City of Memphis: Analysis of Impediments to Fair Housing Choice

Transcription

1 City of Memphis: Analysis of Impediments to Fair Housing Choice 2011 Submitted by the Metropolitan Milwaukee Fair Housing Council

2 Author of the Report This report was produced by the Metropolitan Milwaukee Fair Housing Council, Inc. (MMFHC). Kori Schneider Peragine, Carla Wertheim and Erika Sanders are the primary staff responsible for its content. MMFHC was established in October 1977 as a private, non-profit organization dedicated to promoting fair housing throughout the State of Wisconsin by combating illegal housing discrimination and by creating and maintaining racially and economically integrated housing patterns. MMFHC operates the following four programs: Enforcement Program Intake of fair housing complaints and counseling on options for remedy. Investigative services for persons who allege housing discrimination. Referrals to attorneys and government agencies. Systemic investigations of institutional discrimination. Outreach and Education Program Presentations to consumers, advocates and the general public. Fair housing training for property owners and managers, real estate agents and other members of the housing industry. Fair housing technical assistance to government agencies, civil social service agencies and housing providers. Fair Lending Program Intake of fair lending complaints and counseling on options for remedy. Promotes fair lending and seeks to eradicate predatory lending practices through a community coalition, the Strategies to Overcome Predatory Practices (STOPP) Initiative. Monitoring of financial institutions fair lending practices. Technical assistance and education for lenders and the general public. Inclusive Communities Program Technical assistance and professional support to community organizations, developers and local policy makers on inclusionary housing policies and the promotion of racial and economic integration. Assistance with consumers access to pro-integrative housing choices. Research, analysis and documentation of fair and affordable housing opportunities and impediments. 2

3 MMFHC provides services throughout the State of Wisconsin through three offices. Its main office is located in the City of Milwaukee and satellite offices of the organization are located in Madison (Fair Housing Center of Greater Madison) and Appleton (Fair Housing Center of Northeast Wisconsin). This Analysis of Impediments to Fair Housing report was funded by the City of Memphis. The City of Memphis also provided mapping. The Nonprofit Center of Milwaukee s Data Center provided MMFHC with mapping services, data analysis and other technical assistance. Acknowledgement A special thank you to Robert Lipscomb, Don Campbell, James Thornton, Department of Housing and Community Development staff, Memphis Housing Authority staff and members of the Fair Housing Task Force for all of your dedication, time commitment and knowledge! 3

4 Table of Contents Table of Contents Executive Summary i-xii Introduction 1 Demographics and Economic Characteristics Analysis 3 Racial Composition 4 Household profiles 7 Persons with Disabilities 9 Homeownership 10 Age Distribution 10 Employment, Income and Poverty 11 Spatial Mismatch 12 Housing Supply Characteristics 13 Education 14 Linguistic Isolation 15 Fair Housing Impediments 17 City of Memphis 18 Shelby County 34 Federal and State 37 Private Market 40 Recommendations 48 City of Memphis 49 Shelby County 57 Federal and State 58 Private Market 59 Recommendation Implementation Matrix 60 Appendices 62 Appendix A: Memphis s Segregated Housing Environment: Timeline of Federal, State and Local Policies Appendix B: Sect Metropolitan Transportation Planning Process Appendix C: NCRC HMDA Lending Analysis 4

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6 Executive Summary This report, City of Memphis: Analysis of Impediments to Fair Housing 2011, should be used as a planning tool to ensure equal housing opportunities for all persons in the City of Memphis. The report has four main components: an analysis of demographic and economic characteristics in relation to their impact on fair housing; a description of fair housing impediments; recommendations designed to dismantle impediments; and an implementation matrix. Demographic and Economic Characteristics An analysis of the demographic and economic characteristics in the City of Memphis identifies trends that have an impact on impediments to fair housing choice, either now or in the future. Some items of note include: According to the 2010 Census, between 2000 and 2010 the City of Memphis s population decreased by 0.49% to 646,889, while the population of the Memphis MS-AR Metro Area increased by 15.89% and Shelby County s population increased by 3.36%. Nonwhite residents in Memphis increased between 2000 and 2010: the Hispanic population increased by %; the Asian population increased by 7.46%; the African American population increased by 2.62%; at the same time, the white population decreased 15.02%. Minority households tend to be larger than white households: white households average 2.07 persons; Asian households average 2.81 persons; Latino households average 3.75 persons; African American households average 2.81 persons. As a result, minority households are also more likely to be overcrowded. According to the 2000 Census, 26.8% of Memphis s population has a disability (including physical disabilities, mental disabilities, mobility disabilities and other ). The homeownership rate for whites is significantly higher than that of other races and ethnicities at 65.7%. Fewer than 48% of African Americans own their homes. Only 32% of Latinos and 51.6% of Asians own their homes. The median age for Memphis residents (32.7) is younger than the U.S. median age (36.5) and the Tennessee median age (37.3). Median age by race and ethnicity varies significantly in Memphis: the median age of whites is 41.6 years; Asians, 33.1 years; Latinos, 24.6 years; and 29.8 years for African Americans. The 2009 American Community Survey reported white household median income ($51,541) is significantly higher than that of black ($39,237) and Latino ($32,269) households in the City. Median income of Asian households ($51,299) was very nearly that of white households. i

7 According to the 2009 ACS, over 12.3% of Memphis households do not have a vehicle available. African American households are three times more likely than white households to not have a vehicle available (20.3% compared to 6.7%, respectively). The average price in May 2011 for Memphis home sales was $122,074, down 4.8% from $128,267 in May This is compared to $166,700 for the U.S. in % of city residents 25 years and older graduated from high school. Vast disparities in educational attainment are revealed when analyzed by race and ethnicity: Latinos (5.7%), Asians (83.4%) and African Americans (77.8%) are significantly less likely to have a high school diploma than whites (90.9%). 8% of Memphis s population speaks a language other than English at home. About 4% of the population does not speak English very well. Fair Housing Impediments An impediment to fair housing is anything that may hinder or prevent a person from having equal access to housing because of their membership in a federal or State of Tennessee protected class. 2 Impediments may take the form of a governmental entity s policy, practice or procedure; housing industry practices; and other societal factors that may contribute to impeding a person or family from obtaining housing. Impediments in the report fall into one or more of four categories: City of Memphis impediments, Shelby County impediments, state and federal impediments, and private market impediments. Though the City may have limited ability to address impediments in the private market and at the state and federal levels, this report would be incomplete without listing them. City of Memphis Impediments Impediment #1: Flawed City Fair Housing Ordinance In order to complete a thorough analysis of impediments to fair housing choice in Memphis, it is necessary to review the ordinance that seeks to protect individuals rights to housing: Article 10 Section 36, Fair Housing. The mere existence of a local fair housing ordinance is not sufficient to ensure that equal housing opportunities are realized within a community. The law must have broad protections, remedies and enforcement mechanisms available to victims of illegal housing discrimination. The identified impediments are: no relief is available to victims of housing discrimination under the ordinance; victims of housing discrimination have no private cause of action in Federal or State Court; the ordinance is unclear in its definitions of forfeitures and provides negligible penalties for violations of the law; the ordinance does not include all 1 National Association of Realtors, Protected classes listed in the Federal Fair Housing Act include race, religion, color, national origin, sex, disability, and familial status. ii

8 transactions within the housing industry; the enforcement process is overly burdensome and has disincentives for persons to file complaints with the City; and exemptions need clarification to avoid confusion and ambiguity. Impediment #2: Lack of Housing Accessible to Persons with Disabilities Nearly 27% of Memphis population has a disability. Memphis has a large proportion of older housing stock; 35.6% of the City s housing was built in 1959 or earlier. Older housing units are less likely to be accessible to persons with physical disabilities; however, they are also more likely to be affordable. Newer dwellings are more likely to be accessible, but are typically less affordable. Over 84% of Memphis s housing was built in 1990 or earlier and therefore is not required to meet federal accessibility guidelines under the Federal Fair Housing Act Amendment. Impediment #3: Inadequate Affordable Housing Supply Relative to Resident Income According to the National Low Income Housing Coalition s annual Out of Reach report, affordability is a function of income; when incomes are low even moderately priced housing becomes unaffordable. Housing is affordable if you spend no more than 30% of your household income on housing costs. In Memphis and Shelby County the FMR for a two-bedroom apartment is $758; a household must earn $30,320 to be able to afford that apartment. In order to afford a two-bedroom apartment a minimum wage worker must work 80 hours a week. A shortage of affordable housing may not appear to be a fair housing issue on its face. However, lack of affordability has a disproportionate impact, particularly on persons with disabilities, people of color, families with children and the elderly, and therefore cannot be ignored. The Lack of Financial Resources to Build, Preserve, and/or Rehabilitate Affordable Housing The shortage of affordable housing is attributable, in part, to a lack of resources to build and preserve such units in Memphis. The demand for HOME, CDBG and City Capital Improvement Funds exceeds availability. These difficulties are exacerbated by the fact that already inadequate funding sources are decreasing. Structural Quality and Overcrowded Housing While Memphis has housing that is affordable to households at middle income levels, and even some to households at lower incomes, the condition of that housing needs to be taken into iii

9 account. A systematic evaluation of every residential parcel in the city between 2008 and 2010 yielded a blight rate of 22%. 3 Impediment #4: Need for a Critical Review of Memphis Housing Authority s Policies & Practices Amidst the MHA performing its many functions to house low-income households, there are some unfortunate unintended consequences - primarily the segregation of Housing Choice Voucher households. Impediment #5: Inadequacies of the Transit System 12.3% of Memphis households do not own cars. African American households are three times more likely than white households to not have a vehicle available (20.3% compared to 6.7%, respectively). Currently, the Memphis Area Transit Authority (MATA) is not adequate to access many of the City and region s available jobs. Based on the stakeholder input in the MATCP planning process, gaps in services include inadequate service at employment centers. Services for Persons with Disabilities The MATCP planning process results corroborate that there are insufficient services for persons with disabilities outside of MATA s service area. Currently, the paratransit vans operate within ¾ of a mile from the main transit lines. However, disability advocates note that many disabled residents still cannot access the routes. Shelby County Impediments Impediment #6: Shelby County does not have a Fair Housing Ordinance Shelby County does not have a fair housing ordinance. Although victims of illegal housing discrimination in Shelby County are able to utilize the protections under the State of Tennessee Fair Housing Law and the Federal Fair Housing Act, neglecting to pass an ordinance sends its residents the message that fair housing is not valued in the County. Further, the County is missing an opportunity to enact protections that may be more expansive than state or federal fair housing laws. 3 Neighborhood by Neighbor: A Citywide Problem Property Audit, Summary of Findings, Center for Community Building and Neighborhood Action (CBANA) iv

