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Home My WebLink About1996-07-09 - AGENDA REPORTS - FAIR HOUSING IMPEDIMENTS STUDY (2)AGENDA REPORT City Manager Approval �fl Item to be presented by: Vyto Adomaitis CONSENT CALENDAR DATE: July 9, 1996 SUBJECT: FAIR HOUSING IMPEDIMENTS STUDY DEPARTMENT: Community Development Department BACKGROUND The U.S. Department of Housing and Urban Development (HUD) requires that the City implement measures to affirmatively further fair housing in compliance with Title VIII of the Civil Rights Act of 1968, as amended. Recently, as a result of new fair housing regulations being implemented by HUD, the City is being required to conduct and analysis of Impediments to Fair Housing Choice. Through our existing contract with the Fair Housing Council of the San Fernando Valley, the City Council approved on February 27, 1996, an amendment to our contract which included the completion of this impediments study. Pursuant to the Code of Federal Regulations (CFR) 24.570.601 (b) this document has completed and is now ready for submittal to HUD. This document includes an analysis and evaluation of the fair housing requirements of the City, an identification of impediments to fair housing and recommendations for addressing those impediments. City staff are pleased to inform the City Council that this document is consistent with efforts being undertaken through the City's Consolidated Plan process. In addition, this document seeks to expand and complement those efforts already being undertaken through the Consolidated Plan process. Accordingly, staff are now ready to request that the City Council approve the Fair Housing Impediments Study. RECOMMENDATION: Staff Recommends that the City Council: 1. Approve the City's Fair Housing Impediments Study. 2. Direct City staff to submit this document to HUD. ATTACHMENTS A Copy of the City's Fair Housing Impediments Study is available for review in the City Clerk's Reading File `I,J[I'ui�1r'J L Agenda Item: CITY OF SANTA CLARITA I -VIM* -M - - -tTwo _M For Submittal to the U.S. Department of Housing and Urban Development July 9, 1996 The Center for Choice in Housing The Fair Housing Council of the San Fernando Valley O oia F ' o i5 ofcl!!P fW _7 !!/'II/"! / Table of Contents Chapter Chapter 1 Introduction and Overview Chapter 2- Background Data for the City of Santa Clarita Chapter 3- Evaluation of Jurisdiction's Current Fair Housing Profile I. Provision of Fair Housing Services in the Jurisdiction II. HUD Compliance Review Findings and Department of Justice Filings III. State and Federal Fair Housing System Issues Impacting on the City Chapter 4: Identification of Impediments to Fair Housing Choices L Residential Segregation H. Race Conscious Housing Programs III. Sexual Harassment IV. Land Use Issues V. Differential Treatment Discrimination - Rental and Sales Markets VI. Discrimination Against New Immigrants VIL Obligations to Affirmatively Further Fair Housing VIII. Printed Advertising IX. Lending Discrimination X. State Pre-emption of Fair Housing Field Page Number 1 4 16 22 25 25 43 43 73 75 82 93 109 110 118 125 155 1996 Assessment o[1tlpediments to Fair Housing Choices for the Qv Qf Santa Cfarita CA Chapter Page Number XII. Insurance Discrimination 156 XIII. Nimbyism, First Amendment 158 and Fair Housing Rights Chapter 5. Fair Share Analysis 173 Chapter 6. Recommendations 194 Appendices 1. Literature Search 205 II. Lending Focus Group Transcript 228 III. Demographic Data 297 IV. Tables 328 V. Maps 361 Chapter 1 I. Introduction and Overview The City of Santa Clarita is a recipient of the Community Development Block Grant and other federal funds. As such, it is required,. pursuant to 24 CFR 570.601 (b), to conduct "_[an] analysis to determine the impediments to fair housing choice in its housing and community development programs and activities." The Department of Housing and Urban Development (HUD) defines "impediments to fair housing fair housing choices" as: any actions, omissions, or decisions taken because of race, color religion, sex, national origin, familial status or handicap which restrict housing choices or the availability of housing choices.' The City has contracted with the Fair Housing Council of San Fernando Valley ("FHCSFV"/ "Council") and the Center for Choice in Housing ("The Center") to conduct the assessment and produce this report. This report includes recommendations regarding public policies which impact fair housing in Santa Clarita. Exactly what constitutes "fair housing" is a matter of debate. In the 1950s segregation on the basis of race was legal virtually everywhere. ' 24 CFR 570.487(b)(2)(I). 1 IT M13MIMIMP, M -NO 1111 Thus, in 1968, when the Federal Fair Housing Act was enacted, it was clear that "fair housing" meant, at a minimum, ending racial. discrimination in the form of segregation, eliminating the remnants of those practices and promoting racial integration in housing Since 1968, however, there has been continuing controversy about the overall benefits of integrationist models, especially those models which required the entire burden to be borne by racial and ethnic minorities. The supporters of integration roundly applaud the reduction of racially isolated census tracts during the period from 1970 to 1990. These advocates cite this reduction in Los Angeles County's patterns of racial isolation as evidence of the lessening of racial tensions signaling a heightened sense of racial acceptance. They contend that with greater understanding between the races will come greenlining (financial investment) of minority communities. Those who question the benefits of existing integrationist models argue that the movement is generally all in one direction, minorities migrating into Anglo areas. They object to the abandonment of African American and Latino communities by the "brightest and the best," where, in past generations, these individuals served as role models. They also argue that municipal funding and services have been targeted to suburban neighborhoods which are primarily Anglo and away from inner city communities where minorities live in overwhelming numbers. As a result of integration, these detractors argue, minority communities receive fewer services and resources and are left to deteriorate, and that this deterioration is then used as justification ,for redlining (disinvestment) of private financing and insurance dollars away from minority neighborhoods. Advocates for the revitalization of minority communities argue that, in an era of shrinking governmental funds, the bulk of the urban renewal dollars should be directed to areas where the large majorityof minorities currently live, as compared with engaging in social experiments (such as the mobility programs designed to encourage public housing tenants to move into low poverty neighborhoods) that affect relatively few minorities. 2 Some advocates also argue that revitalizing communities serves to present real residential choice to minorities and others, for only then will there be decent, affordable housing with adequate services to present as options to the Anglo suburbs. Improving and maintaining minority communities is one strategy to achieve racial integration, i.e., inducements to Anglos and others to migrate to African-American neighborhoods. At that point, protections must be put into place to prevent wholesale displacement of indigenous residents.We will not come down on one side or the other of these or the many other arguments related to which methods should be used to achieve a free and open society, for it is our opinion that these advocates confuse strategies with the goal: freedom of housing choice. It is our belief that role of government is to facilitate the creation of housing choices, and for the purposes of this study; the term "fair housing choice" shall mean:: the ability of persons of similar income levels in the same housing market area to have a like range of choice available to them regardless of race, marital status, color, religion, ancestry, sex, sexual orientation, disability, national origin, or arbitrary characteristics, such as age or sources of income. This definition necessarily requires analyses of degrees of racial/national origin separation/integration, forms of discrimination, as well as the fair share amounts of public and private funds flowing into communities of color, The San Fernando Valley Fair Housing Council and the Center for Choice in Housing contracted with the City to perform this analysis, which includes the work of a number of individuals and entities. The Analysis is an evaluation of the fair housing/lending obligations of the City, an identification of impediments to fair housing choices and recommendations for eliminating those impediments. 3 . rr•r r S •r r' rr r ri r �r t � The City and the authors gratefully acknowledge the demographic work related to Santa Clarita produced by Barbara Weins of the University of California, Riverside and demographic and segregation patterns related to Los Angeles County produced by the Fair Housing Congress of Southern California, the Home Mortgage Disclosure Act and Housing Urban Discrimination Housing Discrimination Study analyses produced by Gary Dymski, Ph.D., University of California, Riverside, the computer technical support of Charles Bruno and Center for Choice in Housing ("The Center") staff for production of the report. SFVFHC and the Center utilized a number of methodologies in producing this analysis, primarily a legal analysis of the requirements and the efforts undertaken. Also undertaken was an economic analysis of the lending patterns of financial institutions doing business in the Santa Clarita area. The Contractors analyzed the City's housing policies, the City's zoning and land use practices, the City's obligations related to sexual harassment concerns and a number of other discrimination issues, and made recommendations as to how overcome impediments. The Study was funded through the use of the City's Community Development Block Grant administrative funds. The Contractor made recommendations that are set forth in Chapter 6.. Chapter 2 -Background Data for the City of Santa Clarita The Demographics Underlying Housing Affordability in Santa Clarita: Income and Racial Dynamics- 1990 rd / • I I I// M / • / I 2M71• OEM, ' / / The demographics set forth below are derived solely from 1990 census data. Obviously, as we approach the middle of 1996, many things may have changed. Under normal circumstances we would compare the differences which have occurred in the City between 1980 and 1990, however Santa Clarita was not a city in 1980. Although long term trends may not be assessed, the census data allows demographics to be examined at a detailed level.. This analysis will include an analysis of demographics at city wide and census tract levels. The goal is to identify possible problems with respect to low incomes and high poverty rates, to look at the composition of the population and their needs and examine selected housing data. The analysis is organized into two sections. As a way to put Santa Clarita's demographics into a frame of reference, the first section starts by comparing selected data for Santa Clarita and Los Angeles County. The first section finishes by looking a selected data for Santa Clarita as a whole. The second section examines Santa Clarita by census tract to evaluate key demographics and to make inferences about possible relationships and what they might mean to housing access, availability and affordability. Section I: Comparisons with Los Angeles County In 1990 Santa Clarita had a total population of 110,642 people, comprising 1.25% of the population of Los Angeles County, 13.8% of whom are female headed households. The City had 38,362 households in Santa Clarita, 28,096 of whom or 75.4°/x, were families. In Los Angeles County, 67.3% of households were families. There were 15,912 families with children in Santa Clarita, or 55 % of the families. In Los Angeles County, 9.2% of families had children. In Santa Clarita, there are 2,981, or 7.8% of total households, were female headed households, which is a little more than half the number in the County.2 Santa Clarita has an average of 2.84 persons per household and 3.25 persons per family. 