Tag Archives: discrimination

Fair Lending Fade-out

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Bloomberg BNA quoted me in In 2017, Look for Pullback on Fair Lending Enforcement (behind a paywall). It opens,

Expect a pullback in fair lending enforcement in 2017, and especially less focus on disparate impact discrimination as the Trump administration takes office.

That’s the assessment of banking attorneys and others weighing the role of the Consumer Financial Protection Bureau, the Department of Housing and Urban Development, and the Justice Department in the uncertain year ahead.

Although a recent court ruling raises questions about CFPB Director Richard Cordray’s tenure, several said they expect the CFPB to be less assertive no matter who heads the agency.

Meanwhile, new leadership at the Justice Department and HUD means that disparate impact claims—allegations of discriminatory effect, without regard to subjective intent—will get less attention than in recent years.

David Reiss, professor of law at Brooklyn Law School in Brooklyn, N.Y., summed up the assessment of several interviewed by Bloomberg BNA on the picture ahead for 2017.

“I would guess that disparate impact won’t be a priority for the Trump administration,” Reiss said.

New Leadership Ahead

In November, Trump said he’ll nominate Sen. Jeff Sessions (R-Ala.) as attorney general. The president-elect also Dec. 5 named Ben Carson, the former director of pediatric neurosurgery at Johns Hopkins, as his candidate to lead HUD.

Alan S. Kaplinsky, a partner in Philadelphia who leads the consumer financial services practice at Ballard Spahr, said he doesn’t expect Sessions “to be a strong advocate for pushing the legal envelope on fair lending issues.”

And Carson might not use what some have called an “enforcement by litigation” approach to housing policy, according to Joseph Pigg, the American Bankers Association’s senior vice president for mortgage finance.

“Returning to a more normal enforcement regime should be a positive for borrowers and lenders alike,” Pigg told Bloomberg BNA. HUD spokesman Brian Sullivan declined to comment on the fair-lending outlook at HUD.

A Well-Known Unknown

Carson, a well-known physician and education reform advocate, took on an even higher profile by entering the 2016 White House race. But on lending, housing and other matters likely to come before him should he take the helm at HUD, Carson’s record is sparse.

One exception is a July 23, 2015, opinion piece in the Washington Times, where Carson criticized HUD’s Affirmatively Furthering Fair Housing rule. Although HUD has a distinct regulation that governs disparate impact claims under the Fair Housing Act, the AFFH rule has a different focus. The regulation, drawn from language in the Fair Housing Act itself, lays out a new process that HUD says “promotes housing choice and fosters inclusive communities free from housing discrimination.”

Carson criticized the AFFH rule, saying it would inject too much government decision-making into local housing policy. The rule, issued in the wake of the U.S. Supreme Court’s ruling in a major 2015 case on disparate impact claims under the Fair Housing Act, might actually frustrate efforts to develop new housing, he said.

Reiss predicted that Carson will either try to get rid of the AFFH rule, or decide not to enforce it. But he also said Carson’s stance on the regulation probably is somewhat nuanced.

“He’s acknowledged the history of redlining, restrictive covenants, and other problems,” Reiss told Bloomberg BNA. “He doesn’t seem to be denying a history of structural racism in the housing market. He seems to be saying the Affirmatively Furthering Fair Housing rule goes too far.”

Carson and Fair Housing

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photo by Warren K. Leffler

President Johnson signing the Civil Rights Act of 1968 (also known as the Fair Housing Act)

Law360 quoted me in Carson’s HUD Nom Adds To Fair Housing Advocates’ Worries (behind a paywall). It opens,

President-elect Donald Trump’s Monday choice of Ben Carson to lead the U.S. Department of Housing and Urban Development added to fears that the incoming administration would pull back from the aggressive enforcement of fair housing laws that marked President Barack Obama’s term, experts said.

The tapping of Carson to lead HUD despite a lack of any relative experience in the housing sector came after Trump named Steven Mnuchin to lead the U.S. Department of the Treasury amid concerns that the bank for which he served as chairman engaged in rampant foreclosure abuses. Trump has also nominated Sen. Jeff Sessions, R-Ala., to serve as attorney general. Sessions has drawn scrutiny for his own attitudes towards civil rights enforcement.

