The Fair Housing Act and Section 504: What Congress Intended

A. The Fair Housing Act

1. Passage of the Law

While Congress did not prohibit disability discrimination in housing until 1988, it is important to understand the genesis of the antidiscrimination effort that resulted in the passage of the FHA in 1968. The structure and limitations of the FHA provided important lessons to Congress as it substantially revised the law in 1988.

Responding to the African-American civil rights struggle, the urban riots of 1967, and the release of the Kerner Commission report, the 90th Congress considered legislation that would extend the protections of the Civil Rights Act of 1964 to the realm of housing. The assassination of Dr. Martin Luther King Jr. on April 4, 1968, provided the final impetus to move the legislation forward. Final congressional approval came on April 11, 1968, and President Lyndon Johnson signed the bill into law on April 22, 1968. The FHA, also known as Title VIII of the Civil Rights Act of 1968, prohibited discrimination on the basis of race, color, religion, and national origin.

The FHA provides that "[i]t is the policy of the United States to provide, within constitutional limitations, for fair housing throughout the United States."¹ President Johnson reiterated this theme during the bill signing ceremony when he said, "Now, with this bill, the voice of justice speaks again. It proclaims that fair housing for all--all human beings who live in this country--is now part of the American way of life." Despite this lofty prose, it would be 20 years before Congress extended protection to people with disabilities.

By its terms, the FHA applied to a broad range of discriminatory behavior, including the following:

• Refusing to sell, rent, negotiate for, "or otherwise make unavailable or deny" a dwelling.
• Discriminating in the "term, conditions, or privileges of a sale or rental" of a dwelling or in the "provision of services or facilities in connection therewith."
• Making or publishing any discriminatory statement in regard to a sale or rental.
• Misrepresenting the availability of a dwelling.
• Inducing a person to sell or rent any dwelling by representations about the presence of members of a protected class in the neighborhood.
• Discriminating in the access to real estate services.
• Discriminating in housing financing or in financing-related transactions. 42 U.S.C. §3604.

But the FHA's original enforcement scheme was weak. While HUD, state, and local human rights agencies were given the power to hold administrative hearings, they had the power only to investigate and seek to conciliate differences between the parties. Private litigation was authorized in federal courts,² but the relief was limited. Parties could only receive injunctive relief, actual damages, and not more than $1,000 in punitive damages. An award of attorney's fees was permitted only where the court determined that a plaintiff was unable to hire an attorney. As a consequence, individual victims of discrimination often found it difficult to stop discriminatory practices and to collect damages.

2. Legislative History of the Fair Housing Amendments Act of 1988

Soon after passage of the FHA, efforts began in Congress to strengthen its enforcement provisions and to expand its coverage to other "protected classes." After hearing significant testimony about discrimination on the basis of gender, Congress amended the FHA in 1972 to include "sex" as a protected class. Also beginning in the early 1970s, Congressional oversight hearings highlighted how the FHA's weak enforcement mechanism frustrated its lofty purposes.³

In 1978, Congress considered legislation to give HUD greater enforcement power under the FHA, and in 1980, a bill toughening enforcement and expanding coverage to people with disabilities passed in the House of Representatives, but fell prey to a filibuster in the Senate. For most of the next decade, the Administration and Senate leadership opposed comprehensive overhaul of the FHA and no legislation moved forward.

As early as 1983, bipartisan agreement began to form that HUD needed greater powers to enforce the FHA. In his message transmitting fair housing legislation to the Congress, President Ronald Reagan said:

Since its passage, however, a consensus has developed that the Fair Housing Act has delivered short of its promise because of a gap in its enforcement mechanism.

The gap in enforcement is the lack of a forceful backup mechanism which provides an incentive to bring the parties to the conciliation table with serious intent to resolve the dispute then and there. When conciliation fails, the Secretary has no place to go. In those few cases where good will is absent, the exclusive reliance upon voluntary resolution is, in the words of former Secretary Carla Hills, an "invitation to intransigence."

Reform of the Fair Housing Act is a necessity acknowledged by all.⁴

In early 1987, with bipartisan support, the Fair Housing Amendments Act of 1987 was introduced in the House (H.R. 1158) and Senate (S. 558). After hearings, the House Judiciary Committee approved an amended version of the legislation on April 27, 1988.⁵ The chief obstacle to passage concerned the expansive use of HUD administrative hearings as a means of enforcing the rights protected under the FHA. Some scholars believed that such administrative hearings would deny the Seventh Amendment right to a jury trial.⁶

On the House floor, Rep. Hamilton Fish (R-NY), one of the bill's chief sponsors, offered a compromise on the enforcement issue that had been agreed to by civil rights leaders and the National Association of Realtors.⁷ Under the amendment, complainants and respondents in the HUD administrative process would have the option of removing a case to federal court, thereby preserving the right to jury trial. With this obstacle cleared, the bill passed on June 29, 1988, by a vote of 376-23. The Senate passed a similar version of the legislation on August 2, 1988, by a vote of 94-3. By September 13, 1988, with final differences reconciled, the Fair Housing Amendments Act was signed into law by President Reagan.

3. Expanding the Fair Housing Act to Cover Disability and Familial Status

After nearly 20 years of debate, the FHAA expanded the original law to prohibit discrimination on the basis of disability⁸ and "familial status."⁹ These new "protected classes" are entitled to the same level of protection from discrimination as race, color, religion, national origin, and sex.

