LEGAL/LEGISLATIVE UPDATE – June 15, 2018

Published on: June 15, 2018

MARIJUANA MOVEMENT

In the continuing tug-of-war between state and federal lawmakers over legalization of marijuana, it appears the states may have gained an edge. President Donald Trump indicated recently that he might support a bipartisan Congressional measure establishing as a matter of law that states have the authority to determine how to regulate marijuana within their borders. The proposal would negate moves by Attorney General Jeff Sessions to revoke an Obama-era policy, under which the Justice Department agreed not to enforce federal law defining marijuana as an illegal drug in states that had authorized its use.

Sessions, an adamant opponent of marijuana use for both recreational and medicinal purposes (he has asserted that “good people don’t smoke marijuana”) has insisted that federal law prohibiting the drug trumps state laws to the contrary. But reform advocates say his position has accelerated the legalization trend: 29 states now authorize medical marijuana and 9 of them (including Massachusetts, Maine and Vermont) allow recreational use of the drug as well.
In addition to preventing federal interference with the state regulation of marijuana, the bipartisan legislation, co-sponsored in the Senate by Sens. Cory Gardner (R-CO) and Elizabeth Warren (D-MA), and in the House by Reps. David Joyce (R-OH) and Earl Blumenauer (D-OR), would allow individuals convicted of marijuana possession and use to clear their records.

“The bipartisan, commonsense bill ensures the federal government will respect the will of the voters — whether that is legalization or prohibition ─ and not interfere in any states’ legal marijuana industry,” Rep. Gardner said.

Apparently sensing the shift in the political winds, Sessions has moderated his rhetoric, telling lawmakers recently in a Senate hearing that he is focusing on other priorities. But he has also made it clear that his position hasn’t changed. “My view is clear,” he said in an interview with Colorado Public Radio. Unless and until Congress changes the federal law, he said, “[it] remains in effect nationwide, just as it does for heroin and cocaine.”

HOUSING HEAD WINDS

The housing market continues to struggle as rising mortgage rates, rising home prices, and scarce inventories suck the energy out of homebuyer demand. Existing home sales in April fell 2.5 percent compared with March – an unwelcome trend during what is supposed to be the busiest homebuying season. The April total also lagged the year-ago pace for the second consecutive month, while pending sales posted their fourth consecutive year-over year decline, belying the strong home buyer demand that real estate agents report and that consumer surveys confirm.

Rising rates and prices are creating acute affordability problems for first-time buyers – purchases in this market segment declined by 2 percent in the first quarter compared with a year ago. But the lack of inventory also appears to be slamming the door on buyers for whom affordability isn’t a defining issue.

Lawrence Yun

That is the reason “home sales are stuck and not breaking out,” according to Lawrence Yun, chief economist for the National Association of Realtors (NAR), who described the shortage of listings as “dire.”

Although analysts note the “resiliency” of home buyers, who continue to pursue home ownership opportunities, there are signs that the inventory shortage is nibbling away at demand above the entry-level. Redfin’s Housing Demand Index declined by 1.3 percent in April compared with March, pushing this indicator almost 12 percent below the year-ago level.
“It’s the stubbornly low inventory levels in much of the country that are preventing sales from really taking off like they should be,” Freddie Mac Chief Economist Sam Khater agrees. “The underlying demand for buying a home is holding up, and will continue to do so, as long as the economy is generating solid job and income growth,” he argues in a recent report. “Most markets simply need a lot more new and existing supply to cool price growth and give buyers enough choices

SUPPLY SIDE HELP

There is some good news on the supply front: Single-family home starts in April were more than 7 percent above the year-ago pace and permits for the first four months of the year were 8.6 percent above the same January-April period last year. New home sales, though a little (1.5 percent) below the March level were 11.6 percent higher year-over year.

Jim O’Sullivan, chief U.S. economist for High Frequency Economics, sees “no sign of ongoing weakening” in the April data. “The pattern suggests some loss of momentum, but probably in the form of slower growth rather than contraction,” he told HousingWire.com.

Zillow Senior Economist Aaron Terrazas agrees, noting in the same article that the slight April decline in new home sales “was actually smaller than expected, and doesn’t represent much of a deviation from the general strength we’ve seen” since the beginning of this year.