Coupled with Trump’s own checkered history of run-ins with the U.S. Justice Department over discriminatory housing practices, those appointments signal that enforcement of fair housing laws are likely to be a low priority for the Trump administration when it takes office in January, said Christopher Odinet, a professor at Southern University Law Center.

“I can’t imagine that we’ll see any robust enforcement or even attention paid to fair housing in this next administration,” he said.

Trump said that Carson, who backed the winning candidate after his own unsuccessful run for the presidency, shared in his vision of “revitalizing” inner cities and the families that live in them.

“Ben shares my optimism about the future of our country and is part of ensuring that this is a presidency representing all Americans. He is a tough competitor and never gives up,” Trump said in a statement released through his transition team.

Carson said he was honored to get the nod from the president-elect.

“I feel that I can make a significant contribution particularly by strengthening communities that are most in need. We have much work to do in enhancing every aspect of our nation and ensuring that our nation’s housing needs are met,” he said in the transition team’s statement.

The problem that many are having with this nomination is that Carson has little to no experience with federal housing policy. A renowned neurosurgeon, Carson’s presidential campaign website made no mention of housing, and there is little record of him having spoken about it on the campaign trail. One Carson campaign document called for privatizing Fannie Mae and Freddie Mac, the government-run mortgage backstops that were bailed out in 2008.

The nomination also comes in the weeks after a spokesman for Carson said that the former presidential candidate had no interest in serving in a cabinet post because he lacked the qualifications. That statement has since been walked back but has been cited by Democrats unhappy with the Carson selection.

“Cities coping with crumbling infrastructure and families struggling to afford a roof overhead cannot afford a HUD secretary whose spokesperson said he doesn’t believe he’s up for the job,” said Sen. Sherrod Brown of Ohio, the ranking Democrat on the Senate Banking Committee. “President-elect Trump made big promises to rebuild American infrastructure and revitalize our cities, but this appointment raises real questions about how serious he is about actually getting anything done.”

HUD is a sprawling government agency with a budget around $50 billion and programs that include the Federal Housing Administration, which provides financing for lower-income and first-time homebuyers, funding and administration of public housing programs, disaster relief, and other key housing policies.

It also helps enforce anti-discrimination policies, in particular the Affirmatively Furthering Fair Housing rule that the Obama administration finalized. The rule, which was part of the 1968 Fair Housing Act but had been languishing for decades, requires each municipality that receives federal funding to assess their housing policies to determine whether they sufficiently encourage diversity in their communities.

Carson has not said much publicly about housing policy, but in a 2015 op-ed in the Washington Times compared the rule to failed school busing efforts of the 1970s and at other times called the rule akin to communism.

“These government-engineered attempts to legislate racial equality create consequences that often make matters worse. There are reasonable ways to use housing policy to enhance the opportunities available to lower-income citizens, but based on the history of failed socialist experiments in this country, entrusting the government to get it right can prove downright dangerous,” wrote Carson, who lived in public housing for a time while growing up in Detroit.

That dismissiveness toward the rule has people who are concerned about diversity in U.S. neighborhoods and anti-discrimination efforts on edge, and could put an end to federal efforts to improve those metrics.

“If you’re not affirmatively furthering fair housing, we’re going to be stuck with the same situation we have now or it’s going to get worse over time,” said David Reiss, a professor at Brooklyn Law School and research affiliate at New York University’s Furman Center.

Domestic Violence and Housing Discrimination

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REFinBlog has been nominated for the second year in a row for The Expert Institute’s Best Legal Blog Competition in the Education Category.  Please vote here if you like what you read.

DomesticShelters.org quoted me in Abuse Survivors Not Welcome. It opens,

There are lots of barriers survivors of domestic violence face when searching for housing. Sandra Park, an ACLU attorney at the Women’s Rights Project who focuses on the rights of domestic violence survivors, shares one example.

Park worked with a woman called Hope who seemed to be on track to rent an apartment. Hope placed a deposit and the property management company gave her an application that asked for the social security numbers of her children. Due to her history as a domestic violence survivor, Hope had changed her own social security number and her identity. She had full custody of her children and their father had no visitation rights.

