News

2019 HOME Income Limits

HUD has published the 2019 HOME income limits. The limits will be effective on June 28, 2019. Until that date, HOME fund recipients should continue to use the 2018 HOME income limits, which were published on June 1, 2018. The CPD Income Calculator has not been updated for the 2019 income limits. A mailing list message will be sent out by HUD once the 2019 income limits have been updated in the calculator. Properties using HOME funds should notify their Participating Jurisdiction for details on using the new income limits.

Proposed Changes to LIHTC Program

     On June 4, 2019, S. 1703, "The Affordable Housing Credit Improvement Act of 2019," was introduced in the Senate. It offers some major revisions to the Low-Income Housing Tax Credit (LIHTC) program. If enacted into law, it would represent the most significant changes to the program since the law was originally enacted in 1986. Major provisions of the proposed legislation are: A 50% increase in LIHTC allocations, phased in over five years;A permanent 4% rate for acquisition costs and projects financed with tax-exempt bonds;A 30% basis boost would be permitted for rural areas and for tax-exempt bond projects;Modification of public use rules to permit LIHTC and tax-exempt bond housing for specific groups, including veterans;Permit use of the Average Income (AI) Minimum Set-aside for tax-exempt bonds;Add specific LIHTC provisions for the implementation of VAWA;Require a "cost reasonableness" component in QAPs for development costs;Increase the number of Difficult Development Areas (DDAs) that are eligible for the 30% basis boost;Repeal the population cap for Qualified Census Tracts (QCTs), opening up more areas to the 30% basis boost;Allow the inclusion of relocation expenses in eligible basis;Eliminate the basis reduction for properties using renewable energy tax incentives;Encourage more LIHTC development in Native American communities by making all such communities DDAs;Give states discretion to increase basis by up to 50% for projects targeting extremely low-income renters;Provide more flexibility for existing tenant eligibility in acquisition/rehab deals;Simplification of the ten-year rule and related party rule by limiting acquisition basis of such properties but not prohibiting the total use of credits;Allow national nonmetropolitan income limits to be used on tax-exempt bond projects;Simplification of the LIHTC student rule by adopting the HUD Independent Student rule;Clarify the ability to claim credits after a casualty loss - even for properties that are not in a federal disaster area;Replace the Right of First Refusal with a purchase option;Require that rents for units with voucher residents be no higher than LIHTC rent for properties using the AI Minimum Set-Aside or the 50% basis boost;Require that the Department of Treasury issue regulations prohibiting local approval or contribution requirements;Require that HFAs - instead to Treasury - determine when a foreclosure was arranged in order to exit an extended use agreement; andChange the name of the program to the "Affordable Housing Tax Credit." In terms of timing, if these provisions are not enacted this year, 2021 will probably be the best bet for the changes. Major tax changes are rarely passed during a Presidential election year.