The FHAA's substantive additions are meant to protect people with disabilities from pervasive discriminatory practices that excluded them from large segments of the residential housing markets. The FHAA was "a clear pronouncement of a national commitment to end the unnecessary exclusion of persons with handicaps from the American mainstream."¹⁰

The FHAA's definition of disability is quite broad:

"(h) 'Handicap' means, with respect to a person--

(1) a physical or mental impairment which substantially limits one or more of such person's major life activities,

(2) a record of having such an impairment, or

(3) being regarded as having such an impairment,but such term does not include current, illegal use or addiction to a controlled substance as defined in section 802 of Title 21."

42 U.S.C. §3602.

This definition includes mental illness, developmental disabilities, physical impairments, persons who test positive for HIV, persons who have AIDS, alcoholics, and persons recovering from addiction to an illegal drug as long as they are not currently using illegal drugs.

In addition to prohibiting discrimination on the basis of disability, the FHAA imposes three other obligations: reasonable accommodation, reasonable modification and design, and construction accessibility requirements.

The FHAA requires housing providers to make reasonable changes, or accommodations, in rules, policies, practices, or services so that a person with a disability will have an equal opportunity to use and enjoy a dwelling unit or common space. Reasonable accommodations may be necessary when someone is applying for housing, during tenancy, or to prevent eviction.

An accommodation can be requested at any time and is considered reasonable if it is practical and feasible and granting it will not impose an undue financial and administrative burden on the housing provider.¹¹ It is clear, however, that providers may have to absorb some cost or administrative inconvenience in providing accommodations.¹² Accommodations that would result in a "fundamental alteration," however, are not required.¹³

The FHAA also requires owners to permit, at the expense of the disabled person, reasonable modifications of existing premises occupied or to be occupied by such person if such modification may be necessary to afford the person full enjoyment of the premises. A landlord may, where it is reasonable to do so, make permission for a modification conditional on the renter agreeing to restore the interior of the premises to the condition that existed before the modification, reasonable wear and tear excepted.¹⁴

Finally, the FHAA requires that most multifamily buildings that are first occupied after March 15, 1991, meet certain adaptability and accessibility requirements.¹⁵ Covered buildings (ground floor units in a building without an elevator and all units in a building served by an elevator) must include the following:

• A building entrance that is wide enough for a wheelchair and accessed via a route without steps.
• Accessible public and common-use areas.
• Doors that allow passage by a person using a wheelchair.
• An accessible route into and through all covered units.
• Light switches, thermostats, and other environmental controls in accessible locations.
• Reinforcements in bathroom walls for later installation of grab bars.
• Kitchens and bathrooms that allow a wheelchair to maneuver about the space.

4. The Administrative Enforcement Process

A victim can file an administrative complaint with HUD;¹⁶ these complaints must be filed within one year of the alleged violation. Under the FHA, HUD can delegate its enforcement authority to a state or local agency whose laws are "substantially equivalent" to the FHA. As a result, HUD refers most administrative complaints to such entities, which are also known as FHAPs, because they are recipients of federal enforcement funding under the Fair Housing Assistance Program.¹⁷ The time frames for filing complaints with FHAP agencies may be as short as 180 days.

As amended in 1988, the FHA provides that any person aggrieved by a discriminatory housing practice may file a complaint with HUD. The HUD Secretary is required to complete an investigation of such complaints "within 100 days after the filing of the complaint...unless it is impracticable to do so."¹⁸ Once these complaints are deemed filed and "perfected,"¹⁹ an investigation ensues and the complaint is processed to conclusion in one of several ways: (1) administrative closure; (2) pursuant to a conciliation or settlement between the complainant and respondent; (3) a finding that no reasonable cause existed to believe discrimination occurred (hereafter, a "no cause" case); or (4) a finding of reasonable cause to believe discrimination had occurred (hereafter, a "cause" case).

By statute, HUD and FHAPs must attempt to bring complainants and respondents together in an attempt to conciliate fair housing complaints.²⁰ Although such conciliation is voluntary (and either side may refuse to conciliate without prejudicing its case), many parties choose this route because it is comparatively inexpensive and quick compared with an administrative hearing or litigation. HUD devotes a chapter of its intake manual to the mechanics of conciliation.²¹

If conciliation fails, HUD (or the FHAP) continues its investigation and eventually must determine whether there is reasonable cause to believe that discrimination has occurred.

If HUD finds cause, the Secretary "shall...immediately issue a charge on behalf of the aggrieved person_,"²² who then has the option to have the matter decided by an administrative law judge or by a federal court. In either setting, the complainant is entitled to representation by a government lawyer.

After a contested hearing (before an administrative law judge or a federal court), a respondent who is found liable for discrimination can be ordered to stop illegal activity, pay compensatory damages, and pay punitive damages (in a court proceeding) or a civil penalty of up to $55,000 (in a proceeding before an administrative law judge).

