A housing authority may not raise a subsidized housing tenant’s rent because she received a personal injury settlement which was placed in an irrevocable trust, a Los Angeles Superior Court judge ruled yesterday.  The decision was hailed by affordable housing advocates as a long awaited interpretation of complex federal regulations which will have national impact. 

Judge James C. Chalfant ruled in favor of Sheila Finley, a low income 64-year-old Santa Monica tenant with disabilities who participates in the federally subsidized Housing Choice Voucher program, which used to be known as Section 8.  Under the program, tenants are supposed to pay only 30% of their income for rent.  When Ms. Finley received settlements of two personal injury lawsuits, they were placed in a Special Needs Trust, from which a trustee makes sporadic payments   The Santa Monica Housing Authority treated distributions from the trust to third parties to pay for some of Ms. Finley’s needs as income and raised her rent accordingly.

Ms. Finley, represented by Western Center and the Legal Aid Foundation of Los Angeles, filed a petition for writ of mandate, which Judge Chalfant granted.  He relied on a federal regulation which excludes from countable income “[l]ump-sum additions to family assets, such as . . . settlement for personal or property losses.”  The money did not lose its protected status just because it was placed in an irrevocable trust, the court ruled.