Criminal Background Checks and Fair Housing

     The federal Department of Housing & Urban Development (HUD) and the Department of Justice (DOJ) are making investigations of fair housing violations in three specific areas a priority for 2019. These areas are sexual harassment, tenant-on-tenant harassment, and policies regarding criminal record checks. In the past two weeks I posted articles on the first two issues and I am completing this series with a discussion of criminal screening policies.      If you have not done so in the past couple of years, a review of your companies criminal screening policies should be a priority. It is important to ensure that your company policies relative to screening for criminal activity do not run afoul of 2016 HUD guidance in this area. It should be noted that the HUD guidance applies to all housing that is subject to the Fair Housing Act - not just HUD-assisted housing.      While communities are not prohibited from using criminal history as a factor in tenant selection, liability is possible under fair housing law if a criminal history policy, without justification, has a disparate impact on minority applicants. If your criminal screening policy considers arrest records as a reason for rejection, you should make some immediate changes. There is virtually no circumstance where an arrest record is considered by HUD to be a legitimate factor in criminal screening. The one exception to this may be a situation in which an arrest has occurred for a crime that could indicate a danger to the community and there has not yet been an adjudication. Other than this exception, HUD has stated clearly that screening based on arrest records is likely to have a discriminatory impact based on race and national origin.      Does your policy list "any felony" or felonies that occurred long ago as reasons not to rent to someone? HUD guidelines call into question the lawfulness of excluding people based on criminal convictions - without consideration of what the conviction was for or how long ago it occurred. Case Example: Jackson v. Tryon Park Apartments, Inc. January 2019      In this case, a court refused to dismiss a lawsuit filed by an applicant who claimed that a community discriminated against him on the basis of race when it denied his rental application based on a policy of automatically rejecting anyone with a felony conviction.      The applicant is African-American with a felony conviction. He met the income eligibility requirement for the apartment he applied for, had no prior evictions, and had an acceptable credit history. The community notified him that his application had been denied due to a felony on his criminal record. The applicant called twice to request an appeal, but his calls were not returned.      The applicant sued, claiming the company policy had a disparate impact based on race. The suit claims that statistics show that blanket bans based on criminal history result in the denial of housing opportunities at a disproportionate rate for African-Americans and minorities.      The community asked the court to dismiss the case and the court refused. The court stated that the statistical racial disparity the plaintiff cited was directly related to the property s alleged policy of excluding persons with a felony conviction. This case is now moving forward.      As noted, the applicant requested a hearing, and was effectively denied such a hearing by the fact that his calls were not returned. HUD guidance states that communities should offer applicants with criminal records an opportunity to explain the circumstances and what has happened in their lives since the conviction. This is similar to the "interactive process" housing providers are required to enter into before rejected a reasonable accommodation request from a disabled applicant or resident.      In another example (Hall v. Philadelphia Housing Authority, April 2019), a court dismissed claims by an applicant who accused the housing authority of race discrimination by denying him housing due to his criminal record. In this case, the person applied for housing in 2016, and the PHA required a credit check and criminal background check for all applicants. The PHA policy stated that certain factors could lead to a mandatory denial, including a homicide-related offense. Critical to this policy is that applicants were provided with the opportunity to dispute the accuracy and relevancy of the information through an informal hearing. After an interview, the PHA denied his application for two reasons: (1) a police record of a felony guilty plea to involuntary manslaughter in 1997; and (2) a landlord/tenant judgment against him for $871.      At his hearing, that applicant clarified that his conviction was for a misdemeanor, not a felony, and provided an explanation for the landlord/tenant dispute. The PHA reversed its decision on the criminal conviction and gave the applicant 30 days to provide proof that he had entered into a repayment plan with the landlord. The applicant did not meet the 30-day deadline, so the PHA upheld the denial of his application. A week later, he sent in the repayment agreement and the PHA granted his application. Eventually, he signed a lease for a unit at the PHA property.      The man then sued, accusing the PHA of race discrimination in violation of fair housing law.      Siding with the PHA, the court dismissed the case. Although the PHA initially found him ineligible for housing due to his criminal record, the PHA reversed its decision after a hearing revealed that the offense was only a misdemeanor. The PHA followed the guidance outlined by HUD and the applicant eventually was housed. This case illustrates the importance of having a policy allowing for appeals and individual assessments of specific circumstances relating to a person s criminal record.      It is also crucial that any policy relating to criminal background checks be implemented consistently, without regard to any protected characteristic. Applying it only to applicants who are members of racial or ethnic minorities, but not to white applicants, is sure to result in a fair housing violation. This point is well made in U.S. v. Dyersburg Apartments, Ltd., October 2018. In this case, the DOJ sued a Tennessee community and its property management company (MACO Management Company) for denial of an application from an African-American applicant because of his criminal record, despite approving the rental applications of two white applicants with disqualifying felony convictions.      This case began in 2012 when a man living with his ex-wife at the community disclosed a felony conviction for writing a bad check. The property s resident selection guidelines provided for rejection of applicants who had a felony conviction within the last ten years as well as any conviction for the sale, distribution, or manufacture of controlled substances or certain sexual offenses.      The manager of the community denied the application because of the policy not to rent to felons. At or about the same time, according to the DOJ complaint, at least two other applicants who were not African-American and who had criminal records in violation of the resident selection guidelines were approved for apartments at the community. Both had disclosed their felony convictions on their rental applications. The first had a conviction for felony sexual battery and was on the national sex offender database; the second pleaded guilty to felony drug charges and was on probation.      Again - consistency is critical!      Finally, as I noted in a post on May 19 of this year, a court has ruled that consumer reporting agencies must comply with the Fair Housing Act when conducting tenant screening services for landlords. In this case (Fair Housing Center, et. Al. v. CoreLogic Rental Property Solutions, LLC, March 2019), the court rejected the CoreLogic claim that the case should be dismissed because fair housing laws do not apply to its services. The court stated that the company "held itself out as a company with the knowledge and ingenuity to screen housing applicants by interpreting criminal records and specifically advertised its ability to improve Fair Housing compliance. " Basically, if a consumer reporting agency is going to make housing decisions for landlords, it must do so in accordance with fair housing requirements. The bottom line here - it is not a good idea to accept the decisions of on-line screening companies as a final decision! Final leasing decisions should be made by landlords.

