CHOY, Circuit Judge:
This is a consolidated appeal by tenants in two federally financed housing projects: Geneva Towers Appartments and Crescent Park. In two district court actions, they sought rescission of rent increases granted their landlords by the Federal Housing Administration (FHA) and an injunction compelling the federal defendants to grant the tenants a full and fair hearing prior to the implementation of the rent increases. They also sought a declaratory judgment that the actions of their landlords in applying for and the FHA in granting the rent increases violated the National Housing Act, the Administrative Procedure Act and the Due Process Clause of the Fifth Amendment. The district court in each case ruled that the Due Process Clause requires: (1) that tenants be given notice of their lessor's application for approval of a rent increase; (2) that tenants have a reasonable opportunity to make written objections; and (3) that tenants be furnished with a concise statement of the FHA's reasons for approving an increase.
Geneva Towers and Crescent Park were financed by the federal government pursuant to § 221(d)(3) of the Housing
Those eligible to receive subsidized mortgages include nonprofit corporations, such as the Kate Maremont Foundation, and limited dividend corporations, such as Geneva Apartments, Inc. See 24 C.F.R. § 221.510 (1973). Congress decided that the benefits of federal financing would be available only where mortgagors operated the projects subject to controls on admissions, rents and profits.
Geneva Apartments, Inc. and Kate Maremont Foundation each signed the standard regulatory agreement to receive federal financing of its project. The agreement implements the regulatory provisions outlined above and, with respect to rent increase applications, provides:
Both landlords applied for and were granted rent increases. In neither case were the tenants given notice of the application or an opportunity to participate in the determination of a rent increase. No FHA procedure, regulation or federal statute provides for tenant participation. The issues presented on this appeal are: (1) whether there is sufficient governmental participation and involvement to subject § 221(d)(3) projects to the due process clause; (2) whether the tenants' interest in not having their rents increased is a constitutionally protected "property interest"; and if so (3) what procedural safeguards does due process require to protect that interest.
I. GOVERNMENT INVOLVEMENT
The Due Process Clause of the Fifth Amendment applies to and restricts only the federal government and not private persons. Public Utilities Comm'n v. Pollak, 343 U.S. 451, 461, 72 S.Ct. 813, 96 L.Ed. 1068 (1952). The standards utilized to find federal action for purposes of the Fifth Amendment are identical to those employed to detect state action subject to the strictures of the Fourteenth Amendment. See United States v. Davis, 482 F.2d 893, 897 n. 3 (9th Cir. 1973). What is "private" action and what is "state" action is often difficult to determine. See Evans v. Newton, 382 U.S. 296, 299, 86 S.Ct. 486, 15 L.Ed.2d 373 (1966). "Only by sifting facts and weighing circumstances can the nonobvious involvement of the State in private conduct be attributed its true significance." Burton v. Wilmington Pkg. Auth., 365 U.S. 715, 722, 81 S.Ct. 856, 860, 6 L.Ed.2d 45 (1961). Burton held that where a state-owned and operated parking facility leased a portion of its building to a coffee shop which engaged in racial discrimination, the state so far insinuated itself into a position of interdependence as to be a joint participant in the unconstitutional activity. Therefore, the Fourteenth Amendment was applicable. The interdependence was principally financial. The rents paid by the shop partially defrayed the cost of the public facility and enhanced its success. Improvements by the shop did not result in increased taxes to it because the fee was held by a tax-exempt government agency. There were a variety of incidental mutual benefits.
Moose Lodge No. 107 v. Irvis, 407 U.S. 163, 92 S.Ct. 1965, 32 L.Ed.2d 627 (1972), reveals a situation distinguishable from the symbiotic relationship in Burton. The Court held that a state-issued liquor license with accompanying regulation did not amount to sufficient state involvement to require the application of the Fourteenth Amendment. The Lodge was a private club in its own building without public funding. The state regulation did not make the state a partner in the club's enterprise. Id. at 177, 92 S.Ct. 1965.
