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How Land Use and Zoning Reforms Can Increase the Availability of Affordable Housing

At present, there is a shortfall of more than 1.5 million affordable housing units in the United States (see Overcoming the Nation s Daunting Housing Supply Shortage, Urban Institute, 2021). As a result of the housing shortage, families pay more for housing and have less savings. They struggle to attain homeownership and find it difficult to access jobs. Local land use regulations and zoning rules contribute to the national housing supply crisis by artificially limiting housing construction and increasing costs. This article will summarize the impacts of restrictive land use policies and outline reforms that state and local governments may adopt to increase the supply of affordable housing. Much of the information in this article is taken from a study by The Department of Housing & Urban Development (HUD) and published by the HUD Office of Policy Development & Research. Relevant Research  Restrictive land use and zoning laws are major drivers of the national housing shortage. Short-sighted local policies increase the cost of housing, limit economic growth, accelerate climate change, and maintain residential segregation. According to "The Impact of Building Restrictions on Housing Affordability," (Wharton Real Estate Review 7:  5-14, by Edward Glaeser and Joseph Gyourko), the relationship between restrictive land use and zoning regulations and housing prices is especially significant in areas with higher demand. The greatest impact is on lower-income renters and starter homes for first-time homebuyers.  Recent research has demonstrated how restrictive zoning limits a worker s ability to move to regions experiencing job growth, which has stunted national economic productivity and growth. (See "Housing Constraints and Spatial Misallocation",  American Economics Journal: Macroeconomics 11 (2): 1-39, by Chang-Tai Hsieh and Enrico Moretti). This lack of affordable housing also limits a worker s ability to find housing near employment centers.  This creates longer commutes and limits the ability of employers to attract workers. This forced living in car-dependent locations increases transportation costs and carbon emissions.  Many places use zoning restrictions to limit the types of housing that can be built to keep lower-income, often Black and brown, households from moving in. This forced segregation has well-documented negative outcomes for children, and  segregation via land use and zoning codes reduces access to neighborhoods that are associated with improved resident trajectories, negatively impacting regions household incomes, educational attainment, public safety, and health outcomes. In short, restrictive zoning can have Fair Housing Act implications. Innovation is Occurring In response to increasing housing affordability pressures and the widespread recognition of the role that restrictive zoning has played and continues to play in driving up housing costs and perpetuating segregation, cities, and counties across the country are taking a hard look at their zoning laws and adopting reforms that can help increase housing supply. While local governments play the most significant role in regulating land use, state governments are beginning to play a role in land reform. Importantly, state governments are more insulated from the "not in my backyard" pressures that often dominate local politics; states typically have broad authority to set the rules by which local governments can regulate land uses, and they can create accountability mechanisms to incentivize local, pro-housing reforms. When combined with incentives and subsidies to enhance affordability, land use, and zoning reforms can significantly impact housing affordability. The most common local reforms being used to increase affordability include the following: Increases in Multifamily Zoning: In many parts of the country, it is impossible to build any housing other than single family. A New York Times article in June 2019, "Cities Start to Question an American Ideal: A House with a Yard on Every Lot," by Emily Badger and Quactrung Bui, revealed that as much as 75 percent of land in major American cities is zoned exclusively for single-family dwellings, and this share is likely much higher outside of large cities. State and local reforms that eliminate or reduce the predominance of single-family zoning create more affordable housing in more places. In 2022, HUD and the Census Bureau published "New Privately-Owned Housing Units Started: Units in Buildings with 2-4 Units." This study revealed that there were only 16,000 units started in buildings with 2-4 units across the United States, less than 20 percent of the level of construction of these residential buildings in the 1970s. After legalizing up to four units of housing, Minneapolis, Minnesota, and Portland, Oregon, both saw increases in permits for duplexes, triplexes, and other newly allowed housing types. Portland also allows developers to build up to six units per lot if a portion of those units is reserved for tenants with lower incomes. Maine and California both legalized building two units on lots previously zoned as single-family, the latter of which could enable 700,000 new market-feasible homes.  Oregon and California have enabled denser multiunit housing in certain areas of cities, including near transit. Development by-Right: By-right development enables housing that complies with zoning and development regulations to be built without discretionary approval. This leads to faster and more reliable development results. For example, in CT, land zoned for single-family housing almost never requires a public hearing before approval, but almost all projects with more than three units must have public hearings. CA on the other hand has made available large tracts of land for housing development by approving by-right housing development in any area currently zoned for parking, retail, or office buildings. These developments are exempt from environmental reviews and are required to provide affordable units. Adaptive Reuse: Cities and states can also enable housing production or conversion on land previously zoned for other uses.  Due to the new "work-from-home era, demand for commercial real estate is down, which leads to a decrease in property values and real estate tax collections.  Office-to-residential conversions could help to solve the dual crises of vacant office space and lack of affordable housing, but the number of buildings suitable for conversion is limited due to restrictive zoning and challenges with building footprints (e.g., reconfiguring building systems and the need for windows in every bedroom).  Los Angeles Adaptive Reuse Program relaxed zoning and other requirements and streamlined the process for developers, leading to the development of more than 46,000 units since 1999. Eliminate Restrictive and Unnecessary Parking Requirements: Most cities have minimum parking requirements (parking spaces required per residential unit), which often mandate more parking spots than market demand would otherwise bear. An article by Jeffrey Spivak, "People Over Parking," in Planning Magazine in 2018,  found that garage parking drives up rents by approximately 17 percent, and other studies have found even larger impacts of minimum parking requirements on rent. Buffalo, New York; Hartford, Connecticut; and Seattle, Washington, have eliminated parking requirements either near transit or across the city and have seen reductions in parking and construction costs in new projects while avoiding using valuable urban land for parking rather than more productive uses. Washington, Oregon, and California have limited parking requirements near transit, while Connecticut enacted parking reform that affects all housing regardless of its proximity to transit. Minimum Lot Sizes: Minimum lot sizes are common in local zoning codes and require that each household occupy more land than is otherwise necessary, This has been a traditional method for localities to prevent the development of affordable housing. Reducing minimum lot sizes enables the construction of more "starter homes" and decreases the per-household cost of providing water and other utilities. In 1998, Houston, Texas, reduced minimum lot sizes from 5,000 to 1,400 square feet, which facilitated the development of more than 25,000 new units since then. In 2019, Helena, Montana, abolished nearly all minimum lot sizes, and Billings, Montana, moved from minimum lot sizes to a lot width requirement. Several other states, including Vermont and New Hampshire, have introduced bills to limit minimum lot sizes. Transit-Oriented Development:  Equitable transit-oriented development promotes affordable housing options in proximity to transit, encouraging people-centered neighborhoods, and reducing displacement in historically disinvested communities struggling with rising housing costs. Both Chicago and Massachusetts have had success with transit-oriented policies. Chicago has legalized more types of housing near transit and has eliminated onsite parking requirements near public transit.  A 2021 Massachusetts law incentivized hundreds of municipalities served by the Massachusetts Bay Transportation Authority to create at least one higher-density multifamily zoning district by right within walking distance of public transportation. Streamlining Processes:  Permitting adds costs and uncertainty to the development process. Some states are setting time limits on how long cities and counties have to review permit applications (Florida is an example).  In 2016, 1,200 affordable dwelling units were built in CA. The state then changed the rules reducing permitting time and limiting utility fees and 12,300 ADUs were built in 2019. Bottom Line: HUD plays a vital role in promoting affordable housing in collaboration with other federal agencies. They allocate significant funds annually, including block grants, to support affordable housing. HUD mandates grantees to identify obstacles to affordable housing and is now offering grants to communities for removing these barriers. The American Rescue Plan added substantial funding through HOME-ARP and the State and Local Fiscal Recovery Fund to enhance the housing supply. However, strict land use and zoning regulations limit the effectiveness of these funds in addressing the nation s housing shortage. Housing operators and local officials should cooperate in the reduction of these unnecessary regulations in order to enhance the potential for the production of affordable housing.

