HUD Shifts Focus to Liberalization of Land Use Regs

The US Department of Housing and Urban Development recently announced that it is going to reverse some Obama-era policies related to integrating lower-income housing into wealthier neighborhoods and place more focus on promoting more affordable housing development overall.

According to an article in the Wall Street Journal, “HUD will begin holding stakeholder hearings on how to change the way it determines whether communities are enforcing the Fair Housing Act, which requires local governments to institute policies that help break down patterns of housing segregation. HUD stakeholders include nonprofit groups, academic researchers and private businesses.

But local officials in some communities said the process was costly and amounted to the federal government forcing them to put low-cost rental buildings in wealthier areas.”

So, instead of focusing its attention on the integration piece HUD will try to create incentives for local governments to liberalize land use policies and make it easier for developers to build more housing in general. From the WSJ article:

Policy makers have long puzzled over how to create incentives for cities and towns to build more housing. Local officials are often in a difficult political position because the loudest voices among their constituents tend to be those objecting to development. At the same time, federal and state governments have limited control over local zoning.

Mr. Carson (HUD Secretary Ben Carson) said the new rule would tie HUD grants, which many communities use to build roads, sewers, bridges and other infrastructure projects, to less restrictive zoning.

“I would incentivize people who really would like to get a nice juicy government grant” to take a look at their zoning codes, he said.


Facebook’s Latest Trouble: Fair Housing

Facebook, which along with Google dominates the online advertising marketplace, is being sued by fair housing groups. Those groups claim that Facebook allows housing advertisers to discriminate against groups like women, families with children and veterans. From a lengthy article published by the Triad Business Journal in cooperation with the New York Times:

Facebook, in response to criticism over the last 17 months, has repeatedly promised that it would crack down on advertisers who use those tools to show housing or employment ads to whites only.

But in the lawsuit filed Tuesday in U.S. District Court in Manhattan, the National Fair Housing Alliance and affiliates in New York, San Antonio and Miami contend that Facebook’s advertising platform “continues to enable landlords and real estate brokers to bar families with children, women and others from receiving rental and sales ads for housing.”

“We want the court to order Facebook to develop a plan to remove any ability for advertisers to access Facebook’s checklists for excluding groups of people in the posting of housing-related ads,” said Diane L. Houk, a lawyer for of Emery Celli Brinckerhoff & Abady. “Because of Facebook’s impact on the housing market, we’ll ask the court to implement a plan of community education and outreach to housing providers to inform them of their obligation not to discriminate.”

Best Screening Practices to Minimize Risk

Property Management Insider has a nice, 7-part list of the best screening practices to minimize risk. Here are just a couple:

2. Reduce subjective decision-making at the community level
Use automatic approvals based on your company’s rental criteria to simplify the move-in process and reduce individual decision-making, thereby reducing fair housing violation risk. Reserve manual approvals for borderline applicants and restrict the ability to perform them to authorized users…

4. Separate criteria for applicants and guarantors
Bad applicants should not be buried under exceptional guarantors. After all, the guarantor isn’t the one who’ll be living in your community…

Here’s a link to the full list, which also includes some tips about setting criteria customized for each community.

More on Reasonable Accommodation Requests for Animals

There’s a good post at the NAA blog about reasonable accommodations for animals, which as most of you know is a growing issue thanks to the increased use of emotional support animals.  One consequence is that apartment management companies are having to adopt more flexible policies regarding animals their residents want to have in their apartments. From the article:

Per U.S. Department of Housing and Urban Development (HUD) guidelines, a disabled resident should be given the opportunity to request any animal that reasonably affords such person equal opportunity to use and enjoy their dwelling. Owners are required to engage the resident in an interactive process in which the housing provider and the requester discuss the requester’s disability-related need for the accommodation and possible alternatives.

In years past, it seemed to be the status quo for apartment housing providers to adopt bright-line rules. These rules allowed for predictability in outcomes and restricted discretion among on-site staff to minimize the risk of fair housing discrimination complaints. While this used to be the case, now managers are expected to make decisions on a case-by-case basis depending on a resident’s unique set of needs and circumstances in accordance with the mandated interactive process.