10 Impediment #7: Historically Inadequate Code Enforcement by Shelby County The Memphis Legal Services assisted MCIL in filing two federal lawsuits in the U.S. District Court against developers, builders, architects, and civil engineers involved in the construction of five large apartment complexes that had thousands of barriers to accessibility for people with disabilities. Since these lawsuits have settled, the County has taken steps to ensure compliance with ADA and requirements under the Fair Housing Act Amendment. While the County has taken steps to ensure that the accessibility requirements are being met, fair housing and disability advocates indicate this is still an area of concern. Impediment #8: Limited Transit in County Lack of transit in Shelby County is a fair housing issue because it limits housing opportunities. Persons in need of transit, without a vehicle available, cannot access housing or jobs in suburban Shelby County. Increasingly, employment opportunities and services are located in Shelby County outside the city, separating persons in need of employment or services but without a vehicle from those services and opportunities. Impediment #9: Limited LIHTC development in County Memphis HOME funds are used to assist developers in project financing. However, Shelby County HOME allocations were $370,000 in 2010 and further reduced to $313,000 in The HOME funds are not large enough to assist a LIHTC developer with gap financing, so are used primarily for single family home rehabilitation. Additionally, developers encounter less opposition from the community when working in the City compared to Shelby County. Impediment #10: NIMBY attitudes Not in My Backyard (NIMBY) attitudes refer to community opposition to projects and policies that might insert a perceived undesirable element into a community. NIMBYism and fair housing issues frequently intersect when affordable housing is proposed. Current residents make assumptions about potential incoming residents based on highly subjective perceptions rather than facts; they assume that affordable housing will increase crime, increase property taxes, overcrowd schools or decrease property values. v

11 State and Federal Housing Policy Impediments While the City of Memphis is only indirectly involved in these State and federal impediments, they must be addressed, as they impact the City s ability to affirmatively further fair housing. 4 State and federal impediments include: Impediment #11: State Limitations to Fair Housing The recently enacted "Special Access to Discriminate" (SAD) bill is a barrier to fair housing choice in Tennessee for several reasons. First, it prevents local governments from enacting their own non-discrimination policies; thereby making the City of Memphis s source of income and property conditions protections unenforceable. Subsequently, persons receiving Section 8 Rent Assistance vouchers are no longer protected under the Ordinance. The other problematic state legislation is the limitation for monetary damages within the State of Tennessee Constitution. Municipal civil penalties in excess of $50 violate Article VI, Section 14 of the Tennessee Constitution if their purpose is punitive rather than remedial. Impediment #12: Frequent Attacks on the Community Reinvestment Act (CRA) by Banking Regulators CRA regulators often submit proposals to Congress to weaken the Community Reinvestment Act (CRA). Weakening CRA would be problematic because the provisions of CRA encourage depository institutions to help meet the credit needs of the communities in which they operate, including low- and moderate-income neighborhoods. Impediment #13: Lack of Resources/Incentives for Developers to Build for the Lowest Income Households Federal resources for the building of new rental housing have lagged far behind the demand, resulting in the shortage of affordable rental housing in many communities. Impediment #14: U.S. Department of Housing and Urban Development does not adequately fund or incentivize PHAs to utilize mobility strategies Mobility options such as outreach to landlords in high opportunity neighborhoods, counseling to educate consumers of housing in high opportunity communities, and Fair Market Rent adjustments have not been feasible options for the Memphis Housing Authority due to limited funding from HUD to implement these programs. 4 Affirmatively further fair housing (AFFH) is a requirement for communities receiving HOME, CDBG and other federal funds. HUD has not defined AFFH statutorily. vi

12 Impediment #15: Racial Segregation of Project Based Housing Project or site-based housing is affordable public housing; HUD contracts with the Tennessee Housing Development Agency (THDA) to administratively manage these sites. HUD s intention was to have these projects scattered, but instead most are located in segregated areas and areas of concentrated poverty. Private Market Impediments Private market impediments are obstacles to fair housing in the housing production, mortgage lending, homeowners insurance, rental and home sales markets. Though the City of Memphis is limited in its ability to address private market impediments directly, it can take a leadership role in bringing these issues to the public s attention and supporting fair housing enforcement and education efforts in the private market. Impediment #16: Mortgage Lending Discrimination in the Lending Market Discrimination in mortgage lending prevents home seekers from obtaining the financing normally required to purchase a home, or can result in borrowers being given unfair terms and conditions. Racial discrimination in the home loan industry can be based either on the race of the loan seeker or on the racial composition of the neighborhood where the home being purchased is located. Foreclosures Foreclosures of single-family homes are a serious threat to neighborhood stability and community wellbeing, particularly in low-income neighborhoods. In April 2011, 1 in every 1,104 housing units in Shelby County had received a foreclosure notice. 5 Shelby County also had the highest number of foreclosures in Tennessee that month. Impediment #17: Homeowners Insurance Discrimination in the Homeowners Insurance Market Homeowners insurance is a requirement for a home mortgage; therefore, the impact of discrimination in the insurance industry is reflected in racial and ethnic homeownership rate disparities. Racial discrimination in the provision of insurance not only denies fair housing choice, but also fosters disinvestment and the deterioration of neighborhoods. Despite the plethora of academic studies and legal action taken by organizations, individual complaints 5 RealtyTrac vii

13 concerning discrimination in the insurance market are relatively rare. Insurance discrimination can be subtle, and without knowledge of underwriting policies and rate standards, it is difficult or impossible for homeowners seeking insurance to know whether they have received unfavorable treatment. Impediment #18: Housing Sales and Rental Markets Discrimination in the Sales and Rental Markets A major impediment to housing choice is discrimination in the sale and rental of housing. In Memphis discrimination based on disability remains the major form of discrimination in the housing market. Memphis Fair Housing Center complaint data indicates that allegations of discrimination based on a disability are the most frequently filed. The protected classes of race and gender are also among the complaints most frequently taken by the Memphis Fair Housing Center. Recommendations Recommendations to remedy the identified barriers to fair housing are the most critical element of this document. This section, therefore, should be used as a starting point for the City of Memphis to develop and implement a comprehensive fair housing action plan. The recommendations are presented in three categories: City of Memphis recommendations, state and federal policy recommendations and private market recommendations. City of Memphis Recommendations Recommendation #1: Appoint Fair Housing Official per Fair Housing Ordinance Memphis Fair Housing Ordinance calls for the City to appoint a Fair Housing Officer to be responsible not only for enforcement of the City s Fair Housing Ordinance but also for the implementation of this report s recommendations. Recommendation #2: Review and Amend Local Fair Housing Ordinance The City Attorney should work with Memphis Area Legal Services Fair Housing Center to address the problems identified. a. The Ordinance should be amended to include relief for victims of housing discrimination in the form of compensatory and injunctive relief. In order to provide consistent enforcement efforts. b. The penalties in the Memphis fair housing ordinance should be increased to provide a true punitive and deterrent effect. viii

14 c. The ordinance should be amended with language that includes housing appraisals as a covered transaction. d. In order to ensure that victims of housing discrimination are not deterred from filing complaints, the ordinance should be amended to remove the requirement that a complainant provide the name and address of every person against whom the complaint is made. e. The exemptions section of the ordinance should be amended with language to make clear that housing for older persons is exempt from both the familial status and age provisions of the law. f. At present, the ordinance allows that if simultaneous complaints are filed with the City, state Human Rights Commission or HUD, the City may hold a filed complaint in abeyance until other agencies have made a determination. This should be altered so that the City may not defer its own determination based on another agency s actions. g. Currently, the ordinance states that if the Fair Housing Officer issues a written order for a respondent to appear in court, but the respondent fails to do so, the court may take a default judgment against them. This discretion allowed in the ordinance may convey to the respondent a lack of seriousness in enforcing fair housing law, and should be amended to read that the court shall make a default judgment against the charged person in favor of the City. Recommendation #3: Memphis Housing Authority The Memphis Housing Authority (MHA) should undertake activities to increase housing choices for its voucher recipients and residents. Given funding constraints, the MHA will need to determine which of the following strategies will be most feasible and effective in providing greater housing opportunities to its voucher recipients: Identification and mapping of nonimpacted area; housing provider outreach; explore potential impact of small market Fair Market Rents (FMRs); and a mobility program. Recommendation #4: Create and Implement a Comprehensive Affordable/Accessible Housing Production Strategy The City of Memphis should create a comprehensive housing strategy to increase the production of affordable and accessible housing, particularly in low poverty communities with access to opportunities. Deconcentration of persons with disabilities, racial and ethnic minorities, and poverty should be a component of all the following recommendations. a. Incorporate visitability 6 and home modification requirements into city subsidies and funding b. Fund visitability and accessibility outreach and education c. Homeless shelter accessibility ix

15 d. Utilize vacant land as incentive to increase affordable housing supply e. Identify and overcome housing production impediments f. Create a citywide housing trust fund g. Utilize Tax Incremental Financing (TIF) to produce accessible and affordable housing Recommendation #5: Education for Affirmatively Further Fair Housing and Section 3 Requirements The City should incorporate education on Section 3 and affirmatively furthering fair housing requirements into its Strategic Community Investment Fund (SCIF) meeting. This is an annual meeting of organizations and agencies who intend to submit competitive applications for funding. Recommendation #6: Support Comprehensive Fair Housing Services a. Continue to Support Memphis Area Legal Services Fair Housing Center as a FHIP funded agency in Memphis: The City should continue to support HUD FHIP (Fair Housing Initiatives Program) funding for Memphis Area Legal Services. Comprehensive fair housing services funded through FHIP can include: conducting housing discrimination complaint intake, case management, investigation and legal services to victims of discrimination; investigations of systemic forms of illegal discrimination; outreach and education throughout the community; and anti-predatory lending activities. b. Outreach to Linguistically Isolated and Bilingual Communities: The City should facilitate the formation of a partnership with organizations that serve non-english speaking or persons with limited English proficiency to develop a proactive approach to reach these linguistically isolated populations on fair housing and fair lending issues. Recommendation #7: Improve Community Reinvestment Utilizing the Community Reinvestment Act (CRA) a. Strengthen Partnerships with Lender: Memphis leaders should partner with lenders to discuss lenders community reinvestment goals, including the number of small business loans, home mortgages, home improvement loans, and community development investments to be made within low- and moderate-income neighborhoods in the City. b. Submit CRA Comment Letters: The City of Memphis should collaborate with local community development organizations such as the Greater Memphis Fair Housing Alliance or the Peace and Justice Center to: i) comment on local bank mergers and acquisitions, as provided for in the federal Community Reinvestment Act; x