5. Other Enforcement Options

In addition to strengthening administrative enforcement by HUD and FHAPs, Congress provided "an improved system for civil action by private parties and the Attorney General."²³ The FHAA extended the statute of limitations from 180 days to two years and made it clear that victims of discrimination were not required to go through the administrative complaint process or to exhaust administrative remedies. The FHAA also removed the $1,000 limit on the award of punitive damages because Congress "believe[d] that the limit on punitive damages served as a major impediment to imposing an effective deterrent on violators and a disincentive for private persons to bring suits under existing law."²⁴

The FHAA, while continuing the Justice Department's "pattern and practice" jurisdiction, also gave the Attorney General authority to commence zoning or other land-use cases referred by HUD, to commence breach-of-conciliation cases referred by HUD, and to enforce subpoenas. Congress also gave the Attorney General the power to seek monetary damages for aggrieved parties and to seek civil penalties up to $100,000.

6. Private Fair Housing Enforcement Agencies

Private fair housing enforcement agencies have played an increasingly important role in vindicating the rights protected by the Fair Housing Act. Some, but not all, of these groups are supported financially through the Fair Housing Initiatives Program (FHIP), which was established in 1987 to provide funding to public and private entities formulating or carrying out programs to prevent or eliminate discriminatory housing practices. Through four distinct categories of funding, FHIP supports projects and activities designed to enhance compliance with the FHA and substantially equivalent state and local laws prohibiting housing discrimination. These activities include programs of enforcement, voluntary compliance, and education and outreach.

The day-to-day work of private fair housing groups involves education and outreach, complaint intake, assessment, investigation, testing, conciliation, and, in some cases, litigation. The existence of such organizations and their willingness to engage in aggressive advocacy has been a significant factor in protecting the rights of people affected by discriminatory practices. One measure of their effectiveness is the amount of compensation won for victims of discrimination. During the 1990s, these groups secured well over $160 million in compensation through FHA litigation.²⁵

B. Section 504 of the Rehabilitation Act of 1973

1. Initial Passage of the Law

In 1973, Congress reenacted the Rehabilitation Act,²⁶ which had been the federal legislative vehicle for providing rehabilitation services to people with disabilities. The law was first enacted to help veterans returning from World War I, and Congress continued to expand and amend the law to address more than the health care needs of disabled veterans.²⁷ People with disabilities had engaged in civil disobedience during the Depression; they had established self-help groups during the 1950s; and organizations of parents created diagnosis-identified organizations, such as the United Cerebral Palsy Association, and the Muscular Dystrophy Association, in the 1940s and 1950s. Pressure from these groups resulted in the creation of a Federal Bureau for the Handicapped, which, in 1970, began providing funds to train special education teachers.²⁸

During the civil rights activity of the 1960s and 1970s, disability activists adopted and adapted civil rights philosophy to their own lives and began an independent living movement that identified barriers as civil rights violations rather than medical problems. In 1973, Congress decided to address negative public attitudes toward people with disabilities by adding civil rights protections to the Rehabilitation Act. They modeled the protections on the 1964 Civil Rights Act.²⁹ The notion wasn't entirely new because, in the previous year, Senator Hubert Humphrey and Representative Charlie Vanik had tried to convince their colleagues to include the word "handicapped" in Title VI of the 1964 Civil Rights Act.³⁰

President Gerald Ford finally agreed to a revised version of the bill after several failed attempts to win support from his as well as Richard Nixon's Administration, although he remained convinced that the cost of the programs would be excessive. The 1973 Rehabilitation Act included language that was nearly identical to that in the Civil Rights Act: "No otherwise qualified handicapped individual in the United States shall, solely by reason of his handicap, be excluded from participation in, be denied the benefits of, or be subjected to discrimination under any program or activity receiving federal financial assistance."

2. Congressional Intent

After Congress had added civil rights language to the Rehabilitation Act in 1973, it held hearings and amended the Act extensively in 1974. One of the most important amendments was to expand the definition of those covered by the law from those whose condition caused "a substantial handicap to employment" to a much broader definition of disability that was not limited to employment.³¹ That definition was reflected in Health, Education, and Welfare's (HEW's) regulations:

Handicapped persons means any person who (i) has a physical or mental impairment which substantially limits one or more major life activities, (ii) has a record of such an impairment, or (iii) is regarded as having such an impairment.³²

Another amendment resulted from the New York City Welfare Department's refusal to make its buildings and programs accessible and usable by welfare beneficiaries with disabilities. The Welfare Department said it had followed HEW's advice and modeled itself on the Social Security Administration. Both agencies were in buildings with stairs, had no materials in braille or on tape, and did not provide clients with sign language interpreters.

The Social Security Administration's position was that Section 504 applied only to recipients of federal funds, not to the Federal Government itself. President Jimmy Carter responded by submitting legislation to Congress that resulted in the 1978 amendment to Section 504,³³ making its prohibitions equally applicable to entities that were "assisted by federal financial assistance" and that were "conducted by an Executive agency or by the United States Postal Service."

The 1978 amendments also responded to critics who complained that Section 504 went too far. As a result, the 1978 amendments preclude coverage of those whose current use of alcohol or drugs prevents the person from performing the duties of the job in question or whose employment would constitute a threat to the property or safety of others.

In addition, the 1978 amendments added several sections to the Rehabilitation Act. Section 505 makes the enforcement provisions of Title VI of the Civil Rights Act of 1964 applicable to Section 504. It permits attorneys' fees in court proceedings. Section 506 makes technical assistance for the removal of architectural, transportation, and communication barriers available, as well as making federal funds available for the removal of such barriers. Section 507 creates the Interagency Coordinating Council to oversee and coordinate federal agency activities. The agencies named are Education, Health and Human Services, Labor, Department of Justice, Office of Personnel Management, Equal Employment Opportunity Commission, and the Access Board.

