May 02

A reader suggests  (copy below) that much of the conversation regarding the new HUD directive on the use of criminal records in tenant screening is an attempt to  “beat the law.”  It is not.  Rather it is seeking to answer the question of how do rental owners reduce the disruption and danger of crime at their properties while also addressing the concerns of local governments and neighbors by avoiding renting to those prone to criminal activity.

Back in 2001 our company set a screening criteria that we used with only minor adjustments since.  (Copy Below) This was based on researching our failed tenants.  At that time, we found that misdemeanor convictions and evictions appeared impactful if they occurred within the past three years and felonies for drugs and violence in the past seven years.  I was surprised while reading HUD’s directive on the use of criminal records for screening that it references a report* that states the recidivism rate of criminals drops to the incidents of criminal activity in the general population at 6-7 years.  I guess we got that one right from our own data, without the fancy formulas used by the researchers. 😉

Note that HUD permits and perhaps even encourage the lifetime rejection of persons with drug distribution and manufacture convictions.  So it seems in HUD’s view, a kid with a misdemeanor possession with intent to distribute conviction can be excluded for is life, while the violent person only for a “reasonable” period of time and the habitual thief never. I question whether permitting the exclusion for drug crimes was done out of recidivism data or if it was a case of political will. I know people who have had drug issues and have overcome those problems to lead productive and successful lives.  Many of those charged with possession with intent to deliver often are simply users or addicts selling small amounts to support their habits.

Back when researching our current criteria we recognized that some applicants with criminal histories did not cause future problems. How do you identify those who were not a risk, from those who are?  We chose to accept those with a letter of recommendation from their PO despite having convictions. In the fifteen or so years since that policy has been in place, we found applicants with the PO recommendation have a failure rate below that of general applicants.  It is unlikely that a PO would put their name to paper if they did not believe in the client.

Our company’s existing screening criteria seemed to be close to the requirements under the HUD April 4th directive. We had to modify it to exclude simple possession drug convictions and theft convictions as  disqualifiers.  While I believe that both are indicators of tenancies that may fail, neither are permitted today.  We also reduced the lookback period on felonies from seven years to six.  The report  HUD based their finding on said 6-7 years.   I do not want to be arguing over being at the top end. And finally, we added more options than PO letters, although PO letters will remain an automatic qualifier if our other criteria are met.  Our revised criminal screening is attached below.  Use it at your own risk if you wish and remember that I am just a landlord, not an attorney.

The part of the challenge is municipalities attempt to shift responsibility for criminal acts from the criminal to the owner of the house they live in through nuisance ordinances.  These laws encouraged owners to have strict no criminal screening policies.

If you go to neighborhood meetings, you will find that most people who live in neighborhoods where your properties are located will be angry if you rent to anyone with a criminal history regardless of the charge or how long ago it was.

This attempt by HUD to solve a problem that was not created by the housing industry (discriminatory law enforcement) creates a solution that makes screening and complying with nuisance laws far more difficult and far more prone to litigation.

All this leads to a tough balancing act for the property owners – far more difficult and involved than simply trying to “beat the law.”

* Megan C. Kurlychek et al., Scarlet Letters and Recidivism: Does an Old Criminal Record Predict Future Offending?, 5 Criminology and Pub. Pol’y 483 (2006) (reporting that after six or seven years without reoffending, the risk of new offenses by persons with a prior criminal history begins to approximate the risk of new offenses among persons with no criminal record).

http://www.albany.edu/bushway_research/publications/Kurlychek_et_al_2006.pdf

Affordable Rental Associates’ Revised Screening Criteria (To open the conversation, not for your use without your attorney’s review):
  • Municipal Convictions* related to manufacturing or distributing a controlled substance, crimes that indicate a demonstrable risk to the safety or peaceful enjoyment of residents or neighbors, and/or property damage: No convictions in 2 years.
  • Misdemeanor Convictions* related to manufacturing or distributing a controlled substance, crimes that indicate a demonstrable risk to the safety or peaceful enjoyment of residents or neighbors, and/or property damage: No convictions in 3 years.
  • Felony Convictions* related to manufacturing or distributing a controlled substance, crimes that indicate a demonstrable risk to the safety or peaceful enjoyment of residents or neighbors, and/or property damage: The latter of 6 years after conviction or 4 years after release from custody
  • Unresolved Cases* related to manufacturing or distributing a controlled substance, crimes that indicate a demonstrable risk to the safety or peaceful enjoyment of residents or neighbors, and/or property damage or charges that may result in imprisonment for more than 15 days: Application will be considered after resolution of the case.
    * Criminal record exception will be made for applicants with otherwise acceptable rental history and income upon positive written reference from their Parole Agent or other official on government letterhead. Other factors may be considered on a case by case basis. It is the responsibility of the applicant to supply any supporting information and documentation
Bill Writes

Much of the conversation I hear about this new directive is about figuring out ways to beat the law. I’m sure we landlords will come up with something and our lawyers will try to protect us.  But lets be realistic.  Most rental policies look back 3-5 years. Each town is different,  but most people returning from incarceration can only afford to live in low income neighborhoods. Much of this won’t apply to the higher end of the market.

