or to provide additional subsidies to housing authorities to meet current justifiable operating deficits.
      S.Rep.No.92-1261, 92nd Cong., 2d Sess. 3 (1972).

      . 42 U.S.C. § 1402(1).

      . A different question would be presented if rents were increased so much that the housing could no longer be characterized as “low rent housing”; that question is not presented by the case before us.

      . See R. Pozen, note 9 supra, at 1227 Appendix, showing that, based on information from the National Association of Housing and Development Officials (NAHRO), a group representing LHA’s Congressional appropriations earmarked for operating subsidies were below the estimated need for such subsidies by $19.6 million in fiscal 1970, $92 million in fiscal 1971, $103 million in fiscal 1972, and $155.4 million in fiscal 1973. We are interested in fiscal years 1969 and 1970, since the amount of rent increase in 1969 was predicated not only on the past operating deficit but on the projected operating deficit for the forthcoming year. We have no data on 1969 operating deficits nationwide, so we cannot reach a final conclusion on this question. We can only observe that the trend of the data would seem to indicate that all money properly available for financing operating deficits was spent. See text at note 21.


source: Caselaw Access Project

author: LEVENTHAL, Circuit Judge:

license: Public Domain

text:
    Elizabeth MARSHALL et al., Appellants, v. James LYNN, Individually and in his capacity as Secretary of Housing and Urban Development, et al.
    No. 71-1786.
    United States Court of Appeals, District of Columbia Circuit.
    Argued Dec. 18, 1972.
    Decided Dec. 10, 1973.
    As Amended Dec. 20, 1973.

      Edward E. Schwab, Washington, D. C., for appellants.
    C. Richard Beyda, Washington, D. C., for appellees, Linda Pollin Memorial Housing Corp. and Shannon & Luchs Company.
    Percy H. Russell, Jr., Asst. U. S. Atty., with whom Harold H. Titus, Jr., U. S. Atty., John A. Terry, and J. Michael McGarry, III, Chevy Chase, Md., were on the brief for appellee, James Lynn, Secretary of HUD. Thomas A. Flannery, U. S. Atty. at the time the record was filed, also entered an appearance for appellee.
    Before BAZELON, Chief Judge, and TAMM and LEYENTHAL, Circuit Judges.
   LEVENTHAL, Circuit Judge:

This case is one of three related eases decided today which involve the procedural rights of tenants of housing constructed under various provisions of the Federal housing legislation, prior to official approval of rent increases. In Thompson v. Washington, No. 71-2049, 162 U.S.App.D.C. -, 497 F.2d 626, we hold that tenants of low-rent public housing are entitled not only to receive notice of proposed rent increases but also to participate in the process of official consideration of rent increases by making written presentations. In the case at bar, we hold that the same opportunities must also be afforded tenants of low- and moderate-income housing constructed pursuant to § 221(d)(3) of the National Housing Act, with both FHA mortgage insurance and below-market-interest-rate loans. In Tenants’ Council of Tiber Island v. Lynn, 162 U.S.App.D.C. -, 497 F.2d 648, we hold that the opportunity to participate need not be accorded tenants of housing constructed under § 220 of the Housing Act as part of area redevelopment plans.

I. STATEMENT OF FACTS

This class action is brought against the Secretary of HUD and officials of the FHA on behalf of tenants of the Linda Pollin Memorial Housing Project who assert that they were entitled to a hearing before their rents were increased in August, 1970. The Pollin Project was constructed and financed with the aid of mortgage insurance by FHA (Federal Housing Administration, now a division of the Department of Housing and Urban Development) pursuant to § 221(d)(3) of the National Housing Act. After receiving notice of the proposed rental increase on July 1, 1970, the tenants demanded of an official of the District of Columbia Insuring Office of FHA that they be given an opportunity to be heard before FHA approved the increases. Their request was denied by the Acting Director of the D. C. Insuring Office who stated:

This office is not obligated, nor do we have the authority to hold hearings with tenants regarding considerations for increases in maximum rents. The rent increase referred to in your letter was granted on the basis of increases in operating expenses and taxes. The increase was supported by -a current financial report prepared by an independent accountant.

This litigation followed.

