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.

If you were rejecting applicants that do not speak English how would you respond to a hearing impaired applicant?  They do not speak English yet are clearly a protected class.

Even if you avoid a discrimination claim with your policy of only accepting people who spoke English you will be harming your business in the process by limiting the pool of prospective tenants  for your vacancies.

I do not speak Spanish, however we built a heck of a business by making our company more accessible to Milwaukee’s large Spanish speaking population by hiring bilingual front line staff.  Our occupancy, and therefore collection rates, are far above what our competitors are telling us theirs are.

We also have had many tenants that speak neither English nor Spanish and have not had any serious problems due to this.  Most come to apply with an interpreter.   In most metropolitan areas there are also organizations such as the Spanish Center or Hmong Community.  We had a Russian tenant who spoke very little English.  We were able to communicate with them through a pastor at their church.

You should get the interrupter’s contact information so you are prepared if a future need arises. Also a quick internet search will most likely find an organization that can help you communicate with the tenant.

So you may find trying to work through the language barriers to be a bit more difficult, but also reaping rewards for the efforts.

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

A few other cases of note similar to Gallagher, Steinhauser, Harrilal et al(rental property owners) vs St. Paul, MN et al.

Armendariz v. Penman (9th Circuit)

An equal protection claim could be established for enforcement of housing and fire codes in an arbitrary and invidiously discriminatory manner.

http://caselaw.lp.findlaw.com/scripts/getcase.pl?navby=search&case=/data2/circs/9th/9355393.html

Read the rest of the post for more cases and be sure to add the ones you know ot the comment section.

DOJ v. Addison IL

The Department’s July,1995 suit alleged that the village had violated the federal Fair Housing Act by illegally tearing down Hispanic neighborhoods as part of an urban renewal program.

http://www.justice.gov/opa/pr/1997/August97/327cr.htm

HUD v Elgin IL

The City of Elgin, Illinois has agreed to pay $500,000 to settle longstanding complaints that its enforcement of housing codes discriminated against Latino residents.The settlement with the U.S. Department of Housing and Urban Development (HUD), Department of Justice and the HOPE Fair Housing Center of Wheaton, Illinois includes a fund to compensate the victims of code enforcement discrimination.

http://www.fairhousing.com/include/media/pdf/sept2002.pdf (at page 3)

http://fairhousing.com/index.cfm?method=page.display&pagename=advocate_sept02_page4

DOJ v. Fairview IL

http://www.justice.gov/crt/housing/documents/fairviewsettle.php

Metropolitan St. Louis Equal Housing Opportunity Council on discriminatory code enforcement:

“The target in Belleville is obviously lower income residents and naturally blacks within the community. Another major cause for concern about Belleville’s occupancy practices is that these other cities are now watching to see how the Federal and State officials respond to Belleville. Without a federal or state response I’m afraid that Southern Illinois will become like Montgomery Alabama in 1955 if it isn’t already? The U.S. Department of Justice is well aware of what has been going on in Belleville and has been for sometime. We at EHOC have found that often people have been afraid of coming forward with complaints until their struggle is recognized by some form of credible authority.”

http://fairhousing.com/index.cfm?method=page.display&pagename=releases_ehoc12-13-02
http://www.citizenreviewonline.org/Dec_2002/subject.htm

(There was a DOJ case, but I can’t find it)

DOJ v. Waukegan, IL

The city of Waukegan, Illinois, whose officials were accused of violating the Fair Housing Act by enacting a housing code to limit the number of Hispanic family members living together, has agreed to pay $200,000 in damages and fines under an agreement reached with the Justice Department.

City officials said they intended to prevent Hispanics from “taking over” Waukegan

http://fairhousing.com/index.cfm?method=page.display&pageID=3167

HOPE Fair Housing Center settles case against West Chicago

http://fairhousing.com/index.cfm?method=page.display&pageID=3474

Property owners and tenants v. Georgetown DE

(Summary Decision allowing case to proceed)

Plaintiffs also allege that defendants have developed a pattern and practice of discriminatory housing code enforcement, by targeting Hispanic units while ignoring and not inspecting units occupied by non-Hispanics

http://www.ded.uscourts.gov/SLR/Opinions/Sep2002/01-881.pdf

I’m sure I am missing many.  Please add your favorite cases to the comments section or email them to me.

City of St. Paul Inspection Dept to go to trial for Fair Housing violations.

Federal Court of Appeals ruled today that the combined cases of  Gallagher, Steinhauser,Harrilal (rental property owners) vs St. Paul will go to trial.

This is a very important case on code enforcement being used in a discriminatory manner.  Continue on to read the highlights with inks to the most recent decision.

This 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 each city employee must defend themselves as they, their co-workers and their employer have disparate interest.

For the city to win if the allegations are proven true they must claim rouge employees were acting outside of the law and contrary to department policy. For the inspectors to win they must argue that they were following instructions from their supervisors that they believed were legal.

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

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.