16 ii) use the CRA comment letters to encourage banks to open additional branches in low- and moderate-income neighborhoods where check cashers and payday loan establishments are concentrated and no bank branches exist; iii) meet with lenders who want to close bank branches in low- and moderateincome neighborhoods, in an effort to discuss the needs of those communities and how those needs will be met without a bank branch nearby; and iv) encourage lenders to provide the community with alternatives to check cashing establishments. Recommendation #8: Transit Recommendations City of Memphis planners and its Fair Housing Officer should work with MATA to better coordinate transit routes and schedules with locations of employers and affordable housing. Additionally, city planners and the Fair Housing Officer should work with the Memphis Urban Area Metropolitan Planning Organization to increase awareness and dialogue of the relationships between fair housing and transit. Recommendation #9: Shelby County Recommendations The City of Memphis has obvious limitations in addressing fair housing impediments outside its borders. The City should work with Shelby County to implement the following: a. Work with Shelby County to request Housing and Transit Impact Studies of new employers. This would serve to identify potential problems employees may have getting to work via transit, as well as assessing the supply of appropriately priced housing near the employer. b. Encourage Shelby County to write and enact a comprehensive fair housing ordinance. c. Encourage Shelby County to incentivize multifamily affordable housing. d. Work with the Memphis Area Metropolitan Planning Organization and Shelby County to ensure adequate and equitable regional transit. State and Federal Recommendations Recommendation #10: HUD Rules and Funding Impediments a. Site-based vouchers: In order to ensure site-based Section 8 developments are not contributing to segregation and concentration of poverty, HUD must make policy changes regarding site approval. b. Small Area Fair Market Rent and Mobility Programs: HUD needs to increase funding for programs that integrate housing. Without increased funding for more flexibility in Fair xi

17 Market Rents and housing mobility programs, meaningful desegregation of vouchers will remain a challenge. Recommendation #11: Advocate for State s Overturning of Fair Housing Barriers a. The City of Memphis should advocate overturning Tennessee s "Special Access to Discriminate" (SAD) bill. It is a barrier to fair housing choice in Tennessee for several reasons that are explained in Impediment #11. b. The City of Memphis should also attempt to overcome the limitations of municipal civil penalties within the State of Tennessee Constitution, as explained in Impediment #11. The City of Knoxville has a model for overcoming this barrier. Contact Knoxville s City Attorney to research their model. Private Market Recommendations Recommendation #12: Advocate for Open and Inclusive Real Estate and Rental Markets Memphis should collaborate with the Greater Memphis Fair Housing Alliance to advocate for more open and inclusive home rental and sales markets by working with the housing industry as follows: a. Work cooperatively with the real estate industry and its trade associations to develop ways for local agents to become more familiar with all neighborhoods in the City of Memphis. b. Encourage housing providers to seek fair housing training. Training could be funded through CDBG funds. c. Encourage greater efforts on the part of the lending, real estate and rental industries to hire and train minority and bilingual lenders, underwriters, real estate and rental professionals. d. Promote more active participation by providers of rental housing in local rent assistance programs to expand locational choice for low-income and minority residents. xii

18 Introduction Introduction The Analysis of Impediments to Fair Housing is a report required by the U.S. Department of Housing and Urban Development (HUD) from communities that receive Community Development Block Grant (CDBG) funds. However, to maximize the potential of this report, City officials must view it as more than just a requirement for receiving block grant funding. It should be used as a meaningful tool enabling the community to take steps to ensure equal access to housing opportunities for all persons in the city of Memphis. According to Carolyn Peoples, former Assistant Secretary of HUD s Fair Housing and Equal Opportunity Office, Once the jurisdiction completes the AI, it must report on its implementation by summarizing the impediments identified in the analysis and describing the actions taken to overcome the effects of the impediments identified through the analysis in its Consolidated Annual Performance and Evaluation Report (CAPER). Although AIs are not submitted or approved by HUD, each jurisdiction should maintain its AI and update the AI annually where necessary. Jurisdictions may also include actions the jurisdiction plans to take to overcome the impediments to fair housing choice during the coming year in the Annual Plan that is submitted as part of the Consolidated Plan submission. Fair Housing Fair housing is a civil right that guarantees equal housing opportunities for all persons regardless of their membership in categories called protected classes. Protected classes under federal and state fair housing laws are listed in the following table. Tennessee does not have any protected classes beyond the federal Fair Housing Act protected classes. Federal Fair Housing Act and Tennessee Human Rights Law Protected Classes Race A person s race or the race of persons with whom one associates. Color A person s skin color. Sex A person s sex, including sexual harassment or intimidation. National Origin The country of one s birth and/or the nationality of one s ancestors. Religion A person s religious beliefs or denominational affiliation. Disability/Handicap A physical or mental impairment that substantially limits one or more major life activities. Family Status Household composition, including the presence of children. Creed 7 [Not defined in the Tennessee Human Rights Law] An impediment to fair housing is anything that may hinder or prevent a person from having equal access to housing because of their membership in a protected class. Impediments may take the 7 Creed is a protected class in the Tennessee Human Rights Law not the Federal Fair Housing Act 1

19 form of a city or other governmental entity s policy, practice or procedure, housing industry practices, or other societal factors. Scope of the Study The City of Memphis: Analysis of Impediments to Fair Housing contains several components. First, the study provides an analysis of demographic and economic characteristics in relation to their impact on fair housing. Included are descriptions of Memphis s racial and ethnic composition, household profiles, population of persons with disabilities, homeownership, age distribution, employment and income levels, poverty, unemployment patterns, transportation, housing supply characteristics, education and linguistic isolation. Next, the report identifies impediments to fair housing. Impediments are organized into three broad categories: City of Memphis impediments; Shelby County, federal and state impediments; and private market impediments. Finally, this report lists recommendations for dismantling the impediments to fair housing choice. 2

20 Demographics and Economic Characteristic Analysis: Fair Housing Implications Memphis s current housing conditions are created by a complex combination of factors, including: illegal discrimination in the housing market, geographic preferences of home seekers, demographic shifts, changes in the number and structure of households, and trends in the larger economy. Memphis s demographic, economic and social characteristics will be discussed in this section of the study, with emphasis on characteristics related to impediments to fair housing choice in the housing market. In 2009, the Memphis submitted a Consolidated Housing and Community Development Plan for the years This document contains a useful summary of 2000 and 2010 census data and American Community Survey (ACS) data for the City of Memphis and was used as a source for much of the demographic data in this section. Additional data and geographic information science (GIS) maps were also used in this report to map socioeconomic and housing market conditions and assist in highlighting patterns that may otherwise go unnoticed. Table 1: Memphis Population Distribution, Population 2000 Population 2010 Population City of Memphis 610, , ,889 Memphis TN-MS-AR 981,747 1,135,614 1,316,100 Shelby County 826, , ,644 Source: U.S. Census 1990, 2000, 2010 According to the 2010 Census, Memphis s population in 2010 was 646,889, a decrease of 0.49% from The population of the Memphis MS-AR Metro Area was 1,316,100 in 2010, an increase of 15.89% from Shelby County s population in 2010 was 927,644, an increase of 3.36% from

21 Racial Composition An examination of demographic changes reveals increases in nonwhite residents in Memphis between 2000 and 2010: The Hispanic population increased by %. The Asian population had an increase of 7.46%. The African American population increased by 2.62%. White residents comprise 29.4% of the City s population, a reduction of 15.02% since Table 2 : City of Memphis Population by Race Over Time Race Population % Population % Population % White 268, , , African 334, , , American American Indian , ,549.2 Asian or Pacific Islander 4,805 9, , Other Race 1, , , Two or More Races 6, n/a n/a 8, Total 610, , ,889 Latino/ Hispanic Not Hispanic , ,317 41, , , , Total 610, , ,889 Source: U.S. Census 1990, 2000, 2010 Maps 1-4 below provide a visual of racial segregation in Memphis. The white population is more densely populated on the north and east sides of Memphis. African Americans reside more heavily on the south and west side of Memphis. While Memphis is segregated, there are 4

22 neighborhoods that are integrated. The Asian American and Latino populations are still somewhat small and spread out throughout the city. Map 1: Dot Density for White population Map 2: Dot Density for African American population 5

23 Map 3: Dot Density for Latino population Map 4: Dot Density for Asian population Legally sanctioned discriminatory housing practices created segregated and unequal neighborhoods and communities throughout the United States. Although discrimination is no longer legal, it is still an endemic problem. 6