2 In 1990, the County's population consisted of 13.8% female headed households. F Los Angeles County has an average of 2.91 persons per household and 3,51 persons per family. Th@ population of people over 65 years of age in Santa Clarita numbered 6,916 or 6.3% of the total population. There were 28,041 people under 16 years of age, or 25.3% of the population. In Los Angeles County, 9.71% of the population was over 65 years of age and 23.7% of the population was under 16 years of age. Out of the population ranging in age from 16 to 64 years of age, there were a total of 946 persons with mobility limits and 1,203 with self care limits. There was a total of 2.85% of the age group. Of the population 65 years of age and over, 799 had mobility limits and 593 had self care limits. This comprised a total of 20.6% of the population of the older age group. There was a total of 1,091 persons or 2.84 % of the City's households, who spoke English poorly or not at all. There was less racial diversity in Santa Clarita than in Los Angeles County as a whole. Santa Clarita was predominately Anglo. 87.3% of Santa Clarita's population was Anglo, in contrast to Los Angeles County where Angeos comprised 56.8% of the population. The next largest group represented in Santa Clarita was of "Hispanic Origin of any race at 13.4% of the population. In Los Angeles County the proportion was much higher at 37.8% of the population. In Santa Clarita, African Americans represented only 1.5% of the population, but represented 11.2% of the population in Los Angeles County. Asian/Pacific Islanders comprised 4.2% of the population of Santa Clarita and 10.8% of the population of Los Angeles County. M GYNO—MiND MOMf '! I } I/ !' I I In Santa Clarita, there were 34,959 or 91.1% of households that had median incomes of $60,996.' There are 5,322 or 13.9% of households on Social Security income with at a median income of $7,884, 1,430 or 3.7% of households had an income from public assistance at a median of $4,464 and 10.7% of households or 4,096 households have retirement income at a median of $9,914. Santa Clarita had a prosperous population which is reflected in the median incomes for households, families and individuals. Median household income for the City of Santa Clarita was $52,970, which was 52% higher than the median household income of $34,965 of Los Angeles County. The median family income in Santa Clarita was $58,064 and $39,035 in Los Angeles County. The per capita income in Santa Clarita was 23.4% higher than that of Los Angeles County at $21,073 and $16,149 respectively. Distribution of household income was skewed to the higher income groups for Santa Clarita. The $50,000-74,999 bracket had the highest representation in Santa Clarita with 29.1% of households falling in that category. In addition, another 25.4% of households made over $75,000 per year. Median household income for Los Angeles County in 1990 was $34,965. Incomes at 50% or less of median, or $17,483 or less, are considered "low" and `very low" income persons by HUD. 3,548 households, or 8.8%, of the total households in Santa Clarita, fell at or below this point. Of this number, 47 African Americans households or 0.1% of total households, 425 Hispanic origin households or 1.1% of total households, and 71 Asian or 0.2% of total households fell at the 50% of median or below. Of the households falling at 50% of median income or below, 86.7% are Anglo, 10.4% are Hispanic origin, 1.1% are African American and 1.7% are Asian. ' Some of these household also have persons with unearned or subsidized income. 7 The breakdown of Santa Clarita households by race at 80% of median ($27,972) are as follows: 6,510 Anglo households or 16.2% of total households; 70 African American households or 0.2% of total households, 914 Hispanic origin households or 2.3% of total households and 176 Asian or 0.4% of total households. Of the County households falling at 80% of median income and below, 84.9% were Anglo, 11.9% were of Hispanic origin, 0.9% were African American and 2.3% were Asian. Looking at median household income by race in 1990 in Santa Clarita, Anglo households had the highest median income at $59,488, with African American households not far behind at $59,298. Households of Hispanic origin had the lowest median household incomes in Santa Clarita: $42,666. Asian households had a median income of $55,884. In Los Angeles County overall, Anglo households had the highest median incomes at $45,655, followed by Asian households at $43,095. Hispanic origin households had median income of $27;361 and African American households had the lowest median income at $25,827. As would be expected, poverty rates for selected groups are far lower in Santa Clarita than in Los Angeles County. 'The poverty rate for families in Santa Clarita was 2.2% compared to 11.6% of families below the poverty line in Los Angeles County. Poverty rates for individuals in Santa Clarita is 3.7% and for female headed households, usually the group with the highest rates of poverty, the poverty rate was a relatively modest 4.8%. In Los Angeles County, 15.1% of individuals fell below the poverty line, as did 25,9% of female headed households. Poverty rates by race for families show that African American families in Santa Clarita and Hispanic origin families Los Angeles County had the highest levels of poverty in 1990. In Santa Clarita in 1990, African American families had a poverty rate of 13.7%. In contrast, Hispanic origin households had a poverty rate of 4.8% and Anglo and Asian families had poverty rates of 2.2%. In Los Angeles County, African American and Latino families each had a rate of 19.8%, Anglo families had a poverty rate of 6.4% and Asian families of 10.8% H i Educational levels in Santa Clarita were much higher than the rest of Los Angeles County.. In Santa Clarita, only 12.1%0 of the population over 25 years of age had not completed high school, 87.9% were high school graduates or higher and 25.9% had a Bachelor's degree or higher. In Los Angeles County, 30% have not graduated high school, 70% were high school graduates or higher and 22.3% had a Bachelor's degree or higher. Labor force participation rates were also higher in Santa Clarita, 75.65% of the eligible population were in the labor force. This is 12.5% higher than the labor force participation rates (of 67.2%) for Los Angeles County. Unemployment rates were lower in Santa Clarita in 1990, at a rate of 3.5% for Santa Clarita and 7.4% for Los Angeles County. Turning to housing data, Santa Clarita had a much higher level of owner occupied housing than Los Angeles County. 75.7% of housing units were owner occupied in Santa Clarita, while only 54% of Los Angeles County's units were owner occupied, 24.3% of Santa Clarita housing was renter occupied in Santa Clarita, in comparison to a 46% renter occupancy rate in Los Angeles County. Vacancy rates were slightly higher in Los Angeles County at 7.4%, as compared to a vacancy rate of 6.5% in Santa Clarita. Of the vacant units in Santa Clarita, 33.3% were for sale and 42.5% were for rent. In comparison, 16.21/o of vacant units were for sale and 39.4% were for rent in Los Angeles County. In both Santa Clarita and Los Angeles County, the majority of home owners were Anglo. In Santa Clarita in 1990, 92% of owner occupied housing were Anglo, 1.1% African American, 7.5% Hispanic origin and 3.6% Asian. In 1990 in Los Angeles County, 72.3% of owner occupied housing were Anglo, 8.9% were African American, 9.9% Hispanic origin and 19.1% Asian. Reviewing owner occupied housing and occupied housing, out of the Anglo population in Santa Clarita in 1990, 76.9% were in owner occupied housing. we Of the African American population in Santa Clarita, only 36.5% of African Americans lived in owner occupied housing, 60.9% of Hispanic origin resided in owner occupied housing and the percentage of Asians who lived in owner occupied housing was 82.9%, In Los Angeles County, 67.2% of Asian, 53.7% of Anglos, 36.5% of African Americans, 21.8% of Hispanic origin residents were in owner occupied housing. In Santa Clarita, as would be expected of a newer city with so much growth, 92.4 % of owner occupied homes had a mortgage, and only 7.6% were paid off. In Los Angeles County, 76.2% of owner occupied dwellings had mortgages. Looking at owner occupied households spending more than 35% of their income on housing costs, it can be seen that, not surprisingly, the lower income groups are hardest hit. In the lowest income group earning less than $20,000 per annum, 100% of Asian households, 73.5% of Hispanic owner occupied households, 70.9% of Anglo and 41.2% of African American owner occupied households were paying more than 35% of their incomes on housing. HUD has now set 35% of income as a level which it is inappropriate to exceed. Exceeding this level jeopardizes a family's ability to pay for health care and other necessaries. At the $20,000-$34,999 level, Hispanic households had the highest level of persons paying over 35% of income on housing at 78.9%, followed by Anglos at 59.2%, Asians at 41.7% and African Americans at 38.6%. At the $35,000-$49,999 level, Asians again have the highest representation at 68.4%, 47.3% of African Americans, 30% of Latinos and 28.4% of Anglos were paying more than 35% of their incomes on housing. For owner occupied households making over $50,000, 50.5% of the Asians, 6.1% of the Anglos, 6% of the Latinos and 5.9% of African Americans were paying 3 5% or more on housing. Turning to renter occupied units, in the lowest income bracket, i.e., less than $10,000, 90.6% of African American, 86.5% of Latino and 64.4% of Anglo renters were paying 3 5% or more of their income on housing. In the $10,000419,999, 82% of African American, 70.7% of Anglo and 69.4% of Latino renters were paying 35% or more of their income on housing. 10 In the $20,000-34,999 bracket, 22.4% of Anglo, 21.3% of African American and 18.7% of Latino renters were paying 35% or more of their income on housing. For renter occupied homes making over $35,000, only 1.2 % of Anglos and none of the other groups renters were paying 35% of more of their income for housing. Turning now to Santa Clarita itself, the first data examined are the income distributions for the City by race. All races show distribution skewed to the higher income levels. The largest concentration of all races is in the $50,000-74,999 income range. In the lowest income categories, Asians/Pacific Islanders had the lowest representation. The rest of the racial groups were close in percentage composition. In the low to middle income ranges, people of Hispanic origin had the highest concentration and African Americans the lowest. In the two highest income categories, African Americans had the highest concentration followed by Asians/Pacific Islanders, Anglos and Latinos. Poverty rates for families and individuals by race show curious results given the median income distribution discussed above. African Americans had the highest rates of poverty for both families and individuals at 13.7% and 17.2% respectively. In fact, these rates were anywhere from two to four times that of the other race groups. Latinos had the next highest rates at 4.8°% for families and 8.2% for individuals. Anglos and Asian/Pacific Islanders have similar rates in the 2-3% range for both groups. Looking at home ownership by race, Asian/Pacific Islanders have the highest rate of home ownership. 