The article contains a link to NAA’s Toolkit on Emotional Support Animals, and also references an upcoming webinar on the subject:

In an effort to continue outreach and education, NAA is hosting a webinar on this issue on Thursday, October 13 at 3 p.m. ET. NAA has enlisted the expertise of Katie Wrenn, Regional Training and Marketing Director at Milestone Management, to share the member perspective and her experiences in dealing with reasonable accommodation requests day-to-day. In addition to Ms. Wrenn’s expertise, Kirk Cullimore will discuss the forms that he was instrumental in getting approved by HUD and share lessons learned from his experience in litigating these cases throughout the investigative process.

*  Edited to add: Chris Loebsack with Loebsack & Brownlee, PLLC has graciously agreed to present a pre-trade show seminar, Emotional Support Animals and Reasonable Accommodation Requests, on October 25, 2016 from 4:30-5:30pm at the Greensboro Coliseum. Not only will you earn 1 CEC for attending, but you’ll have Chris available to answer any questions you may have on this hot topic. Register here.

The Impact of Disparate Impact – Your Screening Procedures May Need Revising NOW

The following is an email sent this morning (4/4/16) by AANC Executive Director Will Brownlee:

HUD Secretary Announces Guidance Regarding Excluding Persons with Criminal Records and Landlord Use of Blanket Bans/Denials

Dear NC rental industry leaders:

 It appears HUD is kicking off Fair Housing Month with a bang.  From the New York Times this morning (thank you Tom and Mary Gwyn for forwarding):

Ever since last summer’s U.S. Supreme Court decision in Texas Dept. of Housing and Community Affairs v. Inclusive Communities Project and the Court’s formal endorsement of a disparate impact fair housing standard, industry watchers have tried to anticipate what may be the next Fair Housing shoe to drop for the housing industry.  This appears to be it.   Based on the information contained in the article and in HUD’s Guidance (see link below), it would appear that criminal screening standards may, by necessity, need to become more nuanced to be viewed as fair housing compliant.

A full copy of the HUD Guidance, released this morning, can be found here: .

Key takeaways after reading the Guidance, which appears at first blush to be something of a frontal assault on the industry’s use of criminal screening for applicant denials:

Although the specific interest(s) that underlie a criminal history policy or practice will no doubt vary from case to case, some landlords and property managers have asserted the protection of other residents and their property as the reason for such policies or practices. Ensuring resident safety and protecting property are often considered to be among the fundamental responsibilities of a housing provider, and courts may consider such interests to be both substantial and legitimate, assuming they are the actual reasons for the policy or practice. A housing provider must, however, be able to prove through reliable evidence that its policy or practice of making housing decisions based on criminal history actually assists in protecting resident safety and/or property. Bald assertions based on generalizations or stereotypes that any individual with an arrest or conviction record poses a greater risk than any individual without such a record are not sufficient to satisfy this burden . . . .

 In most instances, a record of conviction (as opposed to an arrest) will serve as sufficient evidence to prove that an individual engaged in criminal conduct. But housing providers that apply a policy or practice that excludes persons with prior convictions must still be able to prove that such policy or practice is necessary to achieve a substantial, legitimate, nondiscriminatory interest. A housing provider that imposes a blanket prohibition on any person with any conviction record – no matter when the conviction occurred, what the underlying conduct entailed, or what the convicted person has done since then – will be unable to meet this burden . . . .

 A housing provider with a more tailored policy or practice that excludes individuals with only certain types of convictions must still prove that its policy is necessary to serve a “substantial, legitimate, nondiscriminatory interest.” To do this, a housing provider must show that its policy accurately distinguishes between criminal conduct that indicates a demonstrable risk to resident safety and/or property and criminal conduct that does not. A policy or practice that fails to take into account the nature and severity of an individual’s conviction is unlikely to satisfy this standard. Similarly, a policy or practice that does not consider the amount of time that has passed since the criminal conduct occurred is unlikely to satisfy this standard, especially in light of criminological research showing that, over time, the likelihood that a person with a prior criminal record will engage in additional criminal conduct decreases until it approximates the likelihood that a person with no criminal history will commit an offense . . . .

Section 807(b)(4) of the Fair Housing Act provides that the Act does not prohibit “conduct against a person because such person has been convicted … of the illegal manufacture or distribution of a controlled substance as defined in section 102 of the Controlled Substances Act (21 U.S.C. 802).”37 Accordingly, a housing provider will not be liable under the Act for excluding individuals because they have been convicted of one or more of the specified drug crimes, regardless of any discriminatory effect that may result from such a policy . . .

