PER CURIAM.

This case presents for the first time the question of whether new Department of Housing and Urban Development (HUD) regulations governing housing subsidized under the National Housing Act, 48 Stat. 1246, June 27, 1934 (now codified at 12 U.S.C. §§ 1701- 1750g (1976)) validly preempt local rent control regulation. Unlike those considered in a long line of past cases, the newly promulgated HUD regulations which we must consider, 24 CFR §§ 403.1, 403.8, et seq. (1979), specifically preempt all local rent control laws as applied to federally subsidized insured projects. We hold that the HUD regulations were validly promulgated and thus operate through the Supremacy Clause, U.S. Const. Art. VI, cl. 2, to preempt local rent control regulations in these instances. We also conclude that HUD procedures and regulations satisfied the tenants' due process rights.

BACKGROUND

The rental housing which both parties seek to regulate in this case is federally insured subsidized units developed under the National Housing Act (NHA), 12 U.S.C. §§ 1701 et seq. (1976). The general purpose of federal housing regulation has been to meet the national goal of a "decent home and a suitable living environment for every American family." 12 U.S.C. § 1701t (1976); 1968 U.S. Code Cong. Admin. News, pp. 2873, 2877. In order to achieve its goal, Congress has elected to utilize the financial resources and expertise of the private sector rather than to develop projects itself. See S.Rep. No. 281, 87th Cong., 1st Sess. 3 (1961). The NHA programs administered by HUD are intended to stimulate the development of low and moderate income housing by providing subsidies or insured mortgages designed to lower the cost of building a project and thus lower the rent which owners must charge to make a fair return on their investments. The rental housing which the City of Boston purports to regulate involves four HUD programs combining insured mortgages and subsidized rents.

The first of these four programs, section 202 of the Housing Act of 1959, 12 U.S.C. § 1701q (1976), allows HUD to make 3% loans for 50 year terms to eligible developers to provide housing facilities for elderly or handicapped families with inadequate income to pay private market housing rentals. To start the program Congress set up a revolving fund, id. at § 1701q(a)(4), which depends upon repayment of mortgages or Congressional appropriations for its continued success. Section 202 makes money available for mortgages which is otherwise unavailable. Id. at section 1701q(a)(2)(A). In order to insure that section 202 objectives are met, HUD requires an applicant to enter into a regulatory agreement providing that the Secretary of HUD shall establish rental levels and tenant eligibility.

The second of these four programs, NHA sections 221(d)(3), 12 U.S.C. § 1715 l (d)(3) (Supp. II 1978), and (5), 12 U.S.C. § 1715 l (d)(5) (1976), establishes a subsidized mortgage program. Section 221(d)(3) assists "private industry in providing housing for low and moderate income families and displaced families." Id. at section 1715 l(a). As Chief Judge Coffin explained in Hahn v. Gottlieb, 430 F.2d 1243, 1245 (1st Cir. 1970):

"This assistance to the private sector takes two forms. First, the FHA provides insurance on long-term mortgage loans covering up to 90 per cent of the project's cost, thus encouraging private investment in projects which would otherwise be too risky. Second, eligible borrowers can obtain below-market interest rates on FHA-insured loans, thus reducing the rentals necessary to service the landlord's debt obligations. 12 U.S.C. § 1715 l(d)(5)."

Id. at 1245.

Again, Congress provided the Secretary with broad discretion to manage and control the rental housing. Id. at 1246. HUD is authorized to control rents and operation through a regulatory agreement, although the Secretary may defer to other federal or local law. 12 U.S.C. § 1715 l(d)(3) (Supp. 1978). While a project owner may apply for rent increases, the Secretary controls the determination and strict limitations are placed on the permissible return on investment. Once more, defaults on mortgages directly cause the mortgagee to draw upon the insurance fund. 12 U.S.C. § 1715 l(g).

A third program, section 236 of the NHA, 12 U.S.C. § 1715z-1 (1976), is designed to encourage private enterprise to develop rental and cooperative housing for lower income families and provide periodic subsidy payments to the mortgagee which effectively reduced the interest payments on the mortgage to 1% on qualified rental housing. 12 U.S.C. § 1715z-1(c) (1976). The Secretary is expressly directed by Congress to establish rental charges. The Secretary may also enter into regulatory agreements and establish necessary rules and procedures. Id. at section 1715z-1(h) (1976).

