News

A. J. Johnson to Offer Average Income Live Webinar

A. J. Johnson will be conducting a webinar on January 26, 2022, on Requirements & Best Practices Relating to the Average Income Minimum Set-Aside for LIHTC properties. The Webinar will be held at 1:00 PM Eastern Time. The Average Income Minimum Set-Aside Test ("AI") was added to the LIHTC program in March 2018. While it is being implemented successfully on many properties, there remains a good deal of industry-wide confusion about the use of the AI set-aside and the risks involved. This one-hour live webinar will review the requirements of the AI, discuss the risks of this set-aside, and provide best practice recommendations for the implementation of the Average Income test. We will also cover the current IRS guidance relating to the AI set-aside and recent industry requests made to the IRS. The Webinar will be presented by A. J. Johnson, a nationally recognized expert on affordable housing who has already provided compliance oversight on multiple properties using the AI set-aside. Those interested in participating in the Webinar may register on the A. J. Johnson Consulting Services website (www.ajjcs.net) under "Training."

IRS Extends COVID-19 Relief for LIHTC and Tax-Exempt Bond Properties

On Friday, January 14, 2022, the IRS will release a notice (2022-05) extending widespread temporary relief from certain requirements for low-income housing tax credit (LIHTC) financed and private activity tax-exempt bond-financed properties due to the COVID-19 pandemic. Extended relief will include: Relief for the 10% test for carryover allocations. If the original deadline for an owner to meet the 10% test for carryover allocations is on or after April 1, 2020 and on or before December 31, 2020, the deadline is extended to the original deadline plus two years. If the original deadline is on or after January 1, 2021 and before December 31, 2022, the deadline is extended to December 31, 2022;The 24-month minimum rehabilitation period. If  the original  deadline for  the 24-month minimum  rehabilitation  expenditure period for  a building  originally  is  on or  after April  1,  2020,  and is  on  or  before December  31,  2021,  then  that  deadline is extended  to  the  original  date  plus  18  months. If  the original  deadline  for  this  requirement  is  on or  after  January  1,  2022,  and on or  before June  30,  2022,  then  that  deadline is  extended to June 30,  2023. If  the original  deadline  for  this  requirement  is  on or  after  July  1,  2022,  and on or before  December  31,  2022,  then that  deadline  is  extended to the original  date plus  12 months. If  the original  deadline  for  this  requirement  is  on or  after  January  1,  2023,  and on or  before December  30,  2023,  then  that  deadline is  extended  to December  31, 2023;The placed-in-service deadline.   If  the  original  deadline for  a low-income  building to be placed in  service  was  the close of  calendar  year  2020,  the new  deadline is  the close of  calendar  year  2022  (that  is,  December  31,  2022). If  the original  placed-in-service deadline was  the  close of  calendar  year  2021 and the  original  deadline for  the 10-percent  test  in  42(h)(1)(E)(ii)  was  before  April  1, 2020,  the  new  placed-in-service deadline  is  the close  of  calendar  year  2022  (that is,  December  31,  2022). If  the original  placed-in-service deadline is  the  close of  calendar  year  2021 and the  original  deadline for  the 10-percent  test  in  42(h)(1)(E)(ii)  was  on or  after April  1,  2020,  and  on  or  before  December  31,  2020,  then the new  placed-in service deadline  is  the  close of  calendar  year  2023  (that  is,  December  31,  2023). If  the original  placed-in-service deadline is  the  close of  calendar  year  2022 (and thus  the  original  deadline for  the  10-percent  test  was  in  2021),  then  the new placed-in-service  deadline is  the close  of  calendar  year  2023  (that is, December  31,  2023);The reasonable restoration period in the event of casualty loss. For  purposes  of    42(j)(4)(E)  both in  the case  of  a casualty  loss  not  due to a  pre-COVID-19-pandemic  Major  Disaster  and in situations  governed by  section  8.02 of  Rev. Proc.  2014-49 in  the  case of  a casualty  loss  due  to  a pre-COVID-19-pandemic  Major Disaster,  if  a low-income  building s  qualified  basis  is  reduced  by  reason  of  the casualty loss  and the reasonable period to  restore  the  loss  by  reconstruction  or  replacement  that was  originally  set  by  the HCA  (original  Reasonable  Restoration  Period)  ends  on or  after April  1,  2020,  then  the  last  day  of  the  Reasonable Restoration Period is  postponed  by eighteen  months  but  not  beyond December  31,  2022.   