Opening Doors that Finance Fair Housing

Size: px

Start display at page:

Download "Opening Doors that Finance Fair Housing"

Beatrice Webster
5 years ago
Views:

1 Opening Doors that Finance Fair Housing October 6, 2016 Alison George Melinda Pasquini, Esq. Denise Rome-Tamulis Polsinelli PC. In California, Polsinelli LLP

2 Questions With a show of hands, how many in the audience are developers? Out of State? How many are property managers? How many are housing authorities or non-profits (more likely to use soft funding sources)? How many are lenders? 2

3 Outline of Presentation Recent Legal Developments Disparate Impact Affirmatively Furthering Fair Housing Implications on Funding Division of Housing CHFA Colorado Trends in Financing 3

4 Fair Housing, Discrimination and Affirmative Furthering Fair Housing Act of 1968 Disparate Impact (Supreme Court) Texas Department of Housing and Community Affairs v. Inclusive Communities Project, Inc., June 25 th, 2015 Affirmatively Furthering Fair Housing (HUD) 80 FR (July 16 th, 2015) 4

Fair Housing Act of 1968 Background on the Fair Housing Act of 1968.

5 Fair Housing Act of 1968 Background on the Fair Housing Act of Act prohibits discrimination against certain protected classes or people in residential dwellings. Race, color, national origin Sex Religion Familial Status Handicap 5

6 Fair Housing Act of 1968 Prohibited Practices Refusals to make housing available i.e. arrest record v. criminal record Discretion except for: Convicted of methamphetamine production in federally-assisted housing Must register as lifetime sex offender Refusal to make reasonable accommodations and modifications for persons with disabilities Accessible New Multi-Family Construction 6

7 Fair Housing Act of 1968 Prohibited Practices (cont.) Racial Steering Exclusionary Zoning Racial Maintenance Policies Financial and Brokerage Service Discrimination Threats or Retaliation 7

8 Fair Housing Act of 1968 Remedies State and local remedies Complaints to HUD Enforcement Rules and Regulations (2013) Prohibiting new construction in areas of minority concentration Private Suits and Federal or State Court 8

9 Disparate Impact Disparate Impact Claims Cognizable under the Fair Housing Act; Inclusive Communities Project, Inc. v. Texas Department of Housing and Community Affairs, No (U.S. S.Ct. issued June 25, 2015) 9

10 Disparate Impact Background: Plaintiff ICG, a Texas based nonprofit whose mission is to assist lower income African Americans in finding housing opportunities in predominately white neighborhoods using Section 8 rental vouchers. TDHCA s qualified allocation plan for awarding low income housing tax credits contained several criteria for scoring 9% tax credit applications. By state statute, the criteria were required to be prioritized and scored in a particular order, with financial feasibility being at the top. Other factors included the following, in order of priority: Quantifiable community participation 10

11 Disparate Impact Background (cont.) Income levels of tenants Size and quality of units Commitment of development funding by local political subdivisions Level of community support, evidenced by statement from local political representatives Rent levels of units Cost of development by square foot Services to be provided to tenants of the development Whether proposed site is located in a disaster relief area 11

12 Disparate Impact Background (cont.) TDHCA s QAP gave it some degree of discretion in awarding LIHTC to prospective applicants; TDHCA contended that IRC Section 42 limited that discretion. 12

13 Disparate Impact The District Court s Ruling Fifth Circuit Ruling Fifth Circuit held, consistent with its prior rulings, that disparate impact claims are cognizable under the Fair Housing Act. Court adopted the three step burden shifting approach outlined in the new HUD regulation: Plaintiff bears burden initially of demonstration of disparate impact. Burden then shifts to defendant which bears the burden of showing that the practice furthers one or more substantial legitimate nondiscriminatory interests of defendant. If defendant satisfies burden of proof, then it shifts back to plaintiff who can still prevail by showing that the substantial, legitimate nondiscriminatory interests supporting the challenged practice could be served by another practice that has a less discriminatory effect. 13

14 Disparate Impact Fifth Circuit Ruling (cont.) Concurring opinion noted that ICG had not identified any specific elements of TCHDA s QAP that led directly to the disparate impact complained of, and that under Title VII precedent, one cannot maintain a disparate impact case without such proof. Supreme Court Decision Primarily a case of statutory interpretation and review of previous case law, particularly Title VII (Civil Rights Act) precedent. Court also looked at legislative history of the Fair Housing Act and the 1988 amendments to conclude that disparate impact claims are cognizable under the Fair Housing Act. 14

