November 30, 2004
MEMORANDUM OF DECISION
This is an appeal by the plaintiff (landlord) from a final decision of the Fair Rent Commission of the City of New Haven (commission) dated October 24, 2003. The landlord owns the housing development know as The Residences at Ninth Square (project). The project includes 335 residential units. Fifty-eight percent of the units are income and rent restricted and the remaining forty-eight percent of the units are market rate rentals. The project also includes retail space and a parking facility. The rent restricted units are indistinguishable from the market rate units, offering the same quality, services and amenities to the residents. The rent restricted units are regulated primarily by virtue of the financing of the project by the Connecticut Housing Finance Authority (CHFA) and through federal low income housing tax credits. CHFA is the monitoring agency that is responsible for insuring that the affordable units are in compliance with the Low Income Housing Tax Credit Program and the CHFA loans. The complainants have been residents of the project since August 21, 1996 and currently reside in one of the units designated as an affordable unit. By letter dated May 31, 2003, the landlord informed the complainants that the rent on their affordable unit would be increased from $704.00 per month to $768.00 per month effective September 1, 2003. This was an increase of approximately 9.1%. The complainants filed a complaint with the commission on or about June 23, 2003. The complainants alleged that the rental increase was excessive and sought to cap any increase at 3% effective September 1, 2003.
The commission commenced a hearing on July 15, 2003. Said hearing was concluded on October 21, 2003. At the hearing, the landlord demonstrated that the market rental for the Complainant's unit was between $975.00 and $1330.00 per month. The landlord further demonstrated that the requested rental rate was approved by CHFA as being within the acceptable range for a low-to-moderate income household under the Low Income Housing Tax Credit Program. The complainants provided documentation of household income of $2375.00 per month, unchanged "since last annual certification." The income was solely derived from complainant Pavlina Baevova, a Yale University employee. The complainant Nikolay I. Baev, MD, PhD. claimed to be unemployed. The landlord demonstrated continuing negative cash flow and overall costs that rose 5.5% in 2002.
The commission issued its decision by letter dated October 24, 2003. In its decision, the commission concluded that it would be unfair and unconscionable for the complainants to be charged an increase larger that the landlord's overall cost increase. The commission found the increase to be harsh in that it would require the complainants to devote in excess of 30% of their income to rent. The commission stated that neither party submitted evidence from which a determination could be made as to an appropriate allocation of the landlord's deficit or of cost increases among the types of uses in the project. Despite this finding, the commission found that a major part, though not all, of the landlord's cash flow problems resulted from vacancy or under-performance of commercial and parking uses, which affordable housing tenants should not have to bear. The commission ordered a reduction of the proposed higher rent to $740.00 a month (an increase of 5.5%) effective November 1, 2003. The landlord filed this appeal.
As set forth in defendant's reply brief, the commission derives its authority from Conn. Gen. Statute Sec. 7-148b et. sec. The portion of that statute which is relevant deals with the control and elimination of excessive rental charges. The defendant also sets forth what the court believes to be the correct standard the court must use in reviewing the decision of the commission. The court's ultimate duty is only to decide whether, in light of the evidence, the agency has acted unreasonably, arbitrarily, illegally, or in abuse of its discretion.Robinson v. Unemployment Security Board of Review, 181 Conn. 1,5 (1980). It is not the function of the court to retry the case or to substitute its judgment for that of the agency. Madow v. Muzio, 176 Conn. 374, 376 (1978). The ultimate issue is whether there is substantial evidence in the record to support the decision of the commission. Jaser v. Zoning Board of Appeals, 43 Conn. App. 545, 548 (1996).
The statute sets forth thirteen criteria which shall be considered by the commission in determining whether or not a rental charge or a proposed rental increase, with due regard of the circumstances, is harsh or unconscionable. The New Haven city ordinance does not include all of these criteria. However the decision of the commission indicates that it applied the standards set forth in Conn. Gen. Statute Sec. 7-148c and the plaintiff did not challenge this process.
The commission made certain findings that are not supported by substantial evidence. Despite a specific finding by the commission that there was no evidence to make a determination as to the allocation of the landlord's deficit, the commission made a finding that a major part of the landlord's cash flow problems were from the underperformance of the retail space and the parking area. In addition, the commission made a finding that it would be harsh to require the complainants to devote in excess of 30% of their income to rent without any evidence whatsoever to support this finding. The evidence clearly shows that the rental increase requested was in accordance with CHFA guidelines and below market rate. Accordingly, there is no basis for a finding that the rental increase was unconscionable.
The decision of the commission was arbitrary and an abuse of its discretion. The appeal is sustained, and the decision of the commission is reversed and the case is remanded to the commission to take action in accordance with this decision denying complainant's complaint.
The court also notes that on October 21, 2003, the commission went into what was most likely an illegal executive session to consult with counsel in violation of the Freedom of Information Act. The session was not for a purpose enumerated in Conn. Gen. Statute Sec. 1-200(6).