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Featured CaseWhen Government Forces Landowners To Provide Low-Income Housing, It’s a TakingCCA Associates v. United States
Contact: Lauren A. Wiggins
Status: Amicus to the United States Supreme Court in preparation.
Beginning in the late 1960s, pursuant to the National Housing Act, the federal government entered into contracts with private developers and mortgage lenders to encourage the construction of low-income housing. Under the terms of the contracts, developers received federally insured 40-year mortgages in return for leasing their residential properties at below-market rents to low-income tenants over this period. As a further incentive to developers, the contracts gave them the option of prepaying the mortgages and regaining complete control of their properties after 20 years.
In 1988, as the first prepayment option dates approached, Congress imposed a two-year moratorium on prepayments. Then, in 1990, Congress enacted the Low-Income Housing Preservation and Resident Homeownership Act (LIHPRHA), which nullified existing prepayment rights and required developers to continue to use their properties exclusively for housing low-income tenants at below-market rents “for the remaining useful life of such housing,” except under the most limited circumstances and with the government’s approval.
CCA Associates and other participating developers sued the federal government on the grounds that LIHPRHA effected both an unconstitutional taking of their property and a breach of contract. The plaintiffs alleged that cancelling the prepayment options gave rise to both an unauthorized physical occupation of their properties by low-income tenants, and a regulatory taking under the three-part balancing standard of Penn Central Transportation Co. v. City of New York. While the litigation was proceeding, in 1996, Congress restored the prepayment rights.
Litigation ensued. In the lead case, Cienega Gardens v. United States (Cienega X), the Federal Circuit overruled its own prior holding and denied an award of just compensation to the plaintiffs. Among other dubious rationales, the Cienega X panel reasoned that the trial court should consider whether the 1996 repeal of LIHPRHA obviated the government’s liability for a taking, and that the economic impact of the eight-year prepayment ban should be weighed against the value of the affected properties over their entire useful life.
In the CCA Associates case, CCA Associates was awarded compensation for a temporary taking by the Court of Federal Claims. But the Federal Circuit vacated the judgment on the merits of the taking claim and remanding with instructions that the Court of Federal Claims reconsider its decision in light of Cienega X.
PLF will support CCA Associates’ certiorari petition to the United States Supreme Court, arguing that LIHPRHA effected both a physical and Penn Central “balancing test” taking of the petitioner’s property.
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