Like many analysts, Terrazas thinks a strong economy and demographic trends (as millennials reach prime homebuying age) will continue to offset the contrary forces created by higher interest rates and home prices. But some question just how effectively buyers can resist those economic headwinds – and for how long.

Home prices are rising at annual rate of between 6.5 percent and 9 percent, depending on which index you follow; incomes have not come close to matching that pace. Since the housing market hit its cyclical bottom six years ago, the NAR’s Nun reports, home prices have increased by 48 percent while wages have grown by only 14 percent. “The current pace of price appreciation far above incomes is not sustainable in the long run,” he insists.

HUD RENT HIKES

Confronting withering criticism from Congressional analysts and consumer advocacy groups, Ben Carson, Secretary of Housing and Urban Development, has reconsidered a plan to increase rents paid by low-income Americans living in subsidized housing. Carson had described his plan as a form of tough love, designed to encourage low-income people to work and giving them a path out of poverty. Critics had said the idea was more akin to burning a village in order to save it ─ more likely to push people into homelessness than into jobs.

“There is no evidence that raising rents causes people to work more,” Will Fischer, senior policy analyst at the Center for Budget Priorities, told the Associated Press. “I don’t think there’s even a plausible theory for why [those rent increases] would encourage work.” The CFBP has estimated that the HUD plan would increase rents paid by low-income tenants more than 20 percent in major metropolitan areas.

Explaining his decision to backtrack on the hike, Carson said an increase in funding for the agency approved by Congress, eliminated the need to reduce rental subsidies. The initial budget proposed by President Trump (which Carson did not oppose) had slashed the agency’s funding by 14 percent, from $48 billion to about $41 billion. The rent increase was necessary, Carson said, “to keep from raising rents on the elderly and the disabled. Now that the budget has been changed,” Carson said (because Congress restored $6.8 billion the Trump Administration had cut), “the necessity for doing that is not urgent.”

STILL SEGREGATED AFTER ALL THESE YEARS

The Fair Housing Act outlawed housing discrimination 50 years ago, but the segregated housing patterns that are a byproduct of discrimination persist today. “[These] patterns did not emerge naturally; [they] represent the lasting impacts of policies ─ both informal and institutionalized ─ specifically aimed at marginalizing minorities,” a study by ApartmentList.com concludes.

To quantify the extent of segregation in different markets, researchers created a “segregation index” measuring the percentage of minorities living in entirely or primarily segregated communities. The ratios indicate the percentage of minority residents who would have to move to different neighborhoods to make the distribution of minorities in each neighborhood match the ratio in the metropolitan area as a whole.

Milwaukee, a segregation extreme, has a segregation index of 0.32. Nearly 56 percent of minority residents live in census tracts that are less than 25 percent white and approximately 75 percent of Black residents live in what the report describes as “concentrated minority tracts.” Seattle, at the opposite extreme, has an index rating of 0.61 – the fourth lowest in the country.

Nationally, across the 250 metropolitan areas the report covers, Blacks have the highest segregation rating of all minorities – 0.61, compared with 0.47 for Hispanics and Asians.

The report also found that segregation is most prevalent in older communities; minority populations are “more evenly distributed,” the report says, “in areas that have experienced rapid growth…since the passing of the Fair Housing Act.”
http://dsnews.com/daily-dose/05-30-2018/residential-segregation-and-housing

IN CASE YOU MISSED THIS

A recent housing industry study found that first-time homebuyers can afford only 20 percent of the housing stock in some markets.

The Consumer Financial Protection Bureau – created to protect consumers ─ has fired members of its consumer advisory board.

Despite continued economic growth and a low unemployment rate, more than 34 million families are still struggling to meet basic financial needs.

Late payments on auto loans and home mortgages are declining, but delinquency rates on credit cards have begun to rise.

How did chocolate, traditionally viewed as an indulgence, become a health food? Not surprisingly, the answer has a lot to do with research funded by the companies that produce the sweet stuff.