82.9% of Asian/Pacific Islander occupied housing is owner occupied. Next were Anglos at 60.9% of owner occupied housing. Hispanics had a rate of 60.9%, African Americans a rate of 58.1%, and Native Americans a rate of 53.4% for owner occupied housing. 11 I I / I I / 1 / / Section II: Analysis of Santa Clarita Census Tracts Santa Clarita is composed of 18 census tracts,' Seven tracts lie entirely in the City limits.' The other ten tracts are only partially in Santa Clarita City limits. Five tracts have populations under 4000 people.' Five tracts have populations of over 10,000.' The rest of the tracts fall somewhere in between. The tract with the largest number of people over 65 years of age has 2004 such persons.' This is by far the largest number and concentration of such persons, 19.5% of the population of that tract, of all the tracts in Santa Clarita. The tract with the highest number of people under 16 years of age has 3,172 persons..,A number of other tracts have high concentrations of persons under 16 years of age.' The highest concentrations of this age group is found in 9200.22 at 31.8% of the population. The census tract with highest number of elderly persons also has the lowest number of persons under 16 years of age.1° We have no data on Tract 9201.02. ' These census tracts are 9200.23, 9200.24, 9203.11, 9203.13, 9203.21, 9203.22 and 9203.24. ' These tracts are 9108.01, 9200.13, 9200.23, 9200.24 and 9203.22. ' These tracts are 9200.03 9200.12, 9200.25, 9203.11 and 9203.24. ' This tract is 9200.03. The next highest number of this age group is 9203.24 with 712 or 6.7% of its population and 9203.21 with 534 or 5.4% of the population over 65 years of age. Tract 9200.13 has the second highest concentration of people over 65 years of age at 9.4% which is 351 people out of its relatively small population of 3,733 people. ' Census tract9203.11 has 2,831 persons and tracts 9200.21, 9200,25, and 9203.21 all have populations of less than 16 years of age of over 2,000 people. 10 High concentrations of young persons are found in a number of tracts, such as in 9201.01 with 29.8% and 9200.11 with 28% of such persons. The tract with the lowest number of people under 16 years of age is 9200.23 (a total population of only 1,996). The lowest concentrations of people under 16 years of age are in 9200.03 with 18.2% (the tract with the largest number and concentration of people over 65), and tracts 9203.22 and 9203.24 both with 21.2% and 9200.23 with 21.9%. 12 i II '( S f l' S I I • f f S 1 l f I/ I There are five tracts with more than 2,500 family households." There are five census tracts where the percentage of families range between 80% and 94%. 12 The highest number of female headed households are found in two tracts." The data concerning disabled persons is very limited. The only data available through the census reflects information on those persons who self identify as being disabled. The count does not include those persons who do not chose to identify themselves as disabled or who are too disabled to do so. 14 What was found, however, was that those who self identified as being disabled and lived alone were located almost entirely in low income tracts. " See tract 9200.03 with 2,965 families, tract 9200.12 with 2, 840 families, and 9200.25, 9203.21, and 9203.24 with families in the 2,500 to 2,700 range. `Z The highest concentrations of families as a percentage of total households in the census tract fall in 9108.01 with 94,1% and tracts 9200.11, 9200.12, 9200.13, 9200.22, 9201.01 in the 80% range. The tract with the lowest concentrations of families are 9200.23 with 30.4%_ The remaining tracts have concentrations in the 60-80% range. The tracts with the largest number of families with children are tract 9200.12 with 1,775 and 9200.25 with 1,540 and 9203.21 with 1,521. The fewest families with children are found in tracts 9200.23 with 231, tract 9108.01 with 332 and tract 9203.22 with 377_ The highest concentration of families with children (as a percentage of families) are in tracts 9200.22 at 67.1%, tract 9201.01 at 65.2% and tract 9200.12 at 62.5% The lowest concentrations of families with children are in tracts 9200.23 at 43.7% and tract 9200.0 at 38.5%. " See tract 9200.25 with 462 households and 9203.11 with 382 households. Tracts 9203.21, 9203.24, 9200.03, 9200,12 and 9200.21 have households in the 200's. The highest concentrations are in 9200.25 with 12.1% of households headed by females, 9209108.01 with 11.1 % and tracts 9203.11 and 9200.21 with 10.9%. 14 In the 16-64 year old age group, the tracts with the highest number of people with mobility limitations are 9200.21 with 174 and 9203.11 with 137 ( 3.1% and 1.7% of the age group, respectively). Tracts with the highest number of people with self care limits in the 16-64 year old group are 9200.21 with 174 (3.1%) and 9200.03 with 147 (2.1%). In the 65 year old and older age group, the tract with the highest number of people with mobility limits is, not unexpectedly, 9200.03 with 227 or 11% of this age group. This tract also has the highest number and concentration of people with self care limitation at 212 people or 10.3% of the population. Tract 9203.24 has the next highest number of people with mobility limitations at 103 or 19% of the older population, and self care limitations at 85 or 15.7%, 13 Ill tl'! I !/' Racial composition varies little between census tracts. The tracts range from 72% to 91% Anglo concentration.15 The African American population of Santa Clarita is very small. The highest concentration is 2.2% in two tracts.16 People of Hispanic origin are in low concentrations compared to the rest of Los Angeles County, ranging from 5.7%o to 21%.° The concentration of Asians range from 1.4% to 5.4%.1e Santa Clarita's tract with the lowest household income had a median income of $42,333," which is higher than the median household income of Los Angeles County at $34,965. The tract with the highest household income has a median income of $63,002,20 It is curious to note that the highest family poverty rate falls in the tract with the highest median income and the tract with the second highest family poverty rate is the lowest income tract. Both these tracts have small populations.21 One tract had a concentration of female headed households under the poverty line of 44%.22 15 The highest concentration of Anglo population is in 9203.22 at 94.3% and 9203.24 and 9200.23 at 91.6%. The lowest Anglo concentration is in 9203.11 at 72,4% ie See tracts 9108.01 and 9203,13. " The biggest concentrations were in 9200.24 at 21.1% and 9200.21 at 19.3%. The lowest concentration is in 9203.22 at 5.7%. " The highest concentration of Asians are found in 9201,01 at 5.8% and 9203.21 and 5.4%. The lowest concentrations are found in 9200.23 at 1.4%. 19 See tract 9203.11 at $42,333 and 9200.23 at $44,107. 21 See tract 9108.01, as well as 9201.01 with incomes at $61,236. A total of six tracts have median household income over $60,000 and six tracts have median household income in the $40,000's and the rest (four tracts) are in the $50,000's. The highest concentration of families at less than the poverty line is in tract 9108.01 at 6.4%o and 9203.11 at 6.4% and 9200.24 at 5.5% " The lowest rates of family poverty are found in 9203..13 at 0.4% and 9200.13 at 0.5%. 22 See tract 9108.01 at 36.8% of female headed households and in 9200.23 at 44%. See also, 9203.11 with one of the higher rates at 13.9% and 9200.11 and 9200.28 at 10.7%. The figures for the larger tracts are well below that of the rest of Los Angeles County while the 14 The tracts in which there is owner occupancy range from 43.2% to 94.7%. 23 Only in one tract did the renter occupied rate exceed the owner occupied rate." Median owner occupied housing values ranged from $179,600 to $500,000.25 The vacancy rates ranged from 2% to 18.3%.26 Both renters and homeowners routinely paid more than 30% of their income on housing. 30% of adjusted gross income was the amount in 1990 which HUD has established as the appropriate amount not to. exceed on housing costs. 2' That amount has be increased to 35% of adjusted gross income. figures for the first two, smaller tracts is considerably higher. 23 See 9200.,13 at 94.7% and 9200.23 at 93.7%. The lowest rates of owner occupied housing falls in 9203.11 at 43.2% and 9203.12 at 61:5%. In the 60% range are 9200.24 and 9203.21. The rest fall in the 70-80% range. 24 See tract 9203.11. 25 See tract 9108.01 with median values in excess of $500,000. Next is 9203.12 at $376,300 and 9203.24 at $332,200. Lowest median home value is in 9200.21 at $179,600 and 9200.03 at $193,000 and 9200.24 at 197,400. 26 21 In all tracts. except 9200.03 and 9200.11 which pay a median rate in the 40% range, . the lowest income group of homeowners (less than $20,000) pays a median rate of 50% or more of their income as housing payments. In the second income group of homeowners ( $20,000- 34,999), tracts 9108.01 and 9200.22 and 9200:23 pay a median rate of 50% or more of their income to housing expenses and several more tracts have median rates in the 40% range. The average median amount of income spent on housing expenses for owner occupied housing is 34.8%. For renters, who have income categories about half that of the homeowner categories, only two tracts, 9203.22 and 9203.24, is the median rate of income spent on rent of the first two income groups ( <$10,000-19,999) under the 50% range. In tract 9203.24 the second lowest income group paid a median or 50% or more and the lowest income group paid 34.8%. There were no renters in the lowest income groups in 9200.11, 9200.3, 9200.22, 9200.23 and 9203.22. The average median rate of income spent on rent was 37.8%. 15 Chapter 3 Evaluation of Santa Clarita's Current Fair Housing Profile I. Provision of Fair Housing Services in the Jurisdiction When Santa Clarita incorporated in 1987, it was eligible to receive Community Development Block Grant ("CDBG") funds because its population exceeded 50,000. Since the time it became a CDBG funded agency, the City has contracted with the Fair Housing Council of San Fernando Valley (" FHCSFV ). The FHCSFV is a private, nonprofit organization established in 1959 to ensure equal access to housing. It is the oldest fair housing council in Southern California. In the past thirty- seven (37) years, the Council has conducted more than 1,700 tests and has trained more than 200 individuals to investigate discriminatory housing practices. The Council has conducted numerous trainings for realtors, managers, agencies, owners and concerned citizens on fair housing issues, as well as racial and ethnic awareness. The Council currently has an active pool of 75 trained testers. The City contracts with the Council to provide education and outreach services, counseling and information services, investigation and testing funds, tester trainings and audit funds. Testing is an investigative tool through which fair housing agencies provide independent corroboration of whether illegal discrimination has occurred; it is often the most effective method by which to prove or disprove allegations of differential treatment. 