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Hoarding - Reasonable Accommodation Requirements Under Fair Housing Law

A "reasonable accommodation" (RA) is the request for a waiver of a policy, practice, or procedure of a housing provider in order to provide equal access and opportunity for people with disabilities. Any request for an RA must be approved as long as it is directly related to the person s disability and does not cause an undue financial and administrative burden or fundamentally alter how a community operates. The Reasonable Accommodation Process Generally, managers should not initiate conversations with residents about possible accommodations - they should wait for an accommodation to be requested. Hoarding is different - discussions with the resident may have to be initiated because the situation is dangerous or unsanitary, and because the resident may not be aware of the problem. Why Hoarding is a Fair Housing Issue Since 2013, hoarding has been considered a disability. The fair housing definition of a disability is "with respect to a person, (i) a physical or mental impairment that substantially limits one or more of such person s major life activities; (ii) a record of having such an impairment, or (iii) being regarded as having such an impairment." Hoarding may be a mental impairment that limits a person s ability to care for themselves (a major life activity). Hoarding becomes a legitimate concern to housing providers when it affects the health and safety of the hoarder, other residents, staff, and/or the property. Hoarding According to Kenneth J. Weiss and Aneela Khan in "Hoarding, Housing, and DSM-5," (American Academy of Psychiatry Law, 2015), about 5.8% of Americans suffer from hoarding; this is 15 - 20 million people. When the American Psychiatric Association declared hoarding a clinical disability in 2013, it gave tenants with hoarding issues certain fair housing protections. The diagnostic criteria for hoarding include: Persistent difficulty discarding or parting with possessions regardless of actual value;A perceived need to save items and distress associated with discarding them;The accumulation of possessions that congest and clutter living areas and substantially compromises their intended use; andClinically significant distress or impairment in social, occupational or other important areas of functioning (including maintaining an environment safe for oneself and others). Fair Housing Implications of Hoarding Even prior to 2013, hoarding had some fair housing protection. In Douglas v. Kreigsfeld Corp., 884A. 2d 1109 (DC 2005), a court ruled that a tenant s request for an RA plan to clean a unit due to the tenant s mental disability and avoid eviction was reasonable. Hoarders tend to be secretive so they rarely will request an accommodation. It is often up to management to start the process. When dealing with a resident with a hoarding problem, it is important not to use the term "hoarder" or to refer to their items as junk, trash, or clutter. Facts About Hoarding Hoarding is the excessive accumulation of items along with the inability to discard them - even when they appear useless.Hoarding & Squalor are not the same. Squalor is defined as filthiness or degradation from neglect.Animal Hoarding involves accumulation of multiple animals. This is a very serious type of hoarding because of fecal and urine smells, sickly or diseased animals, and lack of control by the pet owner/resident. These cases should immediately be referred to animal control or the SPCA.Compulsive hoarding may be a mental disability and 92 percent of hoarders also suffer from one or more other mental health disorders, such as depression, anxiety, OCD, and social phobia.Hoarders are often unable to use their kitchens and bathrooms as intended. This is one of the clearest indicators of a hoarding problem.Hoarding creates health and safety concerns that may lead to lease violations, such as fire hazards, blocked entry/exit, trip and fall risks, infestation, non-working plumbing, and unsafe structural or sanitation systems. Hoarding Characteristics Serious clutter or disorganization including what appears to be random piles or paths;Indecisiveness about discarding items for fear of making the "wrong" decision or not being able to see their things;Hoarders are very private and may not acknowledge that they have a problem;Hoarders are often intelligent and include people from all backgrounds and walks of life, including teachers, engineers, rocket scientists, and business owners;Hoarders are most often elderly women;Hoarders are frequently obese; andHoarders do not create squalor and are not lazy or defiant. Clutter vs. Hoarding Many people live in messy homes, but the home is safe to move around in; they can straighten up enough to feel at ease having guests. Rooms are used for their intended purpose. Housing providers must be able to distinguish between poor housekeeping and a hoarding situation. If in doubt, help should be sought from a social service or fair housing agency. Example of Hoarding A maintenance worker enters a unit to make a repair and finds the unit filled with so much paper and other belongings that walking through it is difficult and unsafe. The tenant is given 30-days to correct the issues but fails to do so. As a result, management begins eviction. Should the owner have taken a different approach to the problem? The answer is probably "yes." Residents who are compulsive hoarders have the right to request a RA from housing providers - even though they may not always ask for an accommodation. This is one time when an accommodation should be offered without specifically being requested by the resident. If a housing provider knows (or should have known) that the