The property management company said they would run a check on the children’s social security numbers—a move that Hope feared could alert her abuser to her location. She refused to give the numbers and was turned down for the apartment. She turned to the ACLU, which filed a Fair Housing Act complaint on her behalf. Ultimately, the management company compensated Hope and changed its policy.

Discrimination Is Real

Research confirms that survivors of domestic violence are sometimes discriminated against when they look for housing. A study done by the Washington, D.C.-based Equal Rights Center found that advocates searching for housing on behalf of a domestic violence victim were either denied housing or offered less advantageous terms, compared to comparable people with no connection to domestic violence.

For example, the domestic violence advocates might be told that they had to meet a landlord in person, or that their move-in date was too soon, or that they would receive a call back with more information while another caller was given the information right away. In some cases the call back never came.

Another study, by the Anti-Discrimination Center of Metro New York and conducted in a similar fashion, found that 27.5% were flatly refused housing or failed to receive follow up.

Potential Problems

There are various reasons landlords might hesitate to rent to a domestic violence survivor:

● The landlord may be uncomfortable dealing with a survivor

● The landlord may believe the abuser will cause issues

● The survivor may have bad credit because the abuser ruined their credit history

● The survivor may have a history of eviction that’s linked to the domestic violence

● The survivor may have a criminal conviction for conduct stemming from self-defense

What Can Survivors Do?

It may help to be honest with your potential future landlord. “If you have negative criminal, credit or tenancy records because of domestic violence and you know the landlord is going to run that kind of check, it can go a long way to be up front and explain why you have that history,” Park says. “In some cases it makes sense to try to provide that information to the landlord, so when the check comes back they don’t throw away your application.”

She says if you believe you’re facing discrimination, you might want to seek legal assistance. Nationally, the Fair Housing Act and the Violence Against Women Act both offer some protection.

The Fair Housing Act doesn’t prohibit discrimination based on domestic violence status. But it does prohibit discrimination based on gender. Since the majority of domestic violence victims are women, in some cases you can make the argument that discriminating against a female domestic violence survivor is discrimination based on gender.

The Violence Against Women Act does offer protection for domestic violence survivors. But it only applies to federally funded and Section 8 housing. If you are applying to a property and you’re covered under the Violence Against Women Act, you may want to notify your landlord about your protection. “Some landlords will not know about the Violence Against Women Act at all, so it can be helpful for them to be educated about that,” Park says.

Some state and local laws also prohibit housing discrimination based on domestic violence status. The National Housing Law Project lists state laws that offer this protection.

David Reiss, professor of law at Brooklyn Law School, recommends keeping careful records as you search for housing, in case you need evidence to prove discrimination.

“Save your texts, emails and voicemails. If you have evidence you want to protect don’t destroy it, save a copy. Once you start making noise that you think you’re being discriminated against people will be more cautious,” he warns.

No Mortgages for New Moms

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photo by tipstimes.com/pregnancy

Realtor.com quoted me in Mom on Maternity Leave Denied a Mortgage: Could It Happen to You? It opens,

Hopeful home buyers can be denied loans for all kinds of reasons, from a poor credit score to low income. It sucks, but it makes sense: Lenders prefer giving cash to people who can pay them back. (Can you blame them?) Yet, sometimes people are turned away for dumb reasons. Take, for instance, the recent case of a Philadelphia mom who was denied a mortgage because she was on maternity leave. It was even paid maternity leave, with a firm date to return to her job. What’s up with that?

According to the Washington Post, the mom in question (who remains anonymous) had applied for financing with her husband to fund renovations on a house in Philadelphia. But due to her maternity leave, her pay stubs showed she was on “short-term disability,” which prompted the loan’s underwriter to surmise she might not resume working full time—even though her employer was happy to submit a letter indicating the day she’d return to the office.

And this mom is hardly alone: Over the past six years, the Department of Housing and Urban Development has documented over 200 cases alleging maternity-related discrimination against women seeking mortgages. In one case, a lender in Arkansas allegedly told the applicant that she’d have to be back at work before her loan could close!

And this is a shame, because housing discrimination—based on gender, familial status, disability, race, and other factors—has been illegal since the Fair Housing Act of 1968. Yet apparently it still exists even at prominent mortgage companies, as evidenced by the cases against Wells Fargo, Bank of America, PNC Mortgage, and others.

