Scott E. Mollen

Land Use—Cities Are Not Required to Conduct Racial Impact Studies When They Rezone Property—Wealth and Income Disparities and Discrimination Are Not Actionable—NYC’s “Arcane” System of Rent Regulation—Developers’ Need to Navigate Through an “Arduous” “Byzantine Review Process”—Rising Property Values Are Desirable—Tenant Protection Laws Should Limit Tenant Harassment—Increase in “White” Residents Does Not Result From a Nefarious Plot, But Results from Population Growth and Income Disparity

A non-profit network of churches, community and tenant organizations and individual plaintiffs had commenced an action to stop construction of a mixed-use real estate development (project), located in what is known as the “Broadway Triangle” part of Brooklyn (site). The plaintiffs asserted claims pursuant to the Fair Housing Act Title VIII of the Civil Rights Act of 1968 (FHA), “either as a private right of action, a 42 USC §1983 claim,” or as a “CPLR Article 78 proceeding.” The plaintiffs sought to require the city of New York (city) “to conduct a racial impact study whenever it rezoned property.”

The court held that the aforementioned statutes did “not create a private right of action, and without that right, 42 USC §1983 claims and Article 78 relief will not lie.” The court explained that even if such claims were viable, “although the city is obligated ‘affirmatively to further fair housing’…, it is not obligated to conduct a racial impact study whenever it rezones property.” The court observed that although “wealth and income disparities and discrimination are exceedingly widespread and unfortunate, and they negatively affect housing patterns,…, they are not actionable.” Accordingly, the court held that there was “no legal impediment to the proposed housing being built.”

The site includes part of Greenpoint, Brooklyn, an historically “White neighborhood” and Williamsburg, which contains “a large Hasidic population.” The site is also close to parts of Bedford-Stuyvesant, a predominantly “Black neighborhood” and near Bushwick, which has historically been “a Hispanic neighborhood.”

The court observed:

New Yorkers suffer from cognitive dissonance on housing: we are still experiencing a “housing emergency” that was first declared during World War II, and which… still officially justifies our arcane system of rent regulation; and yet, to build any new housing, a developer must go through an arduous, Byzantine review process that seems like Rube Goldberg, Franz Kafka, and the Marquis de Sade cooked it up over martinis. The hoops through which a developer must jump include the Department of City Planning (…), the City Planning Commission (…), the Uniform Land Use Review Procedure (…), the City Environmental Quality Review procedure (…), the Draft Environmental Impact Statement (…), the Final Environmental Impact Statement (…), the local Community Board, the Borough President, the City Council, the Mayor, and numerous public hearings…. Along the way, “environmental, social and economic factors” are considered, including “population, housing and economic activity,” “land use patterns, low-income populations, the availability of goods and services,” “economic investment,” and “whether any changes created by the [project] would have a significant impact compared to what would happen in the future without the project….”

A developer had initiated a rezoning from “manufacturing to mixed residential and commercial use.” The project contemplated eight mixed-use buildings which would contain 1,146 residential apartments (project). Approximately 4,072 people were expected to occupy the apartments and the development would generate “a 5.4 percent population increase within the surrounding half-mile.” There would also be approximately 63,000 square feet of commercial space, and “26,000 square feet of required publicly accessible open space.” Pursuant to the city’s “Mandatory Inclusionary Housing” (MIH) requirements, 287 apartments would be “low-to moderate-income units.”

The City Planning Commission had asserted that its “land use decisions are always based on rational land use concerns and not on assumptions based on the religion or ethnicity of an applicant or development team.”

The plaintiffs argued, inter alia, that the rezoning and project “discriminates against People of Color” and thus, “violates the FHA, the Equal Protection Clauses of the United States and New York State Constitutions, and the State Human Rights Law….” The plaintiffs contended that the city refuses to “consider issues of fair housing or segregation in evaluating public and private rezoning proposals” and there is no “alternative mechanism for considering the fair housing or segregation impacts of specific public and private rezoning applications,” and thus, the city “has a de facto policy of not considering them, in violation of the law.”

Additionally, the plaintiffs asserted that the project would further segregate neighborhoods and have “a disparate negative impact upon Families of Colors’ ability to remain in or move into… Williamsburg-Greenpoint, Bedford Stuyvesant and Bushwick.” The plaintiffs argued that “‘wealthy Whites’ will rent most of the market-rate apartments” and many of the “three-and four-bedroom ‘affordable’ apartments will favor Hasidic tenants.” They also argued that “rents will rise in the surrounding areas, causing ‘secondary displacement,’” due to housing costs and landlord harassment.

