2. HUD Issues Forum The Legal Perspective

3. Current Hot Topics Fair Housing Office of Inspector General (OIG) Driven Enforcement Initiatives HUD Proposed Regulations

4. Major Fair Housing Decision Supreme Court ruling issued June 25, 2015 Texas Department of Housing and Community Affairs v. Inclusive Communities Project, 576 U.S. ____ (2015) http://www.supremecourt.gov/opinions/14pdf/13-1371_m64o.pd f

5. Inclusive Communities Holding The Fair Housing Act (FHA) covers disparate impact liability FHA protected classes: – Race – Color – Religion – National Origin – Sex – Disability – Familial Status

6. What is Disparate Impact? Focuses on the effect of an action Intent or motivation is irrelevant In other words: Does a policy have a disproportionate negative impact on protected classes without a legitimate reason for the policy?

7. HUD Disparate Impact Regulation Issued February 15, 2013 Shifts the burden of proving and defending against Fair Housing claims http://portal.hud.gov/hudportal/documents/huddoc?id=discrimi natoryeffectrule.pdf

8. HUD Disparate Impact Regulation Burden Shifting First Plaintiff: must show that the challenged policy caused a statistical discrepancy* * Statistics alone are not enough Next Defendant: must show the challenged practice is necessary to achieve “substantial, legitimate, non- discriminatory interests.”

9. Burden Shifting/Next Steps Is there a less discriminatory alternative? Supreme Court: Plaintiff defines HUD Regulations: Defendant defines

10. Post Ruling Decisions 16 causes in 4 months 9 are housing related: – 5 predatory lending – 1 exclusionary zoning – 1 occupancy related (familial status) – 1 insurance underwriting (Section 8 property) – 1 HUD funding allocation (CDP funds) Pending: Mass. Section 8 Opt Out

11. Remedies? Supreme Court: eliminate the offending practice and replace with race-neutral* policy – * FHA covers more than race Caution: – $1M in compensatory damages awarded to exclusionary zoning plaintiff – Damages and attorney fees awarded to occupancy/familial status claimants

12. Be Proactive Examine policies for potential negative impacts Ask: Is there a less discriminatory way to accomplish the policy objective? Change polices as needed Use your voice: advise and share – Why? To head off potential challenges – Document decision making

13. Be Proactive Sample language*: “In accordance with Texas Department of Housing and Community Affairs vs. The Inclusive Communities Project, Inc., 576 U.S. ___ (2015), the June 2015 decision of the United States Supreme Court regarding disparate impact protections, [Owner/Management Agent] has reviewed its [policy, e.g., House Rules, Tenant Selection Plan] to ensure that the policies contained herein do not impose any artificial, arbitrary or unnecessary barriers to housing for those classes of individuals who are protected under the Fair Housing Act.” * Every property and fact pattern will differ. Check with your attorney or Fair Housing professional to confirm whether appropriate.

14. Example One-strike Eviction/Admission Policies: Statute mandates 3 year prohibition for any applicant previously evicted from federally assisted housing for drug-related criminal activity Less discriminatory alternative? No

15. Example One-Strike Eviction/Admission Policies: Statue is discretionary (“may”) re: violent criminal activity (non-drug related) Less discriminatory alternative? Possibly One option: give mitigating factors greater weight

16. Example One-Strike Eviction/Admission Policies: Statute silent re: non-drug related or non-violent criminal activity Policy: prohibit admission of anyone convicted within last 10 years Less discriminatory alternative? Yes Decrease screening timeframe to a “reasonable” period

17. OIG Enforcement Driven Initiatives Unauthorized distributions and owner advances https://www.hudoig.gov/sites/default/files/documents/2014-KC-0003.pdf Must be in positive surplus cash position Must have advance HUD approval to repay prior owner advances or loans of project funds HUD will more aggressively pursue repayments See July 13, 2015 Memo “Implementing OIG Recommendations Regarding Unauthorized Distributions and Owner Advances”

18. OIG Enforcement Driven Initiatives Management agent front-line expenses https://www.hudoig.gov/sites/default/files/documents/2015-AT-0002.pdf OIG: HQ not monitoring allocations of project vs. agent costs Must be based on actual time spent (not per unit) HUD protocol for review: – Management agents with central office activities – HUD Questionnaire will focus on policies, processes and personnel – Review every 18 months

19. HUD Proposed Regulations VAWA 2013 Reauthorization Published April 1, 2015 http://www.gpo.gov/fdsys/pkg/FR-2015-04-01/pdf/2015-06781.pdf New: covers Section 202 and 811 housing Adds “intimate partner” to the list of eligible relationships Adds “affiliated individual” (person living with domestic violence survivor who is related by blood or marriage) to the list of covered individuals New concept of “strict confidentiality”

20. HUD Proposed Regulations VAWA 2013 Reauthorization VAWA Emergency Transfers – No documentation required to support a request – Could pose problematic for small operators – Unclear how to balance interests of VAWA affected tenants and wait list applicants – Rule is silent on moving costs (why not an eligible project expense? )

21. HUD Proposed Regulations Section 202/811 Statutory Reform Implementation Issued Oct. 7, 2014, re-opened for public comment Dec. 11, 2014 https://www.federalregister.gov/articles/2014/10/07/2014- 23276/supportive-housing-and-services-for-the-elderly-and-persons-with- disabilities-implementing-statutory Intent: Streamline the Section 202 and 811 programs

22. HUD Proposed Regulations Section 202/811 Statutory Reform Implementation New concepts: ePRAC – Enhanced Project Rental Assistance Contract – Increased flexibility to use operating funds to pay debt service Set aside units for elderly individuals with “functional limitations” – Many new proposed definitions SPRAC – Senior Preservation Rental Assistance Contracts – New form of rental assistance

23. HUD Proposed Regulations Section 202/811 Statutory Reform Implementation Changes to: Prepayment of certain loans Modernize capital advance program – Providing grant assistance for applicants lacking capital for site preparation New Regulations : Service Coordinators Assisted Living Conversion program

24. Questions? Lisa Tunick Principal Tunick Law LLC 11006 Veirs Mill Road; Suite L15-105 Silver Spring, MD 20902 (240) 821-6550 Lisa@TunickLaw.com