Here’s a Supreme Court Case that Can Impact RE Investors
The SCOTUS has agreed to hear a Fair Housing case. The case comes from St. Paul, Minnesota via the 8th Circuit Court of Appeals. Why should you or I care about Magner v. Gallagher ??? Seems a group of Real Estate Investors took issue with the City of St.Paul’s Housing Inspection Chief’s tactics with Landlords.
Here’s an interesting quote from the appeals court transcript: … Andy Dawkins was the director of DNHPI from 2002 to 2005. In that position, Dawkins favored owner-occupied housing over rental housing “for the sake of the neighborhood[.]” Toward that end, Dawkins increased the level of Housing Code enforcement targeted at rental properties. In addition to responding to citizen complaints about particular properties, DNHPI inspectors conducted proactive “sweeps” to detect Housing Code violations. Furthermore, Dawkins raised inspection standards by directing DNHPI inspectors to “code to the max,” that is, writing up every violation… (1)(my emphasis added)
The Court will look at 2 questions that are central to this case. Can the rental property owners bring a suit under the Fair Housing Act for a Disparate(2) Impact ? If so, what is the test for such a claim ?
The rental owners claim they were made to make expensive repairs and the excessive enforcement pushed up property management costs. Some of the properties were condemned. Costs became such a burden that in some instances rental owners were forced to sell. The rental owners sued the City claiming the Cities excessive code enforcement made less rentals available to lower income and minority renters. Thus, negatively impacting a protected class under the Fair Housing Act.
A ruling is expected next year. This case bares a close watch. If the Court finds the RE Investors don’t have a claim under the Fair Housing Act…expect more of the same treatment from code enforcers.
(1) US Court of Appeals, 8th District, Cause Number 09-1209
(2) Disparate impact is practice that has an unjustified adverse impact on members of a protected class. Wikipedia
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Comments (2)
Dale, I agree.What scares me is the idea of some city inspector head taking it upon himself to "save the neighborhood" by favoring owner occupied homes over rentals. I have 2 words for that; selective enforcement. This could happen in any city in the US.
Mike Morrison, over 12 years ago
The same thing is happening in the arena of mobile home parks - the last affordable housing available to many. Government is trying to micromanage the day-to-day operations and it just causes more snafus. When the government learns how to operate in the black, then they should be allowed to tell others how to run their "for profit" business.
Dale Osborn, over 12 years ago