Notwithstanding the  preceding sentence,  the Agency  may  require  a shorter  extension,  or  no  extension at  all; andAgency correction periods. if  a correction  period that  was  set  by  the Agency  ended on or  after  April  1,  2020,  and  before December  31,  2021,  then the  end of  the correction period  (including as  already  extended,  if  applicable)  is  extended  by  a year,  but  not beyond December  31,  2022.   If  the correction  period  originally  set  by  the Agency  ends during  2022,  the  end  of  the  period is  extended to December  31,  2022.   Notwithstanding the  preceding sentences,  the Agency  may  require a shorter  extension,  or  no  extension at  all. The notice also provides an extension to satisfy occupancy obligations. If the close of the first year of the credit period with respect to a building was on or after April 1, 2020, and on or before December 31, 2022, then, for purposes of 42(f)(3)(A)(ii), the qualified basis for the building for the first year of the credit period is calculated by taking into account any increase in the number of low-income units by the close of the 6-month period following the close of that first year. This provides an additional six months after the first year of the credit period to qualify units in order to avoid the 2/3-unit rule. Concerning compliance, the notice will provide an extension to the requirement for a 30-day notice for HFA reviews of tenant files through the end of 2022 and will permit HFAs to defer physical inspections through June 30, 2022, with the option to extend the deferral to the end of 2022 in consultation with local public health experts. An Agency was not required to review tenant files in the period beginning on April 1, 2020, and ending on December 31, 2021. The Agency must have resumed tenant-file review as due under 1.42-5 as of January 1, 2022. For purposes of 1.42-5(c)(2)(iii)(C)(3), between April 1, 2020, and the end of 2022, when the Agency gives an Owner reasonable notice that it will review low-income certifications of not-yet-identified low-income units, it may treat the reasonable notice as being up to 30 days. Beginning on January 1, 2023, for this purpose reasonable notice again is generally no more than 15 days. An Agency is not required to conduct compliance monitoring physical inspections in the period beginning on April 1, 2020, and ending on June 30, 2022. Because of the high State-to-State and intra-State variability of COVID-19 transmission, an Agency, in consultation with public health experts, may extend the waiver in the preceding sentence if the level of transmission makes such an extension appropriate. Depending on varying rates of transmission, the extension may be Statewide, may be limited to specific locales, or maybe on a project-by-project basis. No such extension may go beyond December 31, 2022. The Agency must resume compliance-monitoring reviews as due under 1.42-5 once the waiver expires. For purposes of 1.42-5(c)(2)(iii)(C)(3), between April 1, 2020, and the end of 2022 only, when the Agency gives an Owner reasonable notice that it will physically inspect not-yet-identified low-income units, it may treat the reasonable notice as being up to 30 days. Beginning on January 1, 2023, for this purpose reasonable notice again is generally no more than 15 days. The closure of amenities or common areas in LIHTC properties due to COVID-19 will not result in a reduction of eligible basis and essential workers may be provided emergency housing in LIHTC properties. This will apply until December 31, 2022. During the above period, an HFA may deny any application of the above waiver or, based on public health criteria, may limit the waiver to partial closure, or to limited or conditional access of an amenity or common area. (For example, the Agency may apply the waiver to access an amenity or common area that is limited to persons wearing masks or to persons fully vaccinated against COVID-19.) The following relief is provided for tax-exempt bond properties: THE 12-MONTH TRANSITION PERIOD TO MEET SET-ASIDES FOR QUALIFIED RESIDENTIAL RENTAL PROJECTS. For purposes of section 5.02 of Rev. Proc. 2004-39, if the last day of a 12-month transition period for a qualified residential rental project originally was on or after April 1, 2020, and before December 31, 2022, then that last day is postponed to December 31, 2022. B THE 147(d) 2-YEAR REHABILITATION EXPENDITURE PERIOD FOR BONDS USED TO PROVIDE QUALIFIED RESIDENTIAL RENTAL PROJECTS. If a bond is used to provide a qualified residential rental project and if the last day of the 147(d) 2-year rehabilitation expenditure period for the bond originally was on or after April 1, 2020, and before December 31, 2023, then that last day is postponed to the earlier of eighteen months from the original due date or December 31, 2023. Owners of LIHTC or tax-exempt bond properties that may be affected by this relief should obtain a copy of the IRS Notice when published on January 14.