24 Prior to the passage of the Fair Housing Act of 1968, various forms of discrimination and institutional racism were legal: racially restrictive covenants, 8 redlining by banks and insurance companies, 9 discrimination in real estate and rental practices, racially segregated public housing, blockbusting, 10 Federal Housing Administration 11 and Veterans Administration mortgages, urban renewal, 12 freeway construction, white flight, 13 central city disinvestment and exclusionary zoning 14 /NIMBYism 15 by the suburbs. Over a century of legalized discrimination and institutionalized racism created a system in many parts of the country in which racial segregation was the only possible result. Household Profiles Throughout much of the U.S., an increase in the number of households is occurring at a rate that exceeds population growth. This is due to a variety of factors, including the growing number of single person and single parent households, longer life expectancies and the rate of divorce. A result of this trend is smaller household size. Consider: The number of households in Memphis increased from 250,721 to 260,097 between 2000 and 2009, or 3.7%. The average household size increased from 2.52 persons to 2.54 persons. However, the numbers of three or more person households decreased slightly between 2000 and Racially restrictive covenants contractually required buyers of property to sell their homes only to people of particular races. 9 Redlining is a practice in which banks and/or insurance companies do not offer their products or services, or offer inferior products or services, within predominantly minority neighborhoods. 10 Blockbusting is the practice of inducing homeowners to sell their properties by making representations regarding the entry or prospective entry of persons of a particular race or national origin into the neighborhood. 11 Underwriting guidelines for Federal Housing Administration (FHA) mortgages required that "properties shall continue to be occupied by the same social and racial classes" through the 1930s and FHA practices solidified dual housing markets for whites and African Americans that persist today in cities across the country (Bradford 1979; Bradford and Cincotta 1992). 12 Urban renewal, referred to by many as "Negro Removal," uprooted entire minority communities with little or no consideration or concern regarding the impact on the existing residents. Moreover, those plans often resulted in the discriminatory taking of property, thus stripping wealth and equity from these communities (Written testimony of Cheryl Ziegler, Director, Housing and Community Development Project Lawyers Committee for Civil Rights Under Law, Before the Charleston City Council) 13 The departure of white families usually from urban neighborhoods undergoing racial integration or from cities implementing school desegregation. 14 Exclusionary zoning are laws that establish maximum density and minimum lot size requirements restrict opportunities for low-income households, thus effectively discriminating against minorities. 15 NIMBY is an acronym for Not In My Back Yard. A term for a person who resists unwanted development, in this case, any development that may attract person of other races or classes. 7

25 One-person households increased significantly, by 16.6% or 12,682 households, during the same period. Two-person households also increased by 4%, or 3001 households, between 2000 and Minority households tend to be larger than white households; therefore are more vulnerable to being discriminated based on family status. As a result, they are more likely to require larger housing units. In 2000: 16 White households have an average household size of 2.07 persons in Memphis. Asians have an average household size of 2.81 persons. Latinos have an average household size of about 3.75 persons. African Americans have an average of about 2.81 persons per household. In comparison, the average household size in Tennessee is 2.48 persons and the U.S. is 2.5 persons. Although average household size declined, the 2009 American Community Survey reported a decrease in the percentage of households that lived in overcrowded conditions. The traditional census definition of overcrowded household is a household that has more persons than the number of rooms it occupies. (Bathrooms and hallways are not included.) In 2009, 3.1% of the City s households were overcrowded, compared to 6.2% in In 2009 households renting their housing (4.8%) were three times more likely to live in overcrowded conditions than households that owned their homes (1.6%). By race and ethnicity: 1.2% of white households are overcrowded. 4.3% of Asian American households are overcrowded 12.1% of Latino households are overcrowded. 0% of Native American households are overcrowded. 4.0 % of African American households are overcrowded. Families may find house partners necessary to meet the cost of housing, which can result in overcrowding. 16 The American Community Survey did not include this data by race/ethnicity because the sample size was too small. 8

26 Table 3: Memphis Household Size, Household Size Percent Percent Percent 1 Person 28.3% 30.5% 34.0% 2 Person 29.9% 29.4% 29.5% 3 Person 17.6% 17.0% 16.1% 4 or More People 24.3% 23.1% 20.1% Total 229, , ,097 Average Household Size n/a Source: U.S. Census 1990, 2000, American Community Survey 2009 In addition, the married-couple family now makes up 30.5% of the City s households, a decrease of 3.6% from Almost one in four households (23.1%) is headed by a female with no husband present, a decrease of 0.7% from Persons with Disabilities Housing stock with inaccessible features impedes access for persons with many different types of physical disabilities. Ensuring an adequate supply of accessible housing to meet the needs of persons with disabilities must be a City goal. While the actual number of accessible private housing units is not available, multiple sources indicate that demand for such housing is greater than the supply. According to the 2000 U.S. Census, 26.8% of Memphis s population has a disability (including physical disabilities, mental disabilities, mobility disabilities and other ). People with disabilities are more likely to have incomes below the poverty level in Memphis. In 2000, of the Memphis population of persons with disabilities, 20.5% had incomes below the poverty level, essentially the same as the poverty level of Memphis total population (20.6%). By 2009 poverty of the total population had increased to 24.2%. Persons with disabilities are more likely to be unemployed or employed in lower-paying jobs. Based on income data as well as interviews with staff from the Memphis Center for Independent Living (MCIL), it is very evident that persons with disabilities are proportionally more in need of 9

27 affordable housing than those without disabilities. The combined need for housing that is both accessible and affordable poses great challenges for many. Homeownership The homeownership rate in Memphis in 2009 was 54.6%. About 45.4% of Memphis s households rented. Table 4: Memphis, Renter/Homeownership Proportion, Number Percent Number Percent Total Housing Units 271, % 307, % Occupied 250, % 260,097 By owner 139,985 (68.3%) 141,956 (54.6%) By Renter 110,736 (31.0%) 118,141 (45.4%) Vacant 20, % 47,825 * Of All Occupied Housing Units Source: U.S. Census 2000, American Community Survey 2009 Homeownership rates by race and ethnicity show significant disparities. In 2009, the homeownership rate for whites was significantly higher than that of other races and ethnicities at 65.7%. Fewer than 48% of African Americans owned their homes. Only 32% of Latinos and 51.6% of Asians owned their homes. As the equity in a home is often the foundation for educational, employment and business opportunities, these disparities disadvantage minorities. Impediments to homeownership are impediments to fair housing. Age Distribution In 2009, 14.3% of the City s population was 60 and older. The aging of Memphis s population has several fair housing-related repercussions. As the population ages, there will be a corresponding need for increased enforcement of fair housing laws accessibility provisions, as well as education for this population so that elderly persons are aware of their accessibilityrelated fair housing rights. In addition, housing providers and developers will require increased access to education regarding their responsibilities to provide accessible housing. 10

28 The median age for Memphis residents was 32.7 years in 2009, which is younger than the U.S. median age of 36.5 and the Tennessee median age of Median age by race and ethnicity varies significantly in Memphis. In 2009: The median age for whites was 41.6 years. Asians had a median age that is 20% below that of whites, or 33.1 years. Latinos had a median age that is 41% below whites, or 24.6 years. The median age of African Americans was 28% lower than whites, or 29.8 years. The significantly younger median age of minority households presents many implications for future and current housing needs. Currently, larger units are needed to accommodate larger families with children. The younger median age of persons of color suggests that many of these persons are children, likely not yet owning or renting their own housing. Future implications of the younger median age are clear. As the children of these families become adults, they may continue and amplify the trends their parents and grandparents experienced: a strong need for affordable housing and larger housing units. Employment, Income and Poverty The City of Memphis s unemployment rate has increased in recent years. 17 Fully 7.5% of the City s labor force was unemployed in By 2011, the rate had increased to 11.3%. 18 In 2009, Native Americans in Memphis have a poverty rate of 36.1%, more than three times that of whites. The African American poverty rate in metropolitan Memphis is 31.1%, three times the rate for whites. Nationally, the rate of African American poverty is 3.1 times that of whites. The Asian poverty rate is 12.9%; and for the Latino population, the rate is 29.5%. Clearly, Memphis s employment and housing landscapes are working to much greater advantage for whites than for Native Americans, African Americans, Asians and Latinos. City median incomes by race and ethnicity further illustrate this disparity. The 2009 ACS reported Memphis s median household income at $36,535. White household City median income ($51,541) was significantly higher than that of black ($29,237) and Latino ($32,269) households in the City. Median city income of Asian households ($51,299) was very nearly that of white households. 17 An unemployed person is someone in the labor force not working but actively seeking employment State of Tennessee, Bureau of Labor Statistics 11

29 Spatial Mismatch As noted above, the unemployment rate in the Memphis was 11.3% in Unemployment in Memphis is not a racially neutral phenomenon, especially in light of the poverty rates described above. Map 5: City of Memphis Households without a Car, 2000 According to the 2009 ACS, over 12.3% of Memphis households do not have a vehicle available. African American households are three times (20.3%) more likely than white households (6.7%) to not have a vehicle available. See Map 5. This increases challenges to accessing housing and employment opportunities State of Tennessee, Bureau of Labor Statistics 12

30 Housing Supply Characteristics According to the Memphis Area Association of Realtors, the average price in May 2011 for all sales was $122,074, down 4.8% from $128,267 in May This is compared to $166,700 for the U.S. in Table 5: City of Memphis Housing Units by Year Structure Built, 2009 Year Built Number Percent Before ,581 9% 1940 to ,727 8% 1950 to , % 1960 to , % 1970 to ,386 19% 1980 to , % 1990 to , % 2000 to , % 2005 or later 4, % Total 307, % Source: American Community Survey 2009 Over 35.6% of Memphis s housing was constructed before 1959; 35.3% was built between 1960 and 1979; and 29.2% was built after In general, older housing stock is often less expensive, because it is more likely to be in disrepair or have greater maintenance needs, but it is also more likely to be inaccessible to persons with disabilities. 20 National Association of Realtors,

31 Table 6: City of Memphis, Housing Unit Size, 2009 ACS 2009 Bedrooms Number Percent None 3, % 1 40, % 2 100, % 3 121, % 4 35, % 5 or more 7, % Total 307, % Source: American Community Survey 2009 Memphis s housing is primarily composed of two- and three-bedroom units, which together make up 72.1% of the total housing units. The prevalence of two- and three-bedroom units is relevant given the need for larger housing units, particularly those of many larger minority families. The need for units with three and four bedrooms is a pressing one in the city. Education According to the 2009 ACS, 81.4% of city residents 25 years and older graduated from high school. Vast disparities in educational attainment are revealed when analyzed by race and ethnicity. For instance, Latinos (45.7%), Asians (83.4%) and African Americans (77.8%) are significantly less likely to have a high school diploma than whites (90.9%). 14

32 Figure 1: Educational Attainment by Race High School Graduation Rates 100.0% 80.0% 60.0% 40.0% 20.0% 0.0% White Alone African American American Indian Asian Hispanic or latino Source: American Community Survey 2009 Disparities in education are important to fair housing for several reasons. First, persons with less education tend to have lower incomes than those with more education. This reduces the range of housing available to such households. Also, persons with less education are more likely to have very limited access to educational or financial resources that assist in purchasing a home or obtaining a loan. Linguistic Isolation A household in which no one speaks English well is linguistically isolated. Linguistic isolation hinders a person s ability to integrate economically, academically and socially into our society and has stranded many non-english speakers in low-wage menial jobs. Census tracts with a density of households that are linguistically isolated are shown on Map 6. The density corresponds with the density of Hispanic population on Map 3. Just over 8% of Memphis s population speaks a language other than English at home. About 4% of the population does not speak English very well. A population that is both minority and does not speak English well may face discrimination based on national origin as well as challenges related to obtaining housing, like communicating effectively with a rental agent, real estate agent, mortgage lender or insurance agent. 15