Here is a little recognized fact.  About 50% of the people leaving Wisconsin prisons are Caucasians! With the increase of drug felonies and prison time courtesy of the Heroin epidemic, more are released to places like Waukesha, Appleton, Wausau, Green Bay, Janesville, La Crosse, Stevens Point than ever before.  Its true Milwaukee has a larger racial component that other parts of the state, but the fact remains, people returning from incarceration will likely live in rentals in the low income neighborhoods of your city. They make up a significant portion of the tenant pool.  Figuring out a good way to bring these people back into the market is good business.

So why not  define the best practices way of working with our tenants?   HUD issued a letter [ Notice PIH 2015-19] in 2015 to the Public Housing Authorities doing just that for PHA’s http://portal.hud.gov/hudportal/documents/huddoc?id=PIH2015-19.pdf

Not all of this applies to us private landlords, but we can come up with our own list, run it by the attorneys, and Fair Housing.  Please email me your thoughts at billtoday43@aol.com.
In some neighborhoods the percentage of people without criminal history is much smaller than those that do.  

Second interesting fact. Most people do not re offend.  Recidivism is steadily going down in Wisconsin.  Most of the people sent back to prison are for crimeless revocations, meaning that a P.O. sent them back because of a rule violation, not a new crime. While caution in rental practices is warranted, fear is not.

Lastly, Felons are among us!!!  Its estimated that about 700,000 felons live in Wisconsin and they don’t all live in Milwaukee!  But most will live in low income neighborhoods. People on supervision make better tenants than those who are not because the fear of going back is a greater influence on current behavior.  They usually double up with family, friends, spouses, or partners. Anybody who owns property in these neighborhoods know the signs.  So lets be the leaders we are and get in front of this!

Apr 19
Over on  the ApartmentAssoc at YahooGroups list Bill Lauer wrote:
Since we use conviction records as a screening criteria, it is important to consider this in the larger societal context. The disparate impact issue starts way before someone applying for an apartment. This is a simplified version of a much longer story. The sex offender issue is different so lets make that a different discussion.
 
For example, Landlords use felony drug records to screen.  We now know that drug laws were written to unfairly punish one group over another.  For example, the sentencing differences between powder cocaine and crack cocaine.  First offenders with powder cocaine, used largely by white people, often times got off with probation.  Offenders with the same weight of crack, used largely by Black offenders, went to jail or prison. This is where the disparate impact begins.
 
Another example is the criminal  differences between alcohol use, used largely by whites,  and marijuana, used largely by young liberals and Blacks.  http://www.cnn.com/2016/03/23/politics/john-ehrlichman-richard-nixon-drug-war-blacks-hippie/
 
We know that cops overcharge so that “deals” can be made later in the process.  Deals usually come with reduced charges with higher fines in exchange for little or no jail time.  If you don’t have the money, you sit in jail. We know that if you had  the money for a lawyer  you could beat the charges and stay out of jail.  If you didn’t have the money, well, you went to jail, because there was nobody that could make the deal.  And of course, what groups don’t have the money for good lawyers?
 
So now enter the  Heroin epidemic. The current form has been going on for about 10 years, about 6 in Wisconsin.  It is largely affecting white middle class kids.  They go to treatment a few times, they go to prison for possession, maybe theft, prostitution, and burglary.  They come out as felons who can’t go home to their parents, they can’t get a decent job, nor decent housing. This is the push behind a lot of these changes, now, at this time. You can’t give the white kids a special deal for their medical condition of addiction without applying that equally across all protected classes.
 
 Also, the industry’s response to being made more responsible for tenants behavior, [starting 20 years ago] coupled with easy access to  records through the Internet have had a long term, unintended consequence that we as an industry, really need to look at.  As Tim says below, this is nothing that was not predictable.  But we weren’t proactive, so now we get to be reactive.
 
The wave of change in the criminal justice system that this HUD letter represents has got a lot of momentum. Its 25 years in the making.  Coupled with the pressure of governments to reduce the cost of prisons, we’ll see a lot more change in the upcoming 5 years as America empties its prisons.  And they all need a place to live.
 
Bill Lauer
 
I mean….If you follow Ron Johnson’s career, who in a million years would have guessed that he would be calling for more drug treatment, more action, spending more money on junkie, on national TV in WAUKESHA???????  Sitting  next to Tammy Baldwin!

Bill is right.  But this is wrong.

Yes, the HUD screening directive is in response to a criminal justice system that appears skewed against racial and social minorities.