Because of widespread racial and ethnic disparities in the U.S. criminal justice system, criminal history-based restrictions on access to housing are likely disproportionately to burden African Americans and Hispanics. While the Act does not prohibit housing providers from appropriately considering criminal history information when making housing decisions, arbitrary and overbroad criminal history-related bans are likely to lack a legally sufficient justification. Thus, a discriminatory effect resulting from a policy or practice that denies housing to anyone with a prior arrest or any kind of criminal conviction cannot be justified, and therefore such a practice would violate the Fair Housing Act.

At first blush, it would appear that this Guidance practically mandates that the housing providers consider adopting much more nuanced criminal screening policies, ones that take many different factors into account, as this HUD Guidance effectively renders blanket denials for criminal history a thing of the past – with the specific exception of a conviction involving the manufacture or distribution of illegal drugs.  At a minimum, this Guidance should be considered required reading by both industry professionals and their respective legal counsel for Fair Housing Compliance and risk assessments moving forward.

Will Brownlee
Executive Director & General Counsel

New HUD Rule Targets Segregation

On July 8, 2015 HUD finalized a new rule that targets segregation in communities that receive federal funds. From the Wall Street Journal:

The Department of Housing and Urban Development on Wednesday laid out a rule designed to ensure communities that receive federal funds strive to buck historical patterns of housing segregation.

Under the new rule, HUD will provide communities with historical data they must use to analyze segregation patterns, areas where race and poverty are concentrated, and access to good schools and jobs. Communities now will be required to submit these analyses to HUD, set goals for reducing segregation and track the results…

Local governments, states and public-housing authorities that receive federal grants are required to ensure that zoning and affordable-housing initiatives and other funding priorities advance the goals of the Fair Housing Act of 1968. The act aims to give everyone equal access to housing regardless of race, color, religion, sex, familial status or national origin.

But communities and housing authorities have received little direction from the federal government about how to create policies or measure their success.

“This is a very thoughtful attempt by HUD to come up with a rule that gives some teeth to a small provision of the Fair Housing Act,” said Amy Glassman, of counsel at Ballard Spahr LLP, which advises public housing authorities and other multifamily housing providers on fair-housing compliance and defends them in enforcement actions.

Supreme Court Upholds Disparate Impact Liability

You’ve likely heard about the Supreme Court’s ruling in Texas Department of Housing and Community Affairs v. The Inclusive Communities Project, Inc., but in case you haven’t here’s the info we’ve received from the National Apartment Association‘s Greg Brown:

The U.S. Supreme Court today decided to uphold disparate impact liability under the Fair Housing Act, a legal theory that prohibits neutrally-applied practices with a disproportionate impact on minority groups protected by the law, even without proving an intent to discriminate. The 5-4 decision in Texas Department of Housing and Community Affairs v. The Inclusive Communities Project, Inc. also emphasized limitations on the policy, stating that neutrally-applied practices should not fail on disparate impact grounds unless they are “artificial, arbitrary and unnecessary.”

Importantly, the majority opinion highlighted limitations on disparate impact liability to allow “practical business choices and profit-related decisions that sustain the free-enterprise system.” Leeway must be given to housing providers to explain the validity of their policies. Further, a disparate impact claim is not demonstrated by statistical disparity alone. A claim must show that a challenged practice actually caused a disparate impact on a protected group, and the availability of an “alternative practice that has less disparate impact” to serve legitimate business needs.

We are currently conducting a detailed analysis of the Supreme Court’s decision and will continue to seek further clarification on disparate impact liability.

We will keep you updated as we learn more.

Update 6/30/15:

NAA has just added some excellent reference links on this issue:

Commentary: Supreme Court Affirms, Narrows Disparate Impact Liability Under Fair Housing Act

Holland & Knight: Fair Housing Act Prohibits Policies and Practices Causing a Disparate Impact

Ballard Spahr: In 5-4 Decision, U.S. Supreme Court Recognizes Disparate Impact Liability



Greensboro Adds Sexual Orientation and Gender Identity to Protected Classes

At its January 6, 2015 meeting Greensboro’s city council voted to ban discrimination in the “buying, renting, selling or advertising of real estate” based on sexual orientation or gender identity. From the Greensboro News & Record:

The city is the first in the state to include sexual orientation, gender identity and gender expression in its housing nondiscrimination policies, city officials say.