33 Map 6: Memphis, Linguistic Isolation,

34 Fair Housing Impediments As mentioned in this report s introduction, an impediment to fair housing is anything that may hinder or prevent a person from having equal access to housing because of membership in a federal or Tennessee protected class. Impediments may take the form of a city or other governmental entity s policy, practice or procedure, housing industry practices, or other societal factors. This section describes fair housing impediments identified through MMFHC s research and interviews with community representatives. Impediments are organized into four broad categories: City of Memphis impediments, Shelby County impediments, Federal and State of Tennessee impediments, and Private market impediments. Some impediments fall under more than one of the above categories. 17

35 City of Memphis: Procedures, Policies and Practices Impediment #1: Flawed City Fair Housing Ordinance In order to complete a thorough analysis of impediments to fair housing choice in Memphis, it is necessary to review the ordinance that seeks to protect individuals rights to housing: Article 10 Section 36, Fair Housing. The mere existence of a local fair housing ordinance is not sufficient to ensure that equal housing opportunities are realized within a community. The law must have broad protections, remedies and enforcement mechanisms available to victims of illegal housing discrimination. This section will detail some of the more problematic aspects of the ordinance; because of space constraints it is not possible to provide an exhaustive analysis of each. Listed below are some of the features of the ordinance that create impediments to fair housing in Memphis. No Relief is Available to Victims of Housing Discrimination Under the Ordinance Chapter does not provide for the recovery of either compensatory or punitive damages, nor does it allow for injunctive relief for victims of housing discrimination. Although it states that nothing shall be construed so as to preclude any aggrieved person from pursuing other relief, victims of discrimination cannot recover these types of damages under the Ordinance. Specifically, victims may not be compensated for out-of-pocket expenses incurred or for the emotional duress experienced as a result of a discriminatory act. Additionally, without the option of injunctive relief, the ordinance contains no provision for victims to obtain the housing illegally denied them. Both federal and state fair housing laws include these forms of relief for victims as a way to help the person recover true and comprehensive remedy for the injury of discrimination. They are essential components for a fair housing law to have meaningful and effective impact in the community. Victims of Housing Discrimination Have No Private Cause of Action in Federal or State Court The ordinance does not specifically permit victims a private cause of action in federal or state court, which limits remedial options for victims of housing discrimination. This a further disincentive for persons to utilize the Ordinance, thus reducing its usefulness as an effective enforcement tool The Ordinance is Unclear in its Definitions of Forfeitures and Provides Negligible Penalties for Violations of the Law The City of Memphis mandates that the penalty for violating its fair housing ordinance is a fine of fifty dollars ($50.00) and a penalty in any sum not exceeding two hundred dollars ($200.00). This is particularly problematic for several reasons. First, the use of "fine" and "penalty" without defining them, with the word "and" between them, is very confusing. It may be speculated that the fine is in reference to what the City would collect to create the education fund (as referenced in the last sentence of Sec ) and penalty refers to sums of money that 18

36 individuals who bring claims could recover. The use of the word "and" seems to suggest that these two are, indeed, separate categories of forfeitures. However, without further clarification, it leaves complainants, respondents, attorneys and finders of fact with uncertainty as to what punitive measures are under this ordinance and how best to proceed in a fair housing case. Secondly, the maximum $50.00 fine (as restricted by Article VI, Section 14 of the Tennessee Constitution) and $200 maximum penalty have a chilling effect on persons seeking to redress claims of unlawful discrimination. These penalties are substantially lower than those under either federal or state fair housing laws. Under the Federal Fair Housing Act, the maximum penalties that may be imposed upon a violator of the law range from $16,000 for a first violation to $65,000 for a third violation within seven years. The Tennessee Human Rights Law mandates that in housing discrimination cases, maximum civil penalties range from $10,000 for a first violation of the law, to $50,000 for a third violation within seven years. Civil forfeitures are intended to punish a violator of the law and deter further illegal conduct. The Memphis ordinance accomplishes neither purpose. Such minimal fines discourage victims of housing discrimination from pursuing claims under the City ordinance, as no real redress will be achieved. Further, these limited forfeitures send a message to the community that the City does not recognize the deleterious effects of illegal housing discrimination on individual victims, as well as the community at large. Thirdly, the ordinance provides that Each day on which a continuing violation occurs shall constitute a new and separate violation of this chapter. The inclusion of a continuing violation provision is an important aspect of the ordinance and could be useful in assuring expeditious resolution of a complaint of housing discrimination. However, it is unclear how a continuing violation is defined and at what point is an action deemed as continuing. That is, it is not clear whether penalties commence at the day the complaint is filed, the day it is adjudicated, or the day the complainant first learned of the discriminatory act. The Ordinance Does Not Include All Transactions Within the Housing Industry First, the ordinance does not cover housing transactions related to appraisals; appraisals do not appear in the definition of real estate transaction, nor in any description of the ordinance s prohibited practices. It is important that the ordinance include this sector of the housing industry, particularly in view of the fact that the rise of predatory lending was made possible, in part, on the basis of fraudulent appraisals. Second, the Memphis ordinance lacks important coverage that the Federal Fair Housing Act provides when defines a prohibited practice the refusal to sell or rent after the making of a bona fide offer, or to refuse to negotiate for the sale or rental of, or otherwise make unavailable or deny, a dwelling to any person because of [protected class membership]. (Emphasis added.) This omission in the local ordinance is problematic, as the language otherwise make unavailable provides comprehensive protection for discriminatory actions that may not be specified in the law, such as delaying tactics and burdensome applications procedures used, for example, to limit minority access to housing. 19

37 Enforcement Process is Overly Burdensome and Has Disincentives for Persons to File Complaints with the City As part of the City s enforcement process, persons filing complaints are required to provide the name and address of every person against whom the complaint is made. The requirement to name every person is an unrealistic and burdensome requirement to place on complainants. In many housing transactions, particularly in pre-application stages and telephonic contacts, homeseekers are not provided with the names or addresses of the property managers, agents, owners or other parties who may be respondents in a complaint. Obtaining this information may be difficult and requiring that complainants do so is an onerous burden that may discourage victims from filing complaints. Most enforcement agencies, including HUD, do not require this level of information, as much of it may be obtained by the administrative agency in its investigation process. Persons who file complaints simultaneously with the City and other enforcement agencies face another impediment to the adjudication of their complaint. According to the ordinance, if complaints are filed with the state Human Rights Commission or HUD, the City may hold a filed complaint in abeyance until those agencies have made a determination. This is an abdication of the City s responsibility to enforce the fair housing law, and yet another disincentive for persons to file a complaint with the City. These impediments to persons filing complaints have an injurious effect on both individual complainants and the community at large. In being deterred from filing with the City, victims are denied full and comprehensive relief, incidents of discrimination may be significantly underreported and unlawful activities continue unfettered. Moreover, the ordinance lacks stringency in addressing respondents who fail to take these actions seriously. Specifically, the ordinance states that if the Fair Housing Officer issues a written order for the respondent to appear in court, but fails to do so, the court may take a default judgment against them. This discretion allowed in the ordinance may convey to the respondent a lack of seriousness in enforcing fair housing law. A more decisive provision to the effect that the court shall take action would send the necessary message, as well as be more likely to ensure compliance. Exemptions Need Clarification to Avoid Confusion and Ambiguity The following sections of the exemptions section in the ordinance are not sufficiently precise: In its exemption regarding housing for older persons, the ordinance rightly indicates that housing designed and operated to assist older persons is exempt from the familial status portion of the law. However, because age is also a protected class under the Ordinance, the exemption should indicate those properties are exempt from the age provision of the law, as well. In its exemption regarding showing evidence of financial ability, Subsection B stipulates that Nothing in this chapter shall require a real estate broker or salesperson or operator to negotiate with any person who has not shown evidence of financial ability to consummate the purchase or rental of a housing accommodation. Although it is certainly not illegal to require that a homeseeker provide evidence of financial ability, this language 20

38 could be problematic for two reasons: First, the language is ambiguous. Currently, it could be interpreted that the onus of providing evidence of financial ability is on the homeseeker. Thus, a housing provider could merely use as an affirmative defense to a complaint of discrimination that the homeseeker did not provide evidence of financial ability and thus was not negotiated with. This analysis addresses some of the provisions of this ordinance that impede citizens rights to fair housing. A more thorough analysis of the entire ordinance should be conducted by the City Attorney to ensure all provisions are consistent with state and federal fair housing laws. Impediment #2: Lack of Housing Accessible to Persons with Disabilities While the City of Memphis s policies may not be directly responsible for the shortage of accessible housing, local policy can and should be used to address this shortage. Ensuring an adequate supply of accessible housing to meet the needs of persons with disabilities must be a City goal. While the actual number of accessible private housing units is not available, the strong need for such housing is apparent. As mentioned in the Demographics section, nearly 27% of Memphis s population has a disability (including physical disabilities, mental disabilities, mobility disabilities and other ). Memphis has a large proportion of older housing stock; 35.6% of the City s housing was built in 1959 or earlier. Older housing units are less likely to be accessible to persons with physical disabilities and are more likely to have narrow hallways, small bathrooms, and steps; however, they are also more likely to be affordable. Newer dwellings are more likely to be accessible, but are typically less affordable. This is a critical point, because as noted above, a disproportionate number of persons with disabilities have low income. When the Federal Fair Housing Act was amended in 1988, disability was added as a protected class. Moreover, the 1988 amendment required multifamily residences built for first occupancy after March 13, 1991 to have a variety of basic accessibility features, such as doorways and hallways of a certain width, an accessible entrance and accessible environmental controls. Over 84% of Memphis s housing was built in 1990 or earlier and therefore is not required to meet federal accessibility guidelines. However, based on information from the Memphis Center for Independent Living (MCIL) and the Memphis Fair Housing Center, many new multifamily housing developments are not being built in compliance with the Act For example: MCIL v. Woodglen Village Apartments is a federal lawsuit that was filed in the U.S. District Court (2009) on behalf of MCIL against developers, builders, and architects involved in the construction of an apartment complex that had barriers to accessibility for people with disabilities, in violation of the Fair Housing Amendments Act. 21