HUD Sends Reminder on Owner Obligations Regarding Tenant Screening and Notice Requirements

The Department of Housing & Urban Development (HUD) recently published a reminder for HUD multifamily-assisted property owners of relevant legal requirements relating to the use of tenant screening reports and the disclosure of the contents of those reports to tenants. For example, multifamily-assisted property owners must provide written notice of denial under HUD rules, and any housing provider that uses reports to make adverse tenant decisions must provide adverse action notices under the Fair Credit Reporting Act (FCRA). The most efficient way to comply with both obligations is to include the FCRA notice in writing as part of the denial letter that owners are required to send to denied applicants. Notice Obligations Under HUD Rules Under HUD rules, multifamily owners must promptly notify applicants in writing of the denial of admission from Multifamily Housing rental assistance programs. Owner's written rejection notices must include the following information: (1) the specific reason(s) for the rejection; (2) the applicant s right to respond to the owner in writing or request a meeting within 14 days to dispute the rejection; and (3) that persons with disabilities have the right to request reasonable accommodations to participate in the informal hearing process. Note: owners should also remember the VAWA notice requirements for rejected applicants. In addition, any meeting with the applicant to discuss the applicant s rejection must be conducted by a member of the owner s staff who was not involved in the initial decision to deny admission to the property. The owner must advise the applicant in writing of the final eligibility decision within five business days of the owner's response or meeting. Recommended Best Practice When a multifamily assisted property owner denies an applicant, HUD strongly encourages the owner to: Provide written adverse action notices as part of the denial letter; and Provide a copy of any tenant screening report that was relied on when the adverse determination was made. A written notice paired with a report copy allows owners to demonstrate they have fulfilled their legal obligations under the FCRA and also permits applicants to understand the basis for any denial, fully assert their rights with tenant screening companies, and more effectively correct their records. Notice Obligations Under FCRA Under FCRA, landlords or property managers are required to inform rental applicants what played a role in the rejection of the applicant. This requirement is known as the "adverse action notice." Failure to provide the notice correctly may subject owners to legal liability under state and federal law. As Federal Trade Commission (FTC) guidance explains, the adverse action notice must include the following information: The name, address, and phone number of the screening company; That a consumer can receive a free copy of the report from the tenant screening company within 60 days; That a consumer has the right to dispute any information that is incorrect; and That the tenant screening company did not make the decision to take the adverse action and cannot give specific reasons for it. Bottom Line Property owners must provide written notice of denial under HUD rules and include adverse action notices under the FCRA if reports are used for adverse tenant decisions. It is recommended to include the FCRA notice in the denial letter to comply efficiently. The FCRA notice must include the screening company's information, the right to a free report copy, the right to dispute incorrect information, and that the company cannot provide specific reasons for the adverse action.