The method chosen to correct the underlying problem completely ignores the cause.  Rather, the Federal Government and the Administration made screening more complex and litigious instead of addressing unequal enforcement of criminal and municipal laws. Sure in the most egregious situations like Ferguson you see the government step in.

In general, this is another issue forced upon owners who were not the cause. This is a lot like the lead paint situation where the government permitted the use of a known dangerous product for decades, even requiring its use for some federally funded housing, before leaving most of the cost and legal challenges in the lap of the property owners.

So now owners will have to walk even more of a tightrope – rejecting far less applicants for criminal records may keep HUD happy, but then you have to deal with nuisance property concerns and worries that someone you put in may harm other tenants, employees or neighbors.

Apr 12

Last week HUD issued a directive on the use of criminal records in tenant screening.  On the surface, this ruling would prohibit blanket rejections for criminal records, ostensibly including a blanket prohibition against sex offenders.

Renting to registered sex offenders cause anxiety for your neighbors. And I do not disagree with their sentiments.  I would not have wanted someone on the registry living next to me when my children were small and I certainly would not want one living next to my grandchildren today.

I expressed my concern that owners would have to begin accepting  sex offenders to AASEW General Counsel, Heiner Giese.  Heiner brought to my attention that in Milwaukee only 55 properties meet the Milwaukee Sex Offender Residency rule.  The rule penalizes the offender, not the property owners.

If your properties are outside of Milwaukee you may be required to accept sex offenders under the HUD directive.  However, this HUD rule was implemented to address disparate impact of such screening processes as they impact existing protected classes.  It does create a new protected class per se.  Most sex offenders are White males which should make this less of an issue under the April 4th, 2016 HUD Fair Housing letter.

Some people are very passionate on these issues as the recent FaceBook discussion regarding screening for criminals shows. There is, of course, many larger issues with the sex offender registry.  The two kids experimenting in the back of the Chevy probably should not be branded for life on an offender registry.  Remember that 48% of kids have had sex by the time they are 17.  The first sex offender in WI was a case similar to this in Palmyra.

Not that I am an advocate for sex offenders, Affordable had a prohibition against sex offenders renting from us for as nearly as long as the registry existed, but the abundance of residency restrictions will ultimately cause politicians or judges will make them a protected class.  Then all owners, including government housing, will have to rent to them unrestricted throughout the community.

Miami adopted a similar 2,500-foot restriction in 2006.  This resulted in the sex offenders forming a cardboard box camp under the bridges of the Julia Tuttle Causeway, I-195.  In 2010, the city of Miami bulldozed the camp.  It then cost the city $1000 per month per offender that was relocated to house them in hotels.  256 offenders stopped reporting their addresses in the process.

People smarter than me need to find the answer but trust that it will become a problem for everyone if left unaddressed.

 

Apr 05

On April 4th, 2016 HUD guidelines on the use of criminal records in tenant screening were released. This is a game changer that negates much of what was achieved with the crime-free portion of Wisconsin 2015 ACT 176. It also impacts all screening.

No longer can arrests be considered in screening. Convictions may be considered, but only those convictions that directly relate to the safety of the property or its residents.

“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”

Amazingly the directive does not appear to allow consideration of neighbors safety, only residents. So does this mean an axe murdering rapist drug dealing member of the local street gang must be allowed to rent any single family as long as they meet your income guides?

The real losers in this will be the law-abiding tenants and their neighbors

Sep 04

There is a discussion over on theApartment Association email discussion group about income criteria for unmarried co occupants vs. married occupants.

A tenant is a tenant, regardless if they are married, cohabitation, straight, gay, white, black or green.

If you are using a reasonable income criteria for screening, that is good as long as you don’t factor in the other things such as marital status.  

Your protection if occupant A departs on month two of a year lease is to let occupant A know you are not releasing them from the obligation they have to you under the rental agreement. Simply moving out does not relieve the vacating tenant from their obligations under the rental agreement. 

As soon as you start analyzing if applicant A has enough income without applicant B for unmarried tenants, but consider the income of both undividedly  for married tenants you are running afoul of Fair Housing, at least in Wisconsin.

While marital status is not a protected class under Federal Fair Housing, it is a protected class under Wisconsin’s Open Housing Law and in a number of other jurisdictions.

Plain English version:

https://dwd.wisconsin.gov/dwd/publications/erd/pdf/erd_9523_p.pdf

Statute:

https://docs.legis.wisconsin.gov/statutes/statutes/106/III/50/1

106.50 Open housing.

(1)  Intent. It is the intent of this section to render unlawful discrimination in housing. It is the declared policy of this state that all persons shall have an equal opportunity for housing regardless of sex, race, color, sexual orientation, disability, religion, national origin, marital status, family status, status as a victim of domestic abuse, sexual assault, or stalking, lawful source of income, age, or ancestry and it is the duty of the political subdivisions to assist in the orderly prevention or removal of all discrimination in housing through the powers granted under ss. 66.0125 and66.1011. The legislature hereby extends the state law governing equal housing opportunities to cover single-family residences that are owner-occupied. The legislature finds that the sale and rental of single-family residences constitute a significant portion of the housing business in this state and should be regulated. This section shall be considered an exercise of the police powers of the state for the protection of the welfare, health, peace, dignity, and human rights of the people of this state.