District Judge Parker granted summary judgment for defendants on the authority of Hahn v. Gottlieb, 430 F.2d 1243 (1st Cir. 1970) and McKinney v. Washington, 143 U.S.App.D.C. 4, 442 F.2d 726 (1970). Following substantially the same analysis presented in Thompson v. Washington, No. 71-2049, 162 U.S.App.D.C. -, 497 F.2d 626, decided this day, both in establishing jurisdiction and standing, and on the merits, we reverse and remand.

II. THE CLAIM OF RIGHT TO A HEARING

Although the statute governing § 221(d)(3) housing does not provide on its face for a hearing, this housing is “designed to assist private industry in providing housing for low and moderate income families and displaced families.” 12 U.S.C. § 17151(a). When § 221 was enacted in 1954, Congress plainly contemplated that low- and moderate-income tenants were to be the principal beneficiaries of this program. The National Housing Act of 1954, Title III, contained numerous provisions dealing with slum clearance and urban renewal. The purpose of the § 221 program was the provision of rental housing for persons displaced by urban renewal projects, and this was to be accomplished through FHA insurance of long-term mortgages. Section 220 housing was to be built on the urban renewal sites, and § 221 was designed to house persons who were forced to move out of these areas.

In 1961, § 221 was amended to liberalize the range of participants qualifying for FHA insurance, and the terms thereof. A new feature was added — direct interest subsidies, through the below-market interest rate (BMIR) program. The § 221(d)(3) program is described by the Government in its brief (at pp. 5-6) as follows:

“The program provides for mortgage insurance for qualified mortgagors. As a private non-profit corporation, Linda Pollin qualifies for insurance under the program. In order to be insured, the mortgage must meet certain requirements. There is a limitation on the total amount of the mortgage as well as on the amount allowed per dwelling unit. The interest rate on the mortgage to be insured must be either three per cent or such other rate as determined by the Secretary of the Treasury. In return for the mortgage insurance, the mortgagor agrees to be regulated. The statute provides that mortgagors are to be:

regulated or supervised under Federal or State laws or by political subdivisions of States, or agencies thereof, or by the Secretary under a regulatory agreement or otherwise, as to rents, charges, and methods of operation, in such form and in such manner as in the opinion of the Secretary will effectuate the purposes of this section.

“The Secretary has chosen from among the broad alternatives the statute affords him to regulate the mortgagor himself under a regulatory agreement. With respect to rent, the agreement in the instant case provides:

4. (a) Owners shall make dwelling accommodations and services of the project available to occupants at charges not exceeding those established in accordance with a schedule approved in writing by the Commissioner. ...
* -x- -x- * # -x-
(c) The Commissioner will at any time entertain a written request for a rent increase properly supported by sustaining evidence and within a reasonable time shall:
(i) approve a rental schedule that is necessary to compensate for any net increase since the last approved rental schedule in taxes (other than income taxes), and operating and maintenance costs over which owners have no effective control, or
(ii) deny the increase stating the reasons therefor.

“In implementing the program, FHA has established regulations which appear at 24 C.F.R. §§ 221.1-221.790. The applicable provision concerning rent is as follows:

Rents and charges. In approving the allowable rents and charges and in passing upon applications for charges, consideration will be given to the following and similar factors:
(1) Rental income necessary to maintain the economic soundness of the project.
(2) Rental income necessary to provide a reasonable return on the investment consistent with providing reasonable rentals to tenants.”

The Government contends that such rent increase proceedings are summary in nature, with the agency receiving the owner’s' written submission, but affording no hearing on the rental increase. The Government’s position overlooks the reality that an owner is entitled to make a written request and to present supporting evidence. As we have said in our Thompson opinion, a right to be heard embraces the opportunity 'to make a written presentation. That opportunity is available, under Thompson, to tenants of public housing programs under the Housing Act, in view of their statutory interest as beneficiaries of the rent limitations provided by Congress. We think the same analysis applies to tenants in § 221(d)(3) housing programs assisted by Government financing at below market interest rates. We reach this conclusion on our analysis of the purpose and character of the BMIR program.