Congress amended Section 504 again in 1985 to clarify that, contrary to the Supreme Court decision in Atascadero v. Scanlon,³⁴ Congress did intend that states could be sued under the Rehabilitation Act, and that they were not protected by 11th Amendment immunity. In 1987, Congress amended the law once again through the Civil Rights Restoration Act.³⁵ This amendment, also in response to a Supreme Court decision,³⁶ clarified that the definition of a "recipient of federal funds" included more than the business offices that handled the funds; rather, all the offices and programs of the recipient entity had to comply with the law. Thus, a mayor's Office of Housing that received federal funds would be required to comply with Section 504 through its housing development, redevelopment, code inspection, and other activities.

3. History of HUD's Section 504 Regulations

In spite of Section 504's passage in 1973, HEW's publication of model regulations in 1977, and the NCD's repeated recommendations to HUD that it issue its own Section 504 regulations,³⁷ HUD did not issue final regulations until June 1988. HUD was the last Executive agency to issue final regulations, and its ability to enforce the rights of individuals with disabilities in the housing and community development fields was compromised by their absence. The history of the regulations began simply enough, but quickly became mired in politics and philosophical disputes.

Pursuant to Executive Order 11914, HEW published its model Section 504 regulations in 1977. The Executive Order not only required HEW to publish the regulations, but it required all federal agencies to issue their own regulations expeditiously. HUD acted quickly and published its proposed rule for public comment in 1978. The regulations were still in their proposed form when President Reagan entered office in 1980.

One of the Reagan Administration's first acts was to require all agencies whose Section 504 regulations were pending to withdraw them. In July 1981, HUD published a Notice in the Federal Register notifying all recipients of HUD funds that they were to comply with Section 504. Because HUD had no regulations, the Notice advised recipients to rely on HEW's regulations for guidance.³⁸ In August 1981, HUD published a Notice in the Federal Register announcing that it was revising the proposed rules and they would be published soon.³⁹ HUD published this Notice because Paralyzed Veterans of America had sued Secretary Samuel Pierce for HUD's failure to issue regulations.

Neither of these Notices helped HUD enforce Section 504. In fact, some field offices told complainants that HUD could not investigate their complaints because of the absence of regulations, while other offices conducted investigations and negotiated relief for complainants. FHEO ceased conducting compliance reviews when HUD's Office of General Counsel advised it not to because the Department would not enforce the findings from complaint investigations without final regulations.⁴⁰ FHEO urged the Office of General Counsel to request an opinion from the Department of Justice as to HUD's authority to enforce Section 504. By a letter dated February 5, 1987, the Department of Justice confirmed that HUD did have the authority to conduct and enforce the findings resulting from both complaint investigations and compliance reviews, by relying on HUD's Title VI regulations for administrative hearings; by referring cases to the Department of Justice when the parties were unwilling to participate in administrative hearings; and by relying on the Health and Human Services (HHS, formerly HEW) Section 504 regulations.⁴¹

Meanwhile, HUD drafted and attempted to publish revised Section 504 regulations. On May 6, 1983, HUD published Interim Final 504 Regulations, which it republished on May 18, to become final on June 15. These regulations drew immediate and vociferous criticism for insulting people with disabilities, for being inconsistent with the model regulations, and for skirting the public comment requirements of the Administrative Procedures Act. A group of twenty public interest, religious, labor, and civil rights organizations met with HUD representatives and described the most egregious problems they found with the regulations. The groups also complained to the White House, and HUD announced on June 15, 1983, that the regulations would be treated as proposed rules and that it would accept public comments until September 6.⁴²

Of the 1,258 comments that HUD received, only 11 were favorable. HUD sent a revised version of the rules to the Department of Justice, where the Civil Rights Division raised further questions.⁴³ Finally, five years later, after Congress had revised the FHA to prohibit discrimination based on disability (among other changes) and after HUD had begun drafting regulations to implement the law, HUD published final Section 504 regulations on June 2, 1988.

Among the most contentious of the proposed regulations was one that permitted housing providers and managers to ask medical and social service staff whether a housing applicant with disabilities would be likely to diminish other tenants' enjoyment of the premises by adversely affecting their health, safety, or welfare or the physical environment or financial stability of the assisted housing. These questions did not apply to applicants without disabilities. Another section announced that HUD would prohibit only intentional discrimination, in spite of HEW, Department of Justice, and Supreme Court⁴⁴ guidance that Section 504 prohibited unintentional discrimination as well. Finally, while HUD officials were still insisting that 5 percent accessibility for new construction was adequate, Congress had already required 100 percent adaptability in new construction in the FHA.⁴⁵

4. HUD's Final Section 504 Regulations

While HUD's final Section 504 regulations differ from HEW's model regulations, they are more similar than different. HUD removed many of the provisions from the proposed rule that caused the loudest uproar. The final regulations do not permit housing providers to determine if applicants or tenants are capable of "independent living."⁴⁶ Further, the regulations prohibit both intentional discrimination and discrimination by effect.