HUD Issues Guidance on Treatment of Solar Benefits for Residents in Master-metered Buildings

The Acting Director for the HUD Office of Asset Management and Portfolio Oversight recently provided guidance for participants in HUD Multifamily Housing Programs regarding how to handle the benefits of community solar programs that are now being offered by a growing number of states. The purpose of these programs is to benefit multifamily residents by offering access to affordable renewable energy. Community solar arrays have multiple subscribers who receive a credit on their utility bill due to the energy generated by the solar project. These credits can be applied to both owner-paid (i.e., common area costs) and tenant-paid utility bills. In cases where buildings are master-metered and residents do not receive a utility bill, the owner receives the full credit. Solar providers and owners are working to determine how owners can distribute the financial benefits of community or rooftop solar to residents who reside in master metered buildings. HUD has surveyed states that are in the process of implementing different benefit delivery models as part of their community solar offerings, including direct cash payments, and providing additional building amenities like a security guard or shuttle bus. HUD is now providing guidance on which benefits should be considered income to the household for the purpose of determining rent or eligibility. The guidance applies to all project-based Section 8 properties, as well as (1) Section 202; and (2) Section 811. Since projects utilizing the Low-Income Housing Tax Credit (LIHTC) are required to follow HUD Section 8 rules in the determination of income, this guidance also applies to LIHTC properties. Following is a description of the types of benefits that may be offered and whether those benefits should be included as income: Job Training & Workforce Development: This is generally a combination of social services, community supports, job training, and/or education that positions a person for workplace success. Benefits in this category are not income. Additional Support Staff: Hiring additional staff to serve residents or building needs. Examples include resident services staff, building security guards, leasing specialists, maintenance staff, etc. This is not annual income. Additional staff being hired to support the residents is not included as income. Facility Upgrades: Improvements to the building and/or its grounds. Examples include energy efficiency upgrades, playgrounds, community gardens, renovation, bike racks, etc. This is not annual income. Free or Reduced Cost High-Speed Internet Service: Free Wi-Fi is an amenity and is not considered income. Discounted Wi-Fi services are also not considered income. Financial Literacy Programs & Services: Such services may include access to free training, classes, or resources related to budgeting, managing, and paying off debts, and understanding credit and investment products. This is not income. Wellness Programs & Services: Such services are often provided to residents as a preventive measure to help avoid illness and improve general health. This is not income. Shuttle Services: Free shuttle services for residents may include small buses or vans. This is not income. Community Events & Support for Resident Associations: Hosting events for residents or providing financial support for resident associations. This is not income. Increased Operating or Replacement Reserves for the Property: This is not income. Resilience Centers: These are spaces that provide critical services during power outages or extreme weather events. Examples include community heating or cooling centers. This is not income. Non-monetary donations: These are donations such as food, clothing, or toiletries. HUD cannot provide specific guidance as to whether this benefit would be counted as income. A number of factors have to be considered, including the frequency of non-monetary donations. If donations (other than food) are provided on a regular, recurring basis, the value of those donations should be determined and counted as annual income. Gift Cards or Cash Payments: Gift cards are provided to families, including gift cards for gas, groceries, and department stores. Generally, gift cards and cash payments to a family will be counted as income unless a specific HUD income exclusion applies. E.g., if a family receives one gift card, it should be excluded as a temporary, nonrecurring, or sporadic gift. Or, if a family receives one lump sum cash payment, it would be excluded as a lump sum addition to family assets. This guidance does not add or remove any current type of income that must be counted. It is being provided for guidance purposes only. 