Child Care and Affordable Housing - A Potential "Win/Win" for Residents and Owners

A "gray rhino" is a highly probable, high-impact yet neglected threat. These are not random surprises but occur after a series of warnings and visible evidence. The bursting of the housing bubble in 2008, the aftermath of hurricanes, and the fall of the Soviet Union are examples of gray rhinos. Jill Schlesinger, a CBS News business analyst, recently wrote an article making the case that childcare should be added to the list of gray rhinos. Some of the data Schlesinger outlined relating to childcare costs is stunning. A report from the U.S. Treasury stated, "The average family with at least one child under age 5 would need to devote about 13% of family income to pay for childcare, a number that is unaffordable for most families."The Department of Health & Human Services (HHS) considers childcare affordable when it costs no more than 7% of household income. With a U.S. median household income of $67,521, affordability is less than $100 per week. Childcare at this price is almost impossible to find.The average childcare cost in a daycare center is $340 per week, which means an annual income of more than $250,000 is needed to consider the care to be "affordable." A 2021 Care.com annual cost of care survey found that 57% of families spent more than $10,000 on childcare in 2020. Finding care is also a problem. Thousands of centers closed due to COVID-19. The low-paid workers of these facilities are now finding other - better paying - jobs. The median annual pay for daycare workers is $25,460 (12.24 per hour - if they work 40 hours per week). This is not a livable wage. The impact of all this is that parents (mainly women) are being forced to leave the workforce to care for their children. In September 2021, nearly 300,000 women left the labor force. Since the pandemic began that number is 3 million. The Build Back Better Plan of the Biden Administration would cap childcare costs at 7% of income for kids up to age five on a sliding scale, depending on the state of residence. In today s political climate, the chance of passage is close to zero. This lack of affordability presents a potential opportunity for forward-thinking owners of affordable housing. Among the possible ways to improve childcare affordability for residents is Partner with local daycare organizations to negotiate rate breaks for residents, in return for advertising the daycare facility at your property;Offer community space to local daycare operators to set up onsite care for children of the community; orSet up a childcare facility as a community amenity. This third option requires an analysis of the financial feasibility of the operation, as well as a determination of required local approvals. Despite this, such an operation is feasible and already exists in a number of properties across the nation. The following analysis indicates the method an owner may use as a starting point for determining feasibility. Assume that demand is such that 15 households at a property would consider onsite daycare if it was affordable.To pay for a full-time and part-time daycare worker ($18 per hour & $15 per hour:Full-time salary: $37,440Part-time salary (assume 20 hours per week): $15,600Employee benefits of $17,680 (Insurance, paid leave, health care).Total annual employee cost: $70,720If 15 children are cared for at $100 per week for 50 weeks, income is $75,000. Childcare at apartment communities would be considered a resident amenity - not a profit center. A simple break-even outcome may make consideration of this option worthwhile. Regardless of whether apartment owners determine that acting affirmatively regarding childcare is something to be initiated, the childcare crisis is real - and only getting worse. Thinking about how this burden can be eased for our customers seems like good business.