Apr 30

Over on the ApartmentAssoc Yahoo Group an owner asks:

I’m wondering if we would be discriminating to look for one person rather than two, whether a couple or whatever…because we are both over 55 and can’t take the noise we’ve taken through the years…even between couples yelling at each other. Do we have to declare the house 55 and older and find someone over 55 for the lower?  I thought I read a post that said if you are living in the other unit in the house you can…? 

Seems like Fair Housing question month.

Is this your personal residents?  There is an exemption to the Federal Fair Housing law for owner occupied 1-4 family properties. It is called the Mrs. Murphy exemption.   The exemption does NOT apply in Wisconsin however.  

Wisconsin 106.50 

106.50  Open housing.

(1)  Intent. It is the intent of this section to render unlawful discrimination in housing. It is the declared policy of this state that all persons shall have an equal opportunity for housing regardless of sex, race, color, sexual orientation, disability, religion, national origin, marital status, family status, status as a victim of domestic abuse, sexual assault, or stalking, lawful source of income, age, or ancestry and it is the duty of the political subdivisions to assist in the orderly prevention or removal of all discrimination in housing through the powers granted under ss.66.0125 and 66.1011. The legislature hereby extends the state law governing equal housing opportunities to cover single-family residences that are owner-occupied. The legislature finds that the sale and rental of single-family residences constitute a significant portion of the housing business in this state and should be regulated. This section shall be considered an exercise of the police powers of the state for the protection of the welfare, health, peace, dignity, and human rights of the people of this state.

If you do not live in WI here is a good reference to state laws on the “Mrs. Murphy” exemption:

Even under the Federal “Mrs.Murphy” exclusion you are not permitted to advertise an otherwise discriminatory preference, so if you do not qualify under the housing for older persons exemption you could not, lets say, advertise ‘adults only’ or ‘one person only’.  If you do qualify you can advertise 55 and older.

I could not advise you on the housing for older persons question as it is not a issue that I deal with.  

My assumption is if one unit is vacant you do not meet the standard, but I may be wrong.  I would ask the Division of Equal Rights directly:

https://dwd.wisconsin.gov/dwdsendmail/mailtodwd.aspx

Sub (5m)(g) may offer some relief:

(g) A person may not be held personally liable for monetary damages for a violation of sub. (2)(2m) or (2r) if the person reasonably relied, in good faith, on the application of the exemption under this subsection relating to housing for older persons. For purposes of this paragraph, a person may show reasonable reliance, in good faith, on the application of the exemption under this subsection relating to housing for older persons only if the person shows all of the following:

1. That he or she has no actual knowledge that the housing is not or will not be eligible for the exemption.

2. That the owner of the housing has stated formally, in writing, that the housing complies with the requirements for the exemption.

Apr 24

 

Over on the ApartmentAssoc Yahoo Group an owner asks:

The person who would occupy the second floor apartment is older, and I have no real accommodation for mobility issues… is there a polite / legal way to ask before hand since I wouldnt be able to put them in once the person is there (( is there a list / guide to requirements in this regard ? )). 

You should make sure the applicant understands what they are renting ‘This is a second floor apartment’ , but not is a tone to discourage them from renting.    Obviously you cannot say ‘I think you are too old to climb our steps.’  

As far as accessibility modifications, in general you are required to permit the reasonable modifications but are not required to pay for the modifications in pre 1991 housing.  You can require the tenant at the time of move out to restore it to how it was prior to adding the accessibility modifications.  However in most cases doing so would be foolish as you the mod could be a high demand attribute that would make your unit more desirable to other tenants with similar needs. 

Apartments built or substantially modified after 3/1/1991 are required to meet the ADA standards. If that standard was not met during construction, the owner must update it to the ADA requirements. Of course you may be able to sue the builder to pay for it. 😉 

Here is a real good guide to the reasonable modifications requirements

You are required though to make reasonable accommodations, which is different than reasonable modifications.  An example is assigning a parking spot closer to the door for a person with mobility issues if they request this.  

One reasonable accommodation request  that many owners get wrong – if a person is on SSI due to a disability and therefore receives their check on a day other than on the first, you must modify their rent due date and not charge late fees. [Case]

When you decide it is up to you to determine what may or may not work out for a prospective tenant is when you get in trouble. 