HUD Publishes 2023 Income Limits

On May 15, 2023, HUD published the 2023 income limits for HUD programs as well as for the Low-Income Housing Tax Credit and Tax-Exempt Bond programs. The limits are effective on May 15, 2023.  The limits for the LIHTC and Bond projects are published separately from the limits for HUD programs. LIHTC and Bond properties use the Multifamily Tax Subsidy Project (MTSP) limits and are held harmless from income limit (and therefore rent) reductions. These properties may use the highest income limits used for resident qualification and rent calculation purposes since the project has been in service. HUD program income limits are not held harmless. HUD publishes the 50% and 60% MTSP limits in the same table with the Average Income (AI) limits. AI limits are set at 20%, 30%, 40%, 50%, 60%, 70%, and 80%. Projects in service prior to 2009 may use the HERA Special Income Limits in areas where HUD has published such limits. Projects placed in service after 2008 may not use the HERA Special Limits. Projects in rural areas that are not financed by tax-exempt bonds may use the higher of the MTSP limits or the National Non-Metropolitan Income Limits (NNMIL). According to HUD, the non-metropolitan median income has gone up approximately 5.9% from 2022 to 2023. Owners of LIHTC projects may rely on the 2022 income limits for all purposes for 45 days after the effective date of the newly issued limits. This 45-day period ends on June 29, 2023. The limits for HUD programs may be found at www.huduser.gov/portal/datasets/il.html. The limits for LIHTC and Bond programs may be found at www.huduser.gov/portal/datasets/mtsp.html.

Owner Successfully Uses "Mrs. Murphy" Fair Housing Exemption

In Weilburg v. Castellane, the U.S. District Court for the Northern District of NY ruled in favor of an apartment building owner in a religious discrimination case. The fair housing suit was brought by one of the tenants on the grounds that they were evicted by the landlord for being Jehovah s Witnesses. However, the court ruled that the building was exempted from the definition of a "dwelling" under the FHA. The exemption applies to buildings of no more than four units, as long as the owner of the building is a resident in one of the units. The FHA explicitly exempts "rooms or units in dwellings containing living quarters occupied or intended to be occupied by no more than four families living independently of each other, if the owner actually maintains and occupies one of such living quarters as his residence." In this case, the Defendant owned the building, which was divided into four units. He also lived in one of those units. The other units were occupied by families living independently of one another. For this reason, the property qualified for the exemption. Successful use of one of the FHA exemptions is rare. This is especially the case since no one may place a discriminatory ad (no ad was placed in this case) and no one in the real estate business is exempt (the Defendant was not in the real estate business).

