Daily Development for Thursday, August 9, 2007
by: Patrick A. Randolph, Jr.
Elmer F. Pierson Professor of Law
UMKC School of Law
Of Counsel: Blackwell Sanders Peper Martin
Kansas City, Missouri

SERVITUDES; USE RESTRICTIONS; LEASING; FAIR HOUSING:   a restrictive covenant against renting houses in a CCR subdivision violated the Fair Housing Act because of its disparate impact on minorities in Kokomo, Inidiana. Quoting from the opinion as to the statistical analysis supporting the disparate impact finding that "the covenants exclude 56% of racial minority householders from the subdivision, and only 34% White alone householders from the subdivision":

Villas West Ii of Willowridge, Homeowners Assocation, Inc., v. Mcglothin, 841 N.E.2d 584; 2006 Ind. App. LEXIS 123 (Ind. Ct. App. 2006),

Of the 149 lots in Villas West II, there are 147 dwellings owned by white persons and 2 dwellings owned by African Americans. The racial mix of Villas West II is 98.7% white to 1.3% African American. The racial mix of the City of Kokomo is 86.69% white to 10.54% African American and 2.77% other racial minorities.

A plaintiff expert brought in models that he used showed that African American householders in Kokomo are far more likely to rent their homes than white householders. For example, comparing 30 year old persons with $40,000 per year income, an African American person has a 68% chance of renting a home as compared to a white person who has only a 34% chance of renting a home.

In light of this evidence, the trial court ruled, and the appeals court agreed, that the covenants have a greater adverse effect on the African American and racial minority householders than on white householders.  The court concluded that the covenants limit interracial association between residents of Villas West II and householders of minority races to those householders of minority races who are able to buy homes in the subdivision, to the total exclusion of racial minority households who could rent homes in the subdivision if homes were available.

According to the evidence adduced by the association, 27% or 28% of African American households have income sufficient to rent homes in Villas West II if such homes were available for rent.   By excluding all renters from Villas West II, the court concluded that the Association excludes minority households who can afford to rent homes in the subdivision as well as those who cannot afford to rent homes in the subdivision.

The court concluded  that the evidence presented at trial establishes that plaiintiff made a significant statistical showing of a disparate impact, and this factor weighs in favor of plaintiff case.  The court cited Hispanics United, 988 F.Supp. at 1155 (concluding that the plaintiffs demonstrated a discriminatory effect where 49 percent of those affected by the redevelopment plans were Hispanic while only 13.4 percent of the village's population was Hispanic).

Although the association had established a legitimate justification for the leasing restriction that leased units could adversely affect property values the court ultimately concluded that the plaintiffs had established that there were less restrictive alternatives available to accomplish the association's objective, namely, enforcement of the covenants concerning maintenance and upkeep of units:  The covenants cited by the trial court in its findings govern exterior maintenance, maintenance of the dwelling, watering of lawns and shrubs, and prohibited uses and nuisances, such as noxious or offensive activities, accumulation of litter or trash, accumulation of junk vehicles, campers, boats, etc. on the property, construction of outbuildings, and leaving garage doors open. The trial court basically found that, if the basis for the leasing covenant is to maintain property values because renters do not care for the residences as well as owners, the properties can be maintained ju

st as well through the covenants listed above. The appeals court affirmed.

In summary, the court concluded that plaintiff made a prima facie showing of a violation of the Act, and, although the Association demonstrated a bona fide and legitimate justification for the housing action, plaintiff showed that less discriminatory alternatives were available.

The court indicated that this was a close case, but balanced in favor of affirming the holding that the leasing restrictions constituted discrimination in violation of federal law.  The court, however, was cautious in forecasting the impact of this decision:

In [affirming here], we do not intend to imply that all restrictive covenants prohibiting leasing violate the federal Fair Housing Act. Rather, this is complex, fact-sensitive analysis that should not be taken to apply to all such covenants.

Reporters Comment:  Obviously, the plaintiffs' attorneys in this case did an exceptional job of preparing and presenting their evidence, especially their expert testimony. It will be interesting to see whether the detailed and thoughtful analysis in this case, fact intensive as it may be, is sufficiently persuasive to be followed elsewhere.

Editor Comment 1: The editor is dumbfounded, frankly.  Unless we have a federal policy that states that it is unlawful to discriminate on the basis of wealth, the case strikes the editor as wrong.  Is it unlawful for Yankee Stadium to charge $40 for a low end baseball ticket because the impact is to exclude racial minorities from regular attendance at their games?

The plaintiffs made a nice little twist of federal anti-discrimination policy, but the editor doubts that the concept will gather traction.  He been wrong before, of course.

Editor Comment 2: The case was decided in January and there is no history and no one has cited it. 

The Reporter here was Rory O=E2=80=99Bryan of the Indiana Bar. 

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