In providing new BMIR incentives to private developers, Congress indicated its concern that the benefits should go to the low- and moderate-income tenants for whom the program was designed. In fact, the BMIR was proposed because FHA insurance was perceived as not having accomplished the goal of providing housing for the intended beneficiaries. The House Report on the 1961 legislation stated: “There are many families whose incomes are sufficiently high so that they are not eligible for low-rent public housing but who . also cannot afford apartment-type housing even of modest design if it is financed at the going FHA interest rate and subject to the regular FHA insurance premium.” Under the House proposal, the availability of BMIR to a mortgagor was tied to controls on rents and eligibility of tenants. The House Report stated:

The below-market interest rate and reduction of FHA mortgage insurance premiums would be made available only where the mortgagors are willing to operate the housing subject to related controls on rentals and income limits for admissions of tenants to the housing.

Again the House Report states, referring to the BMIR program, that “The FHA would also establish and enforce maximum rentals; and would supervise management practices with respect to such matters as the establishment of appropriate reserves.”

Commentary in the Senate Report is similar. The Senate Report stated that BMIR was designed to assist those “families whose income are sufficiently high so that they are not eligible for low-rent public housing but who cannot afford homeownership even if assisted by FHA insurance of no downpayment 40-year mortgage loans.” The Report discussed the impact of BMIR on the old § 221(d)(3) as follows:

The below-market interest rate and reduction of FHA mortgage insurance premiums would be made available only where the mortgagors operate the housing subject to related controls on rentals and income limits for admissions of tenants to the housing. The section 221 program would continue ‘to be available at market FHA mortgage insurance premium reductions for non-profit mortgagors building for displaced families or other families. In these cases the housing would be subject to the regular FHA regulations and restrictions.

From our reading of the legislative history, we have no doubt that the 1961 program of below-market interest rate subsidies was intended to benefit low- and moderate-income tenants. Therefore we follow our analysis in Thompson v. Washington, decided today, and hold that tenants in housing financed with Federal subsidy in the form of below-market interest rate loans have a statutory right to be heard before their rents are increased.

Tenants in housing financed under the predecessor § 221(d)(3) program, consisting only of FHA mortgage insurance without BMIR, stand in a different position. From the provision of FHA mortgage insurance alone we find it difficult to infer any Congressional intent to provide continuing benefits to tenants in the form of rent control. Provision of FHA insurance represented Government intervention in the market to assure credit, a provision that stimulated the construction of housing which might not otherwise have become available for occupancy. But it is not clear that Congress intended to establish a continuing program of controlled rents monitored for the protection of tenants. On the record before us we cannot be certain how the program prior to the adoption of BMIR actually operated. The mere fact of administrative scrutiny of rents is not inconsistent with a predominant role for market forces, as appears from our decision today in Tenants’ Council of Tiber Island v. Lynn. The legislative history of the 1961 amendments implies that rents in § 221(d)(3) housing had predominantly reflected market changes, at least as to the important factor of rate of mortgage interest. The resulting inability of the families which Congress desired to protect to purchase adequate housing led to the adoption of the BMIR subsidy. Thus, in 1961 Congress focused on the BMIR program as the mechanism to aid families unable to purchase housing at market rents, and specifically tied that program to a mortgagor’s submission to rent controls, applied for the benefit of tenants. We do- not discern a similar protection in the form of continuing regulation of rents in behalf of ténants in housing financed under § 221(d)(3) but without the BMIR subsidy. Hence we conclude that the constitutional or statutory claims of those tenants that they are entitled to be heard before rents are increased are without merit. While the absence of rent control in such housing may mean that some tenants will find it difficult to meet rental payments, that hardship is insufficient, without a more specific statutory basis, to invoke a judicial remedy under the Constitution. See Lindsey v. Normet, 405 U.S. 56, 74, 92 S.Ct. 862, 31 L.Ed.2d 36 (1972).

We remand to the District Court to determine whether the Linda Pollin Memorial Housing project receives Federal subsidy in its financing in the form of BMIR, and if so, to enter an appropriate order effecting the procedural rights of tenants we have delineated in Part III E of our opinion in Thompson v. Washington.

The judgment is vacated and the case remanded for further proceedings not inconsistent with this opinion.