A. J. Johnson Partners with Mid-Atlantic AHMA for June Affordable Housing Training

During the month of June 2023, A. J. Johnson will be partnering with the MidAtlantic Affordable Housing Management Association for six training sessions intended for real estate professionals, particularly those in the affordable multifamily housing field. Four of the sessions will be presented via live webinar and two will be in-person. The in-person session will also include administration of the HCCP exam. A KEY TRAINING WILL BE THE JUNE 21 WEBINAR ON THE SWEEPING CHANGES TO AFFORDABLE HOUSING PROGRAMS AS A RESULT OF THE FINAL HUD RULE ON HOTMA. The following sessions will be presented: June 6: Intermediate LIHTC Compliance (In-person training in Richmond, VA) - Designed for more experienced managers, supervisory personnel, investment asset managers, and compliance specialists, this program expands on the information covered in the Basics of Tax Credit Site Management. A more in-depth discussion of income verification issues is included as well as a discussion of minimum set-aside issues (including the Average Income Minimum Set-Aside), optional fees, and use of common areas. The Available Unit Rule is covered in great detail, as are the requirements for units occupied by students. Attendees will also learn the requirements relating to setting rents at a tax-credit property. This course contains some practice problems but is more discussion oriented than the Basic course. A calculator is required for this course. June 7: Advanced LIHTC Compliance (In-person training in Richmond, VA) - This full-day training is intended for senior management staff, developers, corporate finance officers, and others involved in decision-making with regard to how LIHTC deals are structured. This training covers complex issues such as eligible and qualified basis, applicable fraction, credit calculation (including first-year calculation), placed-in-service issues, rehab projects, tax-exempt bonds, projects with HOME funds, Next Available Unit Rule, employee units, mixed-income properties, the Average Income Minimum Set-Aside, vacant unit rule, and dealing effectively with State Agencies. Individuals who take both two days of training will be provided with study materials and a practice exam to assist in preparation for the HCCP exam, to be administered on June 16. June 8: Review of testable areas and administration of the Housing Credit Certified Professional (HCCP ) exam (In-person exam in Richmond, VA). Following the two days of intensive and comprehensive LIHTC training, AJ will provide a review of program requirements and will administer the HCCP exam in person. June 14: Preparing Affordable Housing Properties for Agency-Required Physical Inspections - Agency inspections of affordable housing properties are required for all affordable housing programs, and failure to meet the required inspection standards can result in significant financial and administrative penalties for property owners. This three-hour training focuses on how owners and managers may prepare for such inspections, with a concentration on State Housing Finance Agency inspections for the LIHTC program. Specific training areas include (1) a complete discussion of the most serious violations, including health & safety; (2) how vacant units are addressed during inspections; (3) when violations will be reported to the IRS; (4) the 20 most common deficiencies; (5) how to prepare a property for an inspection; (6) strategies for successful inspections; and (7) a review of the most important Uniform Physical Conditions Standards as they relate to the five inspectable areas [site/doors & windows/electrical/building exterior & systems/Units & Common Area]. In addition, an update on the current status of REAC will be presented as will a discussion of the new "NSPIRE" protocol, that will ultimately replace the current REAC procedures. At the end of the training, attendees will have a blueprint they can use to prepare their properties for agency-required physical inspections - regardless of the program under which they operate. June 20: The Verification and Calculation of Income and Assets on Affordable Housing Properties (live webinar)- This five-hour live webinar (there will be a 1.5-hour lunch break) provides concentrated instruction on the required methodology for calculating and verifying income, and for determining the value of assets and income generated by those assets. The first section of the course involves a comprehensive discussion of employment income, along with military pay, pensions/social security, self-employment income, and child support. It concludes with workshop problems designed to test what the student has learned during the discussion phase of the training and serve to reinforce HUD-required techniques for the determination of income. The second component of the training focuses on a detailed discussion of requirements related to the determination of asset value and income and is applicable to all federal housing programs, including the low-income housing tax credit, tax-exempt bonds, Section 8, Section 515, HOME, and HOPE VI. Multiple types of assets are covered, both in terms of what constitutes an asset and how must they be verified. This section also concludes with a series of problems, designed to test the student s understanding of the basic requirements relative to assets. June 21: HOTMA - FINAL RULE - On January 9, 2023, HUD published a final rule implementing The Housing Opportunity Through Modernization Act (HOTMA), which was signed into law on July 29, 2016. This final rule was published in the Federal Register on February 14, 2023, and will become effective on January 1, 2024. Virtually all HUD programs are impacted by the rule, as are the Low-Income Housing Tax Credit (LIHTC) Program and the Rural Development Section 515 Program. The final rule makes sweeping changes to HUD programs and will have a significant impact on the determination of income for the LIHTC Program. This full-day training will explain the sweeping changes made by the final rule and will cover the following areas: (1) Definitional changes relating to earned and unearned income, non-recurring income, and foster children; (2) Revised Income Exclusions; (3) New requirements relative to Student Financial Assistance; (4) Changes to the HUD permitted deductions from gross income, including a full review of the new "hardship exemptions;" (5) Brand new rules regarding assets; (6) New Interim Recertification requirements; (6) Changes to the HOME Program; and (7) the new definition of "annual income." June 22: Documentation of Lease Violations - Managers of multifamily housing properties too often find themselves in the position of not being able to enforce the terms of a lease or evict a resident for severe violations simply because of a failure to properly document the file. While failure to pay rent is the most common lease violation, other issues create the greatest challenge with regard to eviction or lease enforcement. This 90-minute session will review some of the most problematic material lease violations and discuss how to properly document those violations. Topics to be discussed will include hoarding, tenant-on-tenant harassment, assistance animal violations, smoking violations (in non-smoking buildings), unauthorized occupants, and "quiet use and enjoyment" issues. The training is intended for site managers and leasing staff, as well as regional property managers. This session is a must for all managers of HUD, Rural Development, and LIHTC properties, and will provide plenty of opportunity for Q & A. These sessions are part of the year-long collaboration between A. J. Johnson and MidAtlantic AHMA that is designed to provide affordable housing professionals with the knowledge needed to effectively manage the complex requirements of the various agencies overseeing these programs. Persons interested in any (or all) of these training sessions may register by visiting either www.ajjcs.net or https://www.mid-atlanticahma.org.