Unfortunately, HUD retained the 5 percent accessibility standard for new construction and imposed only limited responsibility on recipients who contract with others for the provision of housing. Thus, for example, public housing authorities were not required to ensure that their rental subsidies entitle tenants in private housing to the same level of accommodation as tenants living in public housing property. This created an internal inconsistency in the regulation, because the provision that HUD adopted from the HEW model prohibited recipients, such as housing authorities, from entering into contracts that have the effect of "subjecting qualified handicapped persons to discrimination on the basis of handicap."⁴⁷

5. The Administrative Enforcement Process

HUD adopted the Title VI administrative enforcement process, as the HEW regulations had also done. Section 8.56 describes the method by which HUD may review a recipient's compliance with the regulations. HUD may initiate compliance reviews without reason, on a periodic basis, or because of a complaint or any evidence that the recipient is not following the regulations. HUD must notify the recipient of the compliance review, the timing of the on-site visit, which programs will be reviewed, and when the recipient will have an opportunity to respond to any findings. In addition to FHEO investigations, Section 8.56 requires program grant officials to review the recipient's compliance with Section 504 in the normal course of the grant management. If the compliance review is prompted by information of noncompliance, the review shall be conducted promptly.

In 1996, HUD published regulations (24 CFR Part 180) that describe the agency's consolidated hearing procedures for all civil rights matters, including Section 504. Any person who believes that she or he has been subjected to discrimination may file a complaint or may ask a representative to file a complaint. Such a person is not a party in the proceeding but may file a motion to intervene within 50 days of the filing of a charge. Members of a class of people who believe they have been subjected to discrimination may file a complaint for the class. The complaint must be filed within 180 days of the act of discrimination, although this time limit may be waived for good cause, and the contents of the complaint, according to Section 8.56 8(5), may be minimal. Recent changes in the complaint intake system have retitled such complaints "claims," and complaints will be accepted only after FHEO conducts an initial interview with the "claimant." (See Fair Housing Act discussion in Section III for a fuller description of the intake process.)

HUD is to notify complainants and recipients within 10 days of its receipt of the complaint. Twenty days thereafter, HUD is to determine whether the agency will accept the complaint. FHEO is to notify both the respondent and the HUD award official of the allegations, so that the respondent may reply within 30 days after service of the charge. Whenever possible, HUD officials are to attempt to resolve complaints informally. Within 120 days of the receipt of the complaint and failure to resolve the complaint informally, FHEO is to issue a Letter of Findings (LOF). The LOF must describe the violation, the remedy, a notice that the final investigative report is available, and a right to respond to the LOF by any party within 30 days. HUD is to respond to comments by parties within 20 days, and the reviewing civil rights official has 60 days in which to sustain or modify the LOF.

If neither party requests that HUD review the LOF, HUD must send a letter of compliance or noncompliance to the parties and to the HUD award official within 14 days after the respondent has been notified of his or her right to review. HUD shall continue efforts to resolve the complaint informally, and any agreements that this process produces shall be memorialized in a Voluntary Compliance Agreement (VCA). The regulations also prohibit retaliation and intimidation against complainants. HUD will treat complaints about either as new complaints.

If a VCA is not possible, an administrative hearing must commence 120 days after the issuance of a charge. Federal rules of evidence apply at the hearing. The hearing is held before an administrative law judge (ALJ), who must issue his or her initial decision within 60 days of the hearing. An ALJ may award a range of benefits, which include the following:

• Ordering the respondent to pay damages (including damages caused by humiliation and embarrassment).
• Injunctive relief.
• A civil penalty to vindicate the public interest for each separate and distinct discriminatory housing practice. Civil penalties may not exceed $11,000 for a first offense, $27,500 for a second offense, and $55,000 if the respondent has two or more prior offenses.

If the ALJ finds that the respondent is responsible for a housing-related hate act, the ALJ takes this into account in favor of imposing the maximum penalty. Such an act is described in Section 818 of the FHA as a discriminatory housing practice that constitutes or is accompanied and characterized by actual violence, assault, bodily harm, or harm to property; intimidation or coercion that has such elements, or the threat or commission of any action intended to assist or be a part of any such act. Of course, if the ALJ determines that the respondent did not violate the law, he or she must dismiss the charge.

The ALJ's initial decision becomes the final agency decision if the Secretary does not alter it within 30 days. The Secretary may affirm, modify, or set aside in whole or in part the ALJ's initial decision or remand the case for further proceedings. Any adversely affected party may file a motion with the Secretary asking for modification or for setting aside the ALJ's initial decision within 15 days after the ALJ issues it. A statement of opposition to such a petition for review is due 22 days after the ALJ's initial decision. If the Secretary chooses to remand the case, the ALJ must issue another initial decision on remand within 6 days of the Secretary's remand. HUD must publicly disclose each final agency decision.

If the ALJ's initial decision provides for suspension of, termination of, refusal to grant, or refusal to continue federal financial assistance, it must be approved by the Secretary. Reasonable attorney fees and costs may be awarded to the prevailing party (except that no such award may be made to HUD if the agency is the prevailing party). Any party adversely affected by a final decision may file a petition for review in the U.S. Court of Appeals under 42 U.S. Code section 3612(i) within 30 days. Termination of or refusal to grant or to continue federal financial assistance is subject to judicial review.