16 Although FHCSFV is responsible for investigating all forms of discrimination, including sales, rental, lending and insurance concerns, conducting education, outreach, training and counseling programs, as well as hate violence investigations, the overwhelming number of complaints and efforts exerted on behalf of rental discrimination complainants and landlord /tenant issues. For example, during the last program quarter, the Agency intook and investigated three (3) discrimination complaints involving rental situations and counseled twenty-one (21) persons on landlord/tenant issues. Although the seven to one ratio of landlord/tenant inquiries to fair housing complaints suggest that considerably more efforts are expended on landlord/tenant issues than fair housing concerns, this is not necessarily the case. First of all, some of the landlord/tenants inquiries some of which relate directly to fair housing concerns and others do not at all relate. In addition, most landlord/tenant inquiries are handled in less than an hour, whereas fair housing complaints take at least a day, often much more time if the complaint requires testing. In addition, the Council undertakes education and outreach efforts, counseling and proactive programs in the area of rental discrimination. The Council's program in private rental discrimination is strong and comprehensive. The Council has expanded its activities to include participation in statewide fair lending activities, i.e., meeting with lenders and regulators on issues with impact on the basis of race, national origin, familial status, disabilities and other protected categories. Together with the Center for Choice in Housing, SFVFHC, the City's fair housing service provider, is also engaged in advocacy activities related to the fair housing issues raised in rental subsidy programs. The Council's lending and rental subsidy efforts do not constitute full or comprehensive programs. The Council's private rental program responsibilities command so much of staff time and resources that the Council presently spends little staff resources on developing land use, disability, sales discrimination, lending, insurance or government subsidy issues, most of which require the conduct of independent research in order to establish priorities and undertake enforcement programs. 17 At present, the Santa Clarita fair housing service delivery program is complaint driven and comprehensive only with respect to private rental issues. It, however, lacks the resources to undertake proactive programs for other forms of discrimination or to develop mechanisms to promote ethnic and economic integration. SFVFHC and the Center did not conduct any testing research on Santa Clarita's market as part of this effort, instead the City relies upon HUD's 1989-1990 study on rental and sales discrimination. Lacking specific local indicators, we propose that the City use HUD's nationwide statistics as indicators of the level of discrimination that should be expected. Pursuant to HUD's 25 city study of national origin and racial discrimination which documented that 46 out of every 100 times Latinos seek rental housing and 56 out of every time they seek to purchase housing, they suffer discrimination on the basis of their national origin. 53 out of every 100 times African Americans seek rental housing and 56 out of every time seek to purchase housing, they suffer similar housing discrimination on the basis of race. Using the HUD indicators, the City and the SFVFHC could conceiveably need to initiate enforcement actions on behalf of at least 46% of the Latinos and 53% of the African Americans seeking rental housing and 56% of Latinos and African Americans seeking to purchase. The study does not differentiate between newly immigrated and more assimilated, Le., third generation and older, Latinos, nor does it differentiate between fight skinned and dark skinned individuals or those with heavy accents and those without such accents. The conventional wisdom among the fav housing community is that the more recent the immigration, the darker the skin and the heavier one's accent, the more likely one is to suffer discrimination. M 11 1 • I 11 11 N, I I 07TWIVILM41 In 1993, the vacancy rate in the City's 43,463 units was 6.5% or 2,825 units.28 Assuming 3% of the City's population of the 110,642 residents seek housing on an annual basis, then, based on national statistics, the City should be prepared to handle 205 rental discrimination complaints from its the Latino residents and 29 rental complaints from its African American population annually. If income were not a factor, the City should be prepared to handle up to 236 complaints from Latinos seeking to purchase and 29 complaints from African Americans seeking to purchase. In light the immense differences income between Latino and African Americans on one hand and Anglos on the other hand, the City and Council should anticipate many fewer purchase discrimination complaints, e.g., 24 complaints from Latinos and 3 complaints from African Americans, for a total of 261 anticipated complainants. Notwithstanding the fact that SFVFHC operates an effective education and outreach program in place, the national rate far exceeds the number of complaints received and handled by SFVFHC. This suggests that perhaps the national level is not entirely appropriate as a measure and reviews of local conditions should be taken instead. In an attempt to be conservative, we recommend that the City anticipate 10% of the Latino complaint rate, i.e., 26 complaints annually, for a total of 287 rental and sales complaints based on race or national origin. Assuming that each complaint can be disposed of in 16 hours each, which is a very modest estimate of time indeed, requires at least 2.2 full-time counselors to process these, complaints. This estimate does not take into account counselor's supervision or the costs associated with testing, investigations or training. This estimate also does not take into the time necessary to provide training to testers, likely victims of discrimination and industry representatives, counseling, education and outreach. 28 See, 1993 Updated Census Information, City. of Santa Clarita (1993). 19 Rental discrimination based on race and ethnicity are but two of the many complaint types which are likely to be raised in a rental context, such as disability, land use, sexual harassment. In addition, the City should be prepared to undertake education, outreach, counseling and other services to complement lending, disability, land use, insurance and government subsidies enforcement efforts. As noted above, a reasonable estimate is that sexual harassment occurs in at least 3.2% of the City's 10,561 rental units. Although this estimate could result in 338 complaints of sexual harassment, we believe it unlikely, given the degree of underreporting. If an educational campaign is undertaken, we believe that it is responsible to anticipate 3 sexual harassment complaints being filed. These investigations are staff resource intensive, so it is not unreasonable for staff to require 80 hours to complete each investigation or 240 hours total per annum. Investigations of this type would require at least 12% of one person's time. The investigations of subsidy programs, lending, insurance, land use and other issues require substantial amounts of time. Often claims raise systemic issues. The development of fair housing/lending/insurance and other expertise in these areas will require staff resources, training and time, and should include not only enforcement but counseling, education, outreach and training capacities. It is difficult to plan in this environment, for there is no baseline or other data on the nature and extent of lending, land use, insurance or the administration of government subsidies discrimination related to any of the protected classifications for the City of Santa Clarita. Without baseline data on the nature and extent of discrimination in these private and public housing programs, it cannot be known what level of funding level for fair housing services is appropriate. In order to assess whether the level, or indeed the fair housing service delivery priorities established by the City and FHCSFV is appropriate, we would recommend that fair housing reviews of each of the housing/lending/insurance programs, except for the private rental market, be conducted to document 20 whether there is discrimination in any of these programs, and if so, the nature of, discrimination. At this juncture, we do not recommend auditing private rental market practices, for the large majority of the Santa Clarita fair housing complaint investigations and other activities involve private rental market practices. In addition, HUD's audit program has documented rental and sales discrimination in the region. The FHCSFV has enough information on discrimination in this market to compare results and recommend priorities, once additional data on the other programs is available. Instead, we recommend that lending, insurance, rental subsidy and sales audits be conducted. Thereafter, specific programs should be put into place to address the most pressing concerns. Once a decision is made regarding which programs to incorporate, we recommend against trying to put all such programs into place immediately. Instead, we recommend that priorities be established by the City and its Contractor; and that there be a plan developed for the incorporation of one program at a time resulting in the City and SFVFHC providing a comprehensive, full service program within five years. We believe that the City can profit by the experience of Toledo, Ohio and other Mid West programs where the fair housing programs are more comprehensive. These programs have set up separate lending, property insurance and government subsidy units whose staff research these issues and thereafter intake individual complaints and initiate systemic investigations. Typically at least two persons staff each of these units. Systemic lending, insurance and subsidy policies and practices usually affect an entire region, not just one jurisdiction, so the costs associated with the staffing such units could reasonably be apportioned between and among all the jurisdictions with which SFVFHC now contracts. 21 The City presently authorizes $15,780 per annum for fair housing enforcement services. This contract with the Fair Housing Council of San Fernando Valley constitutes the principal mechanism by which Santa Clarita provides fair housing services to its residents. In addition, the City allocates $31,000 in funding to the L.A. County Service Center which alos contributes to the fair housing effort. An estimated 10% of the services provided are in tenant/landlord, housing issues. This compensation to the SFVFHC, is comparable to the amounts provided by other jurisdictions in the Southern California area; it translates into approximately 40% of one full time housing counselor' and a limited amount of investigation and overhead costs, i.e. rent, supplies, copying, tester fees. At a minimum, it appears that funding for the fair housing efforts needs to be increased to expand the fair housing goals and objectives. Without increases in the limited and recently reduced, funding to the City from HUD, the Santa Clarita program will not become comprehensive. As noted above, the present level of funding does not provide for adequate outreach, education, training and enforcement services for rental, sales and sexual harassment programs, or for the development of other important capacities_ It is important to note, however, that in this regard, the City is not unique in its funding for fair housing services. Santa Clarita provides approximately $.40 per capita for low and very low income persons and approximately $.11 per capita for the rest of the population. Since the SFVFHC and L.A. County Service Center provide landlord/tenant services and counseling and because a number of other public agencies do not provide such counseling, the numbers are not comparable. " This assumes a salary of $35,000/annum and 20% fringe benefits.. 