New York State Assn. for Affordable Hous. v. Council of the City of N.Y.

OPINION OF THE COURT

Andrias, J.

Local Law No. 44 (2012) of City of New York, effective January 1, 2013, amended title 26 of the Administrative Code of the City of New York by adding a new chapter 10, which relates to the disclosure on a public website of information regarding “affordable housing” projects that defendant New York City Department of Housing Preservation and Development (HPD) initiates, funds or otherwise participates in. Although one may reasonably argue, as does the dissent, that the disclosure requirements imposed by the law are costly, difficult or cumbersome, or that the law will not remedy corruption in the developer selection process or further the flexible and economical implementation of publicly funded housing, the wisdom, necessity or efficacy of the law is not the province of the courts (see Matter of New York County Lawyers’ Assn. v Bloomberg, 95 AD3d 92, 108 [1st Dept 2012], affd 19 NY3d 712 [2012]). Rather, the only issue before us is whether Local Law No. 44 is unconstitutional because it is preempted by state statutes or violates the Due Process and Equal Protection Clauses of the New York State Constitution. Applying well established precedent to the facts, we find that Local Law No. 44 does not unlawfully interfere with or frustrate HPD’s authority under the City Charter or impermissibly conflict with the state legislature’s delegation of authority and discretion over affordable housing programs to HPD, and that it is not otherwise unconstitutional.

The legislative history reveals that the City Council, in passing Local Law No. 44 over former Mayor Bloomberg’s veto, was concerned that there was “no single, comprehensive, and easily located resource that the public can use to obtain all of the relevant information about [affordable housing] projects,” and that “there [had] been a number of events indicating that HPD’s developer selection process may not be functioning as intended” (Committee on Housing and Buildings, Report of the Infrastructure Division, Sept. 24, 2012 at 3). These events included the receipt by the Committee of “documentation of allegations calling into question the construction quality of the housing built by some HPD-selected developers” (id.). They also included “investigations by the United States Department of Labor (DOL) as well as allegations in the press indicat [ing] possible underpayment and other mistreatment of .construction laborers by some HPD-selected developers and their contractors,” and the indictment of several HPD-selected developers and HPD staff “on charges related to manipulation of HPD’s developer selection process” (id.).

To address these concerns, section 26-902 (a) of the new chapter 10 requires HPD to disclose on its website “the list identifier and the criteria used by the department to determine whether an entity [developer, contractor or subcontractor] qualifies for [each prequalified] list.” Section 26-902 (b) requires HPD to disclose on its website “the list identifier, the name and address of each entity on [a disqualified] list and the name and title of each principal officer and principal owner of such entity and the criteria used by the department to determine whether an entity is disqualified.”

Section 26-903 (a) requires HPD to disclose on its website certain information concerning each affordable housing project carried out using discretionary financial assistance. This includes the project identifier; the applicable HPD program; the project’s size, location, and number of proposed dwellings (separated by bedroom number, income limits and rents); the amount and type of financial assistance given by the City; the anticipated completion dates; the name, address, and principal owners of the developers, contractors, and subcontractors; the manner in which the developers were selected, including if prequalified or disqualified lists were used; whether work on the project will be subject to state or federal prevailing wage law; descriptions of the final outcomes of complaints related to prevailing wage violations; and the total number of “construction conditions” (violations, quality complaints, and quality determinations by HPD) related to the project along with a description of any remedial actions taken, ordered, or requested by HPD. Section 26-903 (b) provides that for projects where the developer was selected by HPD after January 1, 2013, HPD must update project information at least once every six months until completion and must update the information on construction conditions at least once every six months until five years after completion.

Section 26-904 requires quarterly wage reports from contractors and subcontractors with annual gross revenues of at least $2.5 million. The reports must include each laborer’s job title along with the information specified under Labor Law § 195 (3). Section 26-905 provides that, “[i]n addition to any other penalty provided by law,” any contractor or subcontractor which (a) “fails to provide wage reporting information in accordance with section 26-904,” or (b) has “a history of construction conditions, as determined by [HPD],” “shall be ineligible to be included on a prequalified list of contractors and subcontractors.”

Plaintiffs and defendants City of New York and HPD contend that Local Law No. 44 is preempted by state statutes, including Labor Law §§ 650-665, Municipal Home Rule Law § 11 (1) (f), and various provisions of the General Municipal Law and the Private Housing Finance Law. Plaintiffs also contend that the law violates the Due Process and Equal Protection Clauses of the Constitution.

“A local law will be preempted either where there is a direct conflict with a state statute (conflict preemption) or where the legislature has indicated its intent to occupy the particular field (field preemption)” (Eric M. Berman, P.C. v City of New York, 25 NY3d 684, 690 [2015]; see DJL Rest. Corp. v City of New York, 96 NY2d 91, 95 [2001]).