resident is a hoarder with a disability, the law requires attempts to reasonably accommodate prior to eviction. However, minimum health and safety standards must be met, even if the resident who hoards requests or is offered a RA. The RA request will sometimes be for an extension of time to bring the unit up to housing codes before the lease termination or eviction proceedings begin. It is this extra time that is the most common accommodation for hoarding. A "Plan of Action" included in the RA offer is a useful tool for helping hold the resident accountable - and for documenting the housing providers efforts to accommodate the disabled resident. Example of a Reasonable Accommodation for a Hoarder If a housing provider is considering eviction of a hoarder, a "remediation plan" can be offered as a RA to preserve the tenancy. Such a plan could include support services plus an individualized schedule for clean-up and inspections. As noted above, the most common RA for hoarding is more time for the person to obtain supportive and mental health services that would allow the tenant to bring the unit into compliance with the lease. Collaboration between the tenant, the housing provider, mental health professionals, social workers, and/or other advocates is critical. Family members and friends may also play a role. Tips for Working with a Resident Who Hoards Early identification and intervention are key. Educate staff about hoarding.Partner with code enforcement agencies and mental health providers.Develop clear, mutually agreed upon goals and timeframes for meeting expectations.Schedule regular inspections to monitor concerns about possible hoarding problemsAsk open-ended questions - mirror the language used by the resident and listen carefully.Be respectful and non-judgmental.Try to understand why the accumulated items are so important.Helping means working with the resident and not doing the work for the resident.Assist the resident in setting limits and self-monitor his/her hoarding.Reach agreement on post-compliance inspections.Treat residents the way you would want to be treated.Do not immediately begin the eviction process.Document the condition of the apartment with photos and detailed notes, noting the specific code and lease violations.Involve your legal counsel - a full understanding of state and local law is essential.Give the resident a chance to rectify the situation. Include timeframes in the written Plan of Action (this "Plan" is the most common accommodation).The Plan should give the resident a chance to cure the problem at a pace that is conducive to long-term success. Challenges to Working with Hoarders Working with hoarders is one of the most difficult accommodations a housing manager may be called on to make. There are many difficult situations that will arise in this process, including: No support system to assist with clean-up. Actually helping with the physical clean-up is a "slippery slope."Finding help that will enable the hoarder to stick to the plan. Both psychological and physical help is necessary, but finding the physical help is often the most difficult.A lot of hoarders are elderly or have physical conditions that prevent them from being able to do the work themselves. They may have no family (or unwilling family) and cannot afford to hire help. In these cases, housing providers should check with local boy scout troops, fraternities, churches, etc. What does NOT Work When Dealing With Hoarders? Ignoring the problem - it will only get worse;Blaming & Shaming;Avoiding the Discussion;Removing clutter yourself;Unsupported clean-up jobs;Working in isolation; andLack of follow-up monitoring. What If the Accommodation Plan Does Not Work? Due to the nature of hoarding, it should be made flexible enough to deal with the inevitable set-backs. Neither state nor federal fair housing laws limit the number of times a RA may be requested, but if it is unreasonable - for the reasons previously cited - it may be denied. Failure to comply with sanitation, building, or fire codes could be interpreted as an undue financial and administrative burden for the housing provider. Eviction of a Hoarder Depending on state or local law, eviction may be possible for animal hoarding, explosives, the blocking of emergency exits, or directly damaging (and refusing to pay for) the property. It may also be possible to evict a hoarder if, after multiple attempts to accommodate the disability, nothing has worked and the resident is not cooperating with ongoing efforts to resolve the issues. In such cases, close consultation with local counsel is a must. Conclusion Hoarding is a disability, protected by fair housing law. As many as 20 million Americans suffer from hoarding and housing providers must be able to recognize it when they see it. When hoarding is discovered, landlords should generally not begin immediate eviction procedures, nor should they wait for the tenant to request a reasonable accommodation. Instead, owners should enter into an interactive discussion with the resident regarding whether they will cooperate with the implementation of an Active Plan to resolve the problem. If the resident agrees to cooperate, a written "Plan of Action" should be developed. Any plan should be flexible enough to allow for set-backs, but it should require ultimate compliance. Ultimately, while landlords are required to offer reasonable accommodations to residents with hoarding issues, they are not required to tolerate dangerous conditions for the property, staff, or other residents. If such conditions cannot be rectified by a reasonable accommodation, removal of the resident may be the only option. But, removal of a resident with a hoarding issue should be viewed as the last option - not the first.