So ordered.

      . The project is owned by a non-profit corporation, the Linda Pollin Memorial Housing Corporation, and is managed by the Shannon and Luchs Realty Company.

      . 12 U.S.C. § 1715l(d)(3) (1970).

      . 68 Stat. 599 (1954).

      . See Conference Report H.Rep. No. 2271, 83d Cong., 2d Sess. 70 (1954). Also see H.Rep. No. 1429, 83d Cong., 2d Sess. 13, 15 (1954); S.Rep. No. 1472, 83d Cong., 2d Sess. 6 (1954). Section 221(a) of the Housing Act of 1954 provided “This section is designed to supplement systems of mortgage insurance under other provisions of the National Housing Act in order to assist in relocating families to be displaced as the result of governmental action in a community.

      . Housing Act of 1961, P.L. 87-70, 75 Stat. 149 (1961). BMIR operates through the participation of the Federal National Mortgage Association, under its “special assistance” functions. Typically a lender makes a market rate construction loan, insured by FHA, with a firm commitment from FNMA to purchase the loan at the below market interest rate. See P. David, Urban Land Development 297-301 (1970); B. T. Fitzpatrick, FHA and FNMA Assistance for Multi-Family Housing, 32 Law & Contemp. Probs. 439, 448-453 (1967).

      . As amended by 1961 enactment § 221(a) provided: “This section is designed to assist private industry in providing housing for low and moderate income families and families displaced from urban renewal areas or as a result of governmental action.” 75 Stat. 149 (1961).

      . H.Rep. No. 477, 87th Cong., 1st Sess. 11 (1961).

      . Id.

      . Id. at 12.

      . S.Rep. No. 281, 87th Cong., 1st Sess. 7 (1961).

      . Id. at 8.

      . In so holding we are aware of the decisions to the contrary in two other circuits, Hahn v. Gottlieb, 430 F.2d 1243 (1st Cir. 1970) and Langevin v. Chenango Court, 447 F.2d 296 (2d Cir. 1971). Our holding is on statutory grounds, but contrary to these decisions, we regard the constitutional question of the tenants’ right to a hearing as quite open. As we have explained in Thompson v. Washington, we believe the Hahn court, in denying any right to be heard, was heavily influenced by the appellant’s assertion that a full-dress adjudicative hearing was required, and we have decided the issue of the right jto be heard vel non without such a distractiou. The Second Circuit, in Chenango Court, rejected a due process claim on the ground that the Government did not increase the rent but merely approved the increase and that the requisite Government involvement for due process guarantees was lacking. Although we do not decide the constitutional question today, we are skeptical that the distinction on which the Second Circuit relies is very helpful. In many forms of government regulation, the regulated party makes proposals to which the regulating agency responds, and yet due process guarantees have always been thought applicable. The division of labor between the regulator and the regulated — between sua sponte intervention by the agency and requests for change by the regulated party— does not seem, to us, to diminish the government’s involvement or to alter the essential characterization of the process as government regulation.


author: LEVENTHAL, Circuit Judge: FAHY, Senior Circuit Judge,

text:
    TENANTS’ COUNCIL OF TIBER ISLAND-CARROLLSBURG SQUARE, Appellant, v. James LYNN, Individually and in his capacity as Secretary of Housing and Urban Development, et al.
    No. 71-1931.
    United States Court of Appeals, District of Columbia Circuit.
    Argued May 23, 1972.
    Decided Dec. 10, 1973.
    As Amended Dec. 20, 1973.
    Rehearing Denied Jan. 15, 1974.