There is a Fair Housing case from La Crosse where a landlord refused to rent to a single mom because the property had a long drive that was the tenant’s responsibility to shovel, which the landlord felt would be difficult for her to do.  The landlady’s attempt to take it upon herself to determine what would or would not work for the tenant cost the landlady $15,000 plus I’m sure some costs.  The right thing for the landlady to do would have been to point out to every prospective tenant that shoveling the driveway was their responsibility and failing to do so was a lease violation.

There are countless cases of owners who got in trouble for restricting families with children from living on the second floor, or living next to the pool.  The former being for the convenience of the other tenants and the latter being out of fear of children drowning.  Neither are legitimate reasons within the confines of Fair Housing.

Apr 21

The Diagnostic and Statistical Manual of Mental Disorders describes hoarding as a mental disability and therefore most likely covered by the Americans with Disabilities Act and the Federal Fair Housing Act.  As such property owners are required to make reasonable accommodations. I would concur with this.

However there is also the health and safety exception to the reasonable accommodation requirement. This is where it gets difficult for the property owner, those doing social intervention and of course the person with the hoarding behavior. Hoarding can contribute to issues like insect and rodent infestations. Hoarding also can create fire hazards. Often hoarding is a violation of the local housing codes.

In response to a reasonable accommodation request an owner would have to balance the actual risk to health and safety to determine if the request was reasonable or not. Note actual risk and not potential risk that are not directly related to this tenant or applicant.

The ability for an owner to address the situation in a manner that does not involve eviction is often hampered by DNS’ response of placarding or threatening to placard buildings due to clutter and housekeeping. A few years ago I had a long term (~15 years) tenant who always kept her house immaculate until her son was murdered. After that she would not get rid of anything. We had to evict her due to the threat of placarding.

In my view, especially after that case, is hoarding is a disability. Having some sort of intervention available other than homelessness is the right thing.

There is the newly formed Milwaukee County Hoarding Task Force. I think this is a great potential resource not only for those with the disability but to help people in our industry make proper decisions in response to finding hoarding and or clutter at the properties.

I invited the Task Force to submit an article for the Apartment Association newsletter as well as speak at a future meeting if they wish and/or distribute informational materials at our meetings.

Jan 06

Attorney John Shoemaker sends us:

http://www.scotusblog.com/2015/01/symposium-the-case-for-disparate-impact-under-the-fair-housing-act/

Update on Disparate Impact fight set for oral argument 1/21/2015 before the US Supreme Court in Texas Department of Housing and Community Affairs v. Inclusive Communities Project.

——–

1/6/2015

Symposium: The case for disparate impact under the Fair Housing Act

Joe Rich and Thomas Silverstein are attorneys at the Lawyers’ Committee for Civil Rights Under the Law, which filed an amicus brief in support of the respondent, Inclusive Communities Project.

A decision from the Supreme Court upholding the use of the disparate impact standard to enforce the Act will preserve long-settled expectations and avoid upending decades of settled case law, an untenable outcome that would absolve actors who have known for decades that they are liable under the Act for actions with significant, unjustified disparate impact.

“The text of the FHA is likely to be the primary focus of the Court. On its face, the statutory language strongly supports the conclusion, uniformly accepted in the lower courts for nearly four decades, that the Act authorizes disparate impact claims.

[Will Justice Scalia give deference to HUD’s interpretation of the Fair Housing Act?]

“Even if the Court concludes that the text of the Act does not conclusively support recognition of disparate impact claims, the language is, at a minimum, ambiguous. Indeed, in the wake of decades of consistent judicial interpretation supporting the disparate impact standard, it is hard to imagine how the Court could conclude that the language of the Act is unambiguously limited to disparate treatment claims.  The Court made clear in Chevron, U.S.A., Inc. v. NRDC, Inc., that when a statute “is silent or ambiguous with respect to the specific issue, the question for the court is whether the agency’s answer is based on a permissible construction of the statute.” The agency has the power to “fill any gap left, implicitly or explicitly by Congress.” Under Chevron, the Court ordinarily defers to an administering agency’s reasonable statutory interpretation, and Justice Antonin Scalia gave such deference to the EEOC’s interpretation of the ADEA in his concurring opinion in Smith.

“Texas agrees — it argued in the Fifth Circuit in this case that HUD’s interpretation of the FHA should be afforded Chevron deference, and it prevailed when that court adopted HUD’s three-part burden-shifting approach for disparate impact claims under the Act. It is more than a bit ironic that Texas, which was victorious in the Fifth Circuit and yet sought Supreme Court review, now abandons this position.

Oct 23

John Shoemaker is one of the nation’s leading attorneys in the defense of the rights of rental property owners , and subsequently the rights of low income residents who live in rented housing.  He specifically addresses Milwaukee and its HUD Grant application in this letter.  I share this with letter with his permission.  It’s long, but if you intend to be part of low to moderate income housing you need to read this. — Tim Ballering

October 22, 2014

Tim:

I am following up to my recent emails to you about the legal challenges private low-income housing providers have made in Federal District Court in the Twin Cities since 2004.