Department of Justice Shows Interest in Algorithm-Based Tenant Selection Case

Algorithms are increasingly being used by landlords and property managers to select tenants. These algorithms use data such as credit scores, criminal records, and rental history to determine a potential tenant s suitability. One common algorithm used in tenant selection is the "Tenant Score." This algorithm assigns points based on such factors as income, rental history, and credit score, and then generates a score that indicates the likelihood of the applicant being a good tenant. While these algorithms may help landlords make more objective decisions, they are not without controversy. Some argue they may perpetuate biases and lead to discrimination against certain groups. This is the basis for Louis et al. v. SafeRent et al., a lawsuit currently pending in the U.S. District Court for the District of Massachusetts. This suit alleges that the defendant's use of an algorithm-based scoring system to screen tenants discriminates against Black and Hispanic rental applicants in violation of the Fair Housing Act (FHA). The Department of Justice (DOJ) and HUD have now filed a Statement of Interest in which the agencies explain the FHA s application of algorithm-based tenant screening systems. The suit was filed on behalf of two plaintiffs. Both are Black rental applicants who use housing choice vouchers to pay part of their rent. The plaintiffs applied for rental housing but allege they were denied due to their "SafeRent Score," a score derived from algorithm-based screening software. According to the suit, the underlying algorithm relies on certain factors that disproportionately disadvantage Black and Hispanic applicants, such as credit history and non-tenancy-related debts, while failing to consider one highly relevant factor - the use of housing choice vouchers. These HUD vouchers make tenants more likely to pay their share of the rent due to the risk of losing the voucher if the tenant's rent is not paid. Through the Statement of Interest, DOJ and HUD are seeking to assist the court by correcting two questions of law erroneously represent in the defendants' motion to dismiss the case. First, the statement sets out the appropriate standard for pleading disparate impact claims under the FHA, and second, the statement clarifies that FHA text and case law support the FHA application to companies providing residential screening services. While landlords may use algorithm-based scoring systems as part of an application approval process, final decisions relative to applicant approval must be made by humans - not artificial intelligence. Landlords cannot avoid liability under the FHA by using as a defense the fact that the algorithm-based scoring system failed an applicant. These scoring systems do not make rental decisions - landlords do.

