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How the “Equal Housing Opportunity” mantra has just been legally redefined

Fair housing is getting a slight but critical makeover, thanks to the Supreme Court. But most practitioners remain unaware or confused by the ruling, so an attorney gives us real life examples of how it all works.

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We recently covered the monumental Supreme Court of the United States’ ruling which serves as an update to the Fair Housing Act, a ruling that all real estate practitioners must truly understand. Despite headlines on the topic, we have found in discussion across the nation, that many remain unaware of the change, or simply confused.

To cure that ill, we have tapped the wisdom of real estate attorney, Richard D. Vetstein, Esq., Founding Partner at the Vetstein Law Group, P.C. to dive deeper into “disparate impact” and why it’s not just a ruling for landlords. In his own words below, he explains:

What is disparate impact theory?

While everyone in America was focused on the U.S. Supreme Court’s historic marriage equality ruling, at the end of its Term, the Court also issued an important opinion under federal Fair Housing law. In a 5-4 margin, the Court upheld the application of “disparate impact” theory of liability under the Fair Housing Act (“FHA”) in Texas Department of Housing & Community Affairs v. The Inclusive Communities Project, Inc.

What is disparate impact theory you ask? Good question. In a disparate-impact claim, someone who alleges housing discrimination may establish liability, without proof of intentional discrimination, if an identified rental practice has a disproportionate effect on certain groups of individuals (i.e, minorities) and if the practice is not grounded in sound business considerations. Ok, now what does that mean in plain English?

How about a real life example?

Here’s an example. Let’s say you own several apartment buildings, and an upset tenant says that based on statistics for the last 5 years, you have evicted 75% more black tenants than white tenants, while the rate of nonpayment between racial classes have remain about the same. That’s a disparate impact claim. Surprising to most folks is that under a disparate impact theory, the claimant need not show some type of “smoking gun” evidence of direct racial discrimination, like something Donald Sterling would say, such as “we don’t like to rent to black folks.” If the claimant can back up his theory with statistical evidence, then he or she will have their day in court.

While accepting disparate impact as a viable Fair Housing claim, the Supreme Court imposed important limitations on the application of the theory “to protect potential defendants against abusive disparate-impact claims.” In particular, the Court held that a racial imbalance, without more, cannot sustain a claim, and directed lower courts to “examine with care” the claims at the pleadings stage. The Court emphasized the plaintiff’s burden to establish a “robust” causal connection between the challenged practice and the alleged disparities. Further, a defendant’s justification is “not contrary to the disparate-impact requirement, unless … artificial, arbitrary, and unnecessary.” Finally, “remedial orders” must “concentrate on the elimination of the offending practice” through “race-neutral means.”

Huge win for fair housing advocates – why?

Despite the limitation, this is a big win for fair housing advocates. Sec. 8 tenants, the MCAD and EEOC will have another powerful legal theory to use to crack down on discrimiminatory rental practices. Moreover, in the wake of the ruling, HUD just announced its the long-awaited Affirmatively Furthering Fair Housing (AFFH) rule, which will provide maps and data on historic segregation that cities will need to use to assess their progress in reducing segregation, increasing housing choice and promoting inclusivity.

The lesson to take back from this ruling is to ensure you have policies in place to treat every applicant and tenant the same way across the board. The existence of written procedures, policies and manuals are helpful in defense of these types of claims. Saying you follow “Equal Housing Opportunity” is one thing; you have do actually do it.

Reprinted with permission of Richard D. Vetstein, Esq.

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Politics

FCC looking into how landlords are getting around predatory ISP laws

(NEWS) It became illegal in 2008 for landlords to restrict ISP access to their “partners,” but the FCC is looking into loopholes allowing the practice to persist.

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The Federal Communications Commission (FCC) recently announced it is seeking comments on broadband access in multi-tenant buildings.

The FCC wants to gain a better understanding of consumer choice and pricing in apartment and office buildings. Even though most cities have multiple internet service providers (ISPs), renters are often stuck with only one option due to agreements between ISPs and landlords. 


The Wireline Competition Bureau is seeking comments about:

  • Revenue sharing agreements between landlords and ISPs, which incentivizes the landlord to steer tenants to a certain provider.
  • Exclusive wiring agreements in which a landlord says only one ISP can provide service to the building.
  • Exclusive marketing agreements in which only one ISP is allowed to market in the building.

In 2008, the FCC banned exclusive contracts for telecommunications services in apartment buildings.

Even so, ISPs and landlords have found ways to circumvent the rules, preventing tenants from having internet options. A landlord is prohibited from contracting with an ISP for sole service to a building.

One way to get around this rule is to deed ownership of the wiring to the landlord, allowing the landlord to decide which companies have access or not. The FCC rules do not apply, because the landlord owns the wiring.

ISPs can also enter into an agreement with landlords to prevent advertising in the building. The landlord can impose fees on companies that need access to install new wiring. All of these practices block competition for tenants, which drives up prices and limits options, and is the focus of the FCC’s push.

The FCC wants to hear from consumers who have dealt with broadband building restrictions. Tenants, landlords, real estate agents and even ISP owners can comment on the FCC proceedings for 30 days following the public notice.