As for why this happens, experts surmise it’s because some lenders have outdated notions of women in the workplace, presuming most will bail or scale back on their jobs once kids enter the picture, permanently reducing the family’s income and eligibility for a loan. But it’s hardly the norm: Census data suggest that more than half of first-time mothers return to work within three months. Another study by the Department of Health and Human Services’ Maternal and Child Health Bureau found that the average maternity leave lasted a mere 10 weeks.

Bottom line: These days, many moms return to the office—yet some mortgage companies have missed that memo. But luckily, some moms are fighting back—like the Philadelphia woman above, who has recently reached a “conciliation agreement” with the lender, Citizens Bank of Pennsylvania. Although the company denied discriminating against her, it also agreed to conduct fair lending training sessions with staff.

And more should follow, Shanna Smith, president and chief executive of the National Fair Housing Alliance, told the Post: “There needs to be much better training for [lenders] about how to deal with interrupted income for loan closings when a woman is pregnant and [on] paid maternity leave.

All of which may have women everywhere wondering: If they hope to buy a home, might maternity leave get in their way? And if so, what should they do? Probably the first step is just knowing that it’s wrong: Maternity leave—paid or unpaid—is not a legitimate reason to refuse a loan.

“It always helps when you know your rights,” says David Reiss, research director at the Center for Urban Business Entrepreneurship at Brooklyn Law School. “If your lender appears to be violating fair lending laws, you may want to raise the issue directly with your banker and ask to speak to the supervisor to ask the bank to clarify its policy. If your lender continues to enforce a discriminatory policy, you can reach out to the relevant regulators, including HUD and the Consumer Financial Protection Bureau.”

White-Segregated Subsidized Housing

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The  University of Minnesota Law School’s Institute on Metropolitan Opportunity has issued a report, The Rise of White-Segregated Subsidized Housing. While the report is focused on Minnesota, it raises important issues about affordable housing program demographics throughout the country:

  • To what extent do the populations served by programs match those of their catchment areas?
  • To what extent do the served populations match the eligible populations of their catchment areas?
  • To what extent do the served populations match the demographics of those who have applied for the programs?
  • To what extent do variants among those metrics matter?

The Executive Summary opens,

Subsidized housing in Minneapolis and Saint Paul is segregated, and this segregation takes two forms – one well-known, and the other virtually unknown.

At this point it is widely recognized that most Minneapolis and Saint Paul subsidized housing is concentrated in racially diverse or segregated neighborhoods, with few subsidized or otherwise-affordable units in affluent, predominately white areas. Because subsidized units are very likely to be occupied by families of color, this pattern increases the region’s overall degree of segregation.

But what has been overlooked until today, at least publicly, is that a small but important minority of subsidized projects are located in integrated or even-predominately white areas. Unlike typical subsidized housing, however, the residents of these buildings are primarily white – in many instances, at a higher percentage than even the surrounding neighborhood. These buildings thus reinforce white residential enclaves within the urban landscape, and intensify segregation even further.

What’s more, occupancy is not the only thing distinguishing these buildings from the average subsidized housing project. They are often visually spectacular, offering superior amenities – underground parking, yoga and exercise studios, rooftop clubrooms – and soaring architecture. Very often, these white-segregated subsidized projects are created by converting historic buildings into housing, with the help of federal low-income housing tax credits, historic tax credits, and other sources of public funding. Frequently, these places are designated artist housing, and – using a special exemption obtained from Congress by Minnesota developers in 2008 – screen applicants on the basis of their artistic portfolio or commitment to an artistic craft.

These places cost far more to create than traditional subsidized housing, and include what are likely the most expensive subsidized housing developments in Minnesota history, both in terms of overall cost and per unit cost. These include four prominent historic conversions, all managed by the same Minneapolis-based developer – the Carleton Place Lofts ($430,000 per unit), the Schmidt Artist Lofts ($470,000 per unit), the upcoming Fort Snelling housing conversion ($525,000 per unit), and the A-Mill Artist lofts ($665,000 per unit). The combined development cost of these four projects alone exceeds $460 million. For reference, this is significantly more than the public contribution to most of the region’s sports stadiums; it is $40 million less than the public contribution to the controversial downtown football stadium.

