Published on: April 29, 2019
If you’re looking for consistency, you won’t find it in the March housing market reports. After posting the strongest performance in almost four years in February, existing home sales reversed direction in March with a 5.4 percent year-over year decline. The February jump had provided hope that home sales might be regaining their footing after back-to-back declines in December and January; the March swoon dented those hopes, but new home sales restored them, posting their third consecutive monthly increase in March. The seasonally adjusted rate of 692,000 units beat the year-ago pace by 3 percent, with the strongest performance in nearly 18 months. Tossing a bit of cold water on what seemed to be reasonably good news, analysts pointed out that the Commerce Department, which crunches these numbers, revised sales for the previous three months downward.
Home builder confidence levels have remained on the high side, nonetheless, as industry executives continue to see strength in housing fundamentals – employment gains, wage increases and mortgage rates primary among them. Concerns that rising mortgage rates would dampen homebuying demand have been assuaged by the Federal Reserve’s decision to keep patient hands on the monetary controls, at least for a while.
New home starts – or the lack of them – are providing another cause for concern, however. Housing starts fell to a seasonally adjusted rate of 1.139 million units in March – their lowest level in nearly two years. Permits, an indicator of future construction activity, also slid for the third consecutive month., to the lowest level in five months. “Waiting for construction activity to pick up after a sharp drop in mortgage rates is like waiting for Godot,” Chris Rupkey, chief economist at MUFG, told Reuters. “It is hard to know what is ailing the home construction industry.”
The Department of Housing and Urban Development (HUD) is going to begin requiring carbon monoxide detectors in public housing developments. Safety experts have long recommended the safety devices in residential housing, and many state and local building codes require them. But those regulations don’t always apply to older properties, and housing industry executives acknowledge, the rules aren’t always strictly enforced.
“Given the unevenness of state and local law, we intend to make certain that CO detectors are required in all our housing programs, just as we require smoke detectors, no matter where our HUD-assisted families live,” HUD Secretary Ben Carson said in a statement announcing the agency’s plan. The “simple, inexpensive” safety device “can be the difference between life and death,” he noted.
The HUD announcement followed – and seems to have been triggered largely by – an NBC News report that at least 13 public housing residents have died from carbon monoxide leaks in their apartments since 2003.
Consumer advocates welcomed the HUD decision, but they also pointed out that it can take months if not years to complete the rulemaking process that will convert a proposed rule into a final regulation with which public housing administrators will have to comply. They want the agency to take immediate steps to begin protecting public housing tenants.
“HUD could protect tenants now by issuing an interim or direct rule that immediately requires carbon monoxide detectors in federally assisted housing,” Emily Benfer, a public health expert, told NBC. “In a matter of life and death,” she noted, “HUD has good cause to require immediate compliance and notification to tenants of carbon monoxide threats.” Neither of these steps is required, she noted, by interim HUD guidance “encouraging” public housing landlords to make sure working detectors are in place in states where they are required, and “strongly encouraging them” to install the devices where they aren’t required.
HUD officials say they don’t have the authority to require immediate compliance, and housing industry executives have noted that many cash-strapped public housing agencies will need financial assistance to comply.
“In order to ensure the quick installation of detectors, HUD and Congress must also understand that some agencies that run public housing may need access to additional resources now,” a spokesperson for the National Association of Housing and Redevelopment Officials, told NBC.
The drumbeat of concern about climate change is beginning to echo in the banking industry. A recent report produced by representatives of central banks and industry regulators from several countries, warns that the economic disruptions caused by climate change will hit the financial industry hard.
“The enormous human and financial costs of climate change are having a devastating effect on our collective well-being,” members of the Network for Greening the Financial System, which produced the report, note in an open letter. “If some companies and industries fail to adjust to this new world, they will fail to exist,” the letter warns.
The report urges central banks and industry regulators to begin including vulnerability to climate change among the factors in stress tests that assess the financial strength of financial institutions.
Those assessments will highlight the need for financial institutions to include climate risks in their evaluation of assets, so they can make informed investment decisions, the report suggests.
INTO THE MAINSTREAM
In the latest sign that short term rentals are entering the business mainstream, some lenders are beginning to allow ‘hosts’ to use the income earned from renting their homes to qualify for loans to refinance their mortgages.
Airbnb led the way last year, forging partnerships with Fannie Mae and Quicken Loans under which both agreed to count the income homeowners earn through that on-line listing service. Now Vrbo, one of Airbnb’s main competitors, has reached a similar agreement with Quicken.
Lenders will typically count only income from an investment property in qualifying borrowers for a mortgage. Vrbo and Airbnb have argued successfully that lenders should also count income generated by short-term rentals, because many homeowners use that income to pay their mortgages.