      B. Michael Rauh, Washington, D. C., with whom Martin Shulman, Washington, D. C., was on the brief, for appellants.
    Paul L. Friedman, Asst. U. S. Atty., with whom Harold H. Titus, Jr., U. S. Atty., John A. Terry, Gil Zimmerman and J. Michael McGarry, III, Asst. U. S. Attys. were on the brief, for appellees.
    Before FAHY, Senior Circuit Judge, and LEVENTHAL and ROBB, Circuit Judges.
   LEVENTHAL, Circuit Judge:

This case is one of three related cases decided today which involve the procedural rights of tenants of housing, constructed under various provisions of the Federal housing legislation, prior to official approval of rent increases. In Thompson v. Washington, No. 71-2049, 162 U.S.App.D.C. -, 497 F.2d 626, we hold that tenants of low-rent public housing are entitled not only to receive notice of proposed rent increases but also to participate in the process of official consideration of rent increases by making written presentations. In Marshall v. Lynn, No. 71-1786, 162 U.S.App.D.C.-, 497 F.2d 643, we hold that such opportunities must also be afforded tenants of low- and moderate-income housing constructed, pursuant to § 221(d)(3) of the National Housing Act, with both FHA mortgage insurance and below-market-interest-rate loans. In the case at bar we hold that the opportunity to participate need not be accorded tenants of housing constructed under § 220 of the Housing Act as part of area redevelopment plans.

I. INTRODUCTION

Plaintiffs are individual tenants and a tenants’ association of Carrollsburg Square and Tiber Island apartment dwellers. These two apartment buildings, located in the Southwest Redevelopment Area of Washington, D. C., consist of upper-middle and upper-income units financed with loan guarantees by Federal Housing Administration (FHA is a division of the Department of Housing and Urban Development) under § 220 of the National Housing Act, 12 U.S.C. § 1715k (1970). In January and February of 1969, and in August 1970, the FHA approved rent increases in one or both of these two projects.

Plaintiffs claim that FHA’s refusal to give them'a hearing before acting upon the rent increases was contrary to their statutory and constitutional rights. On cross-motions for summary judgment, the District Court awarded summary judgment to defendants. We affirm.

II. STATEMENT OF THE FACTS

Southwest Washington is a 550-acre triangle of land located near the Capitol to the East, and the Potomac River (its southern and western boundary). Prior to its recent redevelopment, the area typified the blighted large cities; housing was often unsafe, unsanitary and insufficiently heated in the winter. Congress concluded that to improve permanently the appearance of such areas, entire communities would have to be replanned.

The development plan centered on enlisting the aid of private investors. It was contemplated that they would insist upon a high return and low equity requirements- before committing private capital to redevelopment of slum areas. Section 220 of the Housing Act of 1954 was to serve as the vehicle. Under the program envisioned, developers could acquire land in urban renewal areas, after it had been written down in cost by the local agencies, mortgage loan terms would be available for 90% of the value of the construction subject to a $50,000,000 limit, and the FHA would guarantee repayment of the loan. The guarantee, which insured in large part against the lender’s risks, made money available at low enough rates of interest to support'the required rate of return, given the predicted market rentals for the area.

Pursuant to the provisions of § 220 and the urban renewal plan for Southwest Washington, the FHA determined in 1962 and 1963 to insure mortages granted by private lenders for the Tiber Island and Carrollsburg Square developments. Together they contain 811 rental units, most of which are in seven high-rise apartment buildings.

Before FHA insurance is granted to a project, rental schedules must be approved by the Commissioner. The schedules consist of a maximum permissible rental ceiling and an initial rent schedule. Originally the FHA approved ceilings of $1,169,035 and $1,093,476, and initial rent schedules of $947,580 and $998,700, for Tiber Island and Carrollsburg Square respectively. These aggregate figures amounted to an average initial rental per unit of about $200 per month for the 811 units in the two combined projects, with a ceiling of approximately $230 per month. Using a conventional assumption that families spend about 20% of their income on rent, the income of the average family unit was envisioned as $13,800. In fact, incomes seem to be in a range from $12,000 to $45,000 per annum. In the case of family tenants, few have children living with them and usually both husband and wife work. Typically the tenants are professionals — lawyers, doctors, economists — and their work is connected with the Federal Government.

On February 3, 1969, FHA gave its required approval to increases bringing the rental schedules to $1,063,440 per year for Tiber Island and $1,085,580 per year for Carrollsburg Square. The Tenants’ Council, believing this increase to be unjustified, requested an audit of the financial reports submitted in support of the increase and a meeting with FHA representatives to discuss the merits of the increase. Both requests were refused.