The court reviewed the regulatory framework, “standing” issues and applicable decisional precedent. Thereafter, the court opined that “it seems difficult to say as a general matter that a decision to build low-income housing in a blighted inner-city neighborhood instead of a suburb is discriminatory, or vice versa.” The court noted that “[g]overnmental or private policies are not contrary to the disparate-impact requirement unless they are artificial, arbitrary, and unnecessary barriers.” The court also cautioned that “[c]ourts should avoid interpreting disparate-impact liability to be so expansive as to inject racial considerations into every housing decision.” The court observed that “[i]f the specter of disparate-impact litigation causes private developers to no longer construct or renovate housing units for low-income individuals, then the FHA would have undermined its own purpose as well as the free-market system….”

The court further explained that although “[w]ealth inequality, and concomitant income inequality, are inexorably, and unfortunately, rising in the United States,” “assertions of wealth discrimination” have been held to be not actionable under the FHA. Those claims are “outside the ambit of constitutional and statutory protection.”

The court also rejected the “displacement” claim which asserted that, if the project causes “property values in the surrounding area to rise (which in and of itself would seem to be desirable), landlords will have an incentive to harass tenants to leave rent regulated and/or other below-market housing.” The court stated that “[t]he antidote to this speculation is stronger tenant protection laws and enforcement, not to resist rising real estate values.” Furthermore, the Final Environmental Impact Statement (FEIS) stated that the project “would not result in significant adverse impacts due to indirect residential displacement of low-or middle income residents [as the] area has experienced a trend toward more costly housing and an influx of a more affluent population that is anticipated to continue in the future without the proposed action.” The court explained that the FEIS demonstrates that “the political process has at least addressed the main issues in the instant lawsuit, which is all that the law requires.”

Additionally, the court discussed a prior court decision, Broadway Triangle Community Coalition v. Bloomberg, 35 Misc3d 167 (Sup Ct, NY County 2011) (Bloomberg), wherein a different judge “preliminarily enjoined a proposed Broadway Triangle housing development” (prior decision). Bloomberg found that the city had failed to consider, inter alia, whether alternatives exist and that the city had not shown that it considered policies and actions which may have had “lesser or nondiscriminatory alternatives.” Bloomberg also stated that the project before that court would have a disproportionate impact on minority groups and would perpetuate segregation.

The subject court stated that, whether or not it would have decided Bloomberg the same way, the subject case involves a different set of facts, i.e., privately owned land and taller buildings. The court emphasized that there is no “per se requirement to conduct a racial impact study to rezone.” Moreover, the prior decision had been rendered before the U.S. Supreme Court had rendered a decision which “severely limited disparate impact litigation.”

The court also failed “to see how building mixed-use, mixed-income housing on what had been a vacant brownfield will ‘have a disparate impact upon racial minorities.’” The court reasoned that the project would “not ‘further segregate the Broadway Triangle neighborhood’ because it will, if plaintiffs are correct, pull Whites closer to majority-minority areas.” Regardless, the court noted that “no court in the 50 years since Congress enacted the FHA has held that zoning decisions require racial impact studies.”

The court further held that the plaintiffs failed to state a claim for intentional discrimination and claims under the Equal Protection Clause. The court reasoned that “proof of racially discriminatory intent or purpose is necessary to establish a violation of the equal protection clause. The court also rejected claims under Human Rights Law §296. Accordingly, the court denied the plaintiff’s request for preliminary injunction as “moot,” since the case was being dismissed.

Additionally, the court observed that the project was not being built in “an affluent, lily-white suburb” and the bedroom mix would include limits on the number of three and four bedroom apartments. The exact percentages will be determined when the developer submits a MIH application and the city determines that the application complies with the Zoning Resolution. The court also questioned whether “Hasidim really have larger families,” whether this is “a subtle form of discrimination” and whether “making a residential building somewhat more attractive to one ethnic group than others” is “illegal?” The court asked whether the mix of apartments is “just a business decision?” The court noted that a three-bedroom apartment could be for parents and a daughter and a son, “hardly an unknown family makeup in Families of Color.” The court emphasized that “the law affords cities and developers flexibility” and concluded that “the attenuated ‘bedroom mix’ claim,… is too thin a reed on which to stop [the project].”

The court also asked “[w]hat good would a racial impact study do?” Pursuant to controlling case law, “unless some intentional discrimination or ‘barriers,’ rather than ‘wealth discrimination,’ could be shown,” the project would be legal. Moreover, although the project will “extend a predominantly White area (…) closer to Black (…) and Hispanic (…) areas,” it did not appear to be a “result of some nefarious midnight plot,” but rather, it seemed to be based on “on-the-ground realities of population growth (…) and income disparity….” The court stated that “[t]he growth and disparity are due to social forces and, thus, are not actionable.” The judge believed that such result would “be integrative, not segregative.”

The court acknowledged that the subject proceeding was “well-intentioned, passionately argued, and occasionally produces a glimmer of plausibility.” However, “there is no private right of action under the FHA provisions upon which it principally relies, and it lies outside the limits on disparate impact claims….” The court concluded that the city needs a lot more housing, the project had “already passed political-process” and it now passed the “judicial-process.”

Disclosure: While my firm was not counsel in the subject litigation, it represents a principal of the developer on unrelated matters.

