When resolving the question of whether disparate impact is a proper theory on which to bring a Federal Fair Housing Act (FHA) claim, the third time may be the charm.  Last year, we reported on Township of Mount Holly v. Mount Holly Gardens Citizens in Action, which was the second Supreme Court case in two years raising the question of whether disparate impact should be recognized under the FHA.  That case, like Magner v. Gallagher in 2012, was settled out of court and never got to oral argument.  The Supreme Court finally got a bite at the disparate impact apple on January 21 of this year, when it heard oral argument in the case of Texas Department of Housing and Community Affairs v. Inclusive Communities Project, Inc.

“Disparate impact,” when used in the context of civil rights litigation, means that a neutral policy or action, whether public or private, has a differential effect on at least one protected group as compared with others.  As we described last year,

The FHA prohibits discrimination among and against certain “protected classes,” including race, religion, sex, national origin, familial status, or disability.  All eleven federal courts of appeals have determined that FHA violations can occur by facial or intentional discrimination, or by policies or actions which—although facially neutral as to protected classes—may negatively affect [a] protected class.  The dispute over the availability of disparate impact analysis in FHA claims arises because of language differences between the FHA and other civil rights laws which more clearly permit disparate impact analysis.

The subject of Inclusive Communities is the Federal Low Income Housing Tax Credit program.  These tax credits are made available through state agencies to developers of affordable housing.  Each state is responsible for determining how the limited supply of tax credits is to be allocated among affordable housing projects.  The Texas Department of Housing and Community Affairs (TDHCA) applies an eleven-factor test, which looks at items such as income levels and the financial feasibility of the project, to make this determination.  The Inclusive Communities Project’s mission is to encourage the integration of affluent, white suburban neighborhoods through placement of low-income residents in affordable housing projects in the Dallas suburbs.  Asserting that the eleven-factor test encouraged the location of affordable housing in low-income and predominantly minority areas, ICP filed suit against TDHCA on a disparate impact theory.  ICP believed that the method for allocating tax credits had differentially impacted minority residents’ ability to freely obtain housing in white areas and increased racial concentrations in low-income areas.  The district court and the Fifth Circuit Court of Appeals found in ICP’s favor.

In the subsequent petition for writ of certiorari, the Supreme Court was asked to answer two questions: is disparate impact cognizable under the FHA?  And if disparate impact is available, what is the proper standard of review in disparate impact cases?  As we noted last year, “[f]air housing advocates, including the Obama administration, have sought to prevent the FHA disparate impact issue from reaching the Supreme Court due to predictions that the Court’s conservative majority would treat disparate impact review unfavorably, which would also potentially affect fair lending laws.”

As usual, it is difficult to determine from oral argument how the Supreme Court will decide the case.  However some observers have noted with surprise that Justice Scalia was at times hostile toward the anti-disparate impact position, which may indicate a ray of hope for fair housing advocates.  In any event, an outcome in favor of ICP would benefit affordable housing developers and fair housing advocates, while a victory for TDHCA would put state and local governments on much stronger ground in enacting and applying facially netural land use regulations.  An opinion in the case is expected in June.

For more information on the relationship between the FHA and local zoning—particularly with respect to housing for people with disabilities—readers should check out the recent publication Group Homes: Strategies for Effective and Defensible Planning and Regulation, available from ABA.

The Denver real estate market has experienced steady growth in the last couple of years, but will it continue into the new year?

It appears so, according to an emerging trends report released by Urban Land Institute and PwC.  The report ranked Denver in the top five real estate markets in the United States based on three broad categories of investment, development and homebuilding.  Only three cities ranked higher than Denver—Houston, Austin and San Francisco.  On account of the significant growth of the millennial population, industry exposure to the technology and energy industries and a strong overall economy, the report predicts that Denver will continue to be a sustainable real estate market.

Notwithstanding the optimistic predictions for 2015, Colorado seems to have some New Year’s resolutions in mind.  Here are some things to watch:

  •  Despite the demand for owner‑occupied, multi‑family housing, condominium development in Colorado has been at a near standstill.  This is largely due to fear of litigation under Colorado’s existing construction defect law.  In 2015, a legislative bill will likely be introduced again to address the existing problems.  Reform may encourage new condominium development in Colorado.
  • In September 2014, the Interstate Land Sales Full Disclosure Act (“ILSA”) was amended to exempt condominium developments from certain ILSA requirements (for more detailed information, click here.)  This amendment, which takes effect in March 2015, may also help jumpstart condominium development in Colorado.
  •  New legislation may be introduced regarding oil and gas drilling restrictions in Colorado this year.  Governor John Hickenlooper has created a 19-member oil and gas task force to provide recommendations regarding local government control of oil and gas drilling.  The recommendations are expected to be published by March 2015.  Legislative responses to the task force’s findings may ultimately have an impact on the energy industry’s long‑term investment in Colorado.

Last week, the United States Senate unanimously approved an amendment to exempt condominium developments from certain provisions of the Interstate Land Sales Full Disclosure Act (“ILSA”).  The bill, which also passed unanimously through the House of Representatives last year, is now being sent to the President for his signature and will take effect 180 days thereafter. 

