No. 95 Rosario v Diagonal Realty, LLC

Sonia Rosario has lived in a rent-stabilized apartment on West 174th Street for 30 years, and for the past 19 years she has received a rent subsidy through the federal section 8 program for low-income tenants, which is administered by the New York City Housing Authority (NYCHA). Rosario's subsidy covers $410 of her $776 monthly rent. In February 2004, her landlord Diagonal Realty notified her and NYCHA that it was opting out of the section 8 program and would no longer accept the rent subsidy payments. A month later, Diagonal commenced a proceeding to evict her for nonpayment of rent.

Rosario and six other tenants who were receiving section 8 subsidies commenced this action against Diagonal and four other landlords that were seeking to opt out of the section 8 program. The tenants sought a declaration that the landlords were obligated to continue accepting their rent subsidies, contending the section 8 subsidies constituted a material term and condition of their leases and that under New York's rent stabilization laws they were entitled to renewal leases on the same terms. They also argued the four landlords (including Diagonal) that were receiving tax abatements under New York City's J-51 tax law were expressly prohibited by that statute
from discriminating against section 8 recipients and, therefore, must accept the subsidies. The landlords relied on a 1996 amendment to the federal section 8 statute that eliminated the "endless lease rule," which had required landlords participating in the program to renew leases for section 8 tenants and prohibited them from terminating a section 8 tenancy except for good cause. Contending this amendment permits them to opt out of the section 8 program, they argued that any contrary provisions in the state's Rent Stabilization Code and the city's J-51 law are
preempted by the federal statute.

Supreme Court, finding there was no express or implied preemption, granted summary judgment for the plaintiffs and declared the landlords could not opt out of the program and must continue accepting the subsidies. The court said the plain language of the J-51 law prohibits owners receiving the benefits of a J-51 tax abatement from discriminating against tenants who, among other things, qualify for section 8 subsidies. "As such," it said, "J-51 falls squarely within the section 8 regulation [24 CFR 982.53(d)] stating that nothing in the section 8 scheme is intended to preempt 'operation of state and local laws that prohibit discrimination against a section 8 voucherholder because of status as a section 8 voucher-holder.'" Regarding the state's rent stabilization laws, the court said,
"It cannot be said that the section 8 statute is so comprehensive as to create an inference that Congress intended to leave no room for state or local regulation in the area, and this court is not persuaded that the provisions of section 8 cannot be harmonized with those of the Rent Stabilization Law."

The Appellate Division, First Department affirmed.

Diagonal argues that a landlord's participation in section 8 is voluntary under federal law and that Congress clearly intended to permit landlords to opt out of the program. It also contends nothing in state or city law prohibits such opting out, saying the State Division of Housing and Community Renewal "has determined that a landlord's opting out of the Section 8 program is not a refusal to renew a lease on the same terms and conditions as the expiring lease and that Section 8 benefits are not part of the terms and conditions of a rent stabilized tenancy."

Diagonal argues, "A landlord's refusal to participate in the Section 8 program going forward does not constitute discrimination in violation of the 'J-51' statute against a tenant who has Section 8 benefits where the landlord has not evicted the tenant or sought to evict the tenant for being a recipient of Section 8 benefits."