39 In addition, approximately 22.8% of Memphis households were headed by individuals 55 and older. Frequently, homes owned by the elderly need to be made accessible, as many older adults have mobility impairments leading to difficulty entering and leaving their homes as well as moving efficiently inside them. Advocates for persons with disabilities in Memphis noted that some Memphis emergency homeless shelters are not accessible to persons with disabilities. City officials noted that shelters receiving federal funds through the City are required to be accessible and make reasonable accommodations for persons with disabilities. However, not all shelters in Memphis receive federal funds or have the requirements for accessibility. Some emergency shelters are funded by religious organizations. As noted in the preamble to the ADA title III regulation, Religious organizations and entities controlled by religious organizations have no obligations under the ADA. Even when a religious organization carries out activities that would otherwise make it a public accommodation, the religious organization is exempt from ADA coverage. Impediment #3: Inadequate Affordable Housing Supply Relative to Resident Income According to the National Low Income Housing Coalition s annual Out of Reach report, affordability is a function of income; when incomes are low even moderately priced housing becomes unaffordable. Housing is affordable if you spend no more than 30% of your household income on housing costs. The report states: In Tennessee, the Fair Market Rent (FMR) 22 for a two-bedroom apartment is $700. In order to afford this level of rent and utilities, without paying more than 30% of income on housing, a household must earn $2,334 monthly or $28,012 annually. Assuming a 40-hour work week, 52 weeks per year, and this level of income translates into a Housing Wage of $ In Tennessee, a minimum wage worker earns an hourly wage of $7.25. In order to afford the FMR for a two-bedroom apartment, a minimum wage earner must work 74 hours per week, 52 weeks per year. Or, a household must include 1.9 minimum wage earner(s) working 40 hours per week year-round in order to make the twobedroom FMR affordable. In Tennessee, the estimated mean (average) wage for a renter is $11.57 an hour. In order to afford the FMR for a two-bedroom apartment at this wage, a renter must work 47 hours per week, 52 weeks per year. Or, working 40 hours per week 22 Fair Market Rent Fair Market Rents (FMRs) are used to determine initial rents for contracts in HUD s Housing Choice Voucher program. Every year, HUD estimates FMRs for 530 metropolitan areas and 2,045 nonmetropolitan county FMR areas. FMRs are gross rent estimates. They include the cost for renting a housing unit plus the cost of all tenant-paid utilities, except telephones, cable or satellite television service and internet service. 22

40 year-round, a household must include 1.2 worker(s) earning the mean renter wage in order to make the two-bedroom FMR affordable. Monthly Supplemental Security Income (SSI) payments for an individual are $674 in Tennessee. If SSI represents an individual's sole source of income, $202 in monthly rent is affordable, while the FMR for a one-bedroom is $ When the same data was analyzed for Memphis and Shelby County the numbers were similar but slightly more burdensome to the tenant. The FMR for a two-bedroom apartment is $758; a household must earn $30,320 to be able to afford that apartment. In order to afford a twobedroom apartment, a minimum wage worker must work 80 hours a week. The median gross rent for an apartment in Memphis for 2009 was $741. A shortage of affordable housing may not appear to be a fair housing issue on its face. However, lack of affordability has a disproportionate impact, particularly on persons with disabilities, people of color, families with children and the elderly, and therefore cannot be ignored. An adequate supply of affordable housing, both for ownership and rental, is essential for an open and inclusive housing market in Memphis. Evidence of the affordable housing shortage can be found in the Memphis Housing Authority s waiting list. The Housing Authority currently assists about 7000 households with rent assistance vouchers. The waiting list to obtain a voucher last opened in Four years later, 1600 households remain on that waiting list. The location of affordable housing is an issue as well. Affordable housing advocates in Memphis have indicated that affordable housing in nonimpacted areas 24 is rare. As shown on Map 2, African Americans in Memphis are segregated and correspond with the lowest income census tracts shown on Map 8. Single mother households, illustrated on Map 9, are also segregated and correspond with the race and income maps. 23 National Low Income Housing Coalition, Out of Reach Nonimpacted areas is a HUD term that describes census tract blocks that have lower concentrations of poverty and lower concentrations of nonwhites than the City as a whole. HUD has defined impacted as an area of minority concentration where: 1) The percentage of persons of a particular racial or ethnic minority in a census block group is at least 20 percentage points higher than that racial or ethnic minority s percentage in an area as a whole; or, 2) The total percentage of all minority persons in a census block group is at least 20 percentage points higher than the total percentage of minorities in an area as a whole; or 3) The census block group s total percentage of racial and ethnic minorities exceed 50%. 23

41 Map 8: Median Household Income Map 9: Single Mother Households The Lack of Financial Resources to Build, Preserve, and/or Rehabilitate Affordable Housing The shortage of affordable housing is attributable, in part, to a lack of resources to build and preserve such units in Memphis. HOME, CDBG and City Capital Improvement Funds are used 24

42 to build, preserve and rehabilitate housing in the City. However, the demand for these resources exceeds availability. Constructing any type of affordable housing requires numerous subsidies; layering of subsidies is common in affordable housing projects and is necessary to close financing gaps. Most developers currently obtain financing by combining federal money disbursed through local and state governments, HOME grants or loans, the Low Income Housing Tax Credit (LIHTC) program, among other financial resources. In addition to this very complex nature of financing, the subsidies used for development of affordable housing are often awarded through a highly competitive process, which discourages some developers from attempting to enter this segment of the market. When financing and subsidy resources are scarce and a return on investment equivalent to development of market-rate units is uncertain, many developers prefer to build simpler and more profitable market rate housing developments. These difficulties are exacerbated by the fact that already inadequate funding sources are decreasing. The City of Memphis s Housing and Community Development Division received just over $11,479,000 in CDBG allocation in 2001, decreasing to just $8,128,514 in When viewed in present dollar values, the difference over time is even starker. Figure 2: Memphis CDBG, HOME, ESG and HOPWA Funds Over Time $20,000,000 $18,000,000 $16,000,000 $14,000,000 $12,000,000 $10,000,000 $8,000,000 $6,000,000 $4,000,000 $2,000,000 $0 Total CDBG Funds Distributed ($) Total ESG Funds Distributed ($) Total HOME Funds Distributed ($) Total HOPWA Funds Distributed ($) Total Funds Distributed ($) Structural Quality and Overcrowded Housing While Memphis has housing that is affordable to households at middle income levels, and even some to households at lower incomes, the condition of that housing needs to be taken into 25

43 account. The age of a housing unit is not an absolute predictor of housing quality, but generally, the older the housing structure, the greater the likelihood of code compliance problems. As noted above, 35.6% of the City s housing was built in 1959 or earlier. A systematic evaluation of every residential parcel in the city between 2008 and 2010 yielded a blight rate of 22%. 25 This means that planners and policymakers need to consider whether Memphis s affordable housing is also safe housing. The U.S. Census defines overcrowded as a household that has more persons than the number of rooms it occupies. There was a decrease from 2000 (6.5%) to 2009 (3.1%) in the number of households living in overcrowded housing. As discussed in the Demographics section, when analyzed by race and ethnicity, the percentage of overcrowded households increases dramatically. Housing that is overcrowded or of poor structural quality has negative health and socioeconomic implications for the people who reside in such conditions. Further, some people who are doubled up in overcrowded households may not be on the unit s lease, and thus particularly vulnerable to eviction and homelessness. Map 10: Percent Spent on Gross Rent, Neighborhood by Neighbor: A Citywide Problem Property Audit, Summary of Findings, Center for Community Building and Neighborhood Action (CBANA)

44 Map 11: Median Gross Rent, 2010 Impediment #4: Need for a Critical Review of Memphis Housing Authority s Policies & Practices The Memphis Housing Authority is charged with administering a variety of federal programs, including but not limited to: the Housing Choice Voucher Program, Choice Initiative (formerly HOPE VI), and public housing. As mentioned in a previous impediment, MHA currently assists about 7000 households with Housing Choice rent assistance vouchers. The waiting list to obtain a voucher last opened in Four years later, 1600 households remain on that waiting list. MHA also provides housing to persons who live in Memphis Public Housing. These public housing units are scattered throughout the City in a number original public housing projects as well as HOPE VI projects. Public housing includes 29 projects with just over 2500 housing units. Segregation of Subsidized Housing While the MHA performs many functions in order to help house low-income households, there are some unfortunate unintended consequences - primarily the segregation of Housing Choice Voucher households. Map 12, below, illustrates the correspondence of vouchers with racially segregated census tracts. Many of the stakeholders interviewed for this report indicated the concentration of vouchers in poor and segregated neighborhoods is an impediment to fair housing. Many of these 27

45 interviewees also indicated that the attitude about rent assistance vouchers has become more negative, increasing NIMBYism in higher income areas. Map 12: Location of Section 8/Housing Choice Vouchers Some of the negative opinions about vouchers may be attributed to a July 2008 article in The Atlantic magazine, which attributed increases in crime in some Memphis neighborhoods to increases in households utilizing rent assistance vouchers. The primary evidence given in the article of an association between crime and residents with rent assistance was a map that showed areas with high incidence of crime corresponding to areas with a large number of people with Section 8 subsidies. However, the map showed numbers of crimes, rather than crime rates. In addition, the article ignored the possibility that neighborhoods with increasing crime might be experiencing systemic disinvestment, leading to an increasing number of homes for rent affordable to persons with a voucher. An increase in crime may not have been a result of vouchers prevalence; rather, both increased crime and voucher use in neighborhoods may be indicative of overall neighborhood decline and disinvestment. HUD officials also disputed The Atlantic author s conclusion by issuing the following response. The question that the Atlantic Monthly article fails to answer is would crime in these Memphis neighborhoods have increased if these former public housing residents had not relocated to them? That s the supposition advanced by Ms. Rosin but where s the evidence? Simply noticing a spike in crime and attributing it to a particular cause isn t good enough. Ms. Rosin mentions 28