These events resulted in litigation in the District of Columbia Court of General Sessions between the project owners and numerous tenants who had placed the rental increase increment into escrow pending a determination of the legality of the increases, as well as the institution of the present action. These suits were dismissed. Thereafter, in December, 1969, a Settlement Agreement was entered into between the Tenants’ Council and the owners. The tenants agreed not to seek restitution for alleged rental overcharges in excess of FHA máximums, in return for which they retained the funds in escrow and were protected against further increases until July 1970 or November 1970, depending on which of two options each tenant elected.

On August 26 and 27, 1970, FHA granted a second round of rental increases, which was allegedly accompanied by the setting of new methods for calculating maximum rental increases allowable under the required rent schedule. Tenants’ Council again tried to obtain an audit or gain access to information justifying the rent increase; its requests were refused by the FHA. On September 30, 1970, the Tenants’ Council and the project owners again entered into a settlement agreement temporarily resolving their renewed dispute concerning rental levels, and only part of the increase approved by FHA was put into effect immediately for those tenants protected by the agreement. On this record the District Court granted summary judgment to the FHA officials. We affirm.

III. THE CLAIM OF RIGHT TO A HEARING

In disposing of the case at hand we refer to the analysis in Thompson v. Washington, No. 71-2049, 162 U.S.App.D.C.-, 497 F.2d 626 decided this day That opinion suffices to establish jurisdiction and standing. In Thompson we held that tenants of lower income public housing programs established under the United States Housing Act, 42 U.S.C. § 1401 et seq., have a right to contest rent increase proposals through written statements. In Marshall v. Lynn, No. 71-1786, also decided this day, we found a similar right to participate held by tenants of housing financed with FHA aid mortgage insurance at below market interest rates, pursuant to Section 221(d)(3) of the National Housing Act, 12 U.S.C. 17151 (1970). We based this procedural protection on our finding that tenants were intended beneficiaries of the rent limitation provisions of those housing programs.

The same analysis leads us to a different result for tenants in housing constructed under § 220 of the National Housing Act. Unlike the other housing programs, § 220 was not passed to benefit any specific class of tenants. Its purpose was to

aid in the elimination of slums and blighted conditions and the prevention of the deterioration of residential property .

This was a remedial program to eliminate slum conditions, while the production of new housing for specific classes of needy persons was left to other programs. It was a different, though complementary, program that was established under § 221(d)(3), combining FHA insurance with below-market-interest-rate loans to developers, to benefit low-and-middle-ineome families displaced by § 220 urban renewal projects. And public housing was also to serve the needs of low-income families.

This absence of purpose to benefit tenants accounts for the absence of any language in § 220 corresponding to the § 207 provision regarding “reasonable rentals.” The omission was intentional. Although the Presidential Advisory Commission had proposed that such language be included in the statute, this suggestion was not followed in the bills put forward for House and Senate consideration. At the hearings the omission was called to the attention of the legislative committees, but the “reasonable rentals” language was not inserted.

Section 220 did enable HUD to control rents through a provision that the Secretary

may in his discretion require such mortgagor to be regulated or restricted as to rents or sales, charges, capital structure, rate of return and methods of operation, and for such purpose the Secretary may make such contracts with . . . any such mortgagor as the Secretary may deem necessary to render effective such restriction or regulations.

Pursuant to this authority, the Secretary promulgated a regulation providing that in reviewing a developer’s quests for rent increase HUD will consider the economic soundness of the project and a reasonable return on the investment consistent with reasonable rentals to tenants. 24 C.F.R. 207.19(e). While the HUD regulations, are not entirely clear as to the objectives sought during review of rental increases, it is our sense that taken as a whole they were not intended to establish a legally protected tenant interest in the setting of rents. The government’s interest as a mortgagee in the economic soundness of the project accounts for a concern that rentals be “reasonable.” This concern would not necessarily coincide with that of the mortgagor. The government may have attitudes toward risk, and preferences for distribution of profits over time, different from those of a project developer. Moreover, the government will be concerned with external effects of a developer’s management decisions on the character of property not owned by the developer but within the total area upgraded through the government’s efforts. A developer might, for example, regard high rents with the likelihood of a high turnover rate or a substantial vacancy rate as offering the best opportunity to maximize his profits. But turnover and vacancies may affect the appearance of the larger residential community and the quality of neighborhood life in general — effects to which the government involved in the entire upgraded area may be more sensitive than a single landlord.

