Tag Archives: Supreme Court

Affirmatively Furthering Fair Housing

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Fast on the heels of the recent Supreme Court decision upholding disparate impact Fair Housing claims, the Department of Housing and Urban Development has issued a final rule, Affirmatively Furthering Fair Housing:

Through this final rule, HUD provides HUD program participants with an approach to more effectively and efficiently incorporate into their planning processes the duty to affirmatively further the purposes and policies of the Fair Housing Act, which is title VIII of the Civil Rights Act of 1968. The Fair Housing Act not only prohibits discrimination but, in conjunction with other statutes, directs HUD’s program participants to take significant actions to overcome historic patterns of segregation, achieve truly balanced and integrated living patterns, promote fair housing choice, and foster inclusive communities that are free from discrimination. The approach to affirmatively furthering fair housing carried out by HUD program participants prior to this rule, which involved an analysis of impediments to fair housing choice and a certification that the program participant will affirmatively further fair housing, has not been as effective as originally envisioned. This rule refines the prior approach by replacing the analysis of impediments with a fair housing assessment that should better inform program participants’ planning processes with a view toward better aiding HUD program participants to fulfill this statutory obligation.

Through this rule, HUD commits to provide states, local governments, public housing agencies (PHAs), the communities they serve, and the general public, to the fullest extent possible,with local and regional data on integrated and segregated living patterns, racially or ethnically concentrated areas of poverty, the location of certain publicly supported housing, access to opportunity afforded by key community assets, and disproportionate housing needs based on classes protected by the Fair Housing Act. Through the availability of such data and available local data and knowledge, the approach provided by this rule is intended to make program participants better able to evaluate their present environment to assess fair housing issues such as segregation, conditions that restrict fair housing choice, and disparities in access to housing and opportunity, identify the factors that primarily contribute to the creation or perpetuation of fair housing issues, and establish fair housing priorities and goals. (1-2)

The tenacious hold that segregation has had over so many communities has been so difficult to address and HUD’s past attempts to do so have come up short so often. One can hope that this change in strategy from an “analysis of impediments” to “a fair housing assessment” can make incremental improvements throughout the nation.

It will be up to the next administration to really implement this rule because at first the rule just requires more planning about fair housing on the part of local communities. It is only later, when HUD evaluates their success and decides whether there will be any consequences for failure, that the rule’s effectiveness can be identified.

SCOTUS Upholds Disparate Impact

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Texas Department of Housing and Community Affairs

The United States Supreme Court held today that disparate-impact claims are cognizable under the Fair Housing Act in Texas Department of Housing and Community Affairs et al. v. The Inclusive Communities Project Inc., (No 13-1371). The conventional wisdom had been that the Court was going to hold that the Fair Housing Act “does not create disparate-impact liability”  (in the words of Justice Alito’s dissent at page 2).

I found it striking the extent to which Justice Kennedy’s opinion, which was joined by Justices Ginsburg, Breyer, Sotomayor and Kagan, relied on the history of residential segregation in the United States. For those of us steeped in the history of housing in America, this history is pretty much standard, but it takes on a lot of meaning when it is restated in a Supreme Court opinion. The opinion reads,

De jure residential segregation by race was declared unconstitutional almost a century ago, but its vestiges remain today, intertwined with the country’s economic and social life. Some segregated housing patterns can be traced to conditions that arose in the mid-20th century. Rapid urbanization, concomitant with the rise of suburban developments accessible by car, led many white families to leave the inner cities. This often left minority families concentrated in the center of the Nation’s cities. During this time, various practices were followed, sometimes with governmental support, to encourage and maintain the separation of the races: Racially restrictive covenants prevented the conveyance of property to minorities; steering by real-estate agents led potential buyers to consider homes in racially homogenous areas; and discriminatory lending practices, often referred to as redlining, precluded minority families from purchasing homes in affluent areas. By the 1960’s, these policies, practices, and prejudices had created many predominantly black inner cities surrounded by mostly white suburbs.

The mid-1960’s was a period of considerable social unrest; and, in response, President Lyndon Johnson established the National Advisory Commission on Civil Disorders, commonly known as the Kerner Commission. After extensive factfinding the Commission identified residential segregation and unequal housing and economic conditions in the inner cities as significant, underlying causes of the social unrest. The Commission found that “[n]early two-thirds of all nonwhite families living in the central cities today live in neighborhoods marked by substandard housing and general urban blight.” The Commission further found that both open and covert racial discrimination prevented black families from obtaining better housing and moving to integrated communities. The Commission concluded that “[o]ur Nation is moving toward two societies, one black, one white— separate and unequal.” To reverse “[t]his deepening racial division,” it recommended enactment of “a comprehensive and enforceable open-occupancy law making it an offense to discriminate in the sale or rental of any housing . . . on the basis of race, creed, color, or national origin.”

