Fair Housing Justice Center, Inc. v. Goldfarb Properties, Inc.

Background

The Fair Housing Justice Center, Inc. (FHJC) sued Pelican Management, Inc., Fordham One Company, LLC, and Cedar Two Company, LLC. The opinion states that Pelican Management’s public-facing name was Goldfarb Properties. FHJC alleged that the defendants’ 2015 rental policy violated the Fair Housing Act (FHA) and the New York City Human Rights Law (NYCHRL).

The 2015 policy required applicants to have a credit rating of at least 650, gross annual income equal to at least 43 times the monthly rent, and a net rent-to-income ratio of no more than 40 percent. The income and rent-to-income requirements applied even when a housing subsidy paid some or all of the rent. The defendants treated voucher payments toward rent as income but still required applicants to meet the 43-times-the-rent requirement. The policy also required rejected applicants to wait at least 60 days before applying again.

FHJC presented evidence involving the Olmstead Housing Subsidy, the New York City HIV/AIDS Services Administration subsidy, and Section 8 or Housing Choice Vouchers. The opinion states that OHS and HASA recipients were disabled under the FHA and that a substantial share of Section 8 households included a person with a disability. FHJC’s expert concluded that the 2015 policy had a substantial adverse impact on applicants with subsidies and applicants with disabilities. The court accepted the expert’s use of general population data because the defendants’ published income requirement could have discouraged people from applying.

The 2019 Policy and Trial Evidence

The defendants adopted a new policy in 2019. Applicants with full subsidies were no longer subject to an income test, although they had to provide verifiable income information, have an acceptable criminal history, and confirm that they could pay the first month’s rent and security deposit. Applicants with partial subsidies still had to meet financial requirements, although the defendants calculated income and rent obligations using the applicant’s share of the rent and lowered the income multiplier from 43 to 40 times the rent.

The court treated applicants with no subsidy, partial subsidies, and full subsidies as separate groups. It accepted FHJC’s expert’s analysis that, under the 2019 policy, 30 percent of applicants without subsidies were approved compared with 13 percent of applicants with partial subsidies. Even excluding denials categorized as “no contact,” the approval rate was 20 percent for applicants with partial subsidies compared with 30 percent for applicants without subsidies. The court also found it appropriate to include denials categorized as “insufficient voucher” and “no contact” in the analysis.

The opinion discusses Kiana Glanton, a visually impaired applicant who used a Section 8 voucher. Goldfarb denied her first application for insufficient income and denied her second application after she submitted an expired voucher. The court found that the second denial was properly based on the expired voucher, but it separately found a statistically significant adverse impact from the 2019 policy’s treatment of applicants with partial subsidies.

2015 Policy: Legal Conclusions

Under the FHA’s disparate-impact framework, FHJC had to show a neutral practice and a significantly adverse or disproportionate effect on people with disabilities. The defendants then had to prove that the policy served a legitimate business interest and, if they did so, FHJC would have to identify a less discriminatory alternative.

The court found that FHJC established the required adverse impact. It rejected the defendants’ justification that the policy was needed to reduce rent arrears because the defendants had not shown that subsidy recipients contributed to those arrears or that the income requirements were necessary for applicants with full subsidies, whose subsidies covered all of the rent. The court therefore found for FHJC on its FHA disability-discrimination claim concerning the 2015 policy.

The court applied the same burden-shifting framework to FHJC’s NYCHRL disability claim and again found for FHJC. It also found that the 2015 policy had a disparate impact based on source of income under the NYCHRL. The court reasoned that subsidies are guaranteed rent payments made directly to landlords, not unrestricted cash income, and that treating them like cash income prevented applicants with full or partial subsidies from accessing housing.

The court further found intentional source-of-income discrimination under the NYCHRL. It relied on the defendants’ knowledge of how subsidies worked, prior fair-housing training, communications with FHJC testers, the defendants’ failure to change the policy after learning that subsidy recipients could not meet the income requirement, and the more favorable treatment given to some applicants without subsidies. The court characterized the defendants’ conduct as reckless indifference amounting to intentional discrimination.

2019 Policy Counterclaim

The defendants sought a declaration that the 2019 policy was lawful, while FHJC asked the court to reject that counterclaim. The court concluded that the 2019 policy did not have a disparate impact on applicants with full subsidies, but it did have a statistically significant adverse impact on applicants with partial subsidies.

The court rejected the defendants’ argument that the partial-subsidy requirements were necessary to assess applicants’ ability to pay. The defendants offered no evidence that partial-subsidy holders were unlikely to pay the portion of rent their subsidy programs had determined they could afford. The court therefore found that the 2019 policy was not lawful, but only as to the partial-subsidy requirements. It did not invalidate the policy’s full-subsidy requirements on the basis discussed in the opinion.

Remedies and Disposition

The court granted FHJC’s proposed injunctive relief. The injunction bars the defendants from denying or withholding apartments based on disability or lawful source of income, including by applying minimum income requirements to applicants with rental subsidies or vouchers. It also bars discriminatory differences in rental-process terms and conditions, including giving variances or waivers to applicants without subsidies but not to applicants with subsidies, and requiring rejected applicants to wait before reapplying. The defendants must adopt written nondiscriminatory rental criteria, provide fair-housing training through a third party, and maintain records demonstrating compliance. The criteria may not include minimum gross- or net-income requirements, including net rent-to-income ratios, for applicants with partial-pay or full-pay subsidies or vouchers.

The court awarded FHJC $52,300 in compensatory damages for diverted resources and $188,240 for future activities addressing frustration of its mission, for total compensatory damages of $240,540. It also awarded $750,000 in punitive damages based on the defendants’ reckless indifference and failure to correct their policies. The court directed the Clerk to enter judgment and close the case.