Rental Application/Lease/Lease Riders - Critical LIHTC Documents

It is important that early in the application process, prospects be advised of the applicable income limits and student requirements for occupancy in a Low-Income Housing Tax Credit (LIHTC) property. Management should explain that the total gross income of all members of the household will be verified and included in income for eligibility purposes. Prospects should also be informed that they may be required to go through this same process on an annual basis. In addition to all the verification forms and affidavits that applicants will be required to deal with as part of the qualifying process, there are three other documents that are critical to the qualification process for LIHTC residents: the rental application, the lease, and required lease riders or addenda. The Rental Application A fully completed application is critical to being able to determine tenant eligibility. The information provided on the application is the basis on which eligibility will be determined and must be comprehensive enough to provide all income sources - including assets. The application must be completed in its entirety, whether it is completed by the applicant or by the manager during the interview process. At a minimum, a comprehensive LIHTC rental application will request the following information: The name and age of each person that will occupy the unit (legal name should be required as it will appear on the lease and tenant income certification).All sources and amounts of current and known projected annual income expected to be received during the 12-month certification period. Include assets currently owned and determine whether household members disposed of assets for less than fair market value during the prior 24 months.The current and anticipated student status of each member of the household during the 12-month certification period.A screening procedure such as credit checks, prior landlord checks, criminal record screening, etc. The application should request information on whether the family s assistance or tenancy has ever been terminated for fraud, nonpayment of rent or failure to cooperate with required recertification procedures.Housing history for the two prior years.The signature of the applicant and the date the application was completed. Lease All residents occupying LIHTC units should be certified and under lease no later than the date the household occupies the unit. Leasing guidelines to keep in mind include: At a minimum the lease should include, but is not limited to:The legal name of all parties to the agreement and all other occupants (live-in aides/caregivers should not be shown on a lease);A description of the unit to be rented;The date the lease becomes effective;Any mandatory charges to the tenant;Optional payments being made by the household;Use of premisesThe term of the lease (should be at least six months at move-in); andThe rental amount. It is important that the rental amount not exceed the amount permitted under Section 42 of the Internal Revenue Code (IRC) or stated in the project s Extended Use Agreement, whichever is lower.As noted in (6) above, the term of the initial lease must be at least six months for all LIHTC units (unless the project is Single Room Occupancy or Transitional Housing for the Homeless). Lease renewals are not subject to the six-month minimum.It is important that the lease reflect the correct move-in date, or the date the tenant takes possession of the unit. This date should match the move-in date shown on the Tenant Income Certification (TIC). Lease Rider/Addendum In addition to a standard lease that meets the applicable requirements of state law, there should be language in the lease or a lease rider/addendum that outlines all the LIHTC requirements per Section 42 of the IRC. Language in this rider/addendum will relate to the rights and obligation of the parties, income requirements, annual certification requirements, and student requirements. Additional clauses will detail requirements relating to: Increases in income;Utility allowance increase/decreases;Income limit increases;Rent changes;Student restrictions and exceptions; andChanges in household composition. Finally, every lease should contain language relating to the "good cause" protection that is afforded to all households that qualify under the LIHTC program. This language should inform all residents that they may not be evicted or otherwise have their tenancy terminated by the owner or management unless there is "Good Cause" to do so. The three documents outline here (application/lease/lease rider) are critical elements relating to LIHTC household eligibility and should be reviewed regularly in order to ensure that they meet the requirements of the LIHTC program.

HUD Issues Guidance on Tenant Notification Requirements Relating to Physical Inspections