15 Disparate Impact Supreme Court Decision (cont.) Court very concerned with opening litigation floodgates for disparate impact claims under the Fair Housing Act. A means of ensuring that disparate impact liability is properly limited is to give housing authorities and private developers leeway to state and explain the valid interest their policies serve. A disparate-impact claim relying on a statistical disparity must fail if the plaintiff cannot point to a defendant s policy or policies causing that disparity. Courts must examine with care whether a plaintiff has made out a prima facie showing of disparate impact. Artificial, arbitrary, and unnecessary barriers. Avoid interpreting disparate impact liability to be so expansive as to inject racial considerations into every housing decision. 15

16 Disparate Impact Supreme Court Decision (cont.) Remedial orders must be consistent with the Constitution. Remedial orders that impose racial targets or quotas might raise difficult constitutional questions. Housing authorities may choose to foster diversity and combat racial isolation with race-neutral tools. Dissents of Justice Thomas and Alito 16

17 Affirmatively Furthering Fair Housing (AFFH) New HUD Rule Background Goals Requirements Changes from Prior HUD Regulations Challenges of New Rule 17

18 AFFH Background In addition to prohibiting discrimination, the Fair Housing Act requires HUD participants to Affirmatively Further Fair Housing 18

19 What is AFFH? Affirmatively Further Fair Housing Includes Taking significant actions to overcome patterns of historic patterns of segregation Achieve truly balanced and integrated living patterns Promote fair housing choice Foster inclusive communities that are free from discrimination 19

20 Goals of New Rule on AFFH Improving integrated living plans and overcoming historic patterns of segregation Reducing racial and ethnic concentrations of poverty Reducing disparities by race, color, religion, sex, familial status, national origin or disability in access to community assets (education, transit access, employment and exposure to environmental health hazards and other stressors that cause harm to quality of life Responding to disproportionate housing needs by protected class 20

21 WHAT S NEW? PREVIOUS HUD REQUIREMENTS Analysis of Impediments (AI) Requires HUD Participants to fulfill AFFH statutory requirements by taking actions to overcome identified impediments HUD participants must maintain records of AFFH and certification to HUD NEW RULE Assessment of Fair Housing (AFH) Aids HUD participants in fulfilling AFFH statutory requirements with standardized data and mapping tools for AFH HUD review and approval of AFH for HUD funding Encourages Joint & Regional AFHs 21

22 AFFH - Mapping Tool 22

23 AFFH Mapping Tool Race/Ethnicity Race/Ethnicity Trends National Origin Limited English Proficiency (LEP) Subsidized/Assisted Housing Housing Choice Vouchers Housing Burden & National Origin Demographics and School Proficiency Demographics & Job Proximity Demographics & Labor Market Demographics & Transit Demographics & Poverty Demographics & Environmental Health Disability by Type Disability by Age Group 23

24 Assessment of Fair Housing Minimum AFH Components Summary of Fair Housing Issues and Capacity Analysis of Data Assessment of Fair Housing Issues Identification of Fair Housing Priorities and Goals Strategies and Actions Summary of Community Participation Review of Progress since prior AFH 24

25 AFFH Who is Affected? Which Financing & Grant Programs are Affected? 25

26 AFFH Who is Affected? Program Participants at the Jurisdictional Level Public Housing Authorities Rental Assistance CHFA LIHTC (Federal and State) v. Loan Programs Local and State Governments receiving the following HUD funds CDBG HOME Investment Partnerships Emergency Solutions Grants (ESG) HOPWA 26

27 Challenges for AFFH Entrenched patterns of segregation Racial & Economic Barriers to Development in High Opportunity Areas Local Land Use Regulations Environmental Regulations Lack of Infrastructure 27

28 Challenges for AFH (cont d) Resource Constraints Development v. Preservation High Costs Coordination Across Agencies NIMBY Opposition Years of delay for projects in high opportunity areas 28

29 CHFA Guiding Principles CHFA s Guiding Principles for the selection of projects to receive an award of Federal and/or State Credits: To support rental housing projects serving the lowest income tenants for the longest period of time To support projects in a QCT, the development of which contributes to a concerted community revitalization plan 29

30 CHFA Guiding Principles (Cont d) To provide for distribution of housing credits across the state, including larger urban areas, smaller cities and towns, rural, and tribal areas To provide opportunities to a variety of qualified sponsors of affordable housing, both for-profit and nonprofit To distribute housing credits to assist a diversity of populations in need of affordable housing, including families, senior citizens, homeless persons, and persons in need of supportive housing 30