The government’s interest in reviewing the mortgagor’s rent-setting decisions may on occasion coincide with the desires of particular tenants to moderate rents, and the Secretary’s use of the power to review rent increase proposals may also promote tenants’ welfare. Nevertheless, the interests of tenants and that of the government are analytically distinct. It is our view, on this record, that neither Congress nor the Secretary intended to establish a program of rent control for the purpose of protecting resident tenants. Whatever protection tenants in fact derive from the process of review they receive as incidental beneficiaries, and this interest is insufficient to support a claim of right to be heard either under the statute or under the due process clause.

Affirmed.

FAHY, Senior Circuit Judge,

dissenting:

The basic requirement that the rentals in the development projects involved shall be reasonable stems from section 207(b)(2) of the National Housing Act. The court accordingly holds in a companion case, Marshall v. Lynn, No. 71-1786, 162 U.S.App.D.C. -, 497 F.2d 643, that the tenants irt projects developed under section 221 of the Act, providing for low or moderate income housing, shall be afforded an opportunity through written statements to contest proposals for rental increases. Yet the court denies this opportunity to tenants in projects developed under section 220 of the Act, which have the purpose of rehabilitating blighted areas. The rentals in those projects are also required to be reasonable, and I find no legal basis for depriving their tenants of the same opportunity accorded tenants in projects developed under section 221. In both situations the reasonable standard of section 207(b)(2) is carried forward by regulations or agreed arrangements between the Administrator and the developer. The regulations or arrangements, as the case may be, are established under the authority granted to the Administrator, by section 220(d)(2) in a section 220 project, and by section 221(d) (3) in a section 221 project.

The distinction between the two situations drawn by the court, based on the difference in the purposes of the two types of projects, I think is not justified. In each instance the reasonable standard applies. What is reasonable in one case may be quite different from what is reasonable in the other, depending upon a number of factors, among them the ability to pay, but these different considerations must be judged, in their own settings, by the same prescribed standard of reasonableness. Therefore, as it seems to me, no legal distinction should be drawn which denies to one the opportunity granted to the other. Both are entitled to reasonable treatment with respect to their respective rentals.

While there is the need for assuring a fair return to the developer on his investment, it is not inconsistent with this need to permit tenants facing rental increases a limited amount of participation in the determination of their reasonableness. Even were the standard of reasonableness to be judged principally from the viewpoint of the need of the investor, those who pay rent should also be heard in some fashion by the public authorities. And those in more comfortable circumstances than others should not because of that be denied an opportunity to contest the reasonableness of their own rentals.

      . See Berman v. Parker, 348 U.S. 26, 30, 75 S.Ct. 98, 99 L.Ed. 27 (1954).

      . Philip David, Urban Land Development 383-98 (1970).

      . Id. at 384.

      . 42 U.S.C. § 1453 (1970). See Q. Johnstone, The Federal Urban Renewal Program, 25 U.Chi.L.Rev. 301, 320 (1958).

      . Henry J. Aaron, Shelters and Subsidies: Who Benefits From Federal Housing Policies 178 (Appendix A) (1972) ; B. T. Fitzpatrick, FHA and FNMA Assistance for Multi-Family Housing, 32 Law & Contemporary Problems 439, 443 (1967).

      . See The Report of the President’s Committee on Urban Housing, “A Decent Home” 55 (1968).

      . HUD Insured Project Servicing Handbook, RHM 4350.1 Supp. 1, Chapter 4, sec. 3.3 (as of September 1970).

      . The average monthly rent of all tenants of § 220 housing, per dwelling unit, was $238.-51 in 1968. Aaron, supra note 5 at 208 (Appendix B).

      . This is the figure used to derive income limits from the maximum rentals in Public Housing. See The Report of the President’s Committee on Urban Housing, Technical Studies, V. 1, G. Von Furstenberg and H. Moskof, Federally Assisted Rental Housing Programs: Which Income Groups Have They Served or Whom Can They Be Expected to Serve 151 (1967).

