Focus on Fair Housing
By Thom Amdur
3 min read
Whenever I meet someone new at an NH&RA conference or industry event, I tend to ask them how they came to the affordable housing business. My unscientific poll results indicate that most of us came to the business via circuitous routes. In my own case, if not for a chance meeting at a Rosh Hashanah brunch 12 years ago with our CFO, I would almost certainly be working in healthcare policy.
But while our paths to affordable housing may be random or coincidental, everyone I speak to has stayed in the industry as a result of commitment—they believe in the mission and genuinely want to play a role in expanding opportunities to low-income Americans. Fair housing certainly fits into this sensibility.
As a trade association dedicated to providing benefits to members, at NH&RA we tend to focus mostly on business opportunities and housing finance. I’m afraid that Fair Housing, while a foundational principal of our industry, may get short-shrift. But recent actions in the courts, HUD, and DOJ have shown that fair housing has significant business implications.
Since we last covered the Supreme Court’s Inclusive Communities Decision and HUD Affirmatively Furthering Fair Housing Rule in TCA, there have been new developments—and more are on the horizon.
Recently, the courts dismissed “Burbank Tenants Association v. Kargman,” which argued that an owner’s decision not to renew its Section 8 contract would have a disparate impact on minority residents and would be a violation of the Fair Housing Act. Had the courts ruled with the plaintiffs, it may very well have had the practical impact of forcing all owners of Section 8 projects to renew their contracts in perpetuity, changing the underlying business agreement between HUD and Section 8 owners. This would have a correlating and significant impact on the underlying value of the Section 8 portfolio.
In the next few months, the courts will consider at least three more disparate impact claims relating to local zoning practices and local housing preferences that could remake local decision making practices (“Mhany Mgmt. v. Nassau County,” “Avenue 6E Investment LLC v. City of Yuma” and “Long Island Housing Services v. Nassau County Industrial Development”). One hopes that the courts’ rulings in these cases will reduce barriers to entry for multifamily and affordable housing developments in NIMBY-leaning communities.
In another recent development, HUD has issued new guidance that severely restricts how and when management companies can use criminal history in tenant screening processes. Following the same logic, many fair housing experts expect that it won’t be long before HUD issues additional guidance restricting how credit checks and income multipliers can be used in the screening process. While these changes may make housing more available to vulnerable populations, it will also require many, if not most, management companies to revisit their tenant screening and record retention processes. The leasing process will almost certainly become more costly and time consuming and this will result in decreased NOI.
Another related issue to watch is the uptick in enforcement actions as a result of inaccessibility in units. These problems may have resulted from poor design or construction but are ultimately the responsibility of the owner. In addition to the cost of remediating these issues and settlements, they can actually be a key factor in your choice of debt instruments at a refinancing and recapitalization.
We should be paying more attention to Fair Housing simply because it is the right thing to do. But in addition, recent developments indicate if we do not adhere to the principle, it can be a significant cost center.