Churches United for Fair Housing, Inc. v. DeBlasio, Sup. Ct., N.Y. Co., Index No. 151786/2018, decided July 30, 2018, Engeron, J.

 

  

Land Use—Housing Discrimination Claims Challenging Town’s Ordinance Which Attempted to Stop Short-Term Residential Rentals Dismissed—Fair Housing Act—Rental Properties Were Not “Dwellings” Under the FHA

Plaintiffs raised objections to a U.S. District Court (court) with respect to a report and recommendation by a U.S. Magistrate Judge (the report). The report recommended that the plaintiffs’ “disparate treatment claim” under the Fair Housing Act (FHA) and their 14th Amendment “as-applied vagueness” claim be dismissed with prejudice. The report also found that the subject rental properties (properties) are not “dwellings” within the meaning of the FHA. Additionally, the report concluded that any amendment to the complaint to replead the FHA disparate impact claim would be futile. The court rejected the report’s recommendation that the plaintiffs’ 14th Amendment “void-for-vagueness” claims be dismissed on the merits with prejudice, since the court lacked subject matter jurisdiction. The court otherwise accepted the report’s recommendation.

The plaintiffs argued, inter alia, that the report erred:

(i) in finding that the… properties were not “dwellings” within the meaning of the FHA; (ii) in finding that any amendment to the complaint to re-plead their FHA disparate impact claim would be futile because they “can add more statistical support for their disparate impact theory of liability under the FHA[,]”…; and (iii) in recommending that their FHA disparate treatment and Fourteenth Amendment as-applied vagueness claims be dismissed with prejudice….

The court rejected the plaintiffs’ argument that the report had “failed to make the reasonable inference in favor of plaintiffs that ‘residential houses’ are designed and/or intended for long-term use as residences and thus clearly fall under the FHA’s definition of dwelling….”

The court explained that when determining “whether a particular building is a dwelling or residence, the focus is on whether the individuals that are subject to discrimination use or intend to use the building as a dwelling or residence.” The court emphasized that a determination of “whether a particular building is a dwelling or residence within the meaning of the FHA does not turn on fixed classifications of the building—e.g., a home or shelter is or is not a residence, or a dormitory is or is not a residence—but instead the court’s analyzed the function of the specific building for a particular plaintiff alleging discrimination under the Act.”

The plaintiffs had identified the properties as “residential houses”. However, the court found that since the “function of the… properties was commercial… and neither the plaintiffs nor their potential guests used or intended to use the properties as a residence,” the report properly concluded that the properties were not “dwellings” within the meaning of the FHA. Therefore, the FHA claims were dismissed “in their entirety with prejudice.”

The plaintiffs challenged the report’s finding that any amendment to the complaint to replead their FHA disparate impact claim would be futile. The court held that the report had correctly found that the FHA claims were deficient since the properties did not constitute “dwellings” within the meaning of the statute. The report asserted that the “disparate impact claim is untenable” also because the plaintiffs had failed to “allege facts or produce statistical information demonstrating a causal connection between the challenged ordinances and the disparate impact upon families with children.” Affording plaintiffs “an opportunity in supplementing their allegations with additional statistical information concerning the causal connection,… would not cure that other, more substantive, pleading deficiency with respect to that claim.” Accordingly, the court affirmed the report’s recommendation that leave to replead the FHA disparate impact claim would be futile. The court further held that the report had properly dismissed the FHA disparate impact claim with prejudice because even if such claim became “ripe for adjudication,” it would fail because the properties were not “dwellings” within the meaning of the FHA.

Additionally, the court held that the plaintiffs lack standing to pursue the 14th Amendment “facial vagueness challenge” and the plaintiffs’ as-applied vagueness “challenge was not ripe for judicial review.” The court lacked jurisdiction to adjudicate the merits of those claims. The court noted that it lacks power to adjudicate the merits of a case or dismiss a case with prejudice when it lacks subject matter jurisdiction. However, the court found that “subject matter jurisdiction exists with respect to plaintiffs’ FHA disparate impact claim.”

Thus, the defendant town’s motion seeking dismissal of the plaintiffs’ claims pursuant to FRCP 12(b)(1) and 12(b)(6) was granted to the extent that plaintiffs’ void-for-vagueness claims were dismissed in their entirety without prejudice. Plaintiffs’ FHA claims were dismissed in their entirety with prejudice. Plaintiffs’ motion for leave to file an amended complaint was denied. Additionally, plaintiffs’ state law claims were dismissed without prejudice. Pursuant to Section 1367(d), the statute of limitations for state law claims timely filed in federal court was tolled for 30 days after the date of the court’s order, unless a longer going period is provided under state law.

LuxuryBeachfrontGetaway.comInc. v. Town of Riverhead, New York, U.S. District Court, EDNY, Case Number: 17-CV-4783, decided July 27, 2018, Feuerstein, J.

  

Scott E. Mollen is a partner at Herrick, Feinstein.