      . 12 U.S.C. § 1715k (1970).

      . Section 220 does provide for rehabilitation loans for properties in urban renewal areas, which are generally run down, and may, therefore, benefit lower income groups. New housing had no such expressed beneficiary class.

      . It seems clear that Congress envisioned its housing legislation as middle income class oriented. See Housing Act of 1954, Hearings Before the U. S. Senate Committee on Banking and Currency, 83d Cong., 2d Sess. 558-61 (1954).

      . H.R.Rep.No.1429, 83d Cong., 2d Sess. 14 (1954).

      . A Report of the President’s Advisory Committee on Government Housing Policies and Programs 7 (1953). The Committee stated:
      The Committee agrees that unreasonable rent increases ought not to follow rehabilitation. The Section 220 proposal contemplates the establishment of maximum rents for structures of 12 or more units. This control would follow the same procedures now used by the Federal Housing Administration in its large-scale rental housing program.

      . See H.R. 7839, 83d Cong., 2d Sess. (1954), as reprinted in Housing Act of 1954, Hearing Before the U.S. House Committee ou Banking and Currency, 83d Cong., 2d Sess. 5 (1954); S. 2938, 83d Cong., 2d Sess. (1954), as reprinted in Senate Hearings, supra note 12, at 652.

      . Statement of James G. Thimmes, Vice-President, CIO, and United Steelworkers of America, Senate Hearings, supra, note 12, at 497-98. He stated: “We do not find in the proposed legislation the recommendation made by the Advisory Committee that there be some form of rent supervision on rental projects built or rehabilitated with governmental aids, no matter what the size of the project.”

      . 12 U.S.C. § 1715k (d) (2) (A).

      . Appellants stress that the' Secretary’s regulations for § 220 housing simply incorporate the FHA regulations under § 207, as to the requirement of “reasonable rentals to tenants.” 24 C.F.R. § 207.19(e). This was done by reference, 24 C.F.R. § 220.511. The fact that HUD did not take occasion to refine in its regulations the differing objectives of rent control does not alter the substantial differences in character and interest of tenants in § 220 housing and those in other housing projects.

      . The Government’s brief acknowledges that the restrictions on rents are intended, in part, “as a brake on [investors] to safeguard against exorbitant returns” (p. 9) and “as a barrier to possible runaway revenues” (p. 11). We take this as an objective to be served concomitantly with, rather than independently of, the Government’s interest as a prudent mortgagee.
      We are not confronted with an investor contending that the Government is unreasonably curtailing his return and subsidizing his high-income tenants with a rental restriction that bears no possible relation to protection of the mortgage interest. Presumably, the investor in a project so situated as to permit soaring economic rentals could obtain a private mortgage that would replace the government mortgage and its accompanying restraints.

      . Plaintiffs have argued that “abuse” under prior housing statutes, examined by the Senate Committee during hearings on § 220, led Congress to provide authority to fix rents. The abuses found, however, were unrelated to rent charges. What concerned the Congress was the so-called practice of “mortgaging-out” by which developers reaped windfall profits on the receipt of the mortgages, by building for less than the mortgaging amounts. See Senate Hearings, supra note 12, at 1375-76. The language of discretionary rental restrictions was in the bill as introduced by the House, before the “mortgaging-out” problem emerged at the hearings, and the solution of cost-certification prior to mortgage approval was later provided by regulations. 24 C.F.R. § 220.-618 (1972).

      . “HUD is always prepared to consider timely objections or contentions and supporting documentation submitted to HUD, concerning any matter (including such rent-increase-matters) under HUD consideration.” This is quoted in the Government’s brief (p. 13) as part of a letter from the United States Attorney to appellants’ counsel, dated 16 March 1973. The brief states: “While this letter is not a part of the record, it is obviously a document with which appellants are familiar, and reference to it falls within the teaching of United States v. Kearney, 136 U.S.App.D.C. 328, 331 n.4, 420 F.2d 170, 173 n.4 (1969).” Apart from permissibility of judicial consideration under Kearney it is so obviously part of the duty of HUD officials, under any elementary view of their functions, as to warrant judicial notice under the presumption of regularity.