ALBANY, N.Y., June 26 (Reuters) - New York City is not
contractually obligated to continue a rent subsidy program for
thousands of formerly homeless people, the state's top court
ruled Tuesday in a sharply divided decision.
The city last year terminated the Advantage program, which
provided rent subsidies of up to $1,000 per month for up to two
years, after losing state and federal funding. The Legal Aid Society sued on behalf of tenants, arguing that the city was
obligated to pay their rent because they had been precluded from
other housing options, including homeless shelters, by joining
The plaintiffs also maintained that a set of documents drawn
up by the city that included terms such as "guarantee" and "will
pay" were evidence of the city's intent to enter into a contract
with tenants and landlords.
The Court of Appeals on Tuesday disagreed with the tenants
in a 4-3 ruling.
"The courts are not empowered to second-guess the city by
conjuring up a 'contract' from bits and pieces of documents
meant to explain and condition participation in what was a
voluntary government program," Judge Susan Read wrote for the
Steven Banks, the attorney-in-chief of the Legal Aid
Society, said in an interview that homeless shelters across the
city will be overwhelmed as the remaining Advantage tenants
leave their apartments. The shelters, Banks said, cost taxpayers
more than the program.
Banks also said the city's termination of Advantage could
discourage landlords from participating in future programs for
homeless people, "because even the word 'guarantee' is not
sufficient to ensure rent payments."
Under Advantage, which was launched in 2007, tenants could
receive subsidies for up to two years if they met certain
criteria, including working for at least 20 hours per week or
receiving a fixed income benefit, such as Social Security
The federal government, state and city each paid one-third
of the cost of the program.
Last year, Governor Andrew Cuomo and state lawmakers passed a
budget that cut the state's share of the funding. The federal
government followed suit, prompting the city to end the program
and Legal Aid to file its lawsuit.
In September Manhattan Supreme Court Justice Judith Gische
dismissed the suit, saying the program was a social benefit that
the city was free to terminate based on a lack of funding.
In March the Appellate Division, First Department, affirmed,
finding further that the tenants had misconstrued the city's
guarantees to pay subsidies as legally binding.
In oral arguments before the Court of Appeals earlier this
month, Legal Aid argued that the city had entered into legal
In doing so, Steven Banks, Legal Aid's attorney-in-chief,
cited letters that the city sent to tenants that stated: "The
Advantage program guarantees that the subsidy portion of the
rent will be paid directly to the landlord for one year."
The city countered that it had never intended to enter into a
contract with landlords or tenants, since it knew the program
was susceptible to budget woes.
The Court of Appeals on Tuesday agreed with the city, finding
that obligating it to pay the subsidies "can only discourage
governmental bodies from enacting voluntary programs to help the
"They will fear being compelled by judges to continue such
programs even if sources of funding are reduced or withdrawn,"
Judges Victoria Graffeo, Eugene Pigott and Robert Smith
In dissent, Judge Carmen Ciparick said that if the city did
not want to enter into a contract, it should not have used terms
such as "guarantee" and "will pay" in Advantage program
The documents "unambiguously memorialize a bargained-for
exchange between the city and the Advantage landlords to which
the parties mutually assented," Ciparick wrote. She was joined
by Chief Judge Jonathan Lippman and Judge Theodore Jones.
The program's termination affected roughly 15,000 people,
Legal Aid noted.
According to the New York City Department of Homeless
Services, when Advantage payments ended in February, 6,482
households, or 18,764 individuals, were receiving subsidies. If
the program had continued, the number of households that would
have remained on Advantage as of July 1 would have been 3,385 or
8,417 individuals, a department official said.
The city's Corporation Counsel Michael Cardozo said in a
statement, "As we maintained, the Advantage program was not a
legally binding contract between the City and the tenants or
landlords, but rather a social program. We believe the Court
reached the right decision under the law."
New York City Department of Homeless Services Commissioner
Seth Diamond said in a statement, "In the absence of state and
federal partners, who carried the majority of funding, it was
unsustainable for the City to maintain the Advantage program.
Homeless Services is actively offering prevention services to
households and landlords experiencing difficulties, and the
overwhelming number of households who received the Advantage
subsidy remain housed in the community."
The case is Jasmine Zheng, et al v. the City of New York, et
al, New York State Court of Appeals, No. 147.
For the plaintiffs: Steven Banks of The Legal Aid Society.
For New York City et al: Eric Rundbaken of the New York City
(Reporting by Dan Wiessner)
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