If voluntary compliance is not possible, HUD may follow the procedures for terminating federal financial assistance. Other compliance methods, however, include referral to the Department of Justice with recommendations to proceed to litigation, initiation of debarment proceedings (which may result in a recipient becoming temporarily or permanently ineligible to receive HUD grants or contracts), and proceedings under state and local law (see Section 8.57).

As with all other civil rights statutes dependent on a link to federal funding, HUD may not terminate funding before a final attempt to resolve the complaint informally is exhausted; an express finding is made on the record, after a hearing; the Secretary has approved the termination; and the Secretary has notified the relevant House and Senate committees and has given them 30 days to review the proposed termination of funds.⁴⁸

Special rules apply when HUD proposes to terminate Community Development Block Grant funds. In that case, HUD must notify the governor or the executive of the local government and ask him or her to attempt to secure compliance. HUD must provide this notice at least 60 days before suspending, refusing to grant, or terminating the HUD funds.

Either HUD or the recipient may request a hearing (see Section 8.58). Hearings will be held in Washington, D.C., by an ALJ. The respondent has the right to be represented by counsel. Title V controls the conduct of the hearing (see 29 U.S.C. Sections 554-557). Technical rules of evidence do not apply, but the parties may be required to produce documents, including exhibits, affidavits, depositions, and admissions (see 24 CFR Section 8.67).

The ALJ issues a recommended decision to the Secretary. Either party may file objections to the judge's decision with the Secretary. The Secretary then issues a final decision (see Section 8.69). The Secretary's final decision may require termination or denial of federal financial assistance or may impose other penalties. At any time, the Secretary may restore the recipient to full eligibility to receive federal funds if the Secretary is satisfied that the recipient has brought or will bring itself into compliance (see Section 8.59).

Subpart E of the regulations elaborates on the practice and procedure for the hearings. All records are to be public. The general counsel is to be a party to all proceedings. The ALJ will accept amicus curiae participation, but not as a party. Complainants are not allowed to be parties but may participate as amici curiae and may, in all events, be present at the hearing (see Section 8.628).

C. The Role of Federal, State, and Local Agencies in the Fair Housing Act Enforcement Process

1. Introduction

From passage of the FHAA in 1988 through FY 1993, the number of HUD Title VIII complaints more than doubled, but the average age to closure of HUD cases rose only slightly, from 96 days in FY 1989 to 113 days in FY 1993. During the next two years, even as fewer complaints were being received, processing times skyrocketed. By FY 1995, the average age to closure of a HUD case was 269 days.

During FY 1996, HUD modified the way in which housing discrimination complaints were received by the agency. Acting on recommendations from PriceWaterhouse,⁴⁹ the agency instituted a new procedure, by which it accepts "claims" of discrimination from aggrieved parties. These claims do not mature into "complaints" until they contain sufficient information to allow HUD to commence an investigation. While some claims of discrimination are determined to be complete upon receipt, and therefore are accepted as complaints, beginning in FY 1996, the number of complaints received by HUD declined precipitously as the number of claims rose dramatically.

In the spring of 2001, acknowledging that the claims process had failed to improve quality or case processing times, HUD scrapped the claims process altogether.⁵⁰ In its place, HUD appears to be reverting to an older process of determining initial jurisdiction and developing allegations of discrimination into complaints.⁵¹ Because the change in policy is relatively new and HUD has not provided Title VIII data beyond FY 2000, it is impossible to gauge the effect of this new approach.

2. The Claims Process

In its 1996 Report to Congress, HUD described the claims process as follows:

For purposes of this report, the key change is that FHEO no longer regards every inquiry made as a "complaint" triggering a full-fledged investigation....[Initially], the case is considered a "claim" and undergoes some preliminary investigation involving only the complainant and independent sources of information. Many cases drop out at this "claim" stage for a variety of reasons. For instance, the complainant may provide information indicating that the matter is really a landlord-tenant dispute rather than a fair housing dispute. Cases which survive this "claim" stage are considered "complaints" and receive full investigations, which result in a determination by FHEO as to whether there is or is not reasonable cause to believe the [Act] was violated.⁵²

The claims process was designed to streamline intake and to ensure that HUD devoted its scarce resources to cases that merited full investigation.⁵³ In addition to eliminating allegations that weren't covered by Title VIII, the claims process also screens out cases in which a claimant alleges discrimination but cannot establish one of the elements of jurisdiction.⁵⁴ In its first full year of operation (FY 1997), the new process had a dramatic impact: 69.5 percent of all closures were dismissed as claims.⁵⁵ That pattern has persisted in subsequent years: for FY 1998 through FY 2000, closures of claims represented 77 percent, 74 percent, and 71 percent, respectively, of all HUD closures.⁵⁶

The claims procedure had the inherent possibility of delaying resolution of fair housing cases. Time spent processing a claim did not count toward the 100 days in which FHEO is mandated to complete its investigation.⁵⁷ As a result of concerns about the timeliness issue, in May 1997, FHEO established a new time frame of 25 days for assessing claims and determining whether they would be converted to complaints or dismissed. Unfortunately, staffing and management reductions at FHEO have meant that many housing field offices (HUBs), or regional offices created by HUD, are failing to complete the assess process on time.⁵⁸

3. HUD Conducts Its Fair Housing Act Responsibilities Through 10 Regional Offices

For purposes of administering its responsibilities under the FHA, HUD has designated 10 HUBs, or regional offices:

Region 1: Boston
Connecticut, Maine, Massachusetts, New Hampshire, Rhode Island, and Vermont

Region 2: New York
New Jersey and New York

Region 3: Philadelphia
Delaware, District of Columbia, Maryland, Pennsylvania, Virginia, and West Virginia

Region 4: Atlanta
Alabama, Florida, Georgia, Kentucky, Mississippi, North Carolina, South Carolina, Tennessee, and Puerto Rico

Region 5: Chicago
Illinois, Indiana, Michigan, Minnesota, Ohio, and Wisconsin

Region 6: Ft. Worth
Arkansas, Louisiana, New Mexico, Oklahoma, and Texas

Region 7: Kansas City
Iowa, Kansas, Missouri, and Nebraska

Region 8: Denver
Colorado, Montana, North Dakota, South Dakota, Utah, and Wyoming

Region 9: San Francisco
Arizona, California, Hawaii, and Nevada

Region 10: Seattle
Alaska, Idaho, Oregon, and Washington

4. Recent History of HUD Enforcement of Title VIII

Throughout the 1990s, numerous reorganizations and special initiatives at FHEO complicated the task of enforcing fair housing rights through the Title VIII complaint process. Three of these deserve special mention: (1) the devolution of decision making from Headquarters FHEO to HUB directors; (2) HUD's reallocation of resources in FY 1997 and FY 1999 to emphasize "hot cases"; and (3) HUD's preoccupation from FY 1997 through FY 2000 with "doubling enforcement actions."

a. Devolution of Authority to HUBs

From FY 1989 until FY 1992, although HUBs conducted Title VIII investigations, HUD's Office of General Counsel (OGC) retained the authority to make determinations about whether cause existed to believe that discrimination had occurred. Thereafter, authority was transferred to Headquarters FHEO, with OGC concurrence required for every cause finding. This arrangement resulted in significant tension between FHEO and OGC staff, which has existed almost to the present time.⁵⁹ By FY 1994, HUBs were invested with authority to make recommendations for cause or no cause findings in most cases, but all these decisions were reviewed by Headquarters FHEO.

In early FY 1996, Deputy Assistant Secretary Susan Forward began to devolve full authority over cause and no cause decisions to the HUBs, and the HUBs have retained this authority up to the present.

In the early stages of devolution, Headquarters FHEO maintained strict performance standards for HUB directors. By FY 1997 and FY 1998, however, FHEO had lost some of its most capable managers and with them the ability to ensure quality control and a modicum of uniformity in practice among the 10 HUBs. As a consequence, significant differences among HUBs have emerged on such critical areas as numbers of complaints processed, proportion of cases with cause findings, and age of cases.⁶⁰ As a result of HUD's most recent reorganization (See Section VI) and the general devolution of authority to the HUBs, Headquarters FHEO has effectively divested itself of responsibility for oversight of the HUBs. The purported benefits of this devolution have been outweighed by the absence of a Headquarters FHEO office charged with reviewing the national enforcement landscape and assessing whether individual HUBs are doing their part to reach the goals outlined in HUD's Strategic Plan and Business Operation Plan (see Section VI).

One of the major findings of this report is that HUD has been slow to understand the ill effects of devolution and even slower to attempt to remedy them.

b. Hot Cases

As part of its effort to raise the visibility of the agency, HUD embarked in FY 1997 on a campaign to identify and publicize fair housing cases where HUD intervention resulted in visible and newsworthy relief to victims of discrimination. As a consequence, resources in many HUBs and at Headquarters were diverted to such "hot cases." Secretary Andrew Cuomo took a keen personal interest in this campaign, directing his staff to review HUB complaint logs regularly to identify hot cases and personally participating in many press conferences announcing the filing or settlement of complaints. During the initiative, HUB staff were required to send weekly hot case reports to Headquarters, to expedite investigations, and to participate in regular conference calls and media events. Known at Headquarters as "the drumbeat," Secretary Cuomo's effort resulted in almost daily press releases designed to portray the agency as very active in fighting discrimination. While most of these cases involved individuals who had been subjected to outrageous behavior by landlords or neighbors, a small number of the hot cases also dealt with systemic issues, such as alleged lending discrimination. HUD's March 1998 settlement with Texas-based AccuBanc is one such example.⁶¹A principal result of the hot case initiative was the diversion of the most skilled intake workers and investigators from existing cases to hot cases. During more than three years of the campaign, FHEO enforcement staff actually declined by 9 percent,⁶² and the average age of HUD cases increased from 350 to 497 days.⁶³ The hot case approach produced some major public victories, especially in the lending industry, which FHEO had not targeted before. But it also had a measurably negative impact on the routine enforcement business of HUD because of its decision to supplant the day-to-day enforcement rather than to supplement it with additional resources for hot cases.

c. Doubling Enforcement Actions

Beginning in FY 1997, as part of the President's Initiative on Race, HUD committed itself to "doubling enforcement actions" by FY 2000.⁶⁴ HUD defined enforcement actions as "issuance of a charge by HUD or referral by HUD to the Department of Justice for enforcement."⁶⁵ By early in FY 1998, HUD was actively soliciting comments about how its funding programs could incorporate incentives to support the doubling initiative.⁶⁶ Later in the same year, evidence began to emerge that the enforcement strategies of FHIP-funded agencies were being affected by the initiative.⁶⁷ HUD reported early success for the initiative.⁶⁸ The National Council on Disability issued a cautiously optimistic note in responding to the initiative:

