Just A Landlord

Pepsi recently paid millions to settle complaints on their use of criminal background checks in pre employment screening.

http://www.eeoc.gov/eeoc/newsroom/release/1-11-12a.cfm

“Based on the investigation, the EEOC found reasonable cause to believe that the criminal background check policy formerly used by Pepsi discriminated against African Americans in violation of Title VII of the Civil Rights Act of 1964.”

The issue is based on the use of arrest records, rather than convictions, as well as convictions for crimes unrelated to the job they were seeking.  There are also studies that show racial minorities are more likely than majorities to be arrested under the same circumstances.

When you read this in conjunction with HUD’s proposed Fair Housing Act’s Discriminatory Effects Standard rule , it becomes pretty clear that arrest record based screening may cause trouble in the future.  It also would appear that arrest and convictions for crimes unrelated to housing will cause trouble.

What criteria may you legally use to exclude applicants that will disrupt the property and the neighborhood?  Is simple possession of pot enough to legally deny a tenant?  What about crimes of violence that the victims were strictly family?  (You can not discriminate against victims of domestic violence, and that is the way is should be.) What about a serial shoplifter, should they be denied housing?  A car thief?  The guy who gets in fights at the bar , but never at home?  What about the person who is out on bail pending trial on the hatchet murder of his neighbor? No conviction yet, so would you have to accept their application?

And in the course of staying out of trouble with the feds will you fall into problems with local nuisance and housing laws?

The answers?  Unfortunately most governmental agencies fail to create bright line rules so people affected by the rule can stay out of trouble.  Additionally few rules address the problem caused by conflicting regulations such as this proposal and nuisance laws.

The comment period for the proposed  Federal Rule ends on Tuesday January 17th, 2012. The only people who appeared have commented on this en masse were Fair Housing advocates and to a lesser extent, the Bankers. One would have thought that municipalities would oppose as this clearly will disrupt nuisance type ordinances and other rental housing regulations, but it does not appear they did.

None of us would intentionally discriminate, so opposing the rule is probably not the answer, but we need to know what is permitted and what are prohibited screening practices as they relate to criminal backgrounds.  Comments seeking better clarification of the rule may be helpful.

So let’s take a look at HUD’s proposed Fair Housing Discriminatory Effects Standard rule.

2. Discriminatory Effect Defined (Sec.  100.500(a))    Under the Fair Housing Act and this proposed rule, a “discriminatory effect” occurs where a facially neutral housing practice actually or predictably results in a discriminatory effect on a group of persons (that is, a disparate impact), or on the community as a whole (perpetuation of segregation).\41\ Any facially neutral action, e.g. laws, rules, decisions, standards, policies, practices, or procedures, including those that allow for discretion or the use of subjective criteria, may result in a discriminatory effect actionable under the Fair Housing Act and this rule.

This is moderated a bit in Section 3, but you really need a close relationship between the screening purpose and the crime.  I wonder if a sex offender who “only” attached family members would pass this test if they were not proposing to live with family members.

3. Legally Sufficient Justification (Sec.  100.500(b))     A housing practice or policy found to have a discriminatory effect may still be lawful if it has a “legally sufficient justification.” A “legally sufficient justification” exists where the housing practice or policy: (1) Has a necessary and manifest relationship to the defendant’s or respondent’s legitimate, nondiscriminatory interests; \42\ and (2) those interests cannot be served by another practice that has a less discriminatory effect.\43\ A legally sufficient justification may not be hypothetical or speculative. In addition, a legally sufficient justification does not defeat liability for a discriminatory intent claim once the intent to discriminate has been established.

In section 4 they refer to the person alleging a ”legally sufficient Justification”  as “defendant”.  That is a term we all wish to avoid to have following our name on any document.

The last paragraph is particularly disturbing.  If you satisfy the burden under #3 you can still be in hot water if the complainant can suggest a method to achieve your legitimate goal with a way that is less discriminatory.

4. Burdens of Proof (Sec.  100.500(c))    The burden-shifting framework set forth in the proposed rule for discriminatory effect claims finds support in judicial interpretations of the Act, and is also consistent with the burdens of proof Congress assigned in disparate impact employment discrimination cases. See 42 U.S.C. Sec.  2000e-2(k). In the proposed rule, the complainant or plaintiff first bears the burden of proving its prima facie case, that is, that a housing practice caused, causes, or will cause a discriminatory effect on a group of persons or a community on the basis of race, color, religion, sex, disability, familial status, or national origin.