Under the doctrine of field preemption, a municipality is prohibited from exercising a police power “when the Legislature has restricted such an exercise by preempting the area of regulation” (New York State Club Assn. v City of New York, 69 NY2d 211, 217 [1987], affd 487 US 1 [1988]). In that event, local governments are precluded from enacting laws on the same subject matter whether or not they actually conflict with state law (see Matter of Chwick v Mulvey, 81 AD3d 161, 172 [2d Dept 2010]), unless there is “clear and explicit authority to the contrary” {DJL Rest. Corp., 96 NY2d at 95 [internal quotation marks omitted]).

Field preemption may be based on an express statement in the statute that it preempts all local laws on the same subject matter or “implied from the nature of the subject matter being regulated and the purpose and scope of the State legislative scheme, including the need for State-wide uniformity in a given area” (Albany Area Bldrs. Assn. v Town of Guilderland, 74 NY2d 372, 377 [1989]). To find implied preemption there must be clear evidence that the legislature has “evinced its desire to do so and that desire may be inferred from a declaration of State policy by the Legislature or from the legislative enactment of a comprehensive and detailed regulatory scheme in a particular area” (New York State Club Assn., 69 NY2d at 217).

The Private Housing Finance Law and the General Municipal Law delegate powers to the City, through HPD, to make “loans” or “grants” to develop both private and public properties for affordable housing {see generally Private Housing Finance Law art 12 [enabling the City to develop non-city owned properties for affordable housing]; General Municipal Law arts 15, 16 [enabling the City to develop city owned properties for affordable housing]). Section 1802 of the New York City Charter sets forth the “Powers and duties” of the Commissioner of HPD and delegates HPD as the supervisory agency under the Private Housing Finance Law for New York City.

Stating that General Municipal Law articles 15 and 16 and Private Housing Finance Law articles 8, 8-A, 15 and 22 provide HPD with a variety of tools to foster affordable housing {see Private Housing Finance Law §§ 2 [15]; 572 [14]; 801 [1]; 1151 [9]; General Municipal Law § 692 [4]), the dissent finds that Local Law No. 44 impermissibly conflicts with the state legislature’s repeated and deliberate delegation of authority and discretion over affordable housing programs to HPD and undermines the state legislature’s critical objectives for flexible and economical implementation of publicly funded housing programs. However, the statements of legislative findings and purposes contained in the Private Housing Finance Law and General Municipal Law contain no statement of general preemption. Although certain individual sections contain express preemptive language, they do not bar the enactment of Local Law No. 44.

Nor can any intent to preempt the entire field of affordable housing be implied from the policy and purposes underpinning General Municipal Law articles 15 and 16 (§§ 501, 691) or Private Housing Finance Law articles 8, 8-A, 15 and 22 (§§ 400, 450, 800, 1150). The purpose of article 22 of the Private Housing Finance Law and articles 15 and 16 of the General Municipal Law is to improve the quantity, quality and affordability of housing in the City of New York (Private Housing Finance Law § 1150; General Municipal Law §§ 501, 691), allow the City to assist the private sector in the development of affordable housing by authorizing it to expend funds to do so (id.), and allow the City to make loans to build affordable housing (Private Housing Finance Law § 1152; General Municipal Law § 696-a) and dispose of property (General Municipal Law §§ 507, 695). In the bill jackets submitted by the parties concerning amendments to the Private Housing Finance Law and the General Municipal Law, there is no indication, either express or implied, of any intent on the part of the legislature to preempt the entire field of affordable housing. Rather, the legislative materials merely reflect the legislature’s efforts to create a framework for the financing of affordable housing projects and to defer operational functions to local municipalities. While in a few instances funding is provided specifically through HPD, the legislature has not “evidenced a desire that its regulations should pre-empt the possibility of varying local regulations” (New York State Club Assn., 69 NY2d at 221 [internal quotation marks omitted]; see also Jancyn Mfg. Corp. v County of Suffolk, 71 NY2d 91, 96-97 [1987]).

Under the doctrine of conflict preemption, a local law is preempted by a state law when a “right or benefit is expressly given . . . by . . . State law which has then been curtailed or taken away by the local law” (Jancyn Mfg. Corp., 71 NY2d at 97). “[C]onflict preemption occurs when a local law prohibits what a state law explicitly allows, or when a state law prohibits what a local law explicitly allows” (see Matter of Chwick, 81 AD3d at 168). The crux of conflict preemption is whether there is “a head-on collision between the . . . ordinance as it is applied” and a state statute (Matter of Lansdown Entertainment Corp. v New York City Dept. of Consumer Affairs, 74 NY2d 761, 764 [1989]).

Local Law No. 44 does not directly conflict with the state statutory scheme for affordable housing or wage reporting and is therefore not barred by conflict preemption. The law does not improperly contravene the state legislature’s specific statutory delegations of responsibility to HPD or restrict the manner in which the agency exercises its delegated authority. Nor does the law prohibit what would be permissible for HPD under the General Municipal Law or the Private Housing Finance Law or “impose prerequisite additional restrictions on [HPD’s] rights [to provide loans or grants] under [those] law[s]” (Consolidated Edison Co. of N.Y. v Town of Red Hook, 60 NY2d 99, 108 [1983] [internal quotation marks omitted]).