Priority Fair Housing Issue Number Two - Tenant-on-Tenant Harassment

     The federal Department of Housing & Urban Development (HUD) and the Department of Justice (DOJ) are making investigations of fair housing violations in three specific areas a priority for 2019. Those areas are sexual harassment, tenant-on-tenant harassment, and policies regarding criminal background checks. Last week I provided an article on sexual harassment. Part two of the three part series will deal with tenant-on-tenant harassment. Tenant-on-Tenant Harassment in Housing      Most fair housing cases against property owners are a result of the actions of the owner or agents of the owner. However, HUD regulations and a recent court ruling make it clear that under certain circumstances, an owner may be liable for the actions of a tenant when that tenant harasses another tenant due to a protected characteristic.      Under HUD regulations, property owners may be liable under fair housing law for failing to take action to correct and end discriminatory conduct by one tenant against another tenant. This may be the case when an owner knows of or should have known of the discriminatory conduct and has the power to correct it. A recent court case outlines the risk an owner faces in this type of situation. Francis v. King Park Manor, Inc., March 2019      In March 2019, a New York court ruled that a community could be liable under the Fair Housing Act (FHA) for an alleged campaign of racial harassment against an African-American resident by his neighbor.      The resident claimed that his next-door neighbor began a relentless campaign of racial harassment, abuse, and threats directed toward him. The resident said he feared for his personal safety, so he contacted the police and the site management to complain.      His first call was in March 2012 and as a result, the police in the hate crimes unit visited the site, interviewed witnesses, and warned the neighbor against making threats to the resident. The resident told management that he filed a police report and a police officer told management about the neighbor s behavior. Management did not respond and took no action.      Two months later, the resident called the police again and filed another complaint. The resident also provided written notice to management about the harassment and racial slurs being directed toward him. Management still took no action.      The neighbor s conduct persisted to the point that he was arrested by the police for aggravated harassment. In August 2012, the resident sent a second letter to management informing them of the continued racial slurs and the fact that the neighbor had recently been arrested for harassment.      In September, the resident contacted the police and sent management a third letter complaining about the continuing harassment. At this point, the management company advised the site manager "not to get involved." The resident claimed that the harassing neighbor was allowed to stay in his unit until his lease expired and he moved out in January 2013. A few months later, the neighbor pled guilty to harassment and the court entered an order of protection prohibiting him from contacting the resident.      The resident sued the building owner, accusing the owner and manager of violating fair housing law by failing to take action to address a racially hostile housing environment created by his neighbor. A district court ruled against the resident and dismissed the case.      An appeals court reversed the lower court ruling. The court cited HUD regulations, which specifically state that an owner may be liable under the FHA for "failing to take prompt action to correct and end a discriminatory housing practice by a third-party" tenant where the owner "knew or should have known of the discriminatory conduct and had the power to correct it."      According to HUD guidance, the owner may be held liable only in circumstances where the landlord had the power to take correction action yet failed to do so. In this case, the resident s complaint adequately alleged that the owner and manager engaged in intentional racial discrimination by tolerating and/or facilitating a hostile environment, even though they had authority to "counsel, discipline, or evict the neighbor due to his continued harassment of the resident." The owner had also "intervened against other tenants regarding non-race related violations of their leases or of the law."      The complaint alleged that the owner and manager had actual knowledge of the neighbor s criminal racial harassment of the resident but, because it involved race, intentionally allowed it to continue even though they had the power to end it. Summary      This case once again makes it clear that owners and managers should take all necessary steps to prevent - and address - discriminatory behavior at the community. All onsite employees should be properly trained with regard to how to handle tenant complaints of harassment. This training should include not only managers and leasing personnel, but maintenance staff and anyone else who interacts with the public or with residents. Owners should also have a policy regarding outside contractors, whereby those contractors agree to abide by all applicable fair housing laws.           All complaints of harassment should be promptly investigated and, if warranted, adequate steps should be taken to stop the offensive behavior. Owners should seek legal advice in these cases and document exactly what has been done at each step of the process.