    Once the complainant or plaintiff has made its prima facie case, the burden of proof shifts to the respondent or defendant to prove that the challenged practice has a necessary and manifest relationship to one or more of the housing provider’s legitimate, nondiscriminatory interests.

    If the respondent or defendant satisfies its burden, the complainant or plaintiff may still establish liability by  demonstrating that these legitimate, nondiscriminatory interests could be served by a policy or decision that produces a less discriminatory effect.

Note the second paragraph uses the word “necessary”  There is a good reason  ”necessary” rhymes with “scary”:

Graoch, supra, 508 F.3d at 387 (Nelson, J., concurring) (concluding that “a consensus exists that business necessity is the appropriate test” and that this “business necessity” standard holds defendants to a higher standard than the more lenient “business justifications” test set forth in Wards Cove).

So the question is once this becomes law, and it will as all but one Federal Court of Appeals have held that the current Fair Housing Act prohibits housing practices with a discriminatory effect even absent an intent to discriminate, can we still use criminal background checks as a legitimate means of screening out tenants that will cause harm to other occupants, the neighborhoods and our properties.

I think this is an important enough issue to share it here  - cleaned up from my original post :

While language is neither a Federal nor a Wisconsin protected class,  you need to be careful that the rejection is is not perceived to be discrimination against national origin, which is a protected class.

(more…)

It is a sad reality that many communities use code enforcement to promote an illegal racially motivated agenda.  The ACLU outlines their view of the problem in an article, Renting While Black.

We see it here in Milwaukee where at least one Alderman appears to use Aldermanic Service Requests in a way that only the ku klux klan would be proud of.

Even if so called community leaders are not actively involved in the racially motivated inspections, a complaint based code enforcement  that permits anonymous exterior complaints opens the door for neighbors to promote their biases through code enforcement

There have been a number of federal lawsuits over the years alleging racially motivated code enforcement.  A list of some of those cases can be found here.

Typically if a case gets to the point that the  property owners may win the municipality quickly and quietly settles.  Usually not for the full compensation for the harm caused by the racially motivated enforcement.  But lets face it, it takes a lot of financial and mental tenacity for a small landlord to slug it out against cities with seemingly endless resources to defend their bad behavior.

However there is one such case that the landlords have held on for something like eight years now.  After the Federal Eighth CIrcuit Court of Appeals issued an opinion favorable to the landlords, the city of St Paul has petitioned the US Supreme Court for review (link to petition for review).  You can read the amended original complaint that started this case here.

If the Supreme Court hears this case it will have a huge impact on all landlords who follow fair housing practices, i.e. don’t reject tenants tenants simply because they are a different color, nationality, religion, etc than their neighbors.  One must really respect these property owners for the amount of sacrifice they have made to get this far.

The case alleges that St Paul housing inspection programs were used in a racially motivated manner to force racial minorities out of St Paul and that such actions violated the Fair Housing rights of the occupants.  A very interesting point is a number of city employees including inspectors are on the hook personally in this suit.  From a legal perspective they must defend themselves as they and their employer have disparate interest; for the city to win if the allegations are proven true they must claim rogue employees acting outside of the law.  For the inspectors to win they must argue that they were following instructions that they believed were legal. The inspectors may have a hard time claiming ignorance however as the owners had provided the inspectors with documentation that the inspectors’ acts were contrary to Fair Housing, yet the inspectors continued with their agenda.  At some point the inspectors will have to name their union as third party defendants as the union failed to stop management from allowing/forcing them to violate the rights of the tenants and owners

From my conversations with two of the plaintiffs over the past six or seven years they seem to be just a handful of hard working landlords who independently found themselves on the losing end of government behaving badly.  The current case is a consolidation of three or four cases that started independent of each other, but the claims were so similar that the federal court combined them.

Most of the cases claimed RICO (racketeering) on the part of the city employees. The RICO elements were dismissed due to procedural errors.  I’m certain that some future case will go to trial on that issue, whether in St Paul or somewhere else.

The Eight Circuit Court of Appeals has once again ruled in favor of the suit brought by landlords against the City of St Paul going to trial.

This is the case where the allegation is the City of St Paul is using their building inspection powers to drive low income minorities from the city by over aggressive inspection efforts aimed at  closing the buildings occupied by minorities.

Read the decision here

You can read more about this case here and more Federal cases on racially biased code enforcement here