22 rrI i. t 'I I I!I'! !I' I •I I I I181MMKOW The City of Los Angeles provides approximately $.15 per capita, per annum and the County provides even less. In contrast, Cleveland Heights, Ohio provides $12.24 per capita and Shaker Heights, Ohio provides $25 per capita. Although a per capita approach is one way of making funding decisions, we recommend instead that the City fund the services on the basis of anticipated incidence of discrimination, the level of intervention to be used, the best estimate of how many hours it would reasonably take to resolve such issues and then base funding on the results. Each housing and urban development program should be analyzed from this perspective. The City should thereafter decide how much, if any, additional resources should be allocated from City funds and leveraged from other funding sources public/private for this purpose. There are, of course, arguments for targeting fair housing programs which benefit low and very low income persons if CDBG funds are to be used, for statutory provisions require the these monies primarily benefits such populations. According to the City's 1995 Consolidated Plan statistics, 10.4% of the City's population are very low income and 9.5% are low income, and 80% are moderate and higher income. A fair housing program which focuses on lending that affects the poor may well entail review of the modifications of the State's Low Income Tax Credit Program which has been modified in a way that negaitvely affects the familial status and racial provisions of the fair housing laws, the refusal of certain lenders to provide gap financing on multifamily units which are subsidized, or the fair lending ramifications of lenders' refusaWfailures to locate branches in minority areas. An insurance program may well handle cases of neighborhood redlining, differential treatment of applicants for property or private mortgage insurance, and the State's discontinuation of the Fair Plan program, the insurance of last resort for applicants who have been rejected by other private insurers. The City is in receipt of, or expects to eventually leverage, Department of Housing and Urban Development, L.A. County Section 8 certificates and voucher subsidies, State HOME and other funds. 23 i i 1 /1 ' I I l / / l I L' ./I L i. / In Santa Clarita, CDBG monies are used to funds fair housing activitiesr No other monies are used for the purpose of funding fair housing. Of course if adequate CDBG funds are set aside for fair housing funding, the source does not matter. For example, if the County were to set aside funds to conduct mobility and fair housing counseling to Section 8 recipients seeking housing in Santa Clarita, this counseling could be counted towards the certification goals. "Funding" fair housing services is not the only way to further this goal, of course. In fact, specific fair housing goals and objectives should be formulated for each source of funding which specifically targets the beneficiaries in question. In addition to processing discrimination claims,. the Council provides counseling on landlord/tenant complaints. Counseling persons on landlord tenant matters is not the same as fair housing enforcement and counseling. To the extent that landlord/tenant counseling does not always involve discrimination issues, the counseling should not always be counted either, towards the satisfaction of the City's certification obligations. At some point it may be appropriate for the fair housing and the landlord/tenant services to be performed by different staff or different agencies, depending upon how time consuming the respective components become. 24 II. HUD Compliance Review Findings and Department of Justice Filings. The Council found no evidence of substantive fair housing findings in HUD's compliance reviews or that the Department of Justice has ever brought suit against the jurisdiction. The City Attorney's office confirms that neither HUD nor DOJ has ever instituted either an administrative or judicial action against the jurisdiction. III. State and Federal Fair Housing Procedural Issues Impacting on the City Under the 1989 Federal Fair Housing law, the State of California was given until September, 1993 to enact a law and adopt procedures in fair housing which are substantially equivalent to the federal law and procedures. Failure to implement a program in this period would result in the State's loss of substantial equivalency. In order to retain equivalency status, both the State's statute and the administrative procedures had to be substantially equivalent to those under which HUD operates. The California law was not found to be substantially equivalent until 1995 and the State's administrative procedures are still awaiting federal approval. There are a number of circumstances which have resulted in holding approval of the administrative procedures in abeyance. For example, the State's Department of Fair Employment and Housing ("DFEH") has withdrawn all of its directives on handling and processing cases, leaving complaints and respondents without any assurance as to how efficiently and effectively cases will be handled. Northern California fair housing groups have registered complaints concerning the processing of complaints, while Southern California fair housing enforcement agencies have generally been favorably impressed with DFEH's handling and processing of cases. 25 III II' / /' 1I'I / ( I (' I/ / I I / }[ l♦' While Southern California Councils have found the Department to be cooperative and responsive to both individual and agency complaints, these agencies also express concerns about the lack of timeliness in the processing of complaints . DFEH, like HUD, has but 100 days to investigate a complaint filed with the agency. If DFEH does not complete its investigation within this 100 day period, the complainant is at risk of having her/his complaint dismissed on the basis that the respondent has been too severely prejudiced to defend against the charges leveled. To date, the courts have not dismissed complaints on this basis, but HUD, which routinely exceeds its 100 day limit, has been severely criticized by several courts of appeals for this, failure to comply with the federal fair housing statute. If a DFEH or HUD respondent were to establish actual prejudice, it is entirely possible that an administrative action would be compromised, with the complaint dismissed. Unless DFEH and HUD redirect enough resources so that they routinely satisfy the 100 day investigation requirement complainants should be counseled against electing to use administrative procedures over judicial proceedings. This concern has caused fair housing councils to use a proportion of their limited resources to monitor both DFEH and HUD compliance with these statutory requirements. As set forth above, the Council's resources are too precious to be expended in this manner. Another concern which affects complainants residing in Santa Clarita are those conflict of interest concerns raised in Procedural Issues portion of this submission. Because DFEH, HUD, State Attorney General and Department of Justice attorneys take the position that they represent "the public" and not the individuals who complain of housing/lending/insurance discrimination to administrative agencies, fair housing councils encourage persons complaining to administrative agencies should not rely upon DFEH or HUD procedures or governmental attorneys to protect their interests. 26 l l r I' I YUNIMMUMMIM 17MMMMII' I f I I ! I ! ![ I Instead, the FHCSFV is constrained to advise complainants that to fully protect their rights in the administrative process they must formally "intervene" in the administrative proceeding and must retain their own attorneys to represent them in the administrative process. One purpose behind the 1989 federal amendments was to make the process easier for persons alleging discrimination to access the system and receive relief by providing them with representation in both the administrative and judicial process. This purpose has been frustrated because victims of discrimination still have to take extra steps and expend funds to retain attorneys in order to secure their rights. A victim of discrimination may choose to file a DFEH complaint because s/he may do so without incurring any cost, so it is an option which is often exercised by low income persons. However, if the victim utilizes the California administrative route, there are negative implications, such as the fact is that there are limits on the amount of monetary damages s/he may receive. For example, the DFEH is not permitted to award any damages for emotional distress or more than $1,000 in a punitive damage award. Unlimited emotional distress and punitive damages are available to the tenant who elects to pursue her/his claim in court. Because of the limitations on DFEH awarding emotional distress and punitive damages, complainants often opt to pursue judicial remedies utilizing private and governmental attorneys. In fact, DFEH staff, recognizing the limitations on the DFEH Commission, recommend judicial filings. The result is that the court calendars are more congested and attorney fees are sometimes unnecessarily incurred. Before the California Supreme Court ruled that DFEH could only award $1,000 in punitive damages and no emotional distress damages, the DFEH process was the avenue most favored by indigent complainants. Without the expense of an attorney, these complainants could secure their civil rights. Indigent complainants seeking to use the administrative process have been impacted disproportionately by the California Supreme Court ruling limiting damages, the positions taken by governmental attorneys and the decreased funding to legal services organizations. 27 In turn, among Santa Clarita's impoverished population there is an over representation of racial and language minorities, families with children and disabled persons. For example, 19% of the African Americans and 19% of the Anglos, 22% of the Asians, 39% of the Latinos and 29% of the Native Americans living in Santa Clarita are low and very low income persons. The DFEH and HUD systems are charged with investigating complaints of discrimination, but these agencies have not budgeted any monies to pay for testing or other forms of investigations. These agencies depend upon the existence of fair housing councils to test complaints of housing discrimination. When DFEH or HUD receives complaints concerning Santa Clarita residents that require testingfinvestigation, these Agencies have not contacted FHCSFV to undertake this testing. Instead, the cases go untested. In limited circumstances, the Council may be able to test such cases, but there are still an undetermined number of cases which should be tested which will not be. Until DFEH and HUD routinely budget testing as part of their case investigations Santa Clarita residents are at risk of having their complaints processed and go to administrative or judicial trial without adequate and timely investigations. HUD, in granting interim approval of the State Agency's case management and complaint processing procedure, did not take into account that the State did not budget to pay for the cost of testing to be performed on any complaints. There are many cases in which testing is the most effective, and perhaps only, mechanism to prove whether discrimination has occurred. Similarly, HUD annually sets aside only $10,000 for the entire region for testing. In 1994, rental tests were estimated by National Fair Housing Alliance group members to cost between $750 and $900 each depending on the area of the nation and the circumstances to be replicated. Tests for sales, lending and insurance discrimination are more expensive. The HUD budget for testing for the region is therefore inadequate to meet the demand and therefore contributes to the fair housing problems in this regard. M Ei,: _1 •i ar• , i •i_ t71 ,• f i 11 f S Those Who May Sue Under Fair Housing Provisions Any "aggrieved person" may file an administrative complaint with HUD (pursuant to 42 U.S.C, 3610) or DFEH which may result in an administrative hearing or federal suit; or file a judicial complaint in federal (pursuant to 42 U.S.C. 3613) or State court. The definition of an "aggrieved person" includes anyone who claims that s/he is or will be injured by an existing discriminatory housing practice or one that is about to occur. 