Understanding the Federal Fair Housing Testing Program

Since its creation in 1991, the Department of Justice s (DOJ) Fair Housing Testing Program has used covert testing to uncover evidence of discrimination and unlawful treatment by landlords, lenders, places of public accommodation, and others in all 50 states and the District of Columbia. As a result of the Testing Program s efforts over the past three decades, the DOJ has resolved over 100 federal civil rights cases and has obtained over $14,000,000 in monetary relief, including damages for those hurt by discrimination and penalties paid to the United States. In the warm early Spring of 1995 in southeastern Florida, a young Black man was looking for an apartment. The garden-style complex he visited was just a short walk to US Highway 1 and the Metrorail. It was an inviting property with winding walkways, palm trees and a swimming pool. Inside the management office, the property seemed just as inviting as the outside. The rental agent nodded when the man explained his reason for coming and smiled knowingly as if unsurprised that his housing search brought him to the Kendall House Apartments. But then came the let-down: unfortunately, the agent told him, they had no available units at the moment. The man returned to his car and turned off his tape recorder. What the rental agent did not know was that the DOJ s Fair Housing Testing Program had initiated an investigation of potential discrimination against Black home seekers in the greater Miami, Florida area. And the tests at Kendall House Apartments conducted in conjunction with the locally-based Housing Opportunities Project for Excellence revealed a troubling pattern. Although an individual prospective renter would have no way of knowing for sure, testing demonstrated that white home seekers were invited to consider available units while Black home seekers were told that there were no units available. As the DOJ learned from former employees during discovery, even if Black applicants submitted rental applications, the owner instructed agents to color in the letters "O" and "P" of the words "Rental Application" as code for their race. This practice allowed the owner to disregard Black applicants without the prospective renters ever suspecting they were being treated differently. Through testing, the DOJ also learned that the owners and agents discriminated on the basis of familial status, including by telling prospective tenants that children were not allowed to live in the complex and that the apartments were too small for children. The experience of the young man described above who was told that no apartments were available for rent was just one of many similar examples that would later form the basis of the DOJ s complaint in United States v. Kendall House Apartments (S.D. Fla. 1995) and lead to a $1,000,000 court-approved settlement the following year. Documents of this kind that memorialize settlement terms are called consent decrees or consent orders. In this case, the consent decree required the apartment owners and managers to pay $750,000 in damages to those who experienced discrimination, a $100,000 civil penalty to the United States, and $150,000 to further fair housing and achieve other reforms required by the settlement. At the time, it was the largest monetary amount obtained for a case developed by the Testing Program. Overview of the Testing Program The Testing Program is a specialized unit of the DOJ s Civil Rights Division located in the Housing and Civil Enforcement Section. Since conducting its first tests in 1992, the program has used covert testing to uncover discrimination in central aspects of life, including access to housing, lending, and places of public accommodation. The Testing Program currently conducts testing for potential violations of the following statutes: The Fair Housing Act, which prohibits discrimination in all types of housing, including apartments, RV and mobile home parks, townhouses, and single-family homes; Title II of the Civil Rights Act of 1964, which prohibits discrimination in places of public accommodation, including hotels and restaurants; The Equal Credit Opportunities Act , which prohibits discrimination in lending and credit, including in home mortgages and auto financing; The Americans with Disabilities Act , which prohibits discrimination against persons with disabilities, including in access to transportation, employment, and medical services; and The Servicemembers Civil Relief Act , which provides protections to active-duty members of the military. Although the primary focus of the Testing Program has been to uncover discrimination based on race, color, and national origin, the Testing Program also tests for discrimination against all protected classes under these statutes, including religion, disability, familial status, sex (including sexual orientation and gender identity), and status as a servicemember. Where discrimination is hidden or hard to detect, the Testing Program provides an indispensable tool for uncovering and exposing discriminatory policies and practices. For example, a landlord who wants to rent only to white tenants might tell a Black applicant that there are no units available even when units are in fact available and would be offered to a white applicant. The Black applicant may have no way of knowing that the landlord provided inaccurate information, or that the landlord s actions were motivated by the applicant s race. In such cases, testing provides the perfect tool a framework for determining whether discrimination is at work. Key to the Testing Program s structure is "matched-pair tests." These are tests in which two individuals one acting as the "control group" (e.g., white male) and the other as the "test group" (e.g., Black male) pose as similarly-situated prospective customers. Testers are assigned similar personal and financial characteristics, and the Testing Program compares the testers experiences in seeking housing or other services. Differences between the testers can provide evidence that similar customers are being treated differently because of their race or other protected characteristics. Case Highlights To illustrate the Testing Program s work over the past three decades, I am outlining just a few of the Testing Program s many investigations. By focusing its resources on key areas including identifying and remedying discrimination based on race, national origin, disability, familial status, and sex the Testing Program has achieved meaningful and lasting results. Identifying & Race Discrimination Combatting race discrimination has been a central focus of the Testing Program throughout its tenure. Testing has the unique power to reveal race discrimination that would otherwise elude detection in housing, lending, and public accommodations and the Testing Program has developed testing expertise in all three of these contexts. For this article, I will focus on testing in the area of multifamily housing. In northern New Jersey, the Testing Program gathered evidence that supported a number of DOJ cases alleging violations of the Fair Housing Act, including United States v. Chandler Associates (D.N.J. 1997). In that case, testing evidence exposed striking differences in the experiences of Black and white testers seeking apartments at Pleasant View Gardens in Piscataway, New Jersey. On multiple occasions, Black testers were told by rental agents that no units were available to rent. White testers, however, were repeatedly told not only that units would be available to rent, but also that they could take advantage of special offers, including a discount of $300 on move-in costs or half-price rent for the first five months of their leases or longer. The defendants paid a total of $1,500,000 to resolve the DOJ s case, providing $750,000 to compensate victims of discrimination, $550,000 to fund a fair housing program at the Seton Hall University School of Law Center for Social Justice, and $200,000 to the United States in a civil penalty. Notably, the DOJ obtained a supplemental consent decree the following year after discovering that the defendants were also discriminating against families with children. National Origin Discrimination based on national origin may be related to a person s country of birth or from where their ancestors originated. One of the most famous national origin cases that originated from testing is United States v. Pine Properties (D.Mass 2008). Lowell, Massachusetts has one of the largest concentrations of Cambodian Americans in the United States. After learning of allegations that Cambodian Americans in the Lowell area were facing rental discrimination based on their national origin, the Testing Program began to investigate. In 2005, the Testing Program entered into a contract with a local Cambodian civic organization, the Cambodian-American League of Lowell (CALL), to help recruit local volunteers from the Cambodian-American community. The