We are in our 10th year of federal litigation against Twin Cities’ municipalities, with six federal (Minnesota District) lawsuits still active (four lawsuits vs. the City of St. Paul – 14 total housing providers as plaintiffs: the three Gallagher vs. Magner consolidated cases that were before the U.S. Supreme Court in 2011-12, now awaiting trial; and the McRath vs. St. Paul case in discovery; and two lawsuits recently filed vs. Minneapolis – two providers as plaintiffs: Folger vs Minneapolis, Court File 13-cv-3489; and Ellis vs. HUD and Minneapolis, Court File 14-cv-3045).  Recently, the federal court allowed housing provider Folger’s Fair Housing disparate impact lawsuit against Minneapolis to move past a motion to dismiss and that case is now in discovery. There are approximately 200 properties directly involved in these matters but the outcome of the litigation will impact hundreds if not thousands of other low-income properties.

Outside of these federal lawsuits, we have rarely seen much organized opposition from private real estate investors in response to oppressive public sector housing policies and actions.  This is so even though the local government policies negatively impact the return on investment and incentives to continue providing affordable housing offered by the private market, and negatively impact the availability of such housing at rental rates that are affordable at under 30% of area median income.

Municipalities benefit from this lack of organization among private low-income housing market participants by focusing police power and public resources against each investor one at a time, picking off good, honest, hard-working Americans through ever-increasingly high regulatory standards, confiscatory fees, assessments and fines, targeted enforcement actions, other regulatory burdens and outright illegal policies and conduct.  Low-income citizens who seek safe, decent and sanitary housing in the inner-city communities from private providers, suffer as the public sector actions cause displacement and keep housing units offline for longer periods of time than would be the case if the private market was allowed to operate within traditional legal boundaries, without oppressive local government regulation and illegal policies and conduct.

Challenging these illegal public policies and actions through litigation is not the best option in many situations as the heavy burden of court costs, attorney’s fees and expert fees is barrier to most owners of low-income housing pursuing redress of injuries against local governments.  Owners usually experience an extended period of forced reduction in rental income and related dramatic increase in expenses directly from oppressive, targeted government actions against them. In a marketplace where profit margins are thin, local governments tend to drain private investor’s resources through heavy every day regulatory costs, so by the time litigation may be an option to preserve the portfolio and lifetime of investment, financial resources to carry the battle to court may be few. Many owners have drained available financial resources by the time they decide they need assistance in their fight.  Many owners simply choose to walk away from their investment as they have no remaining resources to fight for extended periods and are unable to retain legal counsel to preserve their rights and fight for change.  Nevertheless, in certain instances, litigation would be the best option where fighting back to save a rental portfolio is deemed necessary, especially if damages are significant or the threat of losing everything is very real and present.

 What if private housing providers organized on a national, regional and/or state level and pooled their resources and joined the cause?  That might move the process of change forward, albeit slowly over an extended period of time.  One strategy might be to pool resources of time, talent and money for not just litigation but also lobbying at the local and state levels to publicly voice opposition to harmful public housing and related policies and advocate for reasoned approaches that preserve property rights, liberties, affordable housing and investments.  We might consider creating a national or regional group of interested and experienced leaders and counsel to roundtable on these issues, including litigation strategies and to examine possible formation of citizen-investor groups to focus on selected municipalities where the fight is particularly advantageous to our cause.

There are other options for real estate investors in the low-income housing market outside the Court process and normal city council hearing process to address these legitimate concerns.

Private housing providers are eligible to file Complaints with the United States Department of Housing and Urban Development (“HUD”).  We have filed three Housing Discrimination Complaints for a total of 16 housing providers and other interested parties with HUD since November 2012. HUD has not been cooperative and has taken every opportunity to delay having to accept complaints and to investigate complaints by private housing providers against local municipalities.   This obstructive behavior by HUD arises I believe from the political animal HUD truly is, especially where the local government leaders are of the same political party as those in the Administration in Washington.

We have started the process this year of bringing HUD into the federal litigation as an interested party under the theory that federal law requires HUD to monitor and take actions to curtail violations of federal law by local governments and their officials.  HUD has a federal statutory duty to honestly monitor and hold accountable local governments that receive federal grant funds where complaints are presented to HUD of wrongdoing by those jurisdictions. Courts have held HUD liable for damages and injunctive relief where HUD has continued to fund local entities with knowledge of discriminatory policies at the local level.  Minneapolis and HUD have notified us that they will be seeking dismissal of the most recent lawsuit in January 2015.

While it might not be a cure-all, I believe the private housing providers must speak up at the local government level during the federal grant funding process.