Analysis of the facts and circumstances in the instant cases discloses sufficient government involvement in the § 221(d)(3) program to subject the activities of the landlords to the Fifth Amendment. Private investors such as Geneva Apartments, Inc. and Kate Maremont Foundation, are engaged in a joint undertaking with the federal government to provide housing for low and
II. TENANTS' PROPERTY INTEREST
The Supreme Court, in Goldberg v. Kelly, 397 U.S. 254, 90 S.Ct. 1011, 25 L.Ed.2d 287 (1970),
The Court recently elaborated upon the first requirement of Goldberg v. Kelly in announcing broad guidelines for the assessment of "property interests" — Board of Regents v. Roth, 408 U.S. 564, 92 S.Ct. 2701, 33 L.Ed.2d 548 (1972), and Perry v. Sindermann, 408 U.S. 593, 92 S.Ct. 2694, 33 L.Ed.2d 570 (1972). Roth was a nontenured teacher who completed a one year term of employment and was not rehired. State law required four years of year-to-year employment prior to tenure and entitled a new teacher to nothing beyond one academic year. The Court made clear "that the property interests protected by procedural due process extend well beyond actual ownership of real estate, chattels, or money, ... Yet ... the Court ... has at the same time observed certain boundaries." Board of Regents v. Roth, supra 571-572, 92 S.Ct. 2171 at 2706. Certain attributes of "property interests" were delineated:
Id, at 577, 92 S.Ct. at 2709. Roth's rights were defined by his appointment, and the Court held that he had merely an abstract concern and not a "property interest" in being rehired. Therefore, he was not afforded procedural due process.
Sindermann had taught in the Texas state college system, a system without formal tenure, for ten years. The Court remanded the case after finding that rules and understandings concerning teacher reappointment could have created a de facto tenure program objectively justifying Sindermann's legitimate claim of entitlement to continued employment. Perry v. Sindermann, 408 U.S. at 601-603, 92 S.Ct. 2593.
Thus Roth requires more than an abstract need or unilateral expectation of a benefit. And Sindermann demonstrates that the source need not be explicit but can be implicit in the overall workings of a governmental program. Accord, Morrissey v. Brewer, 408 U.S. 471, 479, 481-482, 92 S.Ct. 2593, 2599 (1972) (interest of parolees in continued liberty qualifies for protection; "[i]mplicit in the system's concern with parole violations is the notion that the parolee is entitled to retain his liberty as long as he substantially abides by the conditions of his parole." The touchstone is whether those seeking the protection of the Fifth Amendment have a legitimate, objectively justifiable claim to the benefits of the governmental program.
We think the tenants of § 221(d)(3) housing do have such a claim, and it lies in their expectation, statutorily created, that they will continue to receive the benefits of low cost housing.
Section 221(d)(3) plainly contemplates that low and moderate income tenants are to be its principal beneficiaries; as the statute's statement of purpose declares, the program is "designed
H.Rep. No. 447, 87th Cong., 1st Sess. 11 (1961); S.Rep. No. 281, 87th Cong., 1st Sess. 7 (1961), U.S.Code Cong. & Admin.News, p. 1929. In short, there can be little doubt that Congress intended to endow those occupying the housing with some form of benefit. Compare Marshall v. Lynn, supra (§ 221(d)(3) intended to benefit individual tenants) with Tenants Council of Tiber Island-Carrollsburg Square v. Lynn, 497 F.2d 648 (D.C.Cir., 1973) (§ 220 of the National Housing Act, 12 U.S.C. § 1715k, primarily intended for urban renewal purposes and not to aid individual tenants of the projects).
Since entitlement under the Roth-Sindermann analysis depends on a right to the specific benefit the deprivation of which is threatened by the government, the next question is what type of benefit did Congress intend to bestow upon the tenants of § 221(d)(3) housing. Congress' purpose was, again quite clearly, to provide the tenants with the benefit of low cost housing. The source of the tenants' entitlement is explicit: it lies in the congressionally stated purpose of providing persons of meager economic means with low-priced housing, see 12 U.S.C. § 1715l(a), and the statutory requirement that the FHA regulate the rents charged by the private developer. See 12 U.S.C. § 1715l(d)(3). The legislative history buttresses this conclusion. As the 1961 House Report stated it:
H.Rep. No. 447, supra at 11; S.Rep. No. 281, supra at 8, 1961 U.S.Code Cong. & Admin.News, p. 1930. The tenants of § 221(d)(3) housing sign leases with the expectation — created by the congressional commands — that rents will be kept as low as economically feasible. Therefore, even more so than with the type of implicit expectations giving rise to property
III. PROCEDURAL DUE PROCESS
The second step of the Goldberg analysis requires that we determine what form of procedural due process need be accorded tenants of a § 221(d)(3) project. This calls for an analysis of three factors: (1) the importance of the tenants' interest; (2) the input the tenants can make in the adjudicatory process; and (3) the governmental interest at stake.