These four buildings contained a total of 870 units of subsidized housing, most of which is either studio apartments or single-bedroom. For the same expense, using 2014 median home prices, approximately 1,590 houses could have been purchased in the affluent western suburb of Minnetonka.

In short, Minneapolis and Saint Paul are currently operating what is, in effect, a dual subsidized housing system. In this system, the majority of units are available in lower-cost, utilitarian developments located in racially segregated or diverse neighborhoods. These units are mostly occupied by families of color. But an important subset of units are located in predominately white neighborhoods, in attractive, expensive buildings. These units, which frequently are subject to special screening requirements, are mostly occupied by white tenants.

As a matter of policy, these buildings are troubling: they capture resources intended for the region’s most disadvantaged, lowest-income families, and repurpose those resources towards the creation of greater segregation – which in turn causes even more harm to those same families.

Legally, they may well run afoul of the Fair Housing Act and other civil rights law. Recent developments have established that the Fair Housing Act forbids public or private entities from discriminating in the provision of housing by taking actions that create a disparate impact on protected classes of people, including racial classes. Moreover, recipients of HUD funding, such as the state and local entities which contribute to the development of these buildings, have an affirmative obligation to reduce segregation and promote integration in housing.  (1-2)

No doubt, this report will spur a lot of soul searching in Minnesota. It may also spur some litigation. Other communities with subsidized housing programs should take a look at themselves in the mirror and ask if they like what they see. They should also ask whether federal judges would like it.

Racial & Ethnic Change in NYC

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Brooklyn's poet, Walt Whitman

Brooklyn’s poet, Walt Whitman

Michael Bader and Siri Warkentien have posted an interesting mapping tool, Neighborhood Racial & Ethnic Change Trajectories, 1970-2010. They had set out to answer the question:

how have neighborhoods changed since the Civil Rights Movement outlawed discriminatory housing? We study how neighborhood racial integration has changed during the four decades after the legislative successes of the Civil Rights Movement. We were unsatisfied with previous studies that focused mostly on defining “integrated” and “segregated” neighborhoods based on only on whether groups were present. We thought that the most interesting and important changes occur within “integrated” neighborhoods, and we set out to identify the common patterns of those changes.

We used a sophisticated statistical method to identify the most common types of change among Blacks, Latinos, Asians and Whites in the metropolitan neighborhoods of the four largest cities in the U.S.: New York, Los Angeles, Chicago, and Houston. We were disappointed to learn that many integrated neighborhoods were actually experiencing slow, but steady resegregation — a process that we call “gradual succession.” The process tended to concentrate Blacks into small areas of cities and inner-ring suburbs while scattering many Latinos and Asians into segregating neighborhoods throughout the metropolitan area.

While we reserve a healthy dose of pessimism about long-term integration, we also find neighborhoods experiencing long-term integration among Blacks, Latinos, Asians, and Whites. We call these “quadrivial” neighborhoods, which derives from Latin for the intersection of four paths. We thought that seemed appropriate given the often different paths different racial groups took to these neighborhoods. (emphasis in the original)

I was, of course, interested in the New York City map. While NYC is highly segregated, it was interesting to see the prevalence of these so-called quadrivial neighborhoods. The authors find that

About 20 million people call the New York metropolitan area home. The metro area is one of the most segregated in the United States and, as a result, New York has a large proportion of neighborhoods following stable Black and stable White trajectories. Some of the segregation came about because of White flight during the 1970s. Black segregation following this path clusters in the Lower Bronx, North Brooklyn, and in and around Newark, New Jersey.

Large-scale Latino immigration to the New York metro area has been relatively recent, and the number of recent Latino enclaves bears out that pattern. Neighborhoods experiencing recent Latino growth are scattered throughout suburban New Jersey, Long Island and northern New York neighborhoods. New York also experienced high levels of Asian immigration relative to other metropolitan areas. Neighborhoods experiencing recent Asian growth are scattered throughout the metropolitan region.

New York also contains a large number of quadrivial neighborhood and the highest proportion of White re-entry neighborhoods. The latter are found near transportation to Manhattan in the gentrifying areas of Jersey City and Weehawken, New Jersey and the Brooklyn terminals of the Manhattan and Williamsburg Bridges.

New York, therefore, contains the contradiction of containing a large number of segregating neighborhoods along with a distinct trend toward integration.