Opportunity Zones and the Low-Income Housing Tax Credit

The Opportunity Zone (OZ) Program was created as part of the Investing in Opportunity Act, which was included in the Tax Cuts and Jobs Act enacted in December 2017. While this law did not have a significant impact on job creation, the OZ program does have potential as perhaps the most successful element of the legislation. OZs are economically distressed communities characterized by high poverty and limited employment opportunities. The OZ program was created to encourage private investment in these communities in exchange for capital gain tax incentives. The goal is to use the estimated $6.1 trillion of unrealized private gains held by U.S. households. In exchange for investing in communities in qualified OZs, investors will receive beneficial capital gains tax treatment both immediately and over the long term. Both federal and state housing agencies are beginning to take steps to make the OZ program more workable with the LIHTC program. With regard to Federal Housing Administration (FHA) mortgage insurance for properties located in OZs, the FHA will reduce application fees for certain affordable housing programs. HUD is also designating a special team of underwriters to speed up processing of those applications. Fees for properties with at least 90% of units eligible for Section 8 or LIHTC residents will be reduced by two-thirds. It is estimated that this will encourage $100 million of investment in OZs. There is also an LIHTC pilot program that will expedite FHA mortgage financing for projects with equity from the LIHTC program. This pilot program will be available to new construction or substantial rehabilitation LIHTC properties. Unlike current programs intended to stimulate private investment in low-income areas, Opportunity Funds (the funds invested in OZs) can self-certify without the need for approval from the Department of Treasury. This means that Opportunity Funds are managed entirely in the private market with the administration of the funds being entirely the responsibility of fund managers rather than government agencies or individual investors. Critically, there is no cap on the amount of capital that can be invested in qualified OZs through the program. Creating & Investing in OZs OZs are created through a nomination and designation process. Governors of U.S. states and territories - as well as the Mayor of Washington, DC - nominate census tracts as OZs. To qualify, a census tract must meet the following requirements, as stipulated in 45(D)(e): A poverty rate of at least 20%; orA median family income of no more than 80% of the statewide median family income for census tracts within non-metropolitan areas or no more than 80% of the greater statewide median family income or the overall metropolitan median family income for census tracts within metropolitan areas. 57% of all neighborhoods in the United States were considered. The Treasury Department officially certified more than 8,700 census tracts as OZs in June 2018, which is about 12% of all the census tracts in the country. In exchange for investing in OZs, investors can access capital gains tax incentives available only through the OZ program. Investors may only invest in OZs through Opportunity Funds. A qualified Opportunity Fund is a U.S. partnership or corporation that intends to invest at least 90% of its holdings in one or more qualified OZs. There are restrictions on the types of investments in which an Opportunity Fund can invest. These are called "Qualified Opportunity Zone Properties," and may be defined as any one of the following: Partnership interests in businesses that operate in a qualified OZ;Stock ownership in businesses that conduct most of their business in an OZ; orProperty such as real estate located within a qualified OZ. The types of real estate investments permitted by the program are limited to ensure that the communities are improved with the investment. Opportunity funds may invest only in the construction of new buildings or the substantial improvement of existing unused buildings. If an Opportunity Fund invests in the improvement of an existing building, it must invest more in the improvement of the building than it paid to buy the building. Whether the building is constructed from the ground up or improved, the development of the building must be completed within 30 months of purchase. Tax Benefits When an investor sells an appreciated asset, there is a capital gain, which is a taxable event. Under the OZ program, if an investor reinvests a capital gain into an Opportunity Fund, tax liability on the gain is deferred. The investor may also receive tax free treatment for all future appreciation earned through the fund. Primary tax benefits from investing in an Opportunity Fund include: Payment of capital gains tax is deferred until April 2027 for investments that are held through December 31, 2026. To receive this benefit, the gains must be invested in a qualified Opportunity Fund within 180 days of the sale of the asset.If the Opportunity Fund investment is held for at least five years prior to December 31, 2026, liability on the deferred capital gain is reduced by 10%. If the investment is held for a minimum of seven years prior to December 31, 2026, tax liability is reduced by 15%.If an Opportunity Fund investment is held for ten years or longer, there will be no capital gains tax on any appreciation on the Opportunity Fund investment. I.e., Opportunity Fund gains from investments in OZs qualify for permanent exclusion from capital gains tax if the investment is held for at least ten years. OZs and Multifamily Housing At this point, it appears that market rate rental housing will be one of the most popular outlets for OZs. Of the approximately 105 funds currently in existence, 70 (representing about $15 billion in assets or 75% of total funding) have an investment focus on multifamily residential development. Of all funds that have a multifamily component, 28 also have a focus on affordable housing. Currently, financial institutions are the primary LIHTC investors, but Opportunity Fund investors tend to be high net worth individuals, managed investment funds, life insurance companies, and mutual funds. Banks generally do not have capital gains to reinvest. Many states are actively working to make OZ investments and the LIHTC program work together. For example, the Michigan State Housing Development Authority plans to incentivize OZs in the allocation of tax credits. Legislation was recently passed in Nebraska giving priority to OZs in receiving funds from the state Affordable Housing Trust Fund. Summary The Opportunity Zone program is generating a lot of excitement in the investment community. It will almost certainly increase investment in areas of need. Whether the Low-Income Housing Tax Credit Program will play a substantial role in the OZ program is still an open question, but there is clearly a place for the LIHTC program in Opportunity Zones.