Expected 2022 Minimum Wage Changes

In 2022, 20 states will have new minimum wage rates. Many of the changes will take place on January 1 but some states make the change on July 1 while other states increase rates on odd schedules, such as Connecticut, and Florida, which saw its rate increase twice in 2021. Affordable housing managers responsible for determining the income of applicants and residents need to be aware of state and local minimum wage laws in order to ensure the most accurate possible projection of income. States with Minimum Wage in Excess of Federal $7.25 per Hour (as of 1/1/22) - unless noted otherwise, the minimum wage for tipped employees is $2.13 Alaska: $10.34 (AK does not have a different rate for tipped employees).Arizona: $12.80; $9.80 for tipped employees.Arkansas: $11.00; $2.63 for tipped employees.California: $15.00 - applies only to employers with 26 or more employees. Employers in CA with 25 or fewer employees have a minimum wage of $14.00 per hour. Note: CA is the first state to reach the $15 minimum wage.Colorado: $12.56; $9.54 for tipped employees. Colorado cities have the ability to set higher minimums, but so far only Denver has done so. The minimum wage for Denver will be $15.87 on January 1, 2022.Connecticut: $12.00.Delaware: $10.50. Minimum wage for tipped employees is $2.23.District of Columbia: $15.00.Florida: $8.65; $5.63 for tipped employees. Note: the minimum wage will increase to $10 per hour on September 30, 2021, reaching $15 by 2026.Hawaii: $10.10.Illinois: $12.00; $7.20 for tipped employees. The youth minimum wage for youth working less than 650 hours per year is $8.50.Maine: $12.75; $6.38 for tipped employees.Maryland: $12.20 for small employers (14 or fewer workers); $12.50 for all other employers; $3.63 for tipped employees.Massachusetts: $14.25; $6.15 for tipped employees.Michigan: $9.87; $3.75 for tipped employees. Note: this increase has been delayed due to high unemployment numbers and will remain at $9.87 until further notice.Minnesota: $10.33 - this is the rate for large employers (employers with $500,000 or more gross revenue). Small employers have a minimum wage of $8.42 per hour.Missouri: $11.15; $5.575 for tipped workers.Montana: $9.20, for both tipped and non-tipped employees.Nebraska: $9.00Nevada: $8.25 for employees who are not offered health insurance. On July 1, 2020, minimum wage for employees with health insurance increased to $8.00 and those without health insurance to $9.00.New Jersey: $13.00 (large employers - six or more employees); $11.90 (small employers); $5.13 for tipped employees.New Mexico: $11.50; $2.80 for tipped employees.New York: $13.20 statewide; $11 for hospitality, non-fast food, resort service; $8.80 for hospitality, non-fast food, general service; $14.50 for hospitality- fast food; ($15.00 in New York City).Ohio: $9.30 (large employers with $323,000 or more in gross receipts); $7.25 (small employers); $4.65 for tipped employees.Oregon: $11.25 (Portland, $13.25 on July 1) - effective July 1, 2020, statewide minimum will be $12.00 ($11.50 for nonurban counties).Rhode Island: 12.25; tipped employees are $3.89.South Dakota: $9.95; $4.975 for tipped employees.Vermont: $12.55; $6.28 for tipped employees.Virginia: $11.00.Washington: $14.49.West Virginia: $8.75 Certain occupations are exempt from federal minimum wage laws, but states have their own exemptions. Anytime an applicant or resident reports or has a verification of income that is less than the federal or state minimum wage, managers should follow up with employers to determine the reason. That reason should be documented in the file. This information is certainly subject to change and owners and managers should always stay up-to-date with minimum wage increases in their states and localities.

A. J. Johnson to Host Live Webinar on The 4 Percent LIHTC Floor – IRS Revenue Ruling 2021-20.

A. J. Johnson will be conducting a one-hour live webinar on January 6, 2022, on The 4 Percent LIHTC Floor - IRS Revenue Ruling 2021-20.  The Webinar will be held from 1:00 PM to 2:00 PM Eastern time. On December 27, 2020, the FY 2021 Omnibus Spending and COVID-19 Relief Bills became law. One provision of that law was setting the 4% LIHTC at a floor of 4 percent. The provision was effective for acquisition tax credits allocated after December 31, 2020, and for bond-financed properties placed in service and receiving a bond issue after December 31, 2020. The IRS has now issued Revenue Ruling 2021-20, providing clarity on when taxpayers may claim the fixed four percent credit for acquisition and bond projects. The ruling addresses three separate issues relating to the 4% credit: (1) Does the minimum 4% applicable percentage (4% floor) apply to buildings that are financed in part with a draw-down of tax-exempt bonds that were issued in 2020 but had drawn downs of the proceeds in 2021; (2) Does the minimum 4% applicable percentage (4% floor) apply to buildings that were financed with tax-exempt bonds issued in 2020 but then had a "de minimis" bond issue after 2020; and (3) Does the minimum 4% applicable percentage (4% floor) apply to buildings that received an allocation of credits in 2020 and a "de minimis" additional allocation after 2020? This one-hour live webinar will provide a detailed overview of the Revenue Ruling, with specific examples relating to each of the three issues. At the end of the webinar, which will have plenty of time for Q&A,  participants will have a full understanding of when the 4% credit may (and may not) be claimed. Those interested in participating in the Webinar may register on the A. J. Johnson Consulting Services website (www.ajjcs.net) under "Training Schedule."