46 unemployment, drugs and other factors as likely contributing to the higher crime but she stops there. In my experience, doing the research before reaching a conclusion is always preferable. 26 Racial segregation also plagues project-based Section 8 housing. However, project or site-based Section 8 housing is housing that is not administered or owned by the Memphis Housing Authority. This impediment is further discussed in Impediment #15. Three policy areas that have an impact on concentration of vouchers are housing provider outreach, tenant counseling and Fair Market Rents (FMR). Promoting the Housing Choice Voucher (HCV) program to housing providers in nonimpacted parts of the city can increase their participation in the HCV program thereby creating new housing choice and opportunities for voucher holders. Some level of tenant counseling is included when vouchers are awarded to a household. Providing information on non-traditional housing opportunities, in concert with FMR flexibility, can expand housing choices and create racially and economically diverse communities. Outreach to Housing Providers Although MHA engages in some outreach to housing providers, it is clear that the outreach has not been enough to counteract the concentration of vouchers. According to an MHA representative, landlord outreach consists of bi-monthly owner briefings to familiarize property owners with the Housing Choice Voucher (HCV) program as well as to provide a forum at which they may present questions regarding the HCV program. MHA also offers a website to its participants and landlords, which provides a forum in which owners in any area of the city may advertise available housing. A comprehensive housing provider outreach program requires resources. Although the U.S. Department of Housing and Urban Development asks that public housing authorities consider voucher concentration in areas of poverty; HUD does not provide the resources for MHA to adequately do so. As a result, MHA does not make any attempt to increase landlords participation in the voucher program in higher opportunity, lower poverty areas of the city. Fair Market Rents (FMR) Due to limited resources, MHA chooses not to increase allowable Fair Market Rents 27 (FMR) to 120%. Increasing the FMR would allow tenants to seek housing in higher rent areas, further 26 Brian Sullivan and Todd Richardson, U.S. Department of Housing and Urban Development, Office of Policy Development and Research, Letter to The Atlantic dated July 3, FMRs, calculated by HUD, set limits on the subsidy provided to the household. Participating households cannot rent units with gross rents exceeding the FMR; the recipients receive a subsidy equal to the difference between the gross rent and 30% of their incomes. Participants in the voucher program can choose units to live in with gross rents 29

47 from concentrated poverty; however, increasing allowable FMR would decrease the number of households receiving rent assistance. Instead of assisting 6000 households, MHA may only be able to assist In 2011, FMRs allow $628 for an efficiency apartment; $682 for a onebedroom; $758 for a two-bedroom; $1,010 for a three-bedroom; and $1,041 for a four bedroom. Voucher holders will not have access to areas of Memphis with rents higher than the allowable FMR. Impediment #5: Inadequacies of the Transit System According to the Memphis Area Coordinated Transportation Plan (MATCP) demand for public transit-human services transportation is estimated at 201,472 riders in the MATCP Planning Area. Public transit policies affect all areas of life, including relationships between employers and employees, the housing market, educational systems and access to health care. Given Memphis s increases in unemployment and poverty over the last several years, it is more important than ever to facilitate access between available jobs and the workforce. As mentioned previously, 12.3% of Memphis households do not own cars. Minorities, elderly and persons with disabilities have disproportionately low income in Memphis and elsewhere. African American households are three times more likely than white households to not have a vehicle available (20.3% of African American households don t have vehicles, compared with 6.7% of white households). Map 13 shows MATA s existing lines. It is important that the location of transit lines coincides with the location of affordable housing and vice versa. Inappropriately located housing may be affordable, but if it isolates people and prevents them from obtaining employment, education or needed services, it is not in their interest to live there. Planners should not assume that existing transit can or will be extended to meet the needs of residents whose affordable housing was created without regard to bus access. higher than the FMR, but they must pay the full cost of the difference between the gross rent and the FMR, plus 30% of their income. 30

48 Map 13: MATA Transit Lines Connecting the available labor force with available jobs would require either appropriately priced housing in high job growth communities affordable to persons in those jobs, or some form of transportation connecting Memphis residents to jobs. (See Map 14 for information about job location.) Currently, the Memphis Area Transit Authority (MATA) is not adequate to access many of the region s available jobs. Based on the stakeholder input in the MATCP planning process, gaps in services include inadequate assistance at employment centers. Map 14: Memphis Employment Centers 31

49 Services for Persons with Disabilities The MATCP planning process results corroborate that there are insufficient services for persons with disabilities outside of MATA s service area. Currently, the paratransit vans operate within three-quarters of a mile from the main transit lines. However, disability advocates note that many residents with disabilities still cannot access the routes. Map 15 illustrates the census tracts with the greatest densities of persons with disabilities. Disability advocates also indicate that bus stops are not always accessible for persons with physical disabilities. This statement was corroborated by the MATCP planning process results, which indicate individuals with disabilities are restricted in their use of public transit services due to the lack of sidewalks and curb cuts. A resident with a costly wheelchair noted that the driver often dropped her off in the grass instead of on a concrete pad, increasing the wear and tear on her wheelchair. Persons with disabilities are more likely to rely on public transit to travel between home, work and other destinations than persons without disabilities. Map 15: Persons with Disabilities 32

50 Shelby County Policies Reviewing policies and practices in municipalities outside the City is essential in analyzing fair housing impediments. Housing markets are regional, and are best understood in the context of multiple adjacent jurisdictions. County policies that limit affordable, accessible, rental or other housing opportunities affect City of Memphis residents. Impediment #6: Shelby County Does Not Have a Fair Housing Ordinance Shelby County does not have a fair housing ordinance. Although victims of illegal housing discrimination in Shelby County are able to utilize the protections under the State of Tennessee Fair Housing Law and the Federal Fair Housing Act, neglecting to pass an ordinance sends its residents the message that fair housing is not valued in the County. Impediment #7: Historically Inadequate Code Enforcement by Shelby County Shelby County is charged with reviewing building plans and performing building inspections for the County to ensure new construction is in compliance with applicable codes. According to its website, The Department of Construction Code Enforcement is responsible for ensuring that building construction conforms to local zoning regulations and to the safety standards. Local fair housing and disability advocates have indicated that the County has not adequately enforced new construction accessibility standards set forth in the Federal Fair Housing Act Amendment of The Memphis Area Legal Services assisted MCIL in filing two federal lawsuits in the U.S. District Court against developers, builders, architects, and civil engineers involved in the construction of five large apartment complexes that had thousands of barriers to accessibility for people with disabilities, in violation of the Fair Housing Amendments Act. The most recent lawsuit was in Since these lawsuits have settled, the County has taken steps to ensure compliance with ADA and requirements under the Fair Housing Act Amendment. ADA consultants have been invited in to work with the County. In addition, the staff who review building plans have attained certification in accessibility standards. While the County has taken steps to ensure that the accessibility requirements are being adhered to, fair housing and disability advocates indicate this is still an area of concern. 33

51 Impediment #8: Limited Transit in County Lack of transit in Shelby County is a fair housing issue because it limits housing opportunities. Persons in need of public transit cannot access housing or jobs in suburban Shelby County. Increasingly, employment opportunities and services are located in Shelby County outside the city, separating persons in need of employment or services but without a vehicle from those services and opportunities. The expansion of transit into Shelby County municipalities is stymied by lack of political support required for expansion of MATA transit routes, as well as by the fact that the transit-dependent population in the County is diffuse. Further complicating the problem of limited transit is the Memphis Urban Area Metropolitan Planning Organization (MPO) which, according to interviews with stakeholders, emphasizes highway expansion over transit expansion. Impediment #9: Limited LIHTC development in County Local developers indicate that the City of Memphis is a more receptive entity for LIHTC development than the County. Memphis HOME funds are used to assist developers in project financing. Shelby County HOME allocations were $370,000 in 2010 and further reduced to $313,000 in The HOME funds are not large enough to assist a LIHTC developer with gap financing, so are used primarily for single family home rehabilitation. Additionally, developers encounter less opposition from the community when working in the City compared to Shelby County. Impediment #10: NIMBY attitudes Not in My Backyard (NIMBY) attitudes refer to community opposition to projects and policies that might insert a perceived undesirable element into a community. NIMBYism and fair housing issues frequently intersect when affordable housing is proposed. Current residents make assumptions about potential incoming residents based on highly subjective perceptions rather than facts; they assume that affordable housing will increase crime, increase property taxes, overcrowd schools or decrease property values. The complex issues surrounding the Memphis/Shelby County school consolidation have NIMBY roots as well. While there are some valid reasons critics had for not consolidating the school districts; there were other reasons based in prejudice, fear and racism. Memphis City Schools students are 85% African American and 87% are considered low-income, which starkly contrasts with Shelby County schools, which primarily serve white, middle-class students. 34

52 At the time of this report, details of the school consolidation were still being determined. Whatever the result, there will be fair housing implications, both positive and negative: white flight, school integration or school segregation, neighborhood integration, public school disinvestment, etc. 35

53 State and Federal Housing Policies While the City of Memphis is not directly involved in these state and federal impediments, it is essential that this report and the City address them in some way, because they impact the City s ability to affirmatively further fair housing as required by HUD. The City must seek to overcome the following impediments in whatever capacity it has, albeit limited. Impediment #11: State Limitations to Fair Housing The recently enacted "Special Access to Discriminate" (SAD) bill is a barrier to fair housing choice in Tennessee for several reasons. First, it prevents local governments from enacting their own non-discrimination policies; thereby making the City of Memphis s source of income and property conditions protections unenforceable. Subsequently, persons receiving Section 8 Rent Assistance vouchers are no longer protected under the Ordinance. This will severely impact both racial and economic integration efforts. Secondly, a new and restrictive definition of sex will potentially limit the rights of persons who have been discriminated against on sexual orientation, gender identity or because they are transgendered. The other problematic state legislation is the limitation for monetary damages within the State of Tennessee Constitution. Municipal civil penalties in excess of $50 violate Article VI, Section 14 of the Tennessee Constitution if their purpose is punitive rather than remedial. Due to this limitation, victims of discrimination will be reluctant to bring their complaint under any municipal fair housing ordinances. Impediment #12: Frequent Attacks on the Community Reinvestment Act (CRA) by Banking Regulators CRA regulators (the Office of the Comptroller of Currency, the Office of Thrift Supervision, the Federal Reserve Bank and the Federal Deposit Insurance Corporation) often submit proposals to Congress to weaken CRA. Weakening CRA would be problematic because the provisions of CRA encourage depository institutions to help meet the credit needs of the communities in which they operate, including low- and moderate-income neighborhoods. CRA requires that each depository institution's record in helping meet the credit needs of its entire community be evaluated periodically. That record is taken into account when federal examiners consider a financial institution's application to add or remove branches, or to merge with or acquire additional institutions. Both urban areas and rural communities depend on the private sector dollars generated by CRA to encourage mortgage lending and small business loans, and to leverage affordable housing and economic development. Map 16 illustrates the locations of 36