The interest of the tenants in procedural safeguards is substantial. They seek to retain decent housing at a price that is within their power to pay. A rise in the cost of housing could force tenants to forego other perhaps necessary purchases and could even force some tenants to seek other less expensive housing. Moreover, the tenants desire to insure that any rent increase is fairly justified by all the relevant data. And, not the least important, affording the tenants some participation in the rent adjustment process "generat[es] the feeling ... that justice has been done." Joint Anti-Fascist Refugee Committee v. McGrath, 341 U.S. 123, 172, 71 S.Ct. 624, 649, 95 L.Ed. 817 (1951) (Frankfurter, J., concurring); see also U.S. Dep't. of Housing and Urban Development, Management of HUD-Insured Multifamily Projects Under Section 221(d)(3) & Section 236, A HUD Guide, No. HM G 4351.1 at 209 (1971).
As to the input tenants can make, rent determination is based in significant part upon various technical factors. See id. at 209. Tenants can contribute little to such calculations. This argues for giving the tenants less than a full-dress hearing. But it does not mean that they should be denied any role whatsoever. The FHA must also consider whether increased expenses have occurred and whether unnecessary expenses have been minimized, for the FHA will only entertain rent increases when justified by expenses "over which owners have no effective control." Id.
The government's interest is also substantial. It is to preserve the flexibility of the § 221(d)(3) program, for if the program becomes encumbered with bureaucratic obstacles, private investment in the program may be significantly deterred.
Furthermore, the tenants must be given notice of the proposed rent increase and a right to reply before the FHA approves the landlord's request. Although Mitchell v. W.T. Grant Co., 416 U.S. 600, 94 S.Ct. 1895, 40 L.Ed.2d 406 (1974), has perhaps cast doubt on the continued vitality of the "presumption" in cases like Bell v. Burson, 402 U.S. 535, 542, 91 S.Ct. 1586 (1971) and Boddie v. Connecticut, 401 U.S. at 378-379, 91 S.Ct. 780, in favor of pre-action notice and opportunity for hearing,
HUFSTEDLER, Circuit Judge (dissenting):
These tenants present a sympathetic case. Rent increases beyond their means threaten them with the loss of the housing they now enjoy, and the prospects are bleak for their finding adequate replacements. Their plight is of no less concern because it is shared by tens of thousands of other tenants whose incomes have not kept pace with spiraling inflation and to whom no recourse to the procedural protections of the Fifth and Fourteenth Amendments is available because neither a state nor the federal government is significantly involved in their housing arrangements. The Supreme Court has made it clear, however, that the fact alone that one suffers grievous loss because of a governmental act does not give the injured person a right to prior notice and hearing. (Compare Board of Regents v. Roth (1972) 408 U.S. 564, 92 S.Ct. 2701 with Joint Anti-Fascist Refugee Committee v. McGrath (1951) 341 U.S. 123, 168, 71 S.Ct. 624 (Frankfurter, J., concurring).) Furthermore, these tenants are not the only low and moderate income housing consumers with interests in the outcome of this controversy; other such housing consumers will be adversely affected if these tenants prevail. Sympathy for these plaintiffs, therefore, cannot substitute for careful analysis of the nature and the legal consequences of their interests.
I agree with the First and Second Circuits and with the majority in the cases at bench that the tenants have no statutory right to notice and an evidentiary hearing anteceding rental increases (Hahn v. Gottlieb 1st Cir. 1970) 430 F.2d 1243; Langevin v. Chenango Court, Inc. (2d Cir. 1971) 447 F.2d 296.) If the tenants are to have a right, it must be founded on the Constitution. I also agree with my brothers that the federal government is sufficiently enmeshed in the housing projects before us that the Fifth Amendment can be invoked. (See Public Utilities Comm'n v. Pollak (1952) 343 U.S. 451, 72 S.Ct. 813; Adams v. Southern California First Nat'l Bank (9th Cir. 1974) 492 F.2d 324, 340 (Hufstedler, J., dissenting from denial of hearing en banc).) However, I disagree that the nature of the interests asserted by these tenants is such that the Fifth Amendment can be applied to require their landlords or the Government to give them notice and opportunity to be heard before rental increases can be approved and effected.