A.J. Johnson to Provide Live Fair Housing Webinar on December 29

A. J. Johnson will be conducting a webinar on December 29, 2021, on Compliance with Federal & State Fair Housing Requirements. This is A.J. s last Fair Housing training of 2021 and is a must for individuals required to take fair housing training this year. The Webinar will be held from 1:00 PM to 4:00 PM Eastern time. The course "Compliance with Federal and State Fair Housing Requirements" will equip attendees with the knowledge and understanding needed to avoid fair housing violations. The course curriculum is centered around the regulations in the two major fair housing laws, The Fair Housing Act (Title VIII of the Civil Rights Act of 1968) and Section 504 of the Rehabilitation Act of 1973. The course also includes a discussion of the additional state and local protected characteristics.  In addition, relevant portions of the Americans with Disabilities Act (ADA) are covered as is an in-depth discussion of reasonable accommodation requirements - including rules relating to assistance animals. The purpose of the Fair Housing Act is to eliminate housing discrimination, promote economic opportunity, and achieve diverse, inclusive communities. Professional fair housing training assists in this mission by ensuring that housing professionals understand both the rights of the public relative to fair housing and the duties and responsibilities of real estate professionals. Those interested in participating in the Webinar may register on the A. J. Johnson Consulting Services website (www.ajjcs.net) under "Training Schedule."