As the Council points out, compliance with the local law is not a condition for access to housing finance funding, since developers who fail to make the required wage disclosures do not lose city funding and are not barred from obtaining city contracts. Thus, the law does not interfere, in any way, with HPD’s financing, loan, and land disposition processes for affordable housing development or limit HPD’s ability to partner with any developer on an affordable housing project.

None of the state laws cited by the dissent prohibit HPD from collecting information about wages paid on public projects, or require HPD to prequalify contractors who do not disclose the wages they pay. Because no state law grants contractors the right to withhold information about wages from the City, or guarantees every contractor a place on HPD’s prequalified list for affordable housing developments, Local Law No. 44 does not curtail a right or benefit provided by state law.

The imposition of penalties on contractors when wage records are not provided, in the form of ineligibility for inclusion on prequalified lists (Administrative Code § 26-905 [a]), does not prohibit what state law permits, nor allow what state law forbids. Noncompliance with the state statute brings a different penalty, criminal prosecution. Although Local Law No. 44 requires that employers document and report wages paid to their employees, it does not require employers to pay a particular wage or wage rate and thus imposes no duty that thwarts the State’s exclusive authority to regulate the minimum wage. Nothing in the requirements, or any other section of law, impedes upon, or sets standards for, how HPD can select its developer partners who receive loans or financial assistance. Moreover, Local Law No. 44 does not require HPD to maintain a prequalified list from which noncompliant contractors and subcontractors could be excluded, and in any event, HPD concedes that it does not maintain such a list at the present time.

Furthermore, as the dissent acknowledges, HPD has not been given exclusive authority over affordable housing projects. Certain powers are delegated to the Mayor, such as the authority to approve the terms and conditions of any urban renewal plan (see General Municipal Law art 15), and sales or leases pursuant to General Municipal Law articles 15 and 16 (see General Municipal Law §§ 507 [2] [d]; 695 [2] [a]; [4]). While the City Charter provides that, where the City is providing grants or loans related to affordable housing, the programs must be run by HPD, HPD is subject to Council oversight. The City Council is also given certain specified responsibilities, such as designating areas for urban renewal (see General Municipal Law § 504) or for the Urban Development Action Area Program (see General Municipal Law §§ 693, 697), and approving urban renewal projects as a matter of land use (General Municipal Law § 696; Private Housing Finance Law § 577).

Ricketts v City of New York (281 AD2d 245 [1st Dept 2001], appeal dismissed 96 NY2d 897 [2001]) and Giuliani v Council of City of N.Y. (181 Misc 2d 830 [Sup Ct, NY County 1999]), cited by the dissent, are inapposite. In those cases, the local law curtailing the authority of the Mayor, and held to be viola-tive of Municipal Home Rule Law § 23 (2), was inconsistent with the state enabling law. However, nothing in the Private Housing Finance Law or the General Municipal Law vests sole authority in the Mayor to determine standards for the monitoring of construction or development of affordable housing. While the Private Housing Finance Law and the General Municipal Law empower the Mayor to regulate the loan process for the affordable-housing marketplace, that authority is limited to the management and creation of loans or grants.

Plaintiffs failed to establish a violation of their due process rights under the “stigma plus” rule (see Matter of Lee TT. v Dowling, 87 NY2d 699, 708 [1996]). They did not show that they have been stigmatized, since HPD has not published any consumer complaints and has not yet issued regulations under the local law setting forth a protocol for vetting of consumer complaints before their publication on its website. Nor did plaintiffs show that they have been deprived of any future employment opportunities, and it is speculation at this point to say that they might ever be thus deprived. The local law does not provide that, in the event consumer complaints about contractors are received, the contractors will not be considered for affordable housing projects.

As to their equal protection claim, plaintiffs contend that the local law discriminates against corporations in favor of individuals and that such discrimination is irrational. However, plaintiffs have failed “to negative every conceivable basis which might support [the law]” (Heller v Doe, 509 US 312, 320 [1993] [internal quotation marks omitted]). The Council asserts that the rational basis for making a distinction between corporations and individuals was to protect small businesses from the costs of reporting. The Council is correct that the local law is not invalid under rational-basis review simply because it may be underinclusive or fail to address all aspects of the problem (see id. at 321).

Accordingly, the order of the Supreme Court, New York County (Frank P. Ñervo, J.), entered on or about September 29, 2014, which granted defendant Council of the City of New York’s motion to dismiss the complaint, and denied plaintiffs’ cross motion for summary judgment declaring Local Law No. 44 unconstitutional, illegal, invalid, null and void, should be modified, on the law, to declare Local Law No. 44 constitutional, and, as so modified, affirmed, without costs.