On July 8, 2019, the Department of Housing & Urban Development (HUD) issued a memo for HUD staff and multifamily owners and agents (O/As) clarifying owner responsibilities to notify residents in advance of physical inspections and to make final inspection documents available for review and comment. The memo also encourages collaborative implementation of new house rules. In addition, the memo provides guidance on sharing responses to tenant complaints and encourages tenants to report false owner certifications of completed repairs of exigent health & safety (EH&S) findings. Notifying Residents of a Physical Inspection HUD is encouraging owners to give as much advance notice as possible to residents of a planned inspection. Residents should be given at least 24-hour notice of a planned inspection unless state or local law requires more than a 24-hour notice. With Notice H-2019-04, HUD employees and contract inspectors acting on behalf of HUD will give site owners and their agents 14 calendar days of notice prior to an inspection. This was a dramatic reduction from the prior notice, which was frequently extended up to four months. An extension of up to seven days is permitted under the new procedures, but if the second attempt does not result in a completed inspection due to the fault of the O/A, a REAC score of zero will be registered and the owner is subject to HUD s remedies for a failing score. Making Inspection Documents Available for Comment & Review Owners are obligated to make certain inspection documents available for review and comment. Once the 30-day technical review appeal period and the 45-day database adjustment appeal period have expired, the owner must make its physical inspection report and all related documents available to the residents during regular business hours and upon reasonable requests for review and copying. Related documents include: Notice of Default (NOD) or Housing Assistance Contract or a Notice of Violation (NOV) or Regulatory Agreement. A copy of the notice must be left under each tenant door, posted in the mail room, and on each floor, or by other means;"Owner s Certification that the Physical Condition of the Project is in compliance with HUD contracts and the Physical Condition Standards of 24 CFR 5.703;" andOwners Plan of Corrective Action, if one is submitted. Once the owner s final physical inspection score is issued, the owner must make any additional information available for review and copying by residents upon reasonable requests during regular business hours. All documents must remain available for review for 60-days from the date the final score was issued. The owner must also post a notice to the residents in the management office and in any bulletin boards in all common areas that advises the residents of the availability of the materials noted above. Responding to Resident Complaints When an O/A submits a written response to a resident complaint to HUD or the PBCA, a copy of that response should be given to the person who made the complaint, but only if requested. If the owner discusses more than one topic in the document, only the portions related to the resident s complaint should be provided. Self-Certifying Completed Repairs of EH&S Findings According to the memo, resident advocates have raised concerns about owner self-certification of completed repairs. As a result, O/As are encouraged to submit supporting documentation with their reports identifying and certifying completed repairs, such as: Photos taken before and after repairs;Work orders or invoices from the contractor who completed the repairs; orLetters from relevant tenant organizations satisfied with the repairs. The memo also gives HUD staff the authority to request whatever supporting documentation they feel is necessary in order to ensure that work has been properly completed.

Resident Protections in a Low-Income Housing Tax Credit Property -- "Good Cause" Termination

Every Section 42 Low-Income Housing Tax Credit (LIHTC) property must have a recorded Extended Use Agreement (EUA). One of the requirements of an EUA is that it prohibit eviction or termination of occupancy by a low-income resident without "good cause." The requirement for an EUA went into effect for LIHTC properties with allocations of credit beginning in 1990 and the good cause protections were included in the original law requiring EUAs. IRS Revenue Ruling 2004-82 (July 29, 2004) made clear that all EUAs for LIHTC projects must include a prohibition against evicting or terminating tenancy of a low-income resident for other than good cause. This requirement must remain in place throughout the entire term of the EUA, which will be a minimum of 30 years. What is "Good Cause?" The general definition of "good cause" is "serious or repeated violations of the material terms of the lease." The owner of a LIHTC project must be able to demonstrate - if challenged in state court - that good cause existed to support the eviction or termination of a low-income resident. For purposes of 42(h)(6)(E)(ii)(I), good cause is determined by the state or local law applicable to the location in which the project is located. The IRS will never take a position relative to what constitutes good cause in any specific situation. This is purely a state and local law issue. Examples of Good Cause Examples of good cause based on most state and local laws governing landlord/tenant relationships include: Nonpayment of rent;Material violations of a lease or rental agreement;Destruction or damage of the property;Interference with other tenants or creating a nuisance; andUsing the property for an unlawful purpose. In the context of a properly structured lease for a LIHTC property, lease violations could include: Refusal to follow the rules of the Section 42 program, including recertification, permitting management to obtain utility records, etc.;Being deemed ineligible under the rules of the Section 42 program (e.g., student status); andProvision of incorrect information relating to eligibility. What about states that allow Landlords to non-renew leases without cause? Many states permit a landlord to non-renew a lease at the end of a lease term without cause - i.e., no reason is needed. In such cases, if a landlord refuses to enter into a new lease, it is not considered, per se, eviction without good cause. However, in these cases, owners must be prepared to demonstrate if challenged in state court that the non-renewal of a lease is not a "termination of tenancy" for other than good cause under the EUA. While state landlord/tenant law may permit non-renewal without cause, the EUA is a state-court enforceable deed restriction agreed to by the owner. These agreements may be enforced in state court by any interested party. The tenant is clearly an "interested party," but the HFA could also be considered an interested party and seek enforcement of the EUA on behalf of a resident. Conclusion Owners of LIHTC properties must remember that once the EUA is executed, the right to lease non-renewal without cause is waived. Unless a tenant has violated the terms of a lease or rental agreement, an owner will be hard pressed to defend the termination of a low-income resident s occupancy in a LIHTC property.