IRS Issues Revenue Ruling on 4 Percent Tax Credit Floor

The IRS has issued Revenue Ruling 2021-20, providing clarity on when taxpayers may claim the fixed four percent credit for properties with tax-exempt bonds. The IRS addressed three separate issues relative to the 4% credit: Does the minimum 4% applicable percentage (4% floor) apply to buildings that are financed in part with a draw-down of tax-exempt bonds that were issued in 2020 but had drawn downs of the proceeds in 2021?Does the minimum 4% applicable percentage (4% floor) apply to buildings that were financed with tax-exempt bonds issued in 2020 but then had a "de minimis" bond issue after 2020?Does the minimum 4% applicable percentage (4% floor) apply to buildings that received an allocation of credits in 2020 and a "de minimis" additional allocation after 2020? Example #1: Bonds are issued and partly used in 2020, with the remainder of the bond proceeds drawn down in 2021. The amount drawn in 2020 exceeded the lesser of $50,000 or 5% of the issue price, which qualifies the issue as a 2020 issue.  The qualified low-income building is placed in service after December 31, 2020.Example #2: Assume the same facts as in Example #1, except that instead of a draw-down of bonds in both 2020 and 2021, the Agency issues bonds in 2020 to finance the construction of the project, and in a subsequent year (e.g., 2021), the Agency issues a different issue of tax-exempt bonds, in a de minimis amount, that the Borrower similarly uses to finance construction of the building.Revenue Procedure 2021-43 states that an issuance of bonds in a year after the initial issuance is not de minimis if the aggregate amount of the post-2020 obligations is at least 10% of the total bond financing for the project. Example #3: In 2020, the Agency and Borrower enter into a binding agreement whereby the Agency will allocate tax credits for the acquisition of an existing building and an additional allocation of credits for the rehabilitation of the building into a low-income building. The allocations of both the acquisition and rehab credit are made in 2020. The allocations were made under 42(h)(1)(E) and was a valid carryover allocation. The owner completes the acquisition and rehab of the building and places the building in service after December 31, 2020. After 2020, but before the building is placed in service, the Agency makes an additional allocation of credits relating to the acquisition of the building. This additional allocation is de minimis and reduces the Agency s ceiling for housing credit dollar amounts for the year after 2020 in which the allocation is made. I.e., this is not an allocation of credits due to an issuance of tax-exempt bonds.Revenue Procedure 2021-43 states that an allocation of credits in a year after the initial allocation is not de minimis if the allocation amount of the post-2020 credit amount is at least 10% of the total allocations for the project. The ruling indicates that the 4% credit floor does not apply in any of the cited examples, even though all the buildings described in the examples satisfy the requirement of 42(b)(3) that a building is placed in service after 2020. It should be noted that since the IRS considers the placed-in-service date of a building for acquisition purposes to be the date the building is purchased by the new owner, in example #3 above, the building could not be purchased until after December 31, 2020. Generally, a project without tax-exempt bonds - such as shown in Example #3 - must only meet the post-2020 placed in service test to qualify for the 4% floor for acquisition credits. Properties with tax-exempt bonds must meet two tests: (1) The property must be placed in service after 2020, and (2) the bonds must be issued after 2020. However, the facts presented in Example #3 have led the IRS to the conclusion - based on the Service s interpretation of Congressional intent - that even being placed in service after 2020 may not automatically entitle the acquisition costs of a non-tax-exempt bond project to the 4% floor. This issue is covered in more detail below. IRS Ruling Relative to Example #1: The IRS believes that if the post-2020 draws under the 2020 issue allowed the 4% floor to apply, the result would be a windfall of credits that were not taken into account when the transaction was structured in 2020. Thus, in Example #1, because the loan was issued in 2020, the applicable percentage of the building is determined without regard to the 4% floor. The applicable percentage of the building is the amount determined under 42(b)(1)(B) and (C) for the month that the bonds were issued. The project may not use the 4% floor.IRS Ruling Relative to Example #2: In this example, the post-2020 bond proceeds were from a post-2020 issuance of an exempt facility bond issue. Thus, the situation outlined in Example #2 may qualify a project for the 4% floor, but in order to make this determination, an examination of the effect of the post-2020 bond issuance on project feasibility must be made. Since the law allowing the 4% floor was designed to prevent windfalls, it is necessary to consider whether the de minimis post-2020 issue could create a windfall of tax credits. If the post-2020 issuance is non-de-minimis, any concern over a windfall of credits is lessened. In other words, if the post-2020 issuance is not de minimis, the transaction is less likely to have been entirely structured prior to the enactment of the 4% floor. In addition, a greater portion of the total credits generated by applying the 4% floor to the building would be expected to result from basis financed by the post-2020 issuance.If the de minimis amount of bond financing is fully issued after 2020, the IRS takes the position that this more closely aligns with a building whose only tax-exempt financing was issued prior to 2021 - even if placed in service after 2020. Thus, the IRS rules that only non-de-minimis post 2020 tax-exempt bond issuance qualifies a project for the 4% floor. For projects that do not meet this test, the applicable percentage for the building will be based on the credit percentage in place during the month of the initial bond issuance, or, at the election of the taxpayer, the placed in-service date. IRS Ruling Relative to Example #3: In this example, credits were allocated in 2020 and an additional allocation - of a de minimis amount - occurred after 2020. The Taxpayer Certainty and Disaster Tax Relief Act of 2020, Section 201(b)(1) states that the 4% rate applies to buildings that receive an allocation of housing credit after December 31, 2020, or in the case of tax-exempt bond financed projects ( 201(b)(2)), to projects if the bonds were issued after December 31, 2020. So, a plain reading of the statute indicates that in this example, the project should be eligible for the 4% credit floor. However, the IRS takes a different position. The Service once again makes the "windfall" argument. Since the transaction was structured in 2020, and at that time the allocating agency did not take the 4% floor into account, the 4% credit was not needed for deal feasibility.In the Ruling, the IRS acknowledges that the windfall effect with an allocation is less than in a building financed with exempt facility bonds. However, the Service believes that the requirements of 201(b)(1) of the Act manifest the same legislative intent of 201(b)(2) of the Act and should therefore be interpreted consistently. For this reason, the principles that govern de minimis amounts of bonds are equally applicable to de minimis allocations. Therefore, in the example cited here, the 4% floor does not apply to the building described in Example #3, and the credit percentage will be the percentage for the month of the allocation or, at the election of the taxpayer, the month the building was placed in service. To summarize the IRS ruling - Example 1: the 4% floor does not apply to the building, which is financed in part with a draw-down exempt facility bond issue that was issued in 2020 and on which one or more draws are taken after December 31, 2020.Example 2: the 4% floor does not apply to the building which is financed in part with proceeds of an exempt facility bond issue that was issued in 2020 and in part with proceeds of a different exempt facility bond issue that is issued in a de minimis amount after December 31, 2020.Example 3: the 4% floor does not apply to the building which receives an allocation of credits in 2020 and a de minimis additional allocation after December 31, 2020. Owners that anticipate the use of the 4% credit floor for properties being placed in service after December 31, 2020, should carefully review this Revenue Ruling for applicability to their project.