Affordable Housing Making Presidential Campaign Appearance

As we near the first Democratic Presidential debates, and push nearer the meaningful campaign season, Presidential hopefuls are beginning to flesh out positions on affordable housing. One of the first to provide specific proposals is Cory Booker, Senator from New Jersey. Pledging to make housing a priority in his 2020 campaign, Booker released his plan for affordable housing on June 5. The core of the Senator s plan is a monthly tax credit for renters who pay more than 30% of their income in rent. Such a plan could assist more than 57 million people. The credit would refund the difference between 30% of income and the neighborhood fair market rent cap, as set by HUD. The median credit is estimated to be $4,800 per family. Senator Kamala Harris released details on a similar program in 2018. Unlike most IRS refunds or credits that pay once per year, this credit would be paid monthly. Booker has also proposed a "Baby Bonds" program, which is a concept that has been developed by professors at Duke University and Ohio State University. This program is designed to close the black-white racial wealth gap. Under Booker s proposal, a federally funded savings program would invest $1,000 for every child at birth in an account that "could grow up to $2,000 every year thereafter, depending on family income." The funds could be used to help young people afford first-time down payments, and, according to the Booker campaign, could be fully funded simply be restoring the estate taxes that were assessed in 2009. Other features of Booker s plan include fully funding the National Housing Trust Fund with $40 billion, a national right to counsel fund for persons facing eviction and expanding the Fair Housing Act to include protections against discrimination based on sexual orientation or gender identity. He has also discussed source of income protections to prevent landlords from discriminating against recipients of housing assistance (e.g., housing choice vouchers). The most far-reaching idea in Booker s housing platform is a proposal to steer federal funds to local efforts to eliminate restrictive zoning. Booker s plan would link $16 billion for various block grants and federal spending programs to local easing or elimination of restrictive zoning. Senator Elizabeth Warren of MA previously announced a housing program that would provide first-time homebuyer down payment assistance in communities once subject to federal discrimination through "redlining." A recent report on predatory housing contracts in Chicago shows that discrimination in housing and lending siphoned billions of dollars from black households. As the campaign season heats up, more candidates will develop affordable housing plans, which for the first time in history, may become a major issue during the Presidential campaign season.