31 CHFA Guiding Principles (Cont d) To provide opportunities for affordable housing within a half-mile walk distance of public transportation such as bus, rail, and light rail To support new construction of affordable rental housing projects as well as acquisition and/or rehabilitation of existing affordable housing projects, particularly those with an urgent and/or critical need for rehabilitation or at risk of converting to market rate housing 31

32 CHFA Guiding Principles (Cont d) To reserve only the amount of credit that CHFA determines to be necessary for the financial feasibility of a project and its viability as a qualified low income housing project throughout the credit period To reserve credits for as many rental housing units as possible while considering these Guiding Principles and the Criteria for Approval 32

33 CHFA Priorities Recognizing the unique challenges of developing housing for certain populations and in certain geographic areas, CHFA has identified the following priorities: Projects serving Homeless Persons as defined Projects serving persons with special needs Projects in Counties with populations of less than 175,000 Projects are not required to meet a priority in order to receive an award of Federal Credits or State Credits 33

34 CHFA Criteria for Approval Market Conditions Readiness to Proceed Overall Financial Feasibility and Viability Experience and Track Record of the Development and Management Team Project Costs Proximity to Existing Tax Credit Projects Site Suitability 34

35 Questions 35

36 Current Trends in Financing Affordable Housing Developments State CHFA HUD Local New City and County of Denver Ordinance 36

37 HOME Funds 37

38 Community Development Block Grants 38

39 CDBG Allocations 39

40 CDBG Allocations 40

41 HUD Loan Guarantee Programs Supportive Housing for the Elderly Section 202 Multi-Family for Moderate Income - 221(d)(3) & 221(d)(4) Existing Multi-Family - 207/223(f) Assisted-Living and 223(f) Hospitals - Section

42 City & County of Denver Ordinance Effective January 1, 2017 Establishes a dedicated fund to support city affordable housing programs Affordable housing linkage fee applicable to new construction Increases existing property tax revenue capacity 42

43 City and County of Denver Ordinance Sources of Revenue (cont d) 0.5 Mill increase in 2016 Property Taxes Linkage Fees Houses and Townhouses $0.60/sqft Multi-Family $1.50/sqft Industrial $0.40/sqft Commercial $1.70/sqft Remodels only to the extent the gross floor area of the structure is increased 43

44 City and County of Denver Ordinance (cont d) Permitted Uses of Revenue Linkage Fee 80% or less AMI Multifamily Rentals 80% or less AMI For Sale Housing Homebuyer Assistance for 80% or less AMI Property Tax Revenue 80% or less AMI Multifamily Rentals 100% or less AMI For Sale Housing Homebuyer Assistance for 120% or less AMI 44

45 City and County of Denver Ordinance (cont d) Permitted Uses of Revenue (cont d) Property Tax Revenue Development of permanent supportive housing and services not to exceed 10% of fund Programs supporting low-income at risk individuals in danger of losing homes Mitigation of gentrification displacement Homeowner emergency repairs 45

46 City and County of Denver Ordinance (cont d) The Numbers $150 Million over 10 years 6,000 New or Preserved Homes Property Tax Revenue year one $6.5 Million 46

47 City and County of Denver Ordinance (cont d) Advisory Committee 23 Members ED OED ED Planning Department ED DHA ED CHFA ED DOH For-Profit Affordable Housing Developer Non-Profit Affordable Housing Developer 47

48 CONTACT Melinda Pasquini Real Estate Attorney (303)

49 Disclaimer Polsinelli provides this material for informational purposes only. The material provided herein is general and is not intended to be legal advice. Nothing herein should be relied upon or used without consulting a lawyer to consider your specific circumstances, possible changes to applicable laws, rules and regulations and other legal issues. Receipt of this material does not establish an attorney-client relationship. Polsinelli is very proud of the results we obtain for our clients, but you should know that past results do not guarantee future results; that every case is different and must be judged on its own merits; and that the choice of a lawyer is an important decision and should not be based solely upon advertisements Polsinelli PC. In California, Polsinelli LLP. Polsinelli is a registered mark of Polsinelli PC 49

FAIR HOUSING: Serious Responsibility, Serious Liability

FAIR HOUSING: Serious Responsibility, Serious Liability PRESENTED TO: American Planning Association Housing and Community Development Division PRESENTED BY: Heidi Aggeler, Managing Director 1999 Broadway