In April 1968, Dr. Martin Luther King, Jr., was assassinated in Memphis, Tennessee, and the Nation faced a new urgency to resolve the social unrest in the inner cities. Congress responded by adopting the Kerner Commission’s recommendation and passing the Fair Housing Act. (5-6, citations omitted)

This straightforward acknowledgment of the history of racial discrimination in America may be the most powerful part of this opinion.

Monday’s Adjudication Roundup

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Monday’s Adjudication Roundup

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Reiss on SCOTUS Junior Lien Decision

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Bloomberg BNA quoted me in Nagging Economic and Credit Questions Dampen Bankruptcy Victory for Bankers (behind paywall). It reads, in part:

The U.S. Supreme Court delivered an important bankruptcy ruling for bankers that doesn’t, however, do anything about still-struggling homeowners (Bank of Am. N.A. v. Caulkett, 2015 BL 171240, U.S., No. 13-cv-01421, 6/1/15); (Bank of Am. N.A. v. Toledo-Cardona, 2015 BL 171240, U.S., No. 14-cv-00163, 6/1/15).

In a June 1 decision, the court said Chapter 7 debtors cannot void junior liens on their homes when first-lien debt exceeds the value of the property, as long as the senior debt is secured and allowed under the Bankruptcy Code.

The decision is a victory for Bank of America, which held both junior liens in the two related cases, and for banking groups that said a different result could have destabilized more than $40 billion in commercial loans secured by similar liens.

But Brooklyn Law School Professor David Reiss June 2 said the case highlights the need for a broad remedy for homeowners who have continued to struggle to make payments since the financial crisis.

“The bank’s position as a legal matter is a very reasonable one, but from a policy perspective we needed and still need a bigger and more systemic solution to the problems that households face,” Reiss told Bloomberg BNA.

*     *     *

[S]ome said the ruling highlights economic questions on several levels.

Reiss, who coedits a financial blog, June 2 said the case shows the federal government’s inability to deal head-on with the impact of financial turmoil in 2008 and 2009.

“Not enough is being done to move households beyond the crisis, and it’s bad for households and it’s bad for the financial sector,” Reiss said. “Here we are seven or eight years later and we’re sitting here with these valueless second mortgages. We’re just slogging through the muck and we’re not coming up with any good solutions to get past it.”

Tenants in Foreclosure

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Judge Demarest issued a Decision and Order in 650 Brooklyn LLC v. Hunte et al. (No. 504623/2013 Feb. 5, 2015). The defendants moved for dismissal because the foreclosing plaintiff failed to comply with a relatively new NY statute that requires that the “foreclosing party in a mortgage foreclosure action, involving residential real property shall provide notice to: (a) any mortgagor if the action relates to an owner-occupied one-to-four family dwelling; and (b) any tenant of a dwelling unit in accordance with the provisions of this section . . ..” (12, citing NY RPAPL section 1303(1))

The Court dismissed defendants’ motion, relying on the plain language of the statute. The Court also noted that the purpose of the RPAPL notice provision, according to the 2009 Sponsor’s Memorandum, was to “establish protections for tenants residing in foreclosed properties” and noting that

20% of all foreclosure filings across the country were in non-owner occupied properties . . . Often, renters have been unaware that their landlords are in default until utilities are shut off or an eviction notice appears on their door . . . This [notice] provision will allow tenants to be fully aware of the status of the property and allow them to make informed decisions about whether they should remain in such property. (15)

Given the straightforward language of the statute, this seems like the right result as a matter of law. It also seems like the right result as a matter of policy. Certain dense jurisdictions, like NYC, have a lot of of tenants living in 2-4 family buildings. Many of these buildings are in areas that have been hard hit by the foreclosure epidemic. Indeed, according to the State of New York City’s Housing and Neighborhoods in 2013, “most of the foreclosure filings in 2013 and other recent years have been on 2–4 family properties.” (3) Many foreclosures have unnecessary collateral damage and improving notice to affected parties like tenants seems like a small and reasonable step for any jurisdiction to take.

Monday’s Adjudication Roundup

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