The final program here involved is a Rent Supplement Program (RSP), 12 U.S.C. § 1701s (1976), which empowers the Secretary to make annual payments on behalf of eligible low income families or individuals unable to afford section 221(d)(3) rents. The maximum payment which the Secretary can make for an eligible tenant is that amount by which the rent approved by the Secretary exceeds 25 percent of the tenant's income. Id. at section 1701s(d).

In examining these four programs it becomes apparent that their success "requires a flexible exercise of administrative discretion." Hahn v. Gottlieb, 430 F.2d 1243, 1246 (1st Cir. 1970). Moreover, Congress has granted the Secretary broad general rule making authority for the NHA and again in each specific section. For project sponsors, the rent received from tenants provides the major source of income from which to maintain the housing and meet the debt service requirements. Although the Secretary originally permitted local governments to operate their rent control programs freely, the Secretary nonetheless engaged extensively in the regulation of rent in HUD insured and subsidized projects through leases and regulatory agreements. In order to increase the rents for units in the project, a landlord must submit a request and justification to HUD. Rental increases are only permissible for justifiable increased costs and, in general, HUD allows a landlord to receive a six percent return on equity. Kargman v. Sullivan, 552 F.2d 2, 4 (1st Cir. 1977).

While Congress was coping with rental housing problems through the NHA, local government concerned with spiraling rents began imposing direct limits on the amount of rent which a landlord could charge. One of the earliest programs of local rent control was that instituted by the City of Boston in 1970, ch. 797, 1969 Mass. Acts, as amended, ch. 863, 1970 Mass.Acts. Originally initiated under statewide local option rent control legislation, the city itself adopted a comprehensive regulatory scheme upon the expiration of the statewide legislation in 1975. Ch. 15, City of Boston Ordinances (1975). Since 1972, privately owned, federally insured and subsidized sections 202, 221(d)(3) and (5) and 236 housing had been covered by Boston's rent control. See City of Boston v. Hills, 420 F. Supp. 1291 (D.Mass. 1976), reconsidered and reversed by district court, 461 F. Supp. 1201 (D.Mass. 1978). Under the local legislation, the City of Boston's rent control legislation sets maximum rents for covered projects. The basic rent established under the 1975 ordinance is that which was previously established in 1970 or 1972. Generally, those base rents were the 1968 rent of the unit or first rent in effect thereafter. The Board is authorized to adjust the established maximum rent upon the petition of either the tenant or landlord. Adjustments are allowable to remove hardships or correct inequities. The governing principle is to maintain maximum rents at levels which will yield landlords a fair net return on operating income from the rental unit. In determining whether a landlord is receiving a fair yield on net operating income, the Board is directed to consider the effect of property taxes, operating and maintenance expenses, capital improvements, depreciation, and increases or decreases in living space or housing services. Finally, the Board may deny an increase to the landlord if the housing does not satisfy local codes.

While Boston's procedure for setting maximum rents has similarities to HUD's rent setting formula, we have previously noted that differences exist. Kargman v. Sullivan, 552 F.2d 2, 5 (1st Cir. 1977). Nevertheless, this circuit decided that no such actual, impermissible conflict existed between local regulation and the NHA provisions as effected preemption. Id. at 6, 13-14. Kargman, however, specifically left open the question we face here: whether a HUD regulation could preempt local rent control. Id. at 6.

As noted, HUD originally left the field open for local rent control of its subsidized insured projects. In 1975, however, HUD promulgated an interim rule, 40 Fed.Reg. 8189 (1975), to deal with the problems it found local rent control was causing. HUD's reasoning was set forth as follows:

"[HUD] has received numerous inquiries relating to the jurisdiction of local rent control boards over FHA projects. This has become an area of great concern to the Department, because it has been determined that local rent control is a significant factor in causing owners of FHA projects, especially subsidized projects, to default on their mortgage payments. The defaults are leading to a substantial number of mortgage insurance claims by mortgagees upon HUD and to the withdrawal from the nation's housing stock of an increasing number of units for low income families. Since HUD already regulates, pursuant to the National Housing Act, the maximum permissible rents that an owner of a project financed by a mortgage insured by HUD may charge, and since each mortgage insurance claim typically requires the expenditure of several millions of dollars by the Department, HUD has an overriding interest to preempt state and local actions which contribute to such claims."