LEGAL BRIEF

IN THE HOLE

The courts over the years have expanded the notion of the “duty of care” property owners owe residents and guests. As a result, condo associations often end up on the losing end of negligence claims – but not always. This decision by an Ohio Appeals Court (Armstrong v. Lakes Golf & Country Club) represents one of those exceptions.

The plaintiff, Scott Armstrong sued the club for injuries he suffered when he fell after stepping into an open hole. The fall occurred when Armstrong was returning to his car after participating in a golfing outing. Armstrong acknowledged that he had a few drinks while playing and several more at the clubhouse bar after the event, consuming approximately 6 drinks over the course of six hours. But he insisted that he was not drunk and other witnesses confirmed that he showed no signs of intoxication when he returned to his car.

Concerned about being hit by other vehicles, he had parked along a curb close to the clubhouse instead of in a designated parking space. He also took a shortcut through a landscape bed instead of walking along a paved and lighted walkway – a shortcut that Armstrong said he and other members used frequently. As he stepped from the mulched bed onto the pavement, his foot landed in an open valve box, causing him to fall and injure his knee. He sued the club for premises liability negligence.

A trial court rejected his claim, finding that the hole was an “open and obvious,” hazard Armstrong could have perceived and avoided. The Appeals Court upheld that decision.

Two Sides

The duty of care concept has two sides, the court noted: The property owner has an obligation to exercise “ordinary care” to maintain its property in a sufficiently safe condition that does not “unreasonably or unnecessarily” expose invitees to danger. But guests also have a responsibility to take reasonable care to avoid “open and obvious” risks.
Under Ohio law, “the rationale of the open and obvious doctrine is that the open and obvious nature of the hazard itself serves as a warning,” the court noted, “so that owners reasonably may expect their invitees to discover the hazard and take appropriate measures to protect themselves against it. When a danger is open and obvious, a premises owner owes no duty of care to individuals lawfully on the premises…. When applicable, the open and obvious doctrine obviates the duty to warn and acts as a complete bar to any negligence claim.”

The standard for determining whether a danger is “open and obvious” is “objective, not subjective,” the court said, based not on whether a particular individual perceived the risk, but whether “an objective, reasonable person” would have perceived it.”

The trial court found that the open hole “was readily observable by a reasonable invitee exercising ordinary care,” the Appeals Court said, “and we find that reasonable minds could not come to [a] different conclusion.” Among other points supporting that conclusion, the court noted: Armstrong said he was able to see both the hole and the cover after he fell, so both should have been equally visible to him before.

Attendant Circumstances

Armstrong argued that the court should have considered “attendant circumstances” that increased the risk and thus negated the open and obvious standard. The court disagreed. Attendant circumstances, the court noted, are defined broadly to include “all circumstances surrounding the event” including the time and place, “the environment, and any “normally existing” conditions that would “unreasonably increase” the risks. “Attendant circumstances do not include the individual’s activity at the moment of the fall, unless the individual’s attention was diverted by an unusual circumstance of the property owner’s making,” the court observed

Armstrong contended that he was distracted by the flow of people and cars in the parking lot, but the court pointed out that traffic in a parking lot is to be expected, and Armstrong “did not establish that the traffic in the parking lot at the time he fell was any different than a [visitor] would ordinarily encounter.”

The other conditions Armstrong cited ─ inadequate lighting and the color of the box cover (similar to the grass) ─ also did not qualify as “attendant circumstances” sufficient either to “reduce the degree of care [Armstrong] was required to exercise for his own safety or enhance the danger of the hazard,” the court found.

The color of the cover Is irrelevant, the court said, because it wasn’t on the valve when Armstrong fell, and darkness is itself “an open and obvious” danger” ─ not an “attendant circumstance” but a warning that individuals must take more care.

There is no question that the risk posed by the valve box “was open and obvious,” the court concluded, and “no evidence of any attendant circumstances [that] enhanced the danger to [Armstrong] and contributed to his fall.”

WORTH QUOTING

“I think that these scooters run amok are actually a plot of the young people to kill off all us old farts so they can have our rent-controlled apartments.” ─ Fran Taylor, a resident of San Francisco, complaining about the influx of electric scooters in that community.


Marcus, Errico, Emmer & Brooks specializes in condo law, representing clients in Massachusetts, Rhode Island and New Hampshire.