42 U.S.C. 3602(I)(1)(2)., Under 42 U.S.C, 3602(d) "aggrieved persons" include individuals, corporations, associations, legal representatives, citizens and non -citizens. The Supreme Court has ruled that not only direct victims of discrimination fall into the classification of "aggrieved persons," but virtually anyone who claims any injury, to wit:. 1) persons deprived of the opportunity of the social, professional and economic benefits of living in an integrated community. Trafficante v. Metropolitan Life Insurance Co., 409 U.S. 205 (1972); 2) a municipality and its residents objecting to realtors engaged in steering. Gladstone, Realtors v. Village of Bellwood, 441 U.S. 91 (1979) and 3) a fair housing council and testers objecting to racial steering and the giving of false information by real estate agents. Havens Realty Corp. V. Coleman, 455 U.S. 363, 372-79 (1982). Standing to bring suit exists "as long as the plaintiff suffers actual injury as a result of the defendant's conduct." Gladstone, Realtors v. Village of Bellwood, 441 U.S. 91, 103 n9 (1979). There are three elements involved in establishing standing for fair housing actions. In order to sue, the plaintiff must show that s/he has: 1) suffered "some actual or threatened injury; 2) that the injury was caused to the defendant's actions; and 3) the injury can be redressed by a court. Valley Forge Christian College v. Americans United for Separation of Church and State, Inc., 454 U.S. 464, 472 (1982). 29 In addition to "aggrieved persons," federal and California attorneys general may also bring suit under fair housing provisions. They may undertake "pattern or practice" cases or cases of "general public importance" under 42 U.S.C. 3614(a). Under 3614(b), the Attorney General may bring a civil case on the basis of a HUD referral; under 3614(c), the Attorney General may also bring an action to enforce a subpoena and under Section 3631 the Justice Department is also responsible for prosecuting cases where force or threats of force are used to injure, intimidate or interfere with persons exercising their fair housing rights. The Justice Department is empowered to seek both equitable relief and to seek monetary damages on behalf of aggrieved persons.' The Justice Department must also provide representation to those persons who elect to go into federal court after HUD has issued a charge. 42 U.S.C. 3612(a)(o). Although there is no statutory definition of what constitutes a "pattern or practice," the Supreme Court has held that the United State must prove. [more than the mere occurrence of isolated or "accidental" or sporadic discriminatory acts. 'It has] to establish by preponderance of the evidence that racial discrimination was the company's standard operating procedure -the regular rather than the unusual practice.30 There is no mathematical formula for how many incidents are required to make a "pattern or practice." Teamsters v. United States, 431 U.S. 324, 336 (1977). "Still, most successful pattern or practice cases against landlords and other housing providers have involved at least three discriminatory incidents or statements." Schwemm, Housing Discrimination; Law and Litigation, para. 26:2(2) at p. 26-6. Where there is an adopted policy or directive, a statement consistent with the policy is sufficient to establish a claim under the "pattern or practice" provision. . Johnson v. Hale, 13 F 3d 1351, 1354 (9th Cir. 1994).. 30 Teamsters v. United States, 431 U.S. 324, 336 (1977). 30 1 1 1 a /I I / l(I '[ f' f / l l/ f' I [ 1 1 1 IwarMITIVIRIN To undertake an action which is of"general public importance" the government must prove that the, conduct affected more than a single person. Some courts have held that what constitutes something of "general public importance" is not a issue which is reviewable by courts. See, Schwemm, Housing Discrimination; Law and Litigation, Sec. 26.2(2) at footnote 42. Pattern or practice cases may also be of general public interest. General public interest involves significant points of law or affect a large number of persons. United States v. Hunter, 459 F.2d 205 (4th Cir.) cert. denied 409 U.S. 934 (1972).. The SFVFHC has standing to sue and has, in fact, filed cases in its own name on a number of occasions. The Council tends to file where the complaints involve large numbers of complainants. The City has not had an occaison to file a fair housing action on behalf of its citizenry. There are a number of criteria which the Council could consider in deciding whether to file. These include: 1) whether the action is a law reform case; 2) the number persons the case will impact; 3) the impact upon other matters pending; and 4) whether the original complainants feel at risk if they were to sue directly, i.e., non-profit developers being denied financing who do not want "burn any bridges" with lenders or victims of sexual harassment. The Council should also consider whether entering the case as a plaintiff will compromise its ability to act as a neutral witness on behalf of the original complainant. If by filing as a plaintiff in the case the Council would compromise the original complainant's case, the Council should refrain from filing and it should have in place procedures to determine whether such a conflict exists and how to resolve it. Although the City would also have standing under the Fair Housing Acts to bring suit to protect the interests of its citizens, it has not yet done so. The City should consider whether, and under what circumstances, (should sufficient resources and funding become available), it would initiate such suits. 31 11/ i MUTT17171wof /' ! 'I I 1 I/ I' II / [' l / !I ! 01,' / Thereafter, it could set up procedures for initiating such fair housing litigations in its own name. Having the City available to undertake litigation (depending upon available resources) would be very beneficial in certain cases, for private counsel working on contingency fee are not always willing to take purely injunctive cases, as compared with high money damage causes. Under the Havens Realty Corp. v. Coleman, 455 U. S- 363 (1982) decision, testers are permitted to sue if they are injured. When testers sue they automatically have a stake in to the outcome of the litigations, raising the issue of whether this stake undermines the weight of their testimony and thereby compromises the original complainant's cause of action_ On the other hand, when eradicating discrimination the more complainants the better, especially in those instances where the testers are aware of the discrimination being practiced against him/her. Some councils have resolved this potential conflict by never revealing the test results to testers. In the overwhelming number of cases, this procedure resolves the matter. Where the discrimination is obvious to the tester and the tester decides to sue, these councils support the tester's case but often refuse to use the tester again for fear of having the individual labeled a "bounty hunter" by the defendant. Other councils will routinely reveal the results of tests to testers and in appropriate cases encourage them to sue.The councils are divided as to whether they utilize such testers in other cases. Given the potential undermining of the original complainant cause of action due the tester's stake in the litigation, the Council routinely does not share test results with testers. It should, however, develop a written policy on this score and develop waivers which testers should sign.. In those instances where the tester nonetheless is injured and files suit, we recommend that the Council develop a policy which includes support for such a tester's suit but thereafter refraining from using the tester in any future investigations. 32 Eliminating testers who file suit diminish the pool of investigators available to test cases, as does tester "burn out." These factors require constant replenishing of the tester pool. The testers who are in most urgent demand are those persons with good credit histories who are willing to subject themselves to full application testing, i.e., allow the landlord to contact the credit bureau and run a full background check on the applicants. The City and Council should strategize on how to increase the pool of such persons, perhaps through access to suitable volunteers. Statute of Limitations Under the federal and state fair housing acts, a private complainant has one year from the act of discrimination to file an administrative complaint and two years to file a judicial complaint."Where there is a pattern of events and at least one of the events occurred outside the period of the statute of limitations, the Supreme Court ruled in Havens Realty Corp.. v. Coleman that where a plaintiff, pursuant to the Fair Housing Act, challenges not just one incident of conduct violative of the Act, but an unlawful - practice that continues into the limitations period, the complaint is timely when it is filed within ,..[two years] of the last asserted occurrence of that practice. 455 U. S. At 380-81.. "It should be noted even in cases where the continuing violation theory does apply, the theory requires continuing unlawful acts and not merely continuing consequences of an old variation." Schwemm, Housing Discrimination: Law and Litigation, Sec. 25.2, p.25-9. " The filing of administrative complaints holds in abeyance the two year California and federal judicial statutes of limitations while the administrative proceedings are pending. 42 U.S.C. 3613(a)(1)(B). 33 "r . 171M' The federal Attorney General is not subject to a statute of limitations when seeking equitable relief in pattern and practices suits. However, since 1988 the United States Justice Department and California Attorney General have had their powers expanded to allow them to also seek monetary damages on behalf of aggrieved persons and civil penalties. 42 U.S.C. 3614(d)(1)(A)-(C). Since the expansion of governmental powers, it is unclear whether the attorney generals are also have a totally free hands on statutes of limitations when filing monetary damage and civil penalty cases. If there are statutes of limitations, one is likely to be two years from the incident of discrimination for money damage cases and five years for federal civil penalties cases. 