Id.

The interim rules were adopted later in 1975 and bar all local rent control applying to subsidized insured projects. 24 CFR §§ 403.1, 403.8-403.10 (1979); 40 Fed.Reg. 8189, 8190 (1975). As to unsubsidized housing which HUD insures, local regulation is permitted except where HUD determines that such local control jeopardizes its economic interest in the project. 24 CFR §§ 403.1-403.7; see also Gramercy Spire Tenants' Association v. Harris, 446 F. Supp. 814, 821 (S.D.N.Y. 1977).

After promulgation of 24 CFR §§ 403.1-403.10 (1979), the City of Boston filed suit against the Secretary of HUD challenging the constitutionality of HUD's preemptive regulation. Certain tenants of section 202, 221(d)(3) and (5) or 236, rent supplemented housing also intervened as plaintiffs. The City and tenants sought declaratory and injunctive relief, and HUD counterclaimed arguing that Boston's ordinance violated the Supremacy Clause. U.S. Const. art. VI, cl. 2.

The district court, applying Jones v. Rath Packing Co., 430 U.S. 519, 97 S.Ct. 1305, 51 L.Ed.2d 604, reh. denied, 431 U.S. 925, 97 S.Ct. 2201, 58 L.Ed.2d 240 (1977), stated that "the only determination necessary is whether the express preemption provision promulgated by the Secretary of HUD was authorized by a valid delegation of Congressional authority and properly promulgated pursuant to that delegation." City of Boston v. Harris, 461 F. Supp. 1201, 1202 (D.Mass. 1978). Since the lower court had earlier determined that HUD's regulations were valid and had the full effect of federal law, City of Boston v. Hills, 420 F. Supp. 1291, 1298 (D.Mass. 1976), it granted the defendant's motion for summary judgment. 461 F. Supp. at 1203.

Plaintiffs-tenants appealed arguing (1) that the Secretary acted in excess of delegated authority in promulgating 24 CFR §§ 403.1, 403.8-403.10 because Congress never intended to authorize the Secretary to preempt local rent control and (2) that the preemption regulation deprived tenants in federally subsidized insured housing of their entitlement to the protection of rent control without due process. We examine both of these issues in turn.

I.

In analyzing whether HUD's regulations validly preempt Boston's local rent control ordinance, we start with the obvious fact, conceded by plaintiffs, that HUD's regulations and Boston's local rent control ordinances directly conflict. Indeed, the very object of the challenged regulations is to provide for the displacement of local rent controls. See text of regulations at note 1. Thus, the only question remaining is whether the Secretary had the authority to promulgate the regulation.

Plaintiffs place much reliance on Kargman v. Sullivan, 552 F.2d 2 (1st Cir. 1977), reh. denied, 558 F.2d 612 (1st Cir. 1977). That case, unlike this one, presented no actual conflict between the operation of HUD's subsidized insured housing programs and Boston's rent control for the regulations now challenged — exclusive regulation of rents by HUD — were not then in effect. In large part that case turned upon the burden of proof and evidence presented at a time when the Secretary's own policies were unclear and, indeed, had vacillated. This court was not persuaded on the record then before it that HUD rents were the minimum necessary to ensure project viability. Kargman v. Sullivan, 552 F.2d 2, 6-7 (1st Cir. 1977). The court stated that the "mere fact that Boston's rents were lower, does not, of itself, present an impermissible actual conflict with federal law." Id. at 7. Because it was not established that Boston's rent regulation caused mortgage defaults in HUD insured projects, the court concluded that the laws could co-exist. The Court specifically noted, however, that

"[T]his is not a case where a national administrator, surveying all of his problems of dealing with local rent control, had concluded that the federal program nationally is jeopardy because of varying approaches to setting rent ceilings, or administrative entanglements, or the risk that local regulation would discourage participation in the program."

Id. at 5.

The very situation stated not to exist in the above quotation now exists. The Secretary has surveyed the situation nationally and has concluded that preemption of local rent control is necessary to protect HUD insured subsidized projects from default. 40 Fed.Reg. 8189 (1975). It can no longer be said that there is no actual conflict between the two schemes of regulation. The Secretary has deliberately framed a regulation creating such a conflict, and the only issue is her power to do so.