Milwaukee is a yearly recipient of federal grants, including a number of grants administered by HUD.  Milwaukee is recognized as an “Entitlement Jurisdiction” for federal HUD funding purposes which means the City applies to and obtains the grants from HUD directly, versus through the State of Wisconsin.  One major grant program is called the Community Development Block Grant program, “CDBG”. As a federal grant funded Entitlement Jurisdiction, Milwaukee must conduct an “analysis of impediments to fair housing choice” (“AI”), every 3-5 years, although HUD strongly recommends each City receiving CDBG funds review the “AI” every year. The official definition of an “AI” is found in HUD’s Fair Housing Planning Guide (“FHPG”), see attached and see http://www.hud.gov/offices/fheo/images/fhpg.pdf

The “AI” is a review of impediments to fair housing choice in the public and private sector. The AI involves:

  • A comprehensive review of a State or Entitlement jurisdiction’s laws, regulations, and administrative policies, procedures, and practices
  • An assessment of how those laws, etc. affect the location, availability, and accessibility of housing
  • An assessment of conditions, both public and private, affecting fair housing choice for all protected classes
  • An assessment of the availability of affordable, accessible housing in a range of unit sizes.
  • The FHPG (Sections 2-16 to 2-17), provides: “Impediments to fair housing choice are defined as:
  • Any actions, omissions, or decisions taken because of race, color, religion, sex, disability, familial status, or national origin that restrict housing choices or the availability of housing choice
  • Any actions, omissions, or decisions that have this effect.  (Note: This means, “Disparate impact”).
  • Policies, practices, or procedures that appear neutral on their face, but which operate to deny or adversely affect the availability of housing to persons because of race, ethnicity, disability, and families with children may constitute such impediments. (“Disparate impact”).
  • Have the effect of restricting housing opportunities on the basis of race, color, religion, sex, disability, familial status, or national origin.  (“Disparate impact”).
  • HUD’s FHPG provides that Milwaukee must analyze the following subjects of City laws, policies and actions on how those laws, policies or actions affect housing choice for low income and protected class members:

4.3       AI SUBJECT AREAS

Public Sector

  1. Local building, occupancy, and health and safety codes that may affect the availability of housing for minorities, families with children, and persons with disabilities, such information should be available through a review of local laws and ordinances relating to these subjects.
  2. Public Sector – other actions –
  • Building codes
  • Local zoning laws and policies (e.g., minimum lot size requirements, dispersal requirements for housing facilities for persons with disabilities in single-family zones, and restrictions on the number of unrelated persons in dwellings based on size of unit or number of bedrooms)
  • Demolition and displacement decisions pertaining to assisted housing and the removal of slums and blight (e.g., relocation policies and practices affecting persons displaced by urban renewal, revitalization, and/or private commercialization or gentrification in low-income neighborhoods)

Federal grant funding to Milwaukee, that includes CDBG, is processed under a Consolidated Planning process whereby: (1) every 5 years, a Consolidated Plan is prepared by Milwaukee with citizen participation and submitted to HUD showing the five year plan; and (2) every year during the five year period the City must provide HUD with an Action Plan and a CAPER (Consolidated Annual Performance and Evaluation Report). By providing detailed financial and beneficiary information in the CAPER, the City explains to HUD and the community how the City is carrying out its housing and community development strategies, projects, and activities.

Milwaukee is now near the end in the process of preparing its five year Consolidated Plan submission for 2015-2019 to HUD.  Part of the required Con Plan process is Citizen Participation [footnote 1], where the City must hold hearings and provide access to Plan information and documentation for community members to review and submit oral and written comments about the City’s plans for using federal grant funds during the next 5 year period. See http://city.milwaukee.gov/NeighborhoodStabilizationProgramNSP/NSP-Meetings—Con-Plan.htm#.VEhAXBYzISg

It seems that most of the meetings/hearings on NSP occurred in March 2014.  But, some meetings and or hearings on the 2015-19 Con Plan may still be on-going.  https://www.facebook.com/events/468204259974633/

Meeting occurred in March 2014.  See http://urbanmilwaukee.com/pressrelease/public-invited-to-offer-feedback-on-spending-plan-for-federal-funds/

states period to comment would end July 2014.

However, HUD says that Complaints about how the City’s housing policies and actions have negatively impacted low-income housing providers and their customers (tenants), impacting the availability of affordable housing and the incentives to continue to provide such housing, can be submitted to the City and/or to HUD at any time.   http://portal.hud.gov/hudportal/HUD?src=/program_offices/fair_housing_equal_opp/complaint-process

I have attached a copy of the draft HUD Consolidate Plan submission for Milwaukee for 2015-2019.

While there are many interesting bits of information in the Plan, see page 8 – City’s proposed code enforcement efforts in next 5 years.

Barriers to affordable housing, see page 103.

See also pages 139 (City goals summary including code enforcement, lead based paint abatement, demo), page 142-43, 146 (homeowner vs rental production- but most blacks need rental).

Also note that Milwaukee is planning on acquiring more vacant homes including foreclosure properties.