Under Vrbo’s agreement with Quicken, although the qualifying income must come from the rental of a primary residence or second home, owners can use the Vrbo program to refinance mortgages on other properties.
“Homeowners’ Vrbo income is accurate, real-time recorded data,” on which Quicken brokers can rely in calculating a borrower’s debt-to-income ratios, Quicken CEO Jay Farner said in a press statement.
The Department of Justice (DOJ) has negotiated an eyebrow-raising $1.6 million settlement agreement with PRG Real Estate Management to resolve allegations that the company and related entities violated the Servicemembers Civil Relief Act (SCRA) by unfairly pursuing eviction orders against members of the armed services.
The DOJ complaint alleged that the company failed to disclose the military status of servicemembers in eviction filings and illegally charged early termination fees when service members terminated leases to comply with deployment orders.
The agreement, the largest ever under the SCRA, requires PRG to pay up to $1.5 million to compensate 127 servicemembers against whom the company obtained what DOJ described as “unlawful court judgments” against them, and an additional $35 million to compensate 10 servicemembers who were improperly charged early lease termination fees. PRG has also agreed to pay a civil penalty of $62,000, repair the credit of servicemembers affected by the judgments against them, provide SCRA training to its employees and adopt policies and procedures to prevent future violations of the statute.
“Our men and women in uniform deserve all the protections the SCRA provides them against civil lawsuits while they are defending our nation,” Assistant Attorney General Eric Dreiband said in a press statement announcing the settlement.
“The incredible sacrifices our servicemembers make when they deploy and move frequently should never create financial or legal hardships for them,” G. Zachary Terwilliger, U.S. Attorney for the Eastern District of Virginia, added. “This settlement helps ensure that these men and women are honored for, not disadvantaged by, their military service, and that servicemembers’ rights are protected going forward.”
IN CASE YOU MISSED THIS
More than two-thirds of American CFOs expect the economy will sink into recession before the end of next year, according to a recent poll; 84 percent think a downturn will begin by the first quarter of 2021.
Same-sex couples are more likely to be denied a mortgage than male-female couples, and they are more likely to be charged higher fees, a study by Iowa State University has found.
Demand for cyber-insurance is growing, an indication, industry executives say, that corporate executives are becoming more aware of cyber risks and taking those risks more seriously.
As more states legalize recreational marijuana, more employees are testing positive for marijuana use.
Applications for unemployment benefits have fallen to a five-decade low, testifying to the labor market’s underlying strength, economists say.
ANOTHER FAIR HOUSING REMINDER
You would think that with all the publicity the issue has received, and the number of court battles condo associations have lost, board members and managers would understand the legal risks they incur when they reject or unreasonably restrict Fair Housing Act accommodations sought by residents with physical or emotional disabilities. But as this Nevada case (Sanzaro v. Ardiente Homeowners Association) illustrates, that memo hasn’t reached everyone.
The plaintiff (Deborah Sanzaro) suffered from a permanent, painful disability that required her to use a walker. She acquired a Chihuahua who helped her cope with bouts of severe pain and was trained to retrieve objects beyond her reach, including her walker. (It’s not clear how a tiny dog was able to retrieve a walker, but no one raised that question during the litigation.)
In 2009, when Sanzaro tried to enter the community’s clubhouse with her dog, the manager (Phelps), stopped her, demanding to see documentation proving that Angel was a service dog and threatening to call security if Sanzaro, who did not have the requested documentation, refused to leave. This was the first of several incidents in which the manager or other association representatives refused to allow Sanzaro to enter the clubhouse with her dog. The dispute played out over the next four years, escalating in intensity and involving owners as well as the association manager and members of the board.
After a hearing that Sanzaro and her husband failed to attend, the board fined her for violating the association’s governing documents by refusing to submit documentation for Angel. Through multiple communications, the board continued to insist that Sanzaro had to document both her disability and the training that qualified Angel as a service dog. Sanzaro filed a formal complaint that went to an arbitrator, who ruled in the association’s favor, finding the documents Sanzaro submitted (including a note from her physician confirming both her disability and her need for the assistance provided by her service dog) to be “unpersuasive.” The state Supreme Court upheld the arbitration decision.
The dispute continued. When the board initiated foreclosure proceedings to collect the approximately $4,000 in accumulated penalties and fines, Sanzaro paid the amount due, but was forced to declare bankruptcy as a result. A few months later, Sanzaro tried again to enter the clubhouse and was again denied entry with her dog. At this point, she submitted a written request for an accommodation, which the board rejected, insisting that she had not documented her disability or her dog’s training.