28 U.S.C. 2462. Notice Requirements The law is also unsettled as to whether a sexual harasser's superior and/or the owner have to be on notice to hold these individuals liable for compensatory damages. In order to hold someone other the harasser liable under the Shellhammer decision, the plaintiff must prove another element of proof in either a "quid pro quo" or "hostile environment" case, i.e., that these persons had actual or constructive knowledge of the abuse or hostile environment. This approach is different than that used in other housing discrimination cases. In Meritor Savings Bank v. Vinson, 477 U.S. 57 (1986) the Supreme Court suggested that an employer who did not have actual knowledge but did have adequate grievance procedures could not be held liable under a hostile environment theory. A "grievance procedure" does not usually exist in a housing environment. Where the harasser receives the rent, acts as the exclusive contact for tenants and tenants do not have the address of the superior or owner, the likelihood is that a court would hold that the Meritor guidelines have not been satisfied. If the harasser is another tenant, the manager, landlord or owner may not be aware of the harassment. The law is unsettled as to whether the victim can receive monetary liability against the manager/landlord/owner for actions by another tenant in circumstances where the manager/landlord/owner has no reason to be aware of the abuse. 34 A tenant experiencing harassment from other tenants may seek an injunction to secure quiet enjoyment of her property, but such an action will not result in monetary damages. Plaintiffs seeking monetary damages may be required to put the manager or owner on specific notice of the hostile environment under they are forced to live in order to prevail. This notice requirement is unique to sexual harassment causes of action. Other discrimination claims require,no such notice. The sexual harassment provisions should be modified to eliminate the need for such notice, thereby bringing into conformity with Title VIII (housing), as compared with Title VII (employment) law. Attorney's Fees and Costs Prior to 1988 only a prevailing plaintiff was eligible to collect attorney's fees. Under the 1988 amendment, the law on attorney's fees changed. Now whichever party prevails, regardless of the party's financial condition, is entitled to fees. However, it is more difficult for prevailing defendants to receive fees. A defendant may collect fees only upon a showing that the plaintiff's action was "frivolous, unreasonable or groundless, or that the plaintiff continued to litigate after it clearly became so." Hughes v. Rowe, 449 U.S. 5, 15 (1980) [quoting Christiansburg Garment Co., EEOC, 434 U.S. 412,422 (1978), an employment case]; 42 U.S.C. 3613(c)(2). On the other hand, a prevailing plaintiff ordinarily receives attorney's fees. Hensley v. Eckerhart, 461 U.S. 424, 429 (1983). In fact, the presumption is in favor of awarding prevailing plaintiffs attorney's fees almost as a matter of course. Abrams v. 11 Cornwell Co., 718 F.2d 22, 24 (2d Cir. 1983) (en banc). 35 ,,, , 'i ei,'tIJdMn4MrIXMM7• , „ e' a t, t TOMM, WOK Among the circumstances that have been held not to justify denial of a plaintiff's fee award are : • that the defendant acted in good faith; • that the defendant lacks the financial resources to pay the plaintiff's fee; • that the plaintiff was represented by a legal services organization or other pro bono counsel who did not charge a fee; • that the plaintiff had a contingency fee agreement with his lawyer; • that the plaintiff did not pursue a class action and/or obtained only modest relief. Schwemm, Housing Discrimination.• Law and Litigation, Sec. 25.3(5)(b), p.25-56-25-57 (Citations omitted.). The Sixth Circuit ruled that promoting private enforcement of fair housing laws through awarding attorney's fees is important in eradicating housing discrimination. Price v. Pelka, 690 F.2d 98, 101-102 (6th Cir, 1982). Under 28 U.S.C. 1920 prevailing parties are entitled to filing fees, costs of stenographic transcripts, transportation and lodging of witnesses, very limited expert witness fees. Telephone and other travel bills may be recovered as attorney' fees. Available Remedies Victims of discrimination have a number of options for remedial relief, one of which is the filing of an administrative complaint with the California Department of Fair Employment and Housing (DFEH) or the Department of Housing and Urban Development (HUD). Wo l ZY ff ' f MUM! f'! I I I Within one year of the act of discrimination, a victim of sexual harassment may file an administrative complaint with DFEH or HUD. Under most circumstances, HUD will refer fair housing complaints to DFEH and the State agency will investigate the allegations as potential violations of the federal Fair Housing Act (FHA), the State Fair Employment and Housing Act (FEHA) and the Unruh Civil Rights Act. If DFEH determines that the complaint has merit, the complainant may opt for either an administrative hearing or to sue in federal or state court. There is no fee associated with filing a DFEH or HUD complaint. The Department, like so many state agencies and HUD, has a large caseload and few staff. The complainant has a year from the date of the abuse to file with DFEH. Once the survivor files with DFEH, the state and federal fair housing statutes of limitations are tolled.. The DFEH and HUD each have 100 days to investigate the claim. DFEH, like HUD, has the right to subpoena records in connection with its investigation. If DFEH or HUD do not complete its investigation within this 100 day period, the complainant is at risk of having his/her complaint dismissed on the basis that the respondent has been too severely prejudiced to defend against the charges leveled against him. To date, the courts have not dismissed any DFEH or HUD complaints on this basis, but HUD, which routinely exceeds its 100 day limit, has been severely criticized by several courts of appeals for this failure to comply with the federal fair housing statute. The reason no case has been dismissed is because no respondent has shown that s/he has suffered prejudice as a result of the delay. If a DFEH or HUD respondent were to establish actual prejudice, that the cause of action would dismissed. In order to avoid compromising complainant's DFEH and HUD must routinely complete their investigations in a timely fashion. If the complainant chooses to go through a DFEH administrative hearing, there are limits on the amount of monetary damages s/he may receive. (This is not the case for HUD complaints.) 37 For example, the Commission is not permitted to award any damages for emotional distress or more than $1,000 in a punitive damage award, no matter how many acts are involved or how egregious the activities involved. Such damages are available if the tenant elects to pursue her claim in court. Because of the limitation on damages, complainants often opt to pursue judicial remedies. The election of the judicial forum will result in more crowded court dockets and increased attorneys fees. If the complainant on whose claim a charge has been issued elects to go to court, the government will provide legal representation on "behalf of complainant, while directly representing the government. The "on behalf of language has never been interpreted. There are advocates who argue that addition of this language in the 1989 federal and 1994 State statutes modified the obligation of government attorneys to individual complainants. Government attorneys that the government is their client, not individual complaints. Thus if there is conflict between the government's interest and that of the complainant, the government attorneys pursue the government's claim. Only a legal services/aid or private attorney will be answerable to the tenant. SFVFHC feels constrained, therefore, to counsel complainants to retain their own counsel even in those circumstances where government lawyers are involved. Often low and moderate income persons cannot the expense of retaining counsel. In order to overcome this impediment, we recommend that the SFVFHC seek a Bar Association opinion as to what the ethical obligations are for government attorneys in this situation. In virtually all housing and abuse cases filed thus far, private attorneys have secured better monetary and injunctive relief for clients than government attorneys have secured in similar circumstances. On the other hand, private attorneys who charge fees for services, sometimes take cases on "contingency". This means that a private attorney on contingency may receive up to 40% of the client's monetary damages. 9M S n,RIVER We recommend that if the SFVFHC is involved in referring the case to an attorney that it use its good offices to convince the attorney to reduce their contingency fees to an equitable rate. The issue of paying contingency fees becomes most pressing when claims are settled before court renders a decision on substantive issues on which prevailing attorneys can base a claim for attorney's fees. Defendants often offer lump sum settlements which include both damages and attorney's fees. By refusing to segregate out attorney's fees from the rest of the lump sum offer, the defendant pits the plaintiff's attorney against the plaintiff, for the client must decide how much of the settlement to retain and how much to give the attorney. Attorneys who do not receive fair compensation for the such cases are hereafter reluctant to take additional cases. Relief Monetary and injunctive damages are available victims of discrimination to compensate then for any out of pocket and emotional distress damages suffered. Compensatory damages include moving expenses which are incurred because of the discrimination, any increase in rent in subsequent lodging, resultant emotional distress or humiliation, disruptions or interruptions in familial and connubial relations and attendant counseling. Once violations of the California and federal fair housing statutes have been established, the plaintiff is entitled to monetary damages for the loss of civil rights, out of pocket expenses and humiliation, embarrassment, emotional distress and other intangible injuries. Compensation for the loss of civil or constitutional rights is limited to no more than nominal damages pursuant to the Supreme Court's 1986 ruling in Memphis School District v. Stachura, 477 U.S. 299 (1986); Baumgardner v. HUD, 960 F.2d 572, 581-583 (6th Cir. 1992). Generally, out-of-pocket expenditures in housing cases do not amount to much. See, e.g., Steele v. Title Realty Company, 478 F. 2d 380 (10th Cir. 1973) where the out-of-pocket injuries consisted of $13.25 in telephone bills and $125.00 in moving and storage expenses. 39 The most significant source of actual housing damages result from injuries such as humiliation, embarrassment and emotional distress. In California, the DFEH Commission is precluded from awarding emotional distress and humiliation damages to complainants. However, California federal and state courts routinely award such damages in housing discrimination cases. Courts are empowered to grant permanent or temporary injunctions, temporary restraining orders or affirmative action order under 42 U.S.C. 3613 designed to "eliminate the discriminatory effects of the past, as well as like discrimination in the future." Louisiana v. United States, 380 U.S., 145,154 (1965). Courts have inherent powers to enforce compliance with injunctive and other decrees through civil contempt proceedings. See, e.g., United States v. City of Yonkers, 856 F. 2d 444 (2d Cir. 1988, rev'd in part sub nom. Spallone v. United States, 110 S_ Ct. 625 (1990), a contempt action in response to the City's resistance to court ordered dispersion of 200 units of public housing into racial majority sectors of the jurisdiction. The court may also assess up to $50,000 in civil penalties for the first violation and up to $100,000 for subsequent violations "to vindicate the public interest." 