Apartment owners likely targets for jurisdictions seeking to close budget shortfalls.
Throughout 2012, state and local lawmakers will propose thousands of measures that will directly impact the financial bottom line and business operations of NAA members nationwide.
While NAA actively monitors over a hundred policy issues state and local budgets, fair housing and employment protections for convicted criminals, bed bugs, and immigration are high priority issues which NAA staff will be closely watching during 2012.
Budgets
Although state revenue collections still remain well below pre-recession levels, the tide seems to be turning as fewer states report facing new budget gaps in 2012. Collections in most states have stabilized or are growing. However, volatility in global markets has put a strain on predicted economic growth on the home front.
Despite closing cumulative budget gaps of more than $500 billion over the past four years and positive signs of revenue growth, balancing budgets will remain among the top agenda items of state lawmakers.
Exacerbated by sharp reductions in federal and state aid, local governments nationwide are likewise grappling with cumulative budget shortfalls that analysts say could reach beyond $83 billion during 2012.
Continued pressure on state and local government finances will force lawmakers at both levels to explore all options for balancing budgets. Those options are likely to include fee increases for public services—including water and trash removal—and the expansion of existing taxes to currently untaxed goods and services.
Examples of legislative deficit-reduction tactics specifically targeting the apartment industry include proposals to tax rent payments as a shelter service (Arizona and Alaska currently permit localities and municipalities to tax residential rent payments); special assessments on individual apartment communities to cover “fair share” costs of life safety services; and fee-based rental property inspections programs.
Criminal Background Checks
Lawmakers in an increasing number of cities and states are considering legislation that would prevent inquires concerning criminal charges and convictions from appearing on employment and rental housing applications.
While some proposals have aimed to make individuals with criminal records a fully “protected class”—thus banning employers and rental housing providers from considering applicants’ criminal backgrounds in any manner—more limited protections actually became law in 2011.
For example, Hawaii, Massachusetts and the city of Philadelphia now prohibit private employers from making any inquiry that aims to determine whether an applicant has been charged with or convicted of a crime until after an initial assessment of the individual’s qualifications has been conducted, such as a first interview.
According to the Reentry Council of San Francisco— an organization dedicated to the societal reintegration of individuals exiting correctional facilities—four cities and one county in two states, Illinois and Wisconsin, “prohibit discrimination against individuals with an arrest or criminal conviction record in housing.” Similar proposals are currently being considered by lawmakers in other states including New York, and draft proposals have been circulated in Seattle and San Francisco but are currently in limbo.
Legislative proposals that prohibit rental housing providers from exercising strict due diligence in all aspects of potential employee and resident screening impose unnecessary and costly impediments to the application process, recklessly endanger the safety of apartment personnel and residents, including children, and expose rental housing owners to legal liability.
Bed Bugs
In 2011, Arizona became the third state in the nation—after Maine and New York—to pass statewide bed bug legislation. The Arizona law enumerates landlord and tenant duties regarding bed bug situations while additionally providing legal liability protection for landlords.
State legislators in Alabama, Connecticut, Massachusetts, New Hampshire, New Jersey, North Carolina, Ohio and Pennsylvania also considered, but did not enact, bed bug legislation this past year. In Illinois, a working group has been created and is tasked with making recommendations to the state legislature regarding preventing and eradicating bed bugs.
Given the rise in national media attention surrounding bed bug infestations, NAA anticipates that state and local lawmakers will continue pushing to address the issue legislatively for the foreseeable future.
Further, in August HUD issued guidelines delineating landlord/tenant bed bug responsibilities and protocols within federally assisted/insured properties.
These guidelines have already affected the legal arena surrounding this issue. NAA will continue to monitor any effects the guidelines may have on state legislation.
Immigration
Under the U.S. Constitution, Congress has primary authority to enact immigration law. Until recently, courts have ruled that state and local attempts to regulate immigration are unconstitutional by citing the Constitution’s “Supremacy Clause.”
On May 26, the U.S. Supreme Court upheld an Arizona immigration law that targets employers. The Court’s ruling in Chamber of Commerce v. Whiting upheld the Legal Arizona Workers Act of 2007, which requires the use of the federal E-Verify system to check immigration status and allows the state the revoke an employer’s business license if it repeatedly hires undocumented immigrants.
Only two weeks after the Whiting ruling, the Supreme Court voided the much publicized Hazelton v. Lozano ruling handed down by the Third U.S. Circuit Court of Appeals. The town of Hazleton, Pa., enacted a law to punish employers who hire undocumented immigrants as well as landlords who knowingly or recklessly rent to them.
The appellate court ruling had blocked the implementation of this ordinance using a Supremacy Clause analysis; however, the Supreme Court has sent the case back to the Third Circuit for review in light of its ruling in the Whiting case. NAA and affiliated apartment associations filed an amicus brief in the Hazleton case with the Third Circuit in November.
Additional legal action on immigration occurred in Alabama regarding its enactment of HB 56, the nation’s most comprehensive and punitive immigration law to date. The statute assigns criminal penalties for some violations, and contains provisions that directly target rental housing providers. Several groups sued to block the law’s enforcement, including the U.S. Department of Justice. In late September U.S. District Court Judge Sharon Blackburn ruled the harboring provisions (penalties for individuals who house- including apartment providers- or transport undocumented immigrants) in the law are unconstitutional as they are preempted by federal law.
As Congress has yet to take up comprehensive immigration reform, NAA believes that if these state and local governments are victorious in these court actions it
will embolden other state and local jurisdictions to continue pushing to address immigration issues legislatively within their own areas. With the Whiting decision
NAA also expects to see an increase in state bills mandating the use of the federal E-Verify system.
Scot Haislip, Esq., is NAA’s Director of State and Local. He can be reached at scot@naahq.org.