 We have discovered here in the Twin Cities, that Cities acquire claimed distressed properties (including those that the City acquired after targeting them) and then hold those properties off market for 3-5 or more years – until they have the money to develop them from federal or other sources and so as they claim, stabilize the real estate market in the inner city.  Through use of a land bank concept, the properties are off-limits to the private market much like the “First Look” program whereby bank REO properties in the inner-city are offered first off-the-books to local governments and NGOs, thereby prohibiting private market acquisition. We learned of this policies through the Cities’ applications for federal Neighborhood Stabilization Program grants (NSP) funding from 2009 and thereafter.

You will be able to learn more about Milwaukee’s use of NSP grants and the issues I have raised herein by looking at the City’s website on NSP funding – see the following link: http://city.milwaukee.gov/NeighborhoodStabilizationProgramNSP.htm#.VEg2DRYzISg

Here in the Twin Cities, we have local government policies that interfere with the normal “ups and downs” of the real estate market and exacerbate the affordable housing crisis.  These local government policies prohibit transfer of ownership of vacant homes without local government approval and require massive investment into claimed distressed homes before re-occupancy. These policies have directly led to an extended period of blight in the inner-city as the normal 300-400 annual vacant homes in St. Paul has continued for eight years at 4-8 times those levels, including above 2,000-2,400 for a number of years.   These local government policies extend the high number of vacant homes for longer periods thereby allowing local governments to control the disposition, ownership and use of these homes.

The continuation of these policies year after year has negatively impacted property (sales) values of homes including older rental properties; however, the tax assessments are continuing at high valuation levels.

Combined City efforts of heavy, targeted code enforcement and high rates of demolitions with associated demo assessments, along with the high number of foreclosures and vacant homes, has led to a golden opportunity for local governments to acquire these claimed distressed properties.  City acquisition of large numbers of claimed distressed properties and the policy of holding those properties offline from sale and redevelopment, along with the lack of production of significant numbers of new affordable rental units for those at under 30% AMI, has exacerbated the unavailability of affordable older housing to meet the high demand for rental housing.

Here, local government documents demonstrate that City officials are seeking to keep private investors from acquiring distressed properties; are placing deed restrictions on renovated homes prohibiting rentals; city policies are de-converting multi-unit rental buildings and homes to smaller number of allowed units – duplexes de-converted to single family homes, and 4-plexes to duplexes.  There are thousands of vacant homes that could be quickly and economically repaired to reasonable housing standards and let out to those in need of rental housing. Instead local governments are requiring massive renovation investment to City-approved standards (including Green Energy) in order to re-occupy these homes.

Federal, state and foundational funding is insufficient to renovate the inner-city older housing stock yet the City will allocate federal funds to each project at levels many times above the amount the private market would or could justify.  Government funding for the expensive renovation and subsidies for new owners, is actually wasted while claiming to develop and preserve affordable housing.  A small portion of the overall Millions in grant and other government funds currently being committed yearly to the government and NGO renovation projects producing a small number of housing units, could be provided to the private market for repairs and commonsense renovations.

With the high demand for affordable rental housing units by poor, minority families, a reasoned argument can be made that available government funds should be spent first on policies that ensure there are enough affordable housing units for most of those in need with ability to pay.  The private market has the time-tested solutions for issues related to timely production of safe, decent and sanitary rental units including renovated units to reasonable standards.  Instead, local government policies are focused on prohibiting the private market solutions and producing expensive renovations to a limited number of homes in the large pool of vacant homes. Government policies like this in the short term only produce minimal numbers of available units and most of them for home-owners only.  It also keeps thousands of low-income and minority families on the waiting lists for affordable housing.

Again, thank you for your interest in our fight for justice here in the Twin Cities.

I look forward to discussing these issues with you.

John

John R. Shoemaker

Attorney at Law

SHOEMAKER & SHOEMAKER, PLLC

Highland Bank Building

5270 West 84th Street

Suite 410

Bloomington, MN 55437

(952) 224-4610

P.S:  In July 2013, HUD proposed a federal regulatory rule called, “Affirmatively Furthering Fair Housing” that has long been a federal funding requirement of all Entitlement Jurisdictions, including Milwaukee. Section 808(e)(5) of the Fair Housing Act (42 U.S.C. 3608(e)(5)) requires that HUD programs and activities be administered [including by grant recipients) in a manner affirmatively to further the policies of the Fair Housing Act.

The new AFFH rule replaces the “AI” process with a Fair Housing Assessment.

To review the new AFFH rule, see https://www.federalregister.gov/articles/2013/07/19/2013-16751/affirmatively-furthering-fair-housing

Final action by HUD on the new AFFH rule is expected in December 2014.

HUD says the AFFH rule is designed to lower the number of lawsuits against local government units.

 HUD Fair Housing Planning Guide

Milwaukee_ConPlandraft-June182014 copy

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