From my conversations with two of the plaintiffs over the past five or six 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.

Much of this is so similar to what we are seeing in Milwaukee.

Note the vacant building ordinance for example.  Our former Commissioner of Neighborhood Services had a number of conversations with his counterparts in MN, and proposed a number of ordinances that were based on what was on the books there.

Here is an except from today’s ruling

To demonstrate a disparate impact, Appellants have offered evidence supporting the following conclusions:

(a) The City experienced a shortage of affordable housing.  The City represented in its 2003 report to the U.S. Department of Housing and Urban Development (“HUD”) that “the lack of affordable housing opportunities remains a major issue facing many Saint Paul lower income households, who are also protected class members,” and that “27.6% of Saint Paul’s lower income residents cannot find adequate affordable housing in the City.”  Then, in 2005, the City estimated that 32% of the households in St. Paul had unmet housing needs (cost burdens, overcrowding, etc.).

(b) Racial minorities, especially African-Americans, made up a disproportionate percentage of lower-income households in the City that rely on low-income housing.  The district court noted that the parties agree that African-Americans make up a disproportionate percentage of low-income tenants in the City.  The City’s 2000 census data showed that 11.7% of the City’s population was African-American, whereas data from October 2004 showed that 61% and 62% of those on waiting lists for public housing and Section 8 assistance, respectively, were African- American.  Further, the City’s 2000 report to HUD showed that 52% of minority-headed renter households were in the bottom bracket for household adjusted median family income, compared to 32% of all renter households.

(c) The City’s aggressive Housing Code enforcement practices increased costs for property owners that rent to low-income tenants.  Appellants produced at least six affidavits describing the toll that the City’s aggressive Housing Code enforcement took on their rental business. They reported a substantial increase in costs, resulting in evictions for tenants and “forced sales” of their properties in some cases.  These allegations are corroborated by an internal memorandum from the City’s fire marshal in 1995, comparing the Housing Code and the HQS and concluding that the Housing Code was more strict in regard to 82% of the examined categories.

(d) The increased burden on rental-property owners from aggressive code enforcement resulted in less affordable housing in the City.  Documents from the City and the Public Housing Authority acknowledged that any decrease in federally assisted rental housing would reduce the amount of affordable housing in the City.  Those predictions were supported by the City’s Vacant Buildings Report, which showed that the number of vacant homes listed in the City rose from 367 to 1,466 between March 2003 and November 2007, which was a nearly 300% increase.  Further, Appellants submitted affidavits from three tenants who alleged that they endured hardship when their homes were condemned for minimal or false Housing Code violations.

These premises, together, reasonably demonstrate that the City’s aggressive enforcement of the Housing Code resulted in a disproportionate adverse effect on racial minorities, particularly African-Americans.  Viewed in the light most favorable to Appellants, the evidence shows that the City’s Housing Code enforcement temporarily, if not permanently, burdened Appellants’ rental businesses, which indirectly burdened their tenants.

Read the entire decision here.  I have a fairly complete set of pleadings if anyone wishes to study this more.

A lively discussion of the case on Ademocracy

I and others were crying tears of joy when we heard this news. It has been a long emotional ordeal for many of us.

There isn’t a jury in the entire world who could listen to this story and not favor the plaintiffs!

ABC News  -Landlord Suit Could Cost City Millions

A legal battle between the City of Saint Paul and a handful of landlords could force the city to pay millions.

It all centers around code enforcement.

Pioneer Press on the lawsuit.

A set of lawsuits alleging St. Paul’s housing-code enforcement discriminated against black tenants was given new life Wednesday when a federal appeals panel reinstated a portion of the case.

The allegations “reasonably demonstrate that the city’s aggressive enforcement of the housing code resulted in a disproportionate adverse effect on racial minorities, particularly African-Americans,” a three-judge panel for the 8th Circuit Court of Appeals wrote in overturning part of a 2008 dismissal of the case by U.S. District Judge Joan Ericksen.

Attorney Tristan Pettit is presenting the Landlord Boot Camp again this February.  Prior Boot Camps were very well received, with positive feed back from all that attended

Here is Tristan’s letter describing the event.

An interesting, soon to be published Wisconsin case on denial of a rental applicant.  This probably has little impact except for Section 8 applicants, but it could also be a basis for Fair housing questions too.

The Housing Authority denied an application because the prospective tenant had been found guilty in a default judgment on municipal citations for disorderly conduct, and assault and battery

Read the case here

From the  New York Post article ‘DIRTY’ WORDS IN ADS

Here are seven dirty words you can’t say in real-estate ads: exclusive, quiet, private, bachelor, kids, walking and playroom.

Yet HUD’s Fair Housing enforcement guidelines appear to be more reasonable and contradict this article.

Use of the term master bedroom does not constitute a violation of either the sex discrimination provisions or the race discrimination provisions. Terms such as ”mother-in-law suite” and ”bachelor apartment” are commonly used as physical descriptions of housing units and do not violate the Act