Court Decision Affirms "Necessity Standard" for Reasonable Accommodations

In Carter v. Murray, 2021, WL 4192055, CIVIL ACTION NO 21-3289 (E.D. PA, September 14, 2021), the U.S. District Court for the Eastern District of Pennsylvania ruled that a tenant was not entitled to a reasonable accommodation of permanent relocation to a unit that was free of carpet fumes and tobacco smoke since the landlord had offered a temporary relocation while repairs were made to remove the offending carpet from the unit. The landlord had also promised to adopt a smoke-free policy for the apartment complex. The suit was brought by Reginald Carter, a resident at Venango House, an apartment building in Philadelphia.  Prior to moving in in August 2018, Carter discovered that the apartment was newly carpeted and painted. Because of his lung disease, he asked management to remove the carpet. He was told this could not be done but was offered an uncarpeted apartment in the building.  He accepted the apartment, but because the linoleum floors and adhesives were also releasing toxins, he did not move in until October to allow the paint to off-gas. He was also unhappy with dust and parts of an unfinished wall. On May 15, 2019, Carter wrote a letter to the manager, Donna Murray, expressing concerns about the smoking of a fellow resident who smoked and used deodorizers to mask the smell. He requested to be moved out of his unit to allow for repainting and floor replacement.  On June 4, 2019, a tenants council meeting was held to address Carter s issues. Carter s lung problems were not brought up at the meeting, but the Council did ask the manager if smoking was going to be prohibited. On December 17, 2019, Carter wrote another letter to Murray in which he stated that he would not allow a contractor to paint his door because of COPD lung disease. He asked that the painting be put on hold until such time as tenants with lung disease could seek exemptions from having their doors painted. The painting was stopped, but no one at the property was asked if they wanted an exemption from the painting of the doors. On January 28, 2020, Carter alleged that an environmental hazard was caused by the improper removal of carpet adhesive in the hallways. He alleged that he was hospitalized twice in 2020 because he "could not walk a block without getting chest, neck, and face pains." He claimed that the "stress of living at the Venango House was a major contributing factor," and that cigar and cigarette smoke from other tenants intensified his breathing problems. In January 2021, Carter emailed Murray and a representative of the management company (Winn Companies) that the smell of paint and new carpeting made his symptoms worse. He complained in February 2021 of cigar smell in his apartment and claimed that due to the racial makeup of the tenancy at Venango House and the fact that management failed to provide 24-hour security and had no central air in the hallways, what was occurring amounted to "murder and institutional racism." On February 22, 2021, Andrew Lund, the Office Manager and Regional Vice-President of the management company, contacted Carter by email about current issues. Carter replied that the smoking issues remained and that he needed permanent relocation instead of a temporary stay at a hotel while repairs were conducted. He alleged that his relocation request was ignored from May 15, 2019 to March of 2021. Carter filed a claim against Lund, Murray and others, alleging constitutional claims for violation of the First and Fourteenth Amendments, claims under the Fair Housing Act (FHA), and state law claims. He requested an order requiring the Winn Companies to relocate him to a place of his choosing at Winn s expense, to remove certain individuals from the tenant council, and to reinstate him as council president. He also sought an order directing the Winn Companies to evict a member of the tenant council with whom Carter had a dispute and to immediately disallow smoking at Venango House The Court dismissed all the constitutional claims. The court also ruled that Carter pleaded no plausible FHA claim for disability. The FHA protects against discrimination based on disability. To state a reasonable accommodation discrimination claim, the plaintiff must plead facts showing (1)accommodations are necessary to afford him equal opportunity to use and enjoy a dwelling; and (2) the defendant refused to make reasonable accommodations in rules, policies, practices, or services. In support of this, the Court cited Vorcheimer v. Philadelphia Owners Association, (a case that those who have taken my fair housing training in 2021 may be familiar with). As stated in Vorcheimer, the element of necessity "requires that an accommodation be essential, not just preferable." A plaintiff must "establish a nexus between the accommodations that he or she is requesting and their necessity for providing handicapped individuals an equal opportunity to use and enjoy housing." The court went on to explain that even if Carter s medical conditions qualified as a disability under the FHA, it did not provide facts alleging the statutory elements of a failure to accommodate claim. In fact, the claim stated that Murray and Lund attempted to resolve Carter s complaints by meeting with Carter and offering relocation to an uncarpeted apartment, and the opportunity to move into a hotel while his floors were refinished. Moreover, Murray and Lund sent Carter an email on March 5, 2021, stating that Venango House would "work toward implementing a smoke-free policy." Thus, the defendants addressed his requests and Carter provided no facts demonstrating a failure to accommodate. For this reason, the court found Carter s disability discrimination claim was not plausible and was dismissed without prejudice. This means that if Carter can address the weaknesses in his case, he may bring it forward again. This case provides another example of fair housing claims relating to reasonable accommodation requests being dismissed when landlords make legitimate offers to meet the requirements relating to the disability - even if the offers do not match the specific demands of the plaintiff.