Affordable Housing Platforms of Presidential Candidates

According to the National Low-Income Housing Coalition s (NLIHC) 2019 Out of Reach report, a full-time worker needs to earn an average hourly wage of $22.96 to afford a modest, two-bedroom rental home in the United States. This amount is called the "housing wage," and is $15.71 higher than the federal minimum wage of $7.25 per hour and $5.39 higher than the national average hourly wage of $17.57 that is earned by renters. In nine states and the District of Columbia, the two-bedroom housing wage is over $25 an hour. With this study as a backdrop, it is worth taking a look at the housing proposals of the 2020 presidential candidates. An Executive Order signed by President Trump in June 2019 establishes the White House Counsel on Eliminating Barriers to Affordable Housing Development and is chaired by HUD Secretary Ben Carson. The expressed goal of the order is to loosen restrictive zoning and building regulations, increase the supply of housing, and bring down housing costs. To date, this is the only action from the administration with a direct relation to housing affordability. However, because most regulatory barriers to affordability occur at the local level, the federal government has relatively little leverage in this area. One thing the executive order does do is lock in affordable housing as a 2020 issue. So, how are the current Democratic candidates for housing approaching the problem? Following is a summary description of the plans that have been made available to this point. Senator Elizabeth Warren As she does with many issues, the housing plan released by Senator Warren is very detailed. Warren s plan, "the American Housing and Economic Mobility Act," includes, among other things: Building, preserving or rehabilitating 3.2 million housing units nationwide for lower- and middle-income people in order to lower rents by 10%. This would be funded by raising the estate tax back to the Bush-era levels; Creating a down-payment assistance program designed to address the black-white homeownership gap by providing assistance to first-time homebuyers who live in formerly red-lined neighborhoods or communities that were segregated by law and are still currently low-income;Expanding fair housing legislation to bar housing discrimination on the basis of sexual orientation, gender identity, marital status, veteran status, or income;Extended the Community Reinvestment Act (CRA) to require non-bank mortgage lenders to invest in minority communities;Providing $2 billion in assistance to mortgage borrowers who are still underwater on their home loans following the financial crisis, meaning they owe more than their homes are worth; andInstituting new requirements for sales of delinquent mortgages. Senator Cory Booker Booker s plan includes: Creation of a tax credit that would aid in capping rental costs at 30% of before-tax income;Implementing zoning reform by requiring cities to eliminate restrictive zoning rules in order to qualify for federal loan and grant programs (it should be noted that Booker is re-thinking this part of his proposal since it will hit lowest income cities the hardest. Wealthy areas that are most likely to use exclusionary zoning are also the least likely to use [or need] federal funds);Funding the construction of new housing units designated for low-income renters by providing $40 billion annually to the Housing Trust Fund;Expanding fair housing laws to prohibit housing discrimination on the basis of sexual orientation, gender identity, or source of income;Expanding access to federal housing assistance programs (this differs 180 degrees from the Administration s current efforts to cut back on the number of people eligible for housing assistance);Creating a fund that would pay for legal counsel for renter s facing eviction;Increasing the amount of money designated for grants given to communities to administer services for the homeless; andGive $1,000 "baby bonds" to every child at birth, which can grow by up to $2,000 per year depending on the family s income. This money could then be used to fund the down payment on the purchase of a home. Senator Kamala Harris Harris s plan focuses on increasing the homeownership rates in black communities, and includes: Expanding the range of information used to create credit scores to include data such as rent and utility payments;Setting aside $100 billion for federal grants that would assist with down-payments or closing costs for families who rent or live in historically red-lined communities;Strengthening anti-discrimination laws to prevent discrimination in home sales, rentals, and mortgage lending; andHarris introduced the Rent Relief Act, which would create a refundable tax credit for households making less than $100,000 annually (or $125,000 in high-cost areas) and spend at least 30% of their income on housing costs. Mayor Pete Buttigieg Mayor Buttigieg has put forth an extensive proposal, called "The Douglass Plan," to address racial disparities in homeownership and wealth. The plan would create a "21st Century Community Homestead Act" that would be tested in select cities around the country. Through this program, a public trust would purchase abandoned properties and