Testing Program then trained these volunteers as housing testers. One of the housing providers tested was Pine Properties, a real estate management company that owned and operated nine rental properties in Lowell and three rental properties in nearby New Hampshire. During the testing, rental agents for Pine Properties told Cambodian-American testers that they had to complete a rental application and have their employment and/or credit verified prior to being able to see an available apartment. They were also informed that they would have to call back after completing the application and after their employment and credit were verified to schedule a separate appointment to see available apartments. In contrast, rental agents showed available apartments to white testers without requiring a rental application, employment or credit verification, or a second appointment. After six months of settlement negotiations, the United States and the owners and managers of Pine Properties reached an agreement to resolve the case. The consent order required the defendants to adopt non-discrimination policies, train employees on the Fair Housing Act, and pay $114,000 to compensate victims as well as $44,000 as a civil penalty. This was the first-ever case generated by the Testing Program that alleged discrimination against Asian Americans. Discrimination Against the Disabled Another type of discrimination in housing starts long before a prospective renter interacts with a housing agent. "Design and construction" investigations concern multifamily housing projects that fail to meet the Fair Housing Act s accessibility requirements for people with disabilities. This may result in doorways that are too narrow for people who use wheelchairs to get through, entrances that require people to climb steps, and walkways that are too steep or narrow to be useable by everyone - in addition to many other inaccessible features selected by builders, architects, and developers. Newly constructed multifamily housing projects are now required to have minimum accessible features to allow individuals with disabilities to maneuver about their apartments and the property s common areas independently. The DOJ typically learns about violations of these requirements only after properties have been built. But in United States v. Edward Rose & Sons (E.D. Mich. 2005), the DOJ was, for the first time, able to halt construction on inaccessible multifamily housing while it was being constructed. In the early 2000s, Edward Rose and Sons, headquartered in Michigan, was one of the largest real estate developers in the Midwest and was responsible for the construction and/or management of at least 49 apartment complexes across 15 states. The Testing Program identified this developer as a target for testing based in part on its size and the geographic scope of its properties. During testing, the DOJ gathered evidence that some features of Edward Rose and Sons properties were inaccessible to persons with disabilities. Testers observed that, at a typical building, the front entrance could only be accessed by going down half a flight of stairs. At most of the properties, the only way for persons using wheelchairs to access the building was through the back entrances, which were considerably farther away from the parking lot than the front entrances. Testers also found that inside the units, kitchens and bathrooms did not have enough space for a wheelchair to turn, doorways were too narrow for persons using wheelchairs, thermostats and environmental controls were too high for persons using wheelchairs, and bathroom walls lacked reinforcement for potential installation of grab bars. Common areas, such as the rental office, parking lots, clubhouse, and recreational facilities, were also not accessible to persons with mobility disabilities. Defendants were in the process of building 19 new apartment complexes in Michigan and Ohio with these inaccessible features. The initial complaint, filed in January 2001, was followed by a 2003 order granting a preliminary injunction to stop construction at the 19 apartment complexes until they could be redesigned or retrofitted to be brought into compliance with the Fair Housing Act. On September 30, 2005, the parties settled the case, and the court entered a consent order. The settlement required that the defendants make more than 5,400 ground-floor apartments accessible to persons with disabilities, pay $950,000 to a fund for persons harmed by the inaccessible features at the defendants apartment complexes which ultimately compensated 37 aggrieved persons and pay a $110,000 civil penalty to the United States. Families with Children The Fair Housing Act prohibits discrimination based on familial status, which includes families with minor children, people in the process of obtaining legal custody of a minor child, and those who are pregnant. One of the most famous familial status cases was brought against the owner of Royal Park Apartments, a complex consisting of eight buildings and 224 rental units in North Attleboro, MA.  Testing at Royal Park revealed a clear policy of segregating families with children by assigning them to certain buildings located in the back of the property or certain floors within each building. A rental agent explained to a tester that "the only buildings with kids are five, seven, and eight; one, two, three, four and six are adults. You will see some kids there cause if they are born there, I can t throw them away." In accordance with the policy, a tester without children was offered units in buildings and on floors that were not offered to a tester with children. The DOJ simultaneously filed a complaint and consent order in United States v. J & R Associates (D. Mass. 2015) to resolve its claims involving Royal Park Apartments. In the settlement, the defendant agreed to create a $135,000 fund to compensate people harmed by its discriminatory practices, pay a $7,500 civil penalty to the United States, adopt non-discrimination policies and procedures, and take other actions to ensure that families with children no longer experienced discrimination when seeking apartments.  In 2017, the DOJ entered into a subsequent settlement agreement with J & R Associates after an investigation revealed evidence of discrimination based on national origin and race. Specifically, the DOJ alleged that rental agents steered applicants of South Asian descent to certain buildings at the apartment complex. Sexual Harassment In addition to identifying violations of law that may warrant enforcement actions, the DOJ also uses testing after a case is resolved. Testing in this "compliance" phase ensures that defendants abide by settlement terms and follow through on policies that prevent discriminatory practices from continuing. A recent sexual harassment case shows how DOJ uses compliance testing in preventing future discrimination. United States v. Waterbury (N.D.N.Y. 2019) In 2018, the DOJ filed a lawsuit against Douglas and Carol Waterbury for discriminating against female tenants and applicants for a period of over 30 years by subjecting them to severe, pervasive, and unwelcome sexual harassment. The Waterburys agreed to relinquish managerial control of their properties to an independent manager, in addition to other remedies. However, the United States discovered, partly due to the efforts of the Testing Program, that the Waterburys were not meeting these obligations. Relying on testing and other evidence, the court found that the defendants failed to comply with the settlement by failing to use an independent manager and by continuing to remain involved in the management of residential properties. The court held the defendants in contempt, sanctioned them, and ordered them to pay the United States $15,000 for violating the settlement terms. The Future of Fair Housing Testing As discrimination becomes more subtle, and as industries and consumers adopt new ways of doing business, the Testing Program continually evolves and employs new methods to fulfill its mission of gathering evidence to uncover unlawful discrimination, particularly based on race or national origin. Owners and managers should expect new testing techniques, such as expanded use of phone and email testing. Bottom Line Many owners and landlords object to testing, feeling that it is unfair entrapment. This is not the case. Landlords who operate their housing in accordance with fair housing laws cannot be "trapped" into a discriminatory act. Regular fair housing training for all staff and remembering to market the "property," and not the residents or the type of people you think should live at the property are two of the best ways to ensure that your property will never be put in a bad situation due to testing. In short, remember two things: (1) Talk about your property - not the people who live there or who you think would like to live there; and (2) consider everyone who calls or comes to your property to be a tester.