The Secretary promulgated the regulations under the authority of 42 U.S.C. § 3535(d) (1976). That section gives the Secretary broad powers under the NHA to "make such rules and regulations as may be necessary to carry out [her] functions, powers, and duties." Id. Moreover, as stated earlier, Congress gave the Secretary broad administrative powers over each of the subsidized insured programs. See text accompanying notes 2 to 11, supra. By virtue of the rent subsidy, direct mortgage loans, mortgage insurance, and interest subsidy programs, the federal government has a very direct interest in and involvement with the financial viability of the housing projects and, therefore, in their rental income. Federal regulation of rents accord the government a voice in securing the economic viability of federally subsidized insured housing. Thus, the Secretary's preemptive regulation, in light of Congress' delegation, is consistent with and advances the purposes of the Act, see Kargman v. Sullivan, 552 F.2d at 14 (Campbell, J., concurring), and is therefore valid. Whirlpool Corp. v. Marshall, ___ U.S. ___, 100 S.Ct. 883, 63 L.Ed.2d 154 (1980) (No. 78-1870) (regulation which furthers purpose of Act and rationally complements statutory scheme is valid).

In promulgating this regulation, there is no dispute that HUD followed the informal rule-making procedures required by federal law. 5 U.S.C. § 553. The Secretary proceeded by adopting an interim rule, based on her experience with insured mortgage claims, decline in housing stock available for low income families, and defaults on mortgage loans and insured mortgages. The rules under challenge were adopted after notice and comment procedure and rested on legislative type findings amply supporting the rule. 40 Fed.Reg. 8189, 49,318; 5 U.S.C. § 553.

II.

We turn next to plaintiffs' due process argument. In promulgating 24 CFR §§ 403.1-403.10 (1979), HUD examined the housing situation nationally and drafted a rule to deal with a series of problems. In other words, HUD engaged in legislative rule-making rather than in an adjudicatory function. Thus, HUD complied with the necessary due process requirements for this action when it proceeded in conformity with 5 U.S.C. § 553 (1976) which requires public notice and hearing prior to the regulation's promulgation.

The question of what procedural requirements HUD must meet when landlords seek to have their rent increased has been answered before. 24 CFR § 401 (1979) promulgated in response to the District of Columbia Circuit's decision in Marshall v. Lynn, 497 F.2d 643 (D.C. Cir. 1973), cert. denied, 419 U.S. 970, 95 S.Ct. 235, 42 L.Ed.2d 186 (1974), provides for written notice to the tenants, an opportunity to comment and a written response from HUD explaining its actions. This provides sufficient protection of plaintiff's interests. This court previously determined that tenants in subsidized housing were not entitled to an administrative hearing or judicial review of agency decisions on rent increases. Hahn v. Gottlieb, 430 F.2d 1243, 1249 (1970). Similarly, several other circuits found that tenants had no due process rights in the adjustment of rents in NHA housing. Grace Towers Tenants' Association v. Grace Housing Development Fund, Inc., 538 F.2d 491 (2d Cir. 1976); Harlib v. Lynn, 511 F.2d 51 (7th Cir. 1975); Paulson v. Coachlight Apartments, 507 F.2d 401 (6th Cir. 1974); Langevin v. Chengano Court, Inc., 447 F.2d 296 (2d Cir. 1971). Moreover, in those cases which did find that tenants must be accorded some rights, the courts imposed only nominal notice and hearing requirements now satisfied by HUD's regulations. Marshall v. Lynn, supra; Geneva Towers Tenants' Organization v. Federated Mortgage Investors, 504 F.2d 483 (9th Cir. 1974). Consequently, tenants here are assured of due process when their landlord petitions for rental increases. Accord Gramercy Spire Tenants' Association v. Harris, 446 F. Supp. 814 (S.D.N.Y. 1977); Argo v. Hills, 425 F. Supp. 151 (E.D.N.Y. 1977), aff'd, 578 F.2d 1366 (2d Cir. 1978); 515 Associates v. City of Newark, 424 F. Supp. 984 (D.N.H. 1977).

Accordingly, the decision of the district court is affirmed.