The tenants have a right to prior notice and hearing only if they have "a legitimate claim of entitlement" to the governmentally conferred benefit. (Board of Regents v. Roth, supra, 408 U.S. at 577, 92 S.Ct. 2701.) The search for a definition of entitlement is elusive because the concept has only recently emerged and in its present formative stage its features are not fully discernible. To say that interests are entitlements only if they are property interests (see id.) is not a useful definitional tool because the term "property" embraces multiple concepts that have differing consequences depending upon the kind of "property" involved and the setting in
Although comprehensive definition of the entitlement concept is not yet possible, the contexts in which prior notice and hearing have or have not been required provide guidance in determining the kinds of interests that are entitlements. An interests that gives rise to an entitlement is always a conditional interest,
It is not sufficient, however, that there be a legal requirement that mandates conferral of the benefit; the legal requirement must be one that the beneficiary may insist upon at a hearing. (See Perry v. Sindermann (1972) 408 U.S. 593, 601, 92 S.Ct. 2694.) Every remedial statute directly and indirectly confers benefits on numerous people. Although conferral of an actual benefit may be essential to the creation of an entitlement, not all recipients of actual benefits have entitlements. Benefits arising from a statute that can become entitlements should be restricted to those benefits conferred on those beneficiaries to whom Congress intended to extend some kind of enforceable interest or, to put it slightly differently, to whom Congress intended to create a governmental obligation.
Thus, a unilateral expectation of continued conferral of a benefit is not an entitlement. (See Board of Regents v. Roth, supra, 408 U.S. at 577, 92 S.Ct. 2701.) The majority errs in implying that an expectation that is reasonable in the light of the purpose of the law from which the benefit flows is an entitlement. Reasonableness of an expectation in absence of some kind of binding legal requirement (cf. Restatement of Contracts § 90) is not enough to generate an entitlement. (Cf. Perry v. Sindermann, supra, 408 U.S. at 601-602, 92 S.Ct. 2694.) The governmental obligation may arise from statute, contract, or common law. (See id.) It may be explicit, or it may be implicit, as for example, a legal obligation based on implied contract (see id.; cf. Morrissey v. Brewer (1972) 408 U.S. 471, 92 S.Ct. 2593), or on a statutory scheme that, by granting power to terminate benefits under
The nature of due process, however, indicates that entitlements involve a component in addition to the existence of an enforceable right. Due process is a practical concept; prior notice and hearing are not required when a hearing would be pointless. The purpose of a prior evidentiary hearing in the entitlement context is to resolve those questions of fact upon which a controversy turns; if there are no material issues of fact to be resolved, a prior evidentiary hearing to determine the existence of facts is meaningless, and the very purpose of requiring procedural due process guarantees evaporates. (See K. Davis, Administrative Law Treatise § 7.01 (1958 & Supp.1970); cf. Greene v. McElroy (1959) 360 U.S. 474, 496, 79 S.Ct. 1700, 3 L.Ed.2d 1377.) The substantive law from which the benefit springs of course determines what factual issues are material. (See, e. g., J. Wigmore, Evidence § 2, at 6-7 (3d ed. 1940).) For a fact to be material, there must be a legal requirement that the benefit be conferred if the fact is established. Unless such a legal requirement exists, there is nothing meaningful for an evidentiary hearing to resolve. Unless the law requires that consequences follow from the proof of a fact, that fact is immaterial to resolution of a conflict; whether the fact is proven or disproven at the hearing has no necessary impact on the outcome of the controversy. In sum, only those interests can become entitlements that are conditional upon the continued existence of one or more controvertible and controverted facts.
Thus, if the beneficiary shows that he is the recipient of a governmentally conferred benefit that is rooted in a legal obligation and that the legal obligation conditions his initial or continued receipt of the benefit on the existence of a controverted fact, he has an entitlement, and he must be accorded prior notice and an opportunity to be heard for the purpose of resolving the controverted factual issue. (E. g., Arnett v. Kennedy, supra, 416 U.S. 134, 94 S.Ct. 1633 (right to employment conditioned on absence of sufficient cause for dismissal); Perry v. Sindermann, supra, 408 U.S. 593, 92 S.Ct. 2694 (same); Morrissey v. Brewer, supra, 408 U.S. 471, 92 S.Ct. 2593 (right to freedom from incarceration conditioned on absence of violation of parole conditions); Goldberg v. Kelly, supra, 397 U.S. 254, 90 S.Ct. 1011 (right to welfare conditioned on claimant's meeting eligibility requirements).)
From these principles we can draw a working definition of an entitlement: An entitlement is a legally enforceable interest in receiving a governmentally conferred benefit, the initial receipt or the termination of which is conditioned upon the existence of a controvertible
These tenants have not met the criteria for claiming an entitlement. They are recipients of some governmentally conferred benefits, but the conferral of these benefits is not controlled by the requisite kind of legal requirement and, more importantly, even if there were an appropriate legal requirement, it would not give rise to the kind of enforceable obligation that could ripen into an entitlement.