Sexual Harassment - A Fair Housing Priority

     The federal Department of Housing & Urban Development (HUD) and the Department of Justice (DOJ) are making investigations of fair housing violations in three specific areas a priority for 2019. Those areas are sexual harassment, tenant-on-tenant harassment, and policies regarding criminal background checks. Over the next three weeks, I will be providing article on each of these three areas with tips and suggestions on how to avoid problems. I will start with the area that is attracting the most intense level of federal scrutiny - sexual harassment. Sexual Harassment in Housing      Federal officials with HUD and the DOJ have made the investigation of sexual harassment in housing a top priority. In 2017, the DOJ launched an initiative to combat sexual harassment in housing, and this initiative was implemented in 2018. There are three major components to the effort: (1) A DOJ/HUD task force to aggressively pursue fair housing sexual harassment cases; (2) an outreach toolkit to leverage the nationwide network of U.S. Attorney s offices; and (3) a public awareness campaign, including the launch of a national Public Service Announcement. This third part of the effort - public awareness - includes a "Call HUD; Because Sexual Harassment in Housing is Illegal," campaign. This component of the national effort is intended to educate the public about the behaviors that constitute sexual harassment and what to do and whom to contact if a person experiences such harassment where they live.      Since launching the initiative, the DOJ has filed nine lawsuits alleging a pattern or practice of sexual harassment in housing. Since January 2017, the Department has filed or settled 14 sexual harassment cases and has recovered more than $2.2 million for victims of sexual harassment in housing.      Three cases in particular show how the Feds are approaching sexual harassment in housing. U.S. v. Robert N. Hatfield (Western District of North Carolina      In April 2019, the DOJ announced a $600,000 settlement with a NC property owner for allegedly subjecting 17 female prospects and residents to sexual harassment during a more than ten-year period.      The owner ran a real estate business that involved the operation of residential rental properties and the selling of homes through "owner financing." The complaint alleged that he subjected female prospects and residents of these homes to sexual harassment by making unwanted sexual advances and comments; groping or otherwise touching their bodies without their consent; offering to reduce or eliminate down payments, rent, and loan obligations in exchange for sexual favors; and taking or threatening to take adverse action against residents when they refused or objected to his advances.      Under the settlement, Mr. Hatfield agreed to pay $550,000 in damages to former and prospective residents, as well as a $50,000 civil penalty. He is also barred from participating in the rental, sale, or financing of residential properties, and requires that he relinquish his ownership in interest in all such properties. U.S. v. Chad David Ables (Western District of Tennessee)      In April 2019, the DOJ announced that it has added more alleged victims in a sexual harassment case against the owner and manager of mobile home rental properties in Henderson County, TN. The landlord is accused of sexually harassing a number of female residents at his properties. He has been accused of conditioning housing or housing benefits on female residents agreement to engage in sexual acts; subjecting at least one female resident to unwanted sexual touching; making unwelcome sexual comments and advanced to female residents; and taking adverse housing-related actions against female residents who refused his advances. These allegations must still be proven in federal court and there has been no settlement of the case. U.S. v. Walden (Northern District of West Virginia)      In March 2019, the owners and former manager of more than 70 rental properties in West Virginia were held in civil contempt for failing to pay $600,000 still owed under a 2017 settlement with the DOJ in a sexual harassment case.      In this case, a married couple owned the properties and the husband, while serving as the manager, subjected female prospects and residents to egregious sexual harassment and retaliation. In 2015, the husband pleaded guilty to sexual abuse and other charges and was jailed for two years. The wife has since died.      The complaint alleged that the husband sexually harassed multiple female prospects and residents from at least 2006 until he was incarcerated. He was accused of engaging in unwanted sexual touching and groping; conditioning or offering tangible housing benefits in exchange for performance of sex acts; touching himself in a sexual manner and exposing himself in the presence of female residents; making unwanted and unwelcome sexual comments and verbal sexual advances; entering the apartments of female residents without permission or notice to sexually harass them; and taking or threatening to take adverse action against female residents who refused or objected to his sexual advances.      The wife was accused of failing to take appropriate steps to remedy the harassment after receiving tenant complaints. Instead, she allegedly took adverse housing actions against the complaining residents in retaliation for the complaints.      To resolve the case, the defendants agreed to a settlement, which required them to deposit $500,000 into a compensation fund for potential victims and pay the government $100,000 in civil penalties. The defendants made the first payment of $100,000 but did not deposit the remaining $400,000 into the compensation fund and did not pay the $100,000 civil penalty.      A federal judge has now held the defendants in civil contempt. The defendants admitted that they had more than $700,000 worth of property but said they could not obtain a loan secured by the properties. They did not want to sell the properties because the husband wanted to transfer his interest in the properties to his children and a forced sale of the properties at a below market price "would only punish innocent persons not party" to the settlement agreement.      The court position is that obtaining fair market value for the sale of the real estate is not a condition for the defendants to satisfy their obligations under the agreement. As stated by the court, the "innocent persons" at issue in this case are the defendant s former female residents and prospects who have yet to be compensated for the harm they suffered as a result of the husband s conduct.      These cases are reminders of the importance of a zero-tolerance sexual harassment policy for all communities. Every employee - from leasing agents to maintenance workers, whether full or part-time - should receive fair housing training, including training on sexual harassment policies, on at least an annual basis.