Congress enacted ILSA in 1968 in response to the growing number of land sellers taking advantage of unsuspecting purchasers, who purchased the land sight unseen.  Upon inspecting the land, buyers may have found their newly acquired properties to be under water, on steep slopes, or suitable only for grazing.  By the time purchasers of these properties realized they had been conned, their binding purchase agreements generally left them with inadequate remedies. 

ILSA attempted to remedy these problems by requiring sellers of non-exempt land to both file a statement of record with the government and also furnish a property report to the prospective buyer.  If the seller fails to provide the property report, the buyer may revoke the purchase agreement for two years from signing.  ILSA also contains a second prong that, in effect, makes unlawful any sale, lease, or offer that constitutes a fraud, or intent to defraud, on the purchaser. 

During the recent economic downturn, condominium buyers used ILSA to revoke their purchase agreements, sometimes even after closing, when developers either failed to comply with ILSA’s onerous registration requirements or mistakenly believed the development fell under one of ILSA’s complicated exemptions.  ILSA became a tool for savvy consumers to use in playing the market, giving them the right to revoke purchase agreements that became economically disadvantageous.

The proposed amendment to ILSA will clarify and expand the exemptions available to condominium developers by:

– exempting all condominium developments, regardless of size, from the registration and disclosure provisions, but not the anti-fraud provisions (unless they meet some other exemption);

– exempting all condominium developments from both the seven-day revocation period for all buyers and the two-year revocation period that arises from the seller’s failure to provide a property report; and

– requiring that the condominium unit purchased be an improved lot under the act, that is, physically habitable with the necessary utilities connected, but no longer requiring the rest of the development to be completed at the time of purchase.

The U.S. Supreme Court has granted a petition for certiorari review in a case with significant practical ramifications regarding the validity of many local sign and advertising regulations, and the ability of businesses, artists and others to freely post outdoor signage.  In Reed v. Town of Gilbert, the Court will be asked to determine whether the Town of Gilbert, Arizona’s sign code meets the constitutional requirement of “content neutrality” under the First Amendment Free Speech Clause.  In doing so, the Court has the opportunity to clear up a division between federal appeals courts regarding the concept of content neutrality.

In 1972, the Court articulated the requirement that regulations of speech be content neutral, saying in Chicago Department of Police v. Mosley, “government has no power to restrict expression because of its message, its ideas, its subject matter, or its content.”  While the First Amendment always disallowed government regulations that gave preference to, say, one side of a political debate over another, the Court’s pronouncement meant that the government could not prefer, say, political debate over religious expression.  Since that time, the federal courts have applied the doctrine of content neutrality in striking down hundreds of local governments’ sign codes that distinguish signs based on their message.

Sign codes’ constitutional validity carries practical consequences for billboard advertisers, business owners, artists, and residents placing everything from political signs to real estate signs and holiday lights.  All of these groups rely on outdoor signage to convey important messages, and sign codes typically impose restrictions on the display of such messages.

At issue in Reed, Gilbert’s sign code distinguishes among a variety of categories of signs.  The Gilbert code provides different regulations for “political signs,” “ideological signs,” qualifying event signs,” “real estate signs,” and others.  Pastor Clyde Reed and Good News Community Church placed temporary signs in street right-of-ways advertising religious services, but Gilbert enforced its sign code against the church’s temporary signs.  The church filed a challenge to the Gilbert sign code.  The Town’s sign code was upheld on summary judgment by the federal district court, and the Ninth Circuit Court of Appeals affirmed.

The Supreme Court’s determination in this case will resolve a split among the federal appeals courts by clarifying the content neutrality concept.  Some federal appeals courts have held sign codes content neutral only if the code can be enforced without any regard to the text or images on a sign’s face, while other courts have permitted some category-based or “context-sensitive” distinctions—like Gilbert’s—among signs.  Potentially at risk are thousands of local governments’ sign codes that rely on category-based distinctions in order to regulate signage.

As of this writing, oral arguments before the Court have not been set.  Business owners, political groups, interested citizens, local governments, and anyone with an interest in outdoor signage or advertising should stay posted for what will likely be an impactful decision.

The City of Denver has released a comprehensive Transit-Oriented Development (TOD) Strategic Plan.  The Plan, which pulls together a variety of City policies and programs and replaces a 2006 TOD Strategic Plan, is intended to provide guidance to three key groups:

– Developers and builders, who can use the Plan to “get information on the City’s TOD focus areas, identify properties for new development, and take advantage of City investments in station areas.”

– Public employees, who are encouraged to use the Plan to “establish a city-wide TOD implementation work program, direct city funds efficiently to the most opportunistic areas, determine the projects that offer the maximum return on public investment, and pursue funding for key infrastructure projects.”

– Residents and business owners in transit station areas, who can use the Plan “as a guide for making real estate decisions, renovating property, or opening a store.”

This article on the Confluence Denver website tells more about the Plan, and the Plan itself can be found here.