I am not sure that I have any insight to explain that contradiction, although Walt Whitman, Brooklyn’s poet, notes:

Do I contradict myself?

Very well, then I contradict myself,

(I am large, I contain multitudes).

Bold New Housing Plan?

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photo by Cybershot800i

Wanderer Above the Sea of Fog by Caspar David Friedrich

Enterprise Community Partners has released An Investment in Opportunity: A Bold New Vision for Housing Policy in the U.S. I thought it would be useful to highlight its specific proposals to make rental housing affordable for low-income households:

I. ENSURE BROAD ACCESS TO HIGH-OPPORTUNITY NEIGHBORHOODS

  1. Improve the Section 8 program and expand regional mobility programs to help more families with rental assistance vouchers access high-opportunity neighborhoods 
  2. Establish state and local laws banning “source of income” discrimination by landlords and property owners 
  3. Balance the allocation of Low-Income Housing Tax Credits and other federal subsidies to both high-opportunity neighborhoods and low-income communities, while creating more opportunities for mixed-income developments 
  4. Establish inclusionary zoning rules at the state and local levels 
  5. Establish state and local regulations that encourage innovation and promote the cost-effective development of multifamily housing 
  6. Incorporate affordable housing considerations into local and regional transportation planning through equitable transit-oriented development

II. PROMOTE COMPREHENSIVE PUBLIC AND PRIVATE INVESTMENTS IN LOW-INCOME NEIGHBORHOODS

  1. Make the public and private investments necessary to preserve existing affordable housing while creating mixed-income communities 
  2. Build capacity of public, private and philanthropic organizations at the local level to pursue cross-sector solutions to the problems facing low-income communities 
  3. Create state and local land banks and other entities to return vacant and abandoned properties to productive use 
  4. Make permanent and significantly expand the New Markets Tax Credit 
  5. Create a new federal tax credit for private investments in community development financial institutions and other community development entities 
  6. Establish federal regulations that encourage “impact investments” in low-income communities by individual and institutional investors

III. RECALIBRATE OUR PRIORITIES IN HOUSING POLICY TO TARGET SCARCE SUBSIDY DOLLARS WHERE THEY’RE NEEDED MOST

  1.  Reform the Mortgage Interest Deduction and other federal homeownership subsidies to ensure that scarce resources are targeted to the families who are most in need of assistance 
  2. Gradually double annual allocations of Low-Income Housing Tax Credits and provide additional gap financing to support the expansion 
  3. Significantly expand funding to Section 8 vouchers to ensure that the most vulnerable households in the U.S. have access to some form of rental assistance 
  4. Expand funding to the Housing Trust Fund and the Capital Magnet Fund as part of any effort to reform America’s mortgage finance system 
  5. Break down funding silos to encourage public investments in healthy and affordable housing for recipients of Medicaid 
  6. Create permanent funding sources at the state and local level to support affordable housing

IV. IMPROVE THE OVERALL FINANCIAL STABILITY OF LOW-INCOME HOUSEHOLDS

  1. Establish minimum wages at the federal, state and local levels that reflect the reasonable cost of living for each community 
  2. Expand the Earned Income Tax Credit, the Child Tax Credit and other essential income supports to America’s low-wage workers 
  3. Create a new federal fund to help test and scale innovative financial products that encourage low-income households to save, with a primary focus on unrestricted emergency savings 
  4. Help more low-income families build strong credit histories 
  5. Establish strong protections against predatory financial products

Not sure if I could really categorize this as “bold.” “Unrealistic” seems more apt in today’s political environment. Indeed, it reads like a wishlist drafted by a committee.

That being said, I think that Enterprise’s vision is helpful in a variety of ways. First, it offers a pretty comprehensive list of policies and programs that that can be used to  make housing more affordable. Second, it recognizes income inequality is a big part of the problem for low-income households. Third, it acknowledges that current federal housing policy favors wealthy households (cf. mortgage interest deduction) over the poor. Finally, it acknowledges that restrictive local land use policies inflate the cost of housing.

I wonder if a bolder plan would be just to fully fund Section 8 so that all low-income households were able to afford a safe and well-maintained home. Probably just as unrealistic as Enterprise’s vision, but it has the virtue of being simple to understand and execute.