If you’re a property owner, it’s time to review your agreements in this area to make sure you don’t end up in the FCC’s crosshairs now or in the future.

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Politics

Housing supply crisis: NAR insists governments take ‘once-in-a-generation’ action

(POLITICS) After years of sounding the alarm bell regarding housing supply and demand imbalances, NAR is pushing local and federal governments to respond “immediately.”

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The National Association of Realtors (NAR) has repeatedly beat the drum for over six years regarding housing supply, so much so that perhaps real estate practitioners have simply accepted it as the ongoing problem that it is. But in a new report by Rosen Consulting Group, released by NAR, housing supply is officially in crisis across all regions.

NAR Chief Economist, Dr. Lawrence Yun has reiterated in most reports for years that the only relief for increasingly tight inventory levels lies an increase in housing starts, placing industry hopes firmly in the hands of American homebuilders who are strapped with lending standards that shifted after the 2008 housing crash, now paired with labor shortages and astronomically skyrocketing pricing on materials.

NAR reports that after decades of under-building and under-investment, housing is now in more of a “dire” status than previously expected. The report, “Critical Infrastructure: Social and Economic Benefits of Building More Housing” asserts that local and federal policymakers must consider “once-in-a-generation” action and that “no matter the approach,” action must be “immediate.”

For an organization that typically employs very tempered wording, this aggressive language is alarming.

As bloggers scream “housing bubble” and analysts warn the script looks nothing like 2008, the timing of this report and the alarm bells being run by NAR are not to be ignored.

“The state of America’s housing stock… is dire, with a chronic shortage of affordable and available homes [needed to support] the nation’s population,” the report asserts. “A severe lack of new construction and prolonged underinvestment [have led] to an acute shortage of available housing… to the detriment of the health of the public and the economy. The scale of underbuilding and the existing demand-supply gap is enormous… and will require a major national commitment to build more housing of all types.”

Dr. Yun notes “It’s clear from the findings of this report and from the conditions we’ve observed in the market over the past few years that we’ll need to do something dramatic to close this gap” between hopeful homebuyers and tightened supply levels.

The report urges lawmakers to “expand access to resources, remove barriers to and incentivize new development, and make housing construction an integral part of a national infrastructure strategy.”

NAR President Charlie Oppler, says that adequate increases in housing construction this decade would add an estimated 2.8 million American jobs and $50 billion in new, nationwide tax revenue. “Additional public funding and policy incentives for construction will very clearly provide huge benefits to our nation’s economy, and our work to close this gap will be particularly impactful for lower-income households, households of color and millennials.”

Earlier this year, NAR encouraged policymakers to reform zoning and permitting policies, also recommending other policies to address national housing supply shortages.

At that time, it sounded like an urgent request. Today, we hear an alarm bell, a demand.

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Politics

Evictions are mounting, affecting renters and landlords

(POLITICS) Eviction moratoriums both ending and extending are causing ripple effects of economic trouble for renters and landlords.

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The United States continues to struggle to find a balance between public health protections to slow the spread of coronavirus and economic measures to prevent Americans from bankruptcy as a result.

While eviction bans initially provided relief for renters who lost jobs and couldn’t afford rent payments, the effects bounced up to property owners who lost those payments. Though the first coronavirus stimulus package renter protections extended to landlords, property owners say banks are still expecting mortgage payments as the relief expires. Many worry the expiration of the additional $600 added to unemployment will exacerbate the problem.

In Texas, the statewide eviction moratorium ended in May. Unlike other major cities which chose to use funds from the federal coronavirus stimulus package to pay for legal representation for tenants, Houston let local protections for tenants expire with the moratorium.

In Houston, there is little recourse for tenants served with an eviction notice. Tenants only have five days to appeal, and there is no legal defense for a tenant who can’t pay at least one month’s rent to the court registry. As a result, tenants facing eviction often surrender and leave. Unfortunately, the result is tenants moving in temporarily with friends and family while they look for new housing, causing overcrowding and presenting a health risk to everyone involved. The CDC has specifically named “poverty and crowding” as a top risk factor for COVID-19.

However, not all evictions are the result of unpaid rent. Marie Baptiste, a landlord in Randolph, Massachusetts reported to the Boston Globe that she has lost recourse against a tenant who not only stopped paying rent long before the pandemic started, but caused water damage and a rat infestation. The tenant argues the structural problems were her reason for withholding rent.

Consequently, Baptiste says she is now $19,000 in the hole for this property, and can do nothing about it. In July, Governor Charlie Baker extended the eviction moratorium to mid-October. In a survey conducted by MassLandlords, one-fifth of landlords are uncertain how they will keep up with mortgage payments. Many fear they will be forced to sell or face foreclosure without relief.

Without protections for both tenants and individual property owners, the eviction moratoriums could have long-term consequences for housing in large cities. Urban centers, already struggling with rent inflation and lack of affordable units as large developers take over, could see this problem exacerbated for years to come. It is imperative that the next stimulus package consider how relief for both renters and property owners can be leveraged to prevent these challenges.

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