provide them to eligible residents. These would include people who earn less than the area s median income or those who live in historically redlined or segregated areas. Residents who participate would be given full ownership over the land and a ten-year forgivable lien to renovate the home so it could be used as a primary residence. Other proposals by the Mayor include: Funding national investment in affordable housing construction;Reforming land use rules to make it easier to build affordable housing units; andExpanding federal protections for tenants against eviction and unjust harassment. Senator Bernie Sanders While Sanders has not put forward a detailed affordable housing plan, he has proposed an "Economic Bill of Rights," which has a housing component. This plan references the fact that some people are paying "40%, 50%, 60% of their limited income in housing," and mentions urban gentrification as an issue that needs to be addressed. Former Secretary of HUD Julian Castro As a former HUD secretary who already had an understanding of affordable housing issues, Castro s plan is detailed and extensive. His proposals include: Expansion of the Housing Choice Voucher program;Creation of a refundable renter s tax credit for households who spend more than 30% of their income on housing;Allocating an additional $45 billion annually for the national Housing Trust Fund and the Capital Magnet Fund to support affordable housing initiatives;Reforming zoning laws to encourage the construction of affordable housing;Addressing homelessness by expanding funding for grant programs and creating a definition of homelessness at the federal level;Extending fair housing protections to the LGBTQ community and to individuals who were previously incarcerated;Developing an approach to identify where gentrification is occurring and help households avoid being displaced; andEstablish zoning policies that take into account climate change. Senator Amy Klobuchar Senator Klobuchar has outlined more than 100 actions she plans to take in her first 100 days in office, a number of which involve affordable housing, including: Reversing the Trump administration s proposed changes to federal housing subsidies;Expanding a pilot program that provides mobility housing vouchers to families with children to help them relocate to higher opportunity neighborhoods;Suspending changes to fair housing policy that are being sought by current HUD Secretary Ben Carson in order to combat housing segregation; andOverhaul housing policy more broadly as part of a national infrastructure plan. Representative John Delaney Congressman Delaney has proposed a $125 billion affordable housing plan that would do the following: Increase funding for the Housing Trust Fund to at least $7 billion annually;Create a $5 billion affordable housing grant program that provides funding to states and municipalities that do away with zoning restrictions limiting the construction of affordable multifamily housing (note how this differs from other proposals that would remove federal funding for localities that have exclusionary zoning; this is the "carrot" vs the "stick.")Establish a right to counsel in eviction procedures, accompanied by $500 million in federal funding for low-income renters legal representation;Increasing the funding for the Homeless Assistance Grant program and the Department of Veterans Affairs Grant and Per Diem account;Revoke the charters held by secondary-mortgage Fannie Mae and Freddie Mac over five-years and, instead, establish a government guarantee on mortgages through the Government National Mortgage Association (Ginnie Mae); andRequire borrowers to put at least 5% down to get a mortgage. None of the other candidates have put forward extensive affordable housing proposals, although all have mentioned housing as a priority. In 2018, Senator Michael Bennet introduced legislation to fight evictions by creating a national database to track instances of eviction and giving money to local and state programs that would increase tenants legal representation. Author Marianne Williamson has called for protecting homeowners from predatory lending practices and increasing access to loan modifications for distressed mortgage borrowers. Entrepreneur Andrew Yang calls for revisiting zoning rules by "taking the needs of renters and those who would be interested in moving into areas into account." Former Congressman Beto O Rourke has stated that he wants to increase funding to the National Housing Trust Fund. Senator Kirsten Gillibrand has proposed a $50 billion investment each year in the Housing Trust Fund. She also said that she would choose a HUD secretary "who understands the nature of homelessness as well as affordable housing." While all of the outlined "plans" are really nothing more than part of a campaign platform at this point, the detail of some of them shows that there is a fairly high level of thought being put into the affordable housing crisis the U.S. is facing. As the 2020 presidential campaign heats up, we will certainly hear more on the subject and can look forward to more specifics. One thing is certain - no matter who is elected President in 2020, affordable housing will be of much greater import than in any prior election.