Also as part of [the President's Initiative on Race], the President proposed and Congress approved a significant expansion in the Department of Housing and Urban Development's (HUD's) fair housing enforcement budget for Fiscal Year (FY) 1999. The approved budget for fair housing programs was $40 million, up from $30 million in FY 1998. NCD commends the President and Congress for recognizing the need to expand fair housing enforcement. NCD recommends that HUD use the increase in appropriations for fair housing to expand its enforcement of the Fair Housing Act and Section 504 of the Rehabilitation Act on behalf of people with disabilities. To the extent that HUD will be doubling enforcement efforts under the Fair Housing Act, for example, NCD recommends that HUD's efforts under Section 504 also be doubled."⁶⁹

By 1999, however, critics such as the Citizens' Commission on Civil Rights began to express concern about the initiative, particularly with respect to its impact on HUD's ability to process Title VIII complaints.⁷⁰

As part of the review of HUD's enforcement of Title VIII, NCD requested information from HUD about the doubling initiative. While HUD did not provide detailed data, it supplied a summary chart purporting to show that the agency had not only doubled its enforcement actions but had actually increased them by 135 percent. On its chart, HUD displays the following caption: "2,922 Enforcement Actions (135 percent of goal attained) after 51 months (100 percent of time) as of December 31, 2000." Chart III-1 summarizes HUD's data from its doubling effort:

Chart III-1

[D]

Even a quick analysis indicates that HUD was not comparing apples to apples when it made its claim that it had exceeded its doubling objective. During the base period (FY 1993-FY 1996), HUD counted only charges and referrals to the Department of Justice, which totaled 1,085 "enforcement actions." Had it used only these two categories for the comparison period (FY 1997-December 31, 2000, a total of 51 months, or 3 months longer than the base period), it would have had only 885 enforcement actions, a reduction of 18 percent compared with the base period figure.

Only by counting other categories, such as temporary restraining orders (TROs), agreements, nonclaimants, and unfiled criminal--none of which fit the agency's initial definition of enforcement actions,⁷¹--could HUD have concluded that it had met or exceeded its target.

NCD interviewed several senior HUD staff members about the effect of the doubling effort on routine intake and investigation of Title VIII and Section 504 complaints and compliance reviews. They were very frank in their response that the doubling initiative had diverted resources away from the agency's core enforcement functions and that Section 504 work had essentially ground to a halt during the initiative.⁷²

5. State and Local Fair Housing Agencies

Even before the FHAA, Congress had directed that states and localities with fair housing laws deemed "substantially equivalent" to the FHA, in terms of substantive coverage and enforcement provisions, were to handle their own administrative hearings. The Fair Housing Assistance Program (FHAP) is authorized by the FHA,⁷³ which permits the Secretary to use the services of responsible state and local agencies in the enforcement of fair housing laws and to reimburse these agencies for services rendered to assist HUD in carrying out the FHA.

Eligible grantees are state and local enforcement agencies administering statutes that HUD has certified as substantially equivalent to the federal statute. Funding is provided to substantially equivalent state and local agencies under FHAP to assist them in carrying out activities related to the administration and enforcement of their fair housing laws and ordinances. Such activities include complaint processing, training, implementation of data and information systems, and other special projects specifically designed to enhance the agency's administration and enforcement of its fair housing law or ordinance.

When Congress amended the FHA in 1988, 36 states and 76 local agencies had been certified by HUD as being "substantially equivalent."⁷⁴ Recognizing that a transition period was necessary to allow these jurisdictions to amend their laws to conform to the FHAA changes, Congress extended the authority of then-certified agencies to continue to handle housing discrimination complaints, but Congress directed HUD to retain jurisdiction over complaints involving handicap and familial status where state and local laws did not provide protection on those bases. By September 13,1992, the end of the transition period, the number of certified agencies declined dramatically, as states and localities failed or refused to modify their laws to conform to the FHAA.⁷⁵ As of March 2001, HUD had certified 32 states,⁷⁶ the District of Columbia, and 53 localities⁷⁷ as having substantially equivalent laws.

Since FY 1980, HUD has provided financial assistance to state and local "substantially equivalent" agencies through FHAP to support complaint processing, training, technical assistance, data, and information systems and to provide incentives for states and localities to assume greater responsibility for administering fair housing laws. State and local agencies (often referred to as FHAPs) are reimbursed on a formula based on the number of fair housing complaints they handle.⁷⁸

Except under unusual circumstances,⁷⁹ a complaint filed with HUD will be routinely referred to a state or local agency that HUD has certified as substantially equivalent. A complainant has little or no influence over this decision, and his or her complaint is effectively confined within the state or local FHAP system, with all the advantages and disadvantages of the track record of that particular FHAP agency. In states or localities that do not have FHAPs, HUD retains responsibility for processing claims and complaints.

Table III-1 provides information about where a complaint is likely to be processed. It demonstrates that FHAP agencies have processing authority for complaints in states and localities covering roughly 79 percent of the U.S. population and that HUD has processing authority over approximately 21 percent. These relative responsibilities should be borne in mind as the reader reviews the data, findings, and recommendations in this report.

Table III-1: FHAP Regional Agencies