In the meantime, the Sanzaros were receiving anonymous hate mail from “concerned” residents, calling them “liars” and “garbage,” saying they were unwanted in the community, and expressing the hope that someone would steal Sanzaro’s dog and “drop it in the desert.” After someone sprayed a death threat on their garage, the couple moved away, although they retained ownership of their unit. The couple then filed suit in Federal District Court against the HOA (Ardiente), Corona (the developer who controlled the association through much of the dispute), RMI (the management company) , Phelps (the manager) and two board members appointed by Corona. The suit alleged that the failure to accommodate Sanzaro’s disability violated both the Americans with Disability Act (ADA) and the Fair Housing Act.
The court ruled that the ADA did not apply, because the relatively limited public events Sanzaro cited did not make the condo community’s clubhouse a “place of public accommodation,” subject to the ADA. There was no question about the applicability of the FHA, however, nor was there any question in the court’s mind that the defendants had violated it.
Fair Housing Test
Sanzaro met all the requirements for establishing a fair housing complaint, the court noted. She had demonstrated that: She was handicapped, as defined by the statute; the defendants knew or reasonably should have known about her handicap; the accommodation she requested was necessary and reasonable; and the defendants refused improperly to permit it.
The defendants did not dispute that they were aware of Sanzaro’s handicap (hard to deny since she was unable to move without a walker), but they contended that the Fair Housing Act allowed them to demand that she document the nature of her disability, her need for a service animal, and the training the animal had received to provide the assistance she required.
That’s not exactly what the statute says, however. The statute allows housing providers and others to demand this supporting documentation, the court noted, only if neither the disability nor the need for the service animal is “readily apparent.” The statute also does not mandate specialized training for a service animal, the court pointed out, “so long as a person with a disability demonstrates a nexus between the disability and the service the animal provides.” Sanzaro’s disability was obvious, the court said, and the “nexus” was clear.
“All defendants knew and could reasonably have been expected to know of Mrs. Sanzaro’s handicap,” the court noted. They also knew she needed the services her dog provided, and they knew the dog “did not pose a risk or threat of harm to anyone in the clubhouse or in the community,” which could have provided grounds for barring the dog from the clubhouse.
No Undue Hardship
The defendants also failed to present any evidence that the requested accommodation imposed an undue hardship on the association or was in any other way “unreasonable,” the court observed, noting: “Angel was not disruptive, threatening or harmful to other residents in the community or in the clubhouse. She was so inconspicuous due to her small size and quiet disposition that individuals in the clubhouse entry often did not even notice her. The accommodation to allow Angel to accompany Mrs. Sanzaro into the clubhouse was clearly reasonable based upon the evidence introduced at trial.”
The defendants argued that their actions were justifiable, because Sanzaro did not properly submit her accommodation request with the requisite supporting documentation. But the court pointed out that the law does not require that an accommodation request “be made in a particular manner or at a particular time.” Nor does the statute require that requests be submitted in writing, the court noted. It requires only that requests be made “in a manner that a reasonable person would understand to be a request for an exception, change, or adjustment to a rule, policy, practice, or service because of a disability…”
The statute does provide that residents aren’t entitled to an accommodation unless they specifically request it. Based on that provision, the defendants argued that two of the incidents when Sanzaro was denied access to the clubhouse did not violate the law, because they occurred before she had submitted her accommodation request. But the court pointed out that an accommodation request can take many forms. And all of Sanzaro’s communications with the management company and the board and her multiple efforts to bring Angel into the clubhouse demonstrated clearly that she was seeking an accommodation to do so. “[The] refusal to allow Sanzaro to enter the clubhouse with Angel therefore constitutes a failure to reasonably accommodate [her]request,” the court said.
Liability and Vicarious Liability
The court’s conclusion that Sanzaro had a legitimate accommodation request that was unfairly denied was fairly straightforward; the assignment of liability was somewhat more complicated, because it involved multiple defendants playing varied roles and questions of both direct and vicarious liability, which the court dissected this way:
The HOA (Ardiente), the developer (Corona) and the management company (RMI) all are required to comply with the FHA, the court noted; all can held liable for violating it; and all can also be held vicariously liable for the acts of their agents and employees. The court rejected liability for one defendant, Wallace, the owner of the management company, because he was not directly involved in any of the accommodation denial incidents, and, the court noted, “absent special circumstances,” he could not be held vicariously liable because, “it is the business entity [and not the owner] that is the principal or employer.”
Damages assessed against the other defendants were substantial. They included $350,000 in joint and several compensatory damages and an additional $285,000 in punitive damages, with more than half of the punitive damages ($150,00) charged to the condo association. RMI, the management company, took the second largest punitive hit ($75,000); the manager, Phelps was assessed $25,000, the declarant, Corona ($15,000) and the two board members $10,000 each.
“We do not think that the modern monetary theory is actually the panacea…We do not think that any country is currently in a position where that theory could actually deliver good value in a sustainable way.”─ Christine Lagarde, chair of the International Monetary Fund, questioning the theory that deficits don’t matter nearly as much as conventional monetary theory assumes.