Resident Manager Unit in a LIHTC Property - A Refresher

The ability of a Low-Income Housing Tax Credit (LIHTC) project to utilize an apartment as a resident manager unit was established by IRS Revenue Ruling 92-61 - way back in 1992. The ruling established that the adjusted basis of a unit occupied by a full-time resident manager in included in the eligible basis of a qualified low-income building under Section 42(d)(1) of the Code, but the unit is excluded from the applicable fraction of the building for purposes of determining qualified basis. This essentially allows a unit to be used as a resident manager s unit without decreasing the credit available to a building. The IRS considers such units to be residential rental "space," as opposed to a residential rental "unit." Thus, the treatment of the unit is similar to the treatment of common area. Manager units have traditionally been handled in two ways for LIHTC projects. The unit is considered common area (as noted above) or other area reasonably required by the project and the use of the unit supports property operations. Under this method, as noted above, the unit is included in the eligible basis of the building but is excluded from the buildings applicable fraction. For example, a 100-unit building with 100 low-income units has an applicable fraction of 100%. If the same building has an approved employee unit, there are now 99 total units and 99 low-income units and the 100% applicable fraction is maintained. In this case, the income of the employee living in the unit is irrelevant, as is any rent paid by the employee (although it is recommended that any rent charged by approved by the appropriate Housing Finance Agency [HFA]).The unit may be occupied by an employee who is also a qualified low-income resident and the unit may be considered a low-income unit. In this case, the unit is included in the building s applicable fraction. If an owner wants to set aside a unit as an employee unit under sceario #1 above, I make three general recommendations: Obtain HFA approval. While some states do not require a formal approval, there are many that do. Some states (e.g., California) require approval even when the size and location of the unit changes. All such approvals should be in writing.While the IRS will not make the charging of rent on an employee unit an audit issue, it is up to the HFA as to whether rent may be charged. So, as with the use of the unit itself, any proposed charges to the employee should be approved by the HFA.The employee should serve primarily the property at which they live. This is the one element that IRS has indicated that they would examine during an audit. The question that arises if an employee works at another property - or even has another job - is whether the presence of the employee unit is really necessary for project operations. Owners should take special care when designating an employee unit at a mixed-income property. Some HFAs will not permit a change in employee units at mixed-income projects. Generally, employee units must be occupied by an onsite manager, assistant manager, or maintenance personnel who work primarily at the property in which the unit is located. As noted in #3 above, it is critical that the employee work at the property on a full-time (or near full-time) basis. If it is intended that the employee also work at another project, HFA approval should be sought before designating the employee unit.

Administration to Issue Guidance Regarding HUD's Interpretation of Disparate Impact in Fair Housing

On Monday, August 19, 2019, the Trump administration will introduce a new rule that may change the way the federal government enforces fair housing law, making it harder for people to file fair housing discrimination complaints. The proposed regulation from the Department of Housing and Urban Development (HUD) would replace the current rule on disparate impact, a legal theory that has guided fair housing law for more than 50-years. Disparate impact refers to practices or policies than have an adverse impact on certain protected groups (e.g., race or national origin) without discriminating against them in explicit ways. In 2015, the Supreme Court recognized this form of discrimination as being prohibited under the Fair Housing Act. The proposed rule from HUD will substantially raise the burden of proof for parties claiming discrimination, making it easier for property owners to implement policies that have a discriminatory effect. In addition to weakening the disparate impact protections, the proposed rule will carve out guidance for the automated decision-making systems used by lenders and landlords that deliver judgments on credit risk, home insurance, mortgage interest rates, and decisions based on criminal records. Under the new regulation, lenders and landlords would not be responsible for the effects of an algorithm provided by a third party - a standard that will almost certainly build a backdoor to bias. The proposed regulation is not a surprise. Last June, HUD Secretary Ben Carson made it clear that HUD was looking at revising the disparate impact procedures to favor lenders and landlords. Once the rule is published on August 19, there will be a 60-day public comment period before it can be implemented. The Current Rule Presently, disparate impact cases proceed by meeting a three-part "burden-shifting" test. A plaintiff makes an allegation and must show that a practice or policy has a disparate impact based on a protected characteristic. If this is shown, the defendant offers a rebuttal, showing that there is a legitimate business reason behind the policy. If that is shown, the plaintiff has an opportunity to show that there is a less discriminatory way to accomplish the same business goal. The Proposed Change The new rule will set a five-point prima facie evidentiary test on the plaintiff side alone. This means that a party seeking to bring a discrimination case under the FHA would need to establish some level of evidence in the pleading stage. To bring forward an accusation of implicit discrimination, plaintiffs would have to demonstrate - before any discovery process - that the policy itself is flawed, and not just that the policy has a discriminatory effect. Under the five-point burden test, plaintiffs would need to 1) prove that a policy is "arbitrary, artificial, and unnecessary" to achieve a valid interest; (2) demonstrate a "robust causal link" between the practice and the disparate impact; (3) show that the policy negatively affects "members of a protected class" based on race, color, religion, sex, familial status, national origin, or disability; (4) indicate that the impact is "significant;" and (5) prove that the "complaining party s alleged injury" is directly caused by the practice in question. The major weakness with this new procedure is that without going through a discovery process, it is nearly impossible to establish the tight causal link between the policy and the impact. In addition, the new HUD rule would establish three new defenses for landlords, lenders, and others accused of discrimination based on models and algorithms. The first defense would enable defendants to indicate that a model is not the cause of the harm. The second would allow the defendant to show that a model or algorithm is being used as intended and is the responsibility of a third party. Finally, the new rule would allow the defendant to call on a qualified expert to show that the alleged harm is not a model s fault. This new rule will give lenders and landlords a huge loophole. Many, if not most, lenders and landlords are not capable of developing their own in-house credit-risk algorithms; instead, they rely on third party vendors. By placing the burden of fairness on the vendors, HUD is establishing an incentive for users and vendors alike to decline to study the outcomes of automated decision-making systems. In other words, as long as the vendor claims to have tested for algorithmic fairness, the lender or landlord is shielded from liability. Since there are no established standards, and HUD does not propose any, to test for disparate impact, the vendors can set their own requirements for testing. If a lender or landlord is not liable for discrimination resulting from an algorithm that it uses, there is no incentive to look for a company that guarantees non-discriminatory algorithms. As for the vendors, there is no incentive to test for disparate impact since if they don t know the type of disparate impact that may result from their algorithm, it will be almost impossible to make them responsible for any discrimination. At the same time, a plaintiff will have no way of knowing what data a vendor uses to reach a leasing or mortgage decision. The vendors will be able to shield their practices behind trade secrets in the way that the algorithms are established. This is the first federal regulation to directly address algorithms and disparate impact. Based on early information on the proposed regulation, it appears that vendors will not be held liable unless their model is blatantly discriminatory. Under this proposal, it will fall on plaintiffs to determine, case by case, how an algorithm affects them by suing the company or companies responsible for making the algorithm - without any standard for what algorithmic fairness means. Civil rights organizations are going to aggressively fight this proposed regulation, while real estate and lender lobbyists will strongly support it. In truth, even if the rule becomes final, no one can be quite sure what impact it will have on fair housing claims or enforcement. As with all regulations of this type, it is likely to be fraught with unintended consequences. But, one thing is certain - if the rule becomes final, tenants and potential purchasers of housing will have a reduced chance of prevailing is disparate impact claims.