The benefits which the tenants received are occupancy of housing that would not have been available had not section 221 of the Housing Act been enacted and their expectation that rental increases would not be permitted without FHA approval under standards that could be promulgated by the FHA.
The tenants did not receive a benefit that their rents could not be increased during their tenancy, because the statute itself contemplated that rents could thus be raised. Nor can the tenants claim that rents could not be increased beyond the ability of any individual tenant or groups of tenants to pay because, while Congress wanted to make housing available to members of a class consisting of low and moderate income groups, Congress did not gear rent levels to the budgets of individual members of the class or to the means of subclasses within the overall class. Indeed, it was contemplated that rent raises might deprive some of the tenants of the ability to remain in a project.
To have an entitlement to low rents, these tenants must assert a legal requirement that would render a rent increase improper under disputable and disputed facts. However, the statute merely requires that the Secretary in his discretion may regulate rents (12 U.S.C. § 1715l(d)(3)); it does not fix or require the Secretary to fix specific factual standards under which rents are to be regulated. The regulations adopted to implement the rent control requirement reflect the need for flexibility that is implicit in the statute. The only regulation that does more than paraphrase the statute, 24 C.F.R. § 221.531(c), does not apply to these projects (compare 24 C.F.R. § 221.510(a), (c), (e) with id. §§ 221.531, 221.532(a)) and does no more than indicate that certain factors are to be balanced in rent control decisions. The HUD handbook on which the tenants rely appears not to be legally binding (see Thorpe v. Housing Authority (1969) 393 U.S. 268, 275, 89 S.Ct. 518, 21 L.Ed.2d 474), and it does no more than enumerate factors that generally are to be considered. Finally, the regulatory agreement imposes no requirement that rent increase requests be denied in certain circumstances; rather, it requires that rent increases be granted at least in certain circumstances and, if denied, that the denial be communicated in a stated manner.
In dealing with statutes that confer direct aid upon identified classes of persons, such as welfare and veterans' benefit statutes (e. g., Goldberg v. Kelly, supra, 397 U.S. 254, 90 S.Ct. 1011), it is reasonable to infer, in the absence of expressed intent, that Congress intended those direct beneficiaries to have legally enforceable interests in such benefits as long as the beneficiaries' eligibility continued. Granting the beneficiary a legal interest assures that each beneficiary receives the benefit that Congress intended to give him. Attaching due process protections to the vindication of the right promotes, rather than impairs, the congressional scheme. Section 221(d)(3), however, gives no direct financial aid to the tenants. Financial inducements are given, not to the tenants, but to private industry to encourage the private sector to build new rental units that would be accessible to lower and middle income families. Congress could have imposed a strict low rent control system expressly for the benefit of the
The same notion can be expressed in a different way. While section 221(d)(3) was clearly intended to benefit specifically those persons who rent units in section 221(d)(3) housing projects, the statutory scheme is more directed to benefiting the class of low and middle income housing consumers than it is to benefiting any specific tenants. The purpose of section 221(d) (3) can be met only if a balance is struck between conflicting goals, the generation of housing, and the maintenance of low rents in the housing generated. Crucial to the balance is the acceptance of somewhat less than optimal achievement of each goal. Thus, although more housing would be generated if rents in section 221(d)(3) projects were not controlled, rents must be subjected to some kind of restraints. Conversely, the fact that tenants of a certain project have their rents raised, even if the rent increase is not necessary for the economic viability of the project, does not mean that achievement of the purpose of the statute is impaired. Section 221(d)(3) is a program intended to maximize the benefit generated for the whole class, even if to do so requires that many individuals in the
If these tenants are allowed to prevail, the ability of the program to benefit the entire class of low and moderate income housing consumers would be impaired. To hold that Congress necessarily conferred a legitimate claim of entitlement on these tenants is to hold that Congress is without power to benefit to the degree it desired the entire class of potential tenants. This court should not hold that Congress' power to control its benevolence is so limited. Congress may not confer a legal interest on the condition that if it is accepted, the beneficiaries' interests will be protected by procedures not satisfying due process (see Arnett v. Kennedy, supra, 416 U.S. 134, 166-167, 185, 211, 94 S.Ct. 1633) because of the costs consequent upon a grant of prior notice and hearing; however, it may decide not to confer the legal interest at all (cf. Richardson v. Belcher (1971) 404 U.S. 78, 81, 92 S.Ct. 254; Bell v. Burson (1971) 402 U.S. 535, 539, 91 S.Ct. 1586). Where, as here, the costs of procedural due process protections are substantial, we should not infer that Congress granted an entitlement.