54 banks in Memphis. neighborhoods. CRA has encouraged bank branches in low income and minority Map 16: Memphis Credit Unions and Banks Impediment #13: Lack of Resources and Incentives for Developers to Build for the Lowest Income Households As mentioned in the previous section, most resources for the development of affordable housing are provided through federal programs. Resources for the building of new rental housing have lagged far behind the demand, resulting in the shortage of affordable rental housing in many communities. Production of new low-income housing today is primarily achieved through the Low Income Housing Tax Credit (LIHTC) Program. This is the most-utilized program for the production of affordable housing, but it is insufficient to overcome the affordable housing shortage, especially for the lowest-income families. Impediment #14: U.S. Department of Housing and Urban Development does not adequately fund or incentivize PHAs to utilize mobility strategies The Memphis Housing Authority is aware that households with Housing Choice Vouchers are concentrated in racially segregated and poor neighborhoods. Mobility options such as 1) outreach to landlords in high opportunity neighborhoods, 2) counseling to educate consumers of housing in high opportunity communities, and 3) Fair Market Rent adjustments have not been feasible options for MHA due to limited funding from HUD to implement these programs. Impediment #15: Racial Segregation of Project Based Housing Project or site-based housing is affordable housing that is not administered or owned by the Memphis Housing Authority. HUD contracts with the Tennessee Housing Development Agency 37

55 (THDA) to administratively manage these sites. HUD s intention was to have these projects scattered, but instead most are located in racially segregated areas and areas of concentrated poverty. Both HUD and THDA, as a grantee of HUD, have the obligation to affirmatively further fair housing when approving sites for project based housing. In order to ensure these agencies are not contributing to segregation and concentration of poverty, policy changes must be made regarding site approval. 38

56 Private Market Impediments to Fair Housing Choice Private market impediments exist in housing production, mortgage lending, homeowners insurance, rental and home sales markets. Though the City of Memphis is limited in its ability to directly address private market impediments, it can take a leadership role in bringing these issues to the public s attention, educating housing consumers and providers, and enacting additional regulations or legislation to ameliorate problems arising from private market impediments. The following discussion identifies several private market impediments that must be addressed. The impediments listed are all directly or indirectly related to illegal discrimination in the market. Social scientists and civil rights organizations identify illegal discrimination as the major contributor to residential racial segregation. 28 Therefore, addressing illegal discrimination is necessary if Memphis is to become a more integrated community. Impediment #16: Mortgage Lending Discrimination in the Lending Market Discrimination in mortgage lending prevents or impedes home seekers from obtaining the financing normally required to purchase a home. Racial discrimination in the home loan industry can be based either on the race of the loan seeker or on the racial composition of the neighborhood where the home being purchased is located. This latter form of discrimination is commonly referred to as mortgage redlining. Discrimination in the home loan industry can take several forms, including: outright denial of a loan; discouraging a loan seeker from applying; offering less favorable rates, terms and service; taking an inordinate amount of time to process applications; and using exclusionary underwriting guidelines. Discrimination can also occur outside of the lending institution itself, in the appraisal of the home, in the underwriting of private mortgage insurance, and in the practices and procedures of the secondary loan market. In addition, the lack of loan origination offices in minority and low-income census tracts is a form of redlining that drives residents into the subprime market, often into predatory loans. Lack of Flexible Underwriting to Accommodate Persons with No Credit History Persons new to this country often have not established the credit required to obtain a prime mortgage. In addition, both housing industry and advocacy representatives suggest that some African Americans do not have an established relationship with a conventional bank or financial institution and/or have sufficient credit histories. These situations do not make these groups any 28 Massey and Denton,

57 less likely to be able to responsibly take on a mortgage; however, these situations do make it difficult for lenders to use conventional underwriting guidelines to give them a mortgage and give lenders a seemingly legitimate excuse to deny the loan. Predatory Lending Practices Deregulation of the banking industry in the 1990s led to a sharp increase in high-cost subprime loans and left many neighborhoods vulnerable to predatory lending practices. A predatory loan is an unsuitable loan designed to exploit vulnerable and unsophisticated borrowers. Predatory loans are a subset of subprime loans. A predatory loan has one or more of the following features: 1) it charges more in interest and fees than is required to cover the added risk of lending to borrowers with credit imperfections, 2) it contains abusive terms and conditions that trap borrowers and lead to increased indebtedness, 3) it does not take into account the borrower s ability to repay the loan, and 4) it violates fair lending laws by targeting women, minorities and elderly persons. NCRC Analysis The National Community Reinvestment Coalition (NCRC) conducted a portfolio and market share analysis using 2009 Home Mortgage Disclosure Act (HMDA) data for Memphis, including all single-family lending, loans to owner-occupants, and first lien loans. Single-family loans include loans for home purchase, home improvement, and refinances. For the portfolio share analysis, NCRC evaluated the prime (or market-rate) and high-cost lending performance by race and ethnicity of borrower (i.e., African American, White, Asian, or Hispanic). NCRC also conducted separate analyses by income level of borrower, by income level of neighborhood, and by minority level of neighborhood. Lending patterns were then compared to the demographics of the City of Memphis to illustrate potential lending disparities. Since high-cost loans accounted for only a small amount of proportion of lending in Memphis in 2009, this analysis will focus on market-rate lending and Federal Housing Administration (FHA) lending. NCRC s primary conclusions are summarized below. The full report can be found in Appendix C. In the City of Memphis, the portion of all prime conventional loans received by African American borrowers (10.3 percent of prime loans versus 50.8 percent of households) was lower than the portion received by non-hispanic white borrowers (53.5 percent of prime loans versus 45 percent of households) compared to their portion of households. 40

58 A significant decrease in high-cost lending occurred between 2006 and Concurrently there was a significant increase in FHA lending. Disparities in lending by income level were experienced to the greatest extent by low-income borrowers (4.1 percent of prime conventional loans versus 28.1 percent of households). In contrast, moderate-income borrowers received a share of prime conventional loans that was commensurate with their share of households (15.5 percent of prime loans versus 17.4 percent of households). Also, moderate-income borrowers received a share of FHA loans more than double their share of households. This is a potential imbalance that should be monitored. The denial ratio was higher when comparing African Americans and Hispanics to non-hispanic whites. African Americans and Hispanics were 3.29 times and 2.58 times, respectively, more likely than non-hispanic whites to be denied loans. Residents of predominantly minority neighborhoods were five times more likely than residents of white neighborhoods to be denied conventional loans. The denial rate disparity (3.6 times) was also quite high in the case of FHA lending. African Americans received a higher share of prime FHA loans than prime conventional loans (42.2 percent versus 10.3 percent). Lenders and other stakeholders should take steps to increase prime conventional lending to African-Americans. Since FHA lending increased dramatically and conventional lending decreased significantly in Memphis from 2006 through 2009, emerging disparities in conventional and FHA loans should be watched and narrowed as much as possible. The map below illustrates that the highest density of conventional loans were made in census tracts with the highest density of white households. 29 Map 17: Memphis Conventional Loans 29 Map 17 created by the National Community Reinvestment Coalition. 41

59 Foreclosures Foreclosures of single-family homes are a serious threat to neighborhood stability and community wellbeing, particularly in low-income neighborhoods. Recent research has shown that the explosion in foreclosures that started in the 1990s was primarily driven by the growth of high-risk subprime lending. Foreclosures, particularly in lower-income neighborhoods, can lead to vacant and abandoned properties. These properties, in turn, contribute to the stock of physical disorder in a community that can create a haven for criminal activity, discourage social capital formation and lead to further disinvestment. 30 In April 2011, 1 in every 1,104 housing units in Shelby County had received a foreclosure notice. 31 Shelby County also had the highest number of foreclosures in Tennessee that month. RealtyTrac numbers indicate that Tennessee s foreclosure rate is the 27 th highest in the nation. The cumulative effects of historic and current housing discrimination including restrictive racial covenants, redlining and neighborhood segregation have left people of color with less equity and access to credit, making them disproportionately vulnerable to predatory lending and foreclosure. Communities of color were saddled with predatory subprime loans at very high rates. Many were sold subprime loans when they could have qualified for prime loans. The foreclosure epidemic has plagued communities of color and caused a loss of wealth that will have lasting generational effects. Disproportionate rates of foreclosure compound the deep and growing racial wealth divide. 32 Map 18, below, illustrates the density of bank-owned properties in predominately minority neighborhoods. 30 Immergluck, Dan and Smith, Geoff, There Goes the Neighborhood: The Effect of Single-Family Mortgage Foreclosures on Property Values ; Georgia Institute of Technology and the Woodstock Institute, June RealtyTrac 32 Race and Recession 2009, Applied Research Center 42

60 Map 18: Memphis Bank-owned Properties In 2009, the City of Memphis filed a lawsuit in Federal Court against Wells Fargo under the Federal Fair Housing Act to address the high rates of foreclosure in minority neighborhoods. These foreclosures cause Memphis and Shelby County to lose property tax revenues and to spend additional funds for critical municipal services as foreclosed homes become vacant and deteriorate. The complaints set forth detailed examples of increased and costly services that the Plaintiffs have had to provide at specific Wells Fargo foreclosure properties. They describe and attach detailed declarations from former Wells Fargo employees explaining how the company has used discretion in pricing and financial incentives to encourage its employees to target African-American neighborhoods for deceptive, high priced loans that predictably result in unnecessary foreclosures. The complaints also include a wealth of statistical evidence that reflects reverse redlining, including the fact that a Wells Fargo mortgage in an African- American neighborhood in Memphis or Shelby County is several times as likely to go to foreclosure as a Wells Fargo mortgage in a white neighborhood. 33 In May 2011, a federal district court judge denied Wells Fargo s motion to dismiss the case. As of October 2011, the case continues to move through the court system. 33 Excerpt from the website of Relman, Dane and Colfax, PLLC; 43