Court Rules that Voucher Fair Housing Protection Does Not Violate Rights of Owner

In a June 2019 ruling (Fletcher Props v. City of Minneapolis), the Minneapolis Appeals court reversed a lower court ruling and found that a city ordinance prohibiting apartment owners from refusing to accept voucher holders did not violate the owner s property rights. Facts of the Case An owner sued the city over a new law that bars owners from screening out prospective tenants who use Housing Choice Vouchers under the Section 8 program;The ordinance has an exception for owners who can show that having to accept voucher holders would create an "undue hardship," though owners may only use this defense after the filing of a discrimination case with the city s Civil Rights Department;The suit argued that the mandate conflicts with state law and unfairly forced the owner to comply with requirements of federal housing voucher programs for low-income residents; andThe owner also claimed that the law violates the state s Constitution because it reduces owners property values, forces owners to enter into contracts unwillingly, and represents an unnecessary government intervention in their businesses. Decision of the District Court The district court granted the owner a judgment without a trial, concluding that the ordinance deprives the owner of its right to substantive due process and equal protection under the state Constitution. The city appealed. Decision of the Appeals Court The Minnesota Appeals court reversed the lower court decision. Reasoning Factors to consider in determining whether a right is fundamental include historical practice and whether the right has uniform and continuing acceptance across the nation;When a fundamental right is not implicated (and such a right was not implicated in this case), the court applies a rational basis analysis, meaning that the court seeks to determine only whether a law is "rationally related" to a "legitimate" government interest;The court did not consider the right to rent property as implicating a fundamental right and the court, in a recent decision, applied rational-basis analysis in considering other legislation affecting rental units;The court concluded that neither the state nor the nation overall has a history of recognizing the right to rent property as a fundamental right. The right to rent property isn t a right "implicit in the concept of ordered liberty, such that neither liberty nor justice would exist if it were sacrificed;" andThe court ruled that the city ordinance rationally serves the public purpose of increasing housing opportunities for voucher holders and is not an unreasonable, arbitrary, or capricious interference with a private interest. As a result, the ordinance was deemed to be constitutional. There is a growing national trend toward protection for voucher holders, with at least 14 states and 75 local jurisdictions offering such protection. This is an important case that establishes that such protections do not violate the fundamental rights of property owners.