Federal Court Holds Tenant Screening Services Subject to the Fair Housing Act

In a landmark civil rights decision (Connecticut Fair Housing Center, et al. v. CoreLogic Rental Property Solutions, LLC, March 25, 2019), the Connecticut federal District Court established for the first time that consumer reporting agencies must comply with the Fair Housing Act (FHA) when conducting tenant screening services for landlords. Since automated decisions by third-party screening companies are rapidly becoming the norm, this ruling has significant implications for landlords, management companies, and renters. The case was filed by the Connecticut Fair Housing Center and the National Housing Law Project after CoreLogic s tenant screening product, CrimSAFE, disqualified a disabled Latino man with no criminal convictions from moving in with his mother. CrimSAFE provides landlords with an "accept or decline" decision based on CoreLogic s assessment of an applicant s criminal record. The lawsuit alleged that CrimSAFE discriminates on the basis of race, national origin, and disability. Facts of the Case In 2016, Carmen Arroyo submitted a rental application to move her son, Mikhail, out of a nursing home and into her apartment.Mikhail was in the nursing home recovering from an accident that left him unable to walk, talk, or care for himself.He was rejected because CrimSAFE determined he had a "disqualifying criminal record."CoreLogic failed to provide the landlord with any documents or explanation of their determination and unlawfully refused to provide Ms. Arroyo with copies of the background report.As a result of the denial, Mikhail had to remain in the nursing home for more than a year longer than necessary.Ms. Arroyo later learned that her son s only criminal record was a charge - from prior to his accident, and later dropped - for shoplifting, an infraction below the level of a misdemeanor.CoreLogic claimed that the case should be dismissed because fair housing laws did not apply to its services. Ruling        -        The Court rejected CoreLogic s claim and concluded that CoreLogic "held itself out as a company with the knowledge and ingenuity to screen housing applicants by interpreting criminal records and specifically advertised its ability to improve Fair Housing compliance. " The Court further held that because companies like CoreLogic essentially make rental admission decisions for landlords that use their services, they must make those decisions in accordance with fair housing requirements.The Court found CoreLogic s file disclosure policies had a "sufficiently close nexus to housing availability" for the FHA to apply.The Court held that consumer reporting agencies have a duty under the FHA not to discriminate in violation of the FHA in carrying out tenant screening activities, including a duty to make reasonable accommodations in their policies and practices that disadvantage persons with disabilities. Reasoning In 2016, HUD provided guidance indicating that excluding rental applicants due to criminal records has a disparate impact for Latinos and African Americans.To avoid this type of discrimination, an "individualized review" should be conducted in order to determine if the affected individual poses a genuine and ongoing threat to persons or property.CoreLogic did not conduct an individualized review of Mr. Arroyo s suitability for tenancy before it rejected him, nor did it offer the opportunity for such an assessment. CoreLogic also prevented the landlord from doing so by withholding information about the underlying criminal history.An individualized review would have shown that Mr. Arroyo posed no threat because he had not been convicted of a crime and was physically incapable of posing a danger to anyone. Conclusion While using third-party services to check criminal history may be fine, landlords should not rely on those services to make the final leasing decision. Landlords should insist that the third party service provide details on any criminal records discovered so that an assessment may be made as to whether the applicant is or is not suitable for occupancy. Landlords should also be certain to have a process in place whereby anyone rejected due to a criminal record has the opportunity to request and have an individualized assessment.