Because the tenants have not been able to make the essential showing that they have any enforceable interest in continuing to receive the benefits that they derived from the statutory scheme, they cannot successfully assert that they have entitlements.
Although neither the statute nor the Constitution requires that the tenants be given notice and an opportunity to be heard, I believe that the kind of participation that my brothers describe should be accorded by administrative policy implemented by appropriate regulations.
Even if I agreed with my brothers that the tenants had an entitlement, I could not join the majority opinion because, in the guise of granting due process, it eviscerates the due process protections that it purports to grant. The great procedural protections of due process are reduced by the majority to little more than a right to send and receive mail. Procedural due process is flexible, but it is not flaccid. At the barest of minimums, due process requires not only adequate prior notice but also a meaningful evidentiary hearing with a right to personal appearance and a right to call and to examine witnesses as well as to present documentary evidence. While stating that the tenants' interest is substantial, the majority opinion gives the tenants fewer procedural protections than the Supreme Court has held to be constitutionally due prisoners, under the extremely difficult conditions attending prison disciplinary proceedings. (Wolff v. McDonnell (1974) 418 U.S. 539, 94 S.Ct. 2963, 41 L.Ed.2d 935.)
I would reverse.
The district court in Geneva Towers also specified that notice to the tenants must be adequately in advance of the effective date of the proposed increase and include the lessor's reasons; that relevant information was to be provided in the application to permit effective challenge; and that the tenants might request information supplied by the FHA to the lessor regarding rents, rent increases and comparable cost structures.
There have been a number of developments in Keller during the pendency of this appeal. The court granted the government's motion for a stay pending appeal with the proviso that the rents be paid but deposited by the landlord into a special account. Kate Maremont Foundation claimed it was unable to meet the proviso and requested that the FHA reprocess the rent increase application in accordance with the order of the district court. The FHA notified the tenants of the application, received written submissions and, after extensive investigation, granted an additional 4.74% rent increase over the original 10% granted in 1971. The FHA subsequently provided a concise statement of the reasons for approving the increase on April 20, 1973. The ramifications of these developments have been discussed in the context of mootness by the parties in supplemental briefs.
Mootness is not the problem here, for the controversy over what due process rights, if any, should be afforded the tenants of § 221(d)(3) projects, remains a live one to the foundation. Cf. Powell v. McCormack, 395 U.S. 486, 495-500, 89 S.Ct. 1944, 23 L.Ed.2d 491 (1969). The issue is whether Kate Maremont Foundation's compliance with the district court's order forecloses its appeal. We think it does. The general rule in the federal courts is that compliance with a judgment, of itself, does not cut off the right of appeal. Ferrell v. Trailmobile, Inc., 223 F.2d 697, 698 (5th Cir. 1955). There are exceptions to the rule: (1) when compliance is by way of compromise or shows an intention to abide by the judgment; (2) when compliance is coupled with acceptance of a benefit; or (3) when compliance renders appellate relief futile. Id. at 698. Not only did Kate Maremont Foundation indicate an intention to abide by the order of the district court, there is no relief this court can now grant the Foundation other than of a declaratory nature. We point out that our foreclosing of Kate Maremont's appeal in no way jeopardizes that of the tenants or the government in Nos. 72-2756, 72-2784, or 72-2788.
The procedure for FHA approval of a rent increase is found in U.S. Dep't. of Housing and Urban Development, Insured Project Servicing Handbook, A HUD Handbook, No. RHM 4350.1, supp. 1 (1970).
(Cf. Hahn v. Gottlieb (1st Cir. 1970) 430 F.2d 1243, 1250.) Even the streamlined procedure mandated by the district courts in Geneva Towers and Keller carries with it a substantial risk of disruptive effect. The finances of section 221(d)(3) projects are finely balanced; the desire to keep rents low leaves landlords no uncommitted income to absorb extraordinary costs. Nor are landlords allowed to obtain increases for most predicted rises in costs; rather, rent increases are generally allowed only for cost increases that have already occurred. Hence, if adjustments for increased costs are even slightly delayed, the viability of the projects would be impaired. Furthermore, the costs of successfully applying for governmental approval of a rent increase would also rise. More dangerous than the realization of these risks with regard to existing projects, however, is the deterrent effect that the mere possibility of such effects would have on potential new participants in the program.