The City Council voted unanimously Tuesday to make the changes to three existing nondiscrimination ordinances…

The final change prohibits discrimination in the “buying, renting, selling, or advertising of real estate” on the basis of sexual orientation or gender identity — a newer battleground in the movement for lesbian, gay, bisexual and transgender rights.


Are Fair Housing ‘Shops’ on the Rise?

The Fair Housing Project, a unit of Legal Aid of North Carolina, has been awarded a HUD Private Enforcement Initiative (PEI) grant of $325,000 a year for three years. According to a release from Legal Aid, “PEI grants fund nonprofit organizations that conduct testing and enforcement activities to prevent or eliminate discriminatory housing practices.”

We’ve heard from one source that these funds are already being used to ramp up the number of Fair Housing ‘shops’ in the Triangle and Triad areas. We’ve also heard that testers might be telling the site teams at the end of the tour that they’ve “passed” even though that tester has not yet compared notes with any other tester for the property. That could be a problem if the reports don’t match up.

We should stress that these are not formal reports or complaints that we’ve received – they are just the first hint that we’ve had that the Fair Housing Project inspections have increased. The purpose here is simply to inform you that your site teams may see an increase in Fair Housing ‘shops’ and that you might want to consider reinforcing the Fair Housing training that you already conduct.

This Gym is Not for You

A property manager in New York City is making a new gym facility available only to those residents who pay market-rate rent:

A tale of two cities is dividing Stonehenge Village, an Upper West Side apartment complex where management has prohibited the rent-stabilized tenants from using a newly minted gym.

Stonehenge Partners, the company that bought the 417-unit, three building complex on W. 97th St. near Amsterdam Ave. in 2006, told residents at a meeting earlier this month that the 1,000-square-foot gym was only open to its market-rate tenants…

A 2008 city law prohibited discrimination in housing based on tenants’ income, James’ spokeswoman said. The law was written to protect tenants in the Section 8 voucher program, but the spokeswoman noted it may apply to other instances, as well…

Residents said management even shot down tenants’ requests to pay a registration fee to use the facility.

“(The gym) is aimed specifically at new and prospective tenants who expect certain amenities and incentives that are commonly available to market rate renters,” said company spokeswoman Marcia Horowitz, who added that attracting market-rate renters that pay as much as three times the amount paid by rent-subsidized tenants “and to maintain high occupancy is critical to the overall financial health of the building which is in every tenant’s interest.”

This is the second story out of New York recently about management companies treating their residents differently based on their rent rates. The first was a story about “poor doors“:

City housing officials approved of a deal to allow a developer to create a separate entrance for low- and moderate-income tenants at a new rental development on the city’s west side…

The 33-story project at 40 Riverside Boulevard will include 55 units (out of 274 total) of affordable housing for low-income households.

The folks on the Freakonomics podcast have an interesting discussion about both these stories and you can listen to them by clicking on the link below. One of the most interesting comments was economist Steven Levitt’s thoughts on why the property managers would not allow rent-stabilized residents to even pay a fee to use the gym:

..I believe in markets and prices and the usual way to deal with the provision of goods is through prices. But I think that the developers here probably have an ulterior motive…

The way that these contracts are usually written is that these apartments will remain rent-controlled, below-market apartments for as long as the current tenants live there. So in a typical setting, it would never make sense to say the old guard tenants can’t use the gym, you just find the right price, it might be a very high price, that takes into account the negative externality they may have on the new tenants, but you wanna charge that price. And it would just be a mistake to ban them completely. But, I don’t know, if I’m that developer, I just wanna get these old guard out and so maybe really the market isn’t the best tool. It’s actually making life very unpleasant in a way that prices can’t actually make life unpleasant. So the idea that you actually ban them from the gym serves a real purpose here. It tells them, look, we think you’re second-class citizens, we don’t respect you, and as long as you live here we’re going to treat you horribly. Now that’s not a very nice and a very moral way to do it, but if your objective is to make life awful for these folks and get them out, it’s proving to be a pretty effective way of doing that, I bet.