42 U.S.C. sec. 3614 (d)(1)(C). HUD administrative law judges may award up to $10,000 in civil penalties for the first violation, $25,000 any subsequent violation during the first five years and up to $50,000 if two or more violations within the past seven years. 42 U.S.C. sec.3612 (g)(3). Under the federal statute, the penalties are awarded to the federal government. Under the state statute, penalties are awarded to the complainant. Like punitive damages, civil penalties are intended to punish culpable parties. In administrative proceedings the civil penalties are determined by the administrative law judge. Parties to a judicial proceeding for civil penalties are entitled to a jury trial to determine liability. Tull v. United States, 481 U.S. 412 (1987). After liability is established, the court is empowered to determine the size of the penalties. Id. at 425-427. 40 � � i. It't / I'I 11 '1 I • I / t � I I t f � [f � e. A plaintiff may also seek punitive damages for sexual harassment from the harasser, his superior and, owner. Punitive damages are not designed to compensate an injured parry, but are intended to punish outrageous conduct and deter other from similar conduct in the future. Smith v. Wade, 461 U. S. 30, 54 (1983). Although under other statutes the standard for proof for punitive damages is "reckless indifference", the key issue in fair housing cases is usually whether the defendant's discrimination was "intentional." Eg., City of Chicago v. Matchmaker Real Fstate Sales Center, Inc., 982 F.2d 1086, 1099-1100 (7th Cir. 1992, cert. denied, 113 S. Ct.. 2961 (1993). Itis not absolutely necessary for a plaintiff to show actual participation or knowledge to secure an award of punitive damages. In housing cases, punitive damages may be awarded if the harasser, his superior or owner can be shown to have acted with "willful and wanton disregard" of the plaintiffs rights, Shaw v. Cassar, 558 F. Supp. 303, 315 (E.D., Mich. 1983); "reckless or callous disregard of, or indifference to" the rights of the plaintiff, United States v. Balistrieri, 981 F.2d 916, 936 (7th Cir. 1992), where the defendant "fostered the acts complained of." Miller v. Apartments and Homes of N.J., Inc., 646 F.2d 101, 111 (3d Cir, 1981). In Asbury v. Brougham, 866 F.2d 1276 (10th Cir. 1989), the Court held that the failure to apologize or otherwise remedy a situation after personally investigating a claim constituted acceptance and ratification of the discriminatory conduct. Id. at 1283. In California, plaintiffs in class actions also usually allege unfair businesses practices under the State's Unfair Business Practices Act pursuant to which each class member is entitled to $250 a day for each violation committed. The SFVFHC may receive monetary awards. These awards may come in the form of damages reflecting compensation for the time and resources it puts into cases. 32 " If the Council receive such damages, they technically belong to the City as "program income." On the other hand, donations to the Council and payments to the Council for future monitoring or testing to be conducted do not constitute forms of"program income." 41 "Ii /['l I tl I'I (/'[ I f • I I[' l f[ S yS f The law is unsettled what the standard of measurement should be in assessing damages involving councils. When legal services attorneys litigate fair housing cases and win, they are entitled attorneys fees. The awards of attorney's fees are based on the value placed on the attorney's working the market place, not the actual amounts paid by the agency to the staff attorney. One of the reasons for allowing legal services agencies market rate fees is to ensure that defendants pay "full freight" when they violate the law. The courts reason that defendants who discriminate are not entitled to discounted attorneys' fees. This reasoning is equally applicable to the work performed by fair housing councils, however, in those cases which have been litigated, councils have only requested reimbursement of actual costs. Since non -profits typically pay salaries which are below market rate, the defendant indirectly benefits and can write off the award as a minimal "cost of doing business." We recommend that SFVFHC seek market rate awards to compensate the Council for the salaries of any staff involved in the case and not the out of pocket cost to the Agency. The other cost for which the Council should seek compensation relates to the " burn out" factor which the Council must cope with in fair housing investigations. Typically, testers and staff who face discrimination every day "burn out" and must be replaced. This leads to need to constantly retrain and informally counsel staff. Few, if any, councils can afford health insurance which provide for health insurance coverage which provides for mental health care. Another type of counseling which is sometimes required relates specifically to the on the job occurances of discrimination. Sometimes staff react strongly to certain kinds of discrimination or specific cases. These reactions may, for example, cause minority staff to become depressed, hostile towards majority staff members, and cause severe interruptions of Council operations. We recommend that SFVFHC document this, type of damage. The costs of replacing testers and staff and providing for mental health counseling for staff should be included in damages which SFVFHC seeks in the future. 42 Chapter 4 Identification of Impediments to Fair Housing Choices Under Title VIII of the federal Civil Rights Act, 42 U.S.C. 3601-3619, as amended, the City is banned from discriminating on the basis of race, color, national origin, religion, sex, disabilities and familial status in most housing and housing related financial and insurance transactions. Below is a discussion of fair housing actions which typically concern municipalities. I. Residential Segregation Most of the early case law involving municipalities concerned cases of racial discrimination. The federal legislative history related to the passage of initial passage of the 1968 Fair Housing Act contains references to residential racial segregation and racial ghettos and the urban disorders of 1967, a major goal in passing the 1968 federal Fair Housing Act was racial integration. 114 Cong. Rec. p. 2275, 2276, 2706, 3422, 9559 & 9591 (1968). Schwemm at2-1. Segregation in a particular community is commonly measured on a measured on a 100 -point scale, with 100 indicating total segregation (i.e., all blacks and all whites live in racially homogeneous areas) and zero indicating a population that is randomly distributed by race. Using this measure, the overall segregation index in 1980 was 77 for the nation's 17 largest metropolitan areas with over 250,000 blacks. 43 Wr ; rRUPOWITEP78I I'f [!'I I • I I' t t' ! f I !T NAO4 if In Los Angeles County the index of dissimilarity within the County was as follows over the years.33 Los Angeles County Index of dissimilarity between An los and: Year of Measurement African- Americans Latinos Asians 1970 .90 .47 .53 1980 .81 .58 .43 1990 .75 .61 .46 There is a lack of agreement among experts as to why segregation persists. There are those who contend that segregation is the result of economic differences with minorities being generally unable to afford upscale housing and from personal preferences,34 These experts argue that segregation is a matter of personal choice and will persist even if discrimination were eliminated entirely. Schwemm at 2-6. " Chart supplied by Dr.. Richard Sander, UCLA 34 See, e.g., Muth, "The Causes of Housing Segregation," Issues in Housing Discrimination, Vol. 1, at 3 (U.S. Commission on Civil Rights 1985). M Other experts argue that discrimination is a major impediment to residential integration. In the 1977, nationwide study on the nature of discrimination against African Americans it was revealed that African Americans seek to rent units 72% of the time and those who see to purchase units face discrimination 48% of the time. A similar study which was conducted in 1989 documented that when Latinos seek rental housing they experience discrimination 46% of the time and 56% of the time when they seek to purchase housing. It was documented that when African Americans seek rental housing they experience discrimination 53 %oof the time and 56% of the time when they seek to purchase housing. (M. Turner, R. Struyk & J. Yinger, Housing Discrimination Study: Synthesis (U. S. Department of Housing and Urban Development 1991). The 1968 federal fair housing prohibitions were targeted at ending the types of discrimination which result in residential segregation. These provisions enacted into statute the case law grounded in the Equal Protection Clause of the United States Constitution, e. g.; Buchanon v. Warley, 245 U.S. 60 (1917) in which the Supreme Court ruled invalid a Louisville, Kentucky ordinance prohibiting whites from occupying units in African American sections of town and African Americans from purchasing a home on blocks where a majority of whites live. See also, Harmon v. Tyler, 273 U.S. 668 (1927). Prior to the enactment of the 1968 Fair Housing Act, exclusionary zoning based on race was also held to be invalid. [Shelley v. Kramer, 334 U.S. 1(1948)]. Segregation, a concern in many cities and communities, is produced by many factors. Segregation in Los Angeles County predated the incorporation of Santa Clarita, and solutions to racial isolation, like many fair housing concerns must be addressed on a regional basis. The migration into Santa Clarita of largely affluent, Anglo families results in a city profile which is substantially different from most of the other parts of the County. 45 111 • /I � 1 / fI 1 11'I I j I I _ f � I / [ j I ! 1 For example, in South -Central Los Angeles there is substantial poverty, however most of the, households are above the poverty line.JS South -Central is 60% African American, but fewer than one African American family in four now lives there. There is a very substantial Latino population and very few Anglos. The Culver City/Compton Axis has population of about 650,000 persons which is home to around half of all middle-class African Americans in Los Angeles County and about a third of the total African American population, with growing Latino and Asian populations.36 Central Los Angeles is just over half Anglo, but its Anglo population is very ethnically diverse. Many first generation Central Americans, Russians, Koreans, Filipinos, and Armenians reside in Central Los Angeles. The southern perimeter of Central Los Angeles is home to a string of small enclaves of middle-class African Americans, and several of these neighborhoods (e.g., West Adams) experienced significant Anglo and Asian in -migration during the 1980s. East Los Angeles is perhaps the only substantial part of Los Angeles that has a dominant Mexican flavor." However, only about one-sixth of the 1990 Latino population in Los Angeles County resided in this region; this area is home to the poorest and most crowded Latinos. After South -Central, East Los Angeles is the poorest sector of the, County, with a poverty rate over 20%. 35 Of the 125,000 households (containing just under half -a -million people) in South - Central Los Angeles, about 68% have incomes above the poverty line; the median income is $25,000 (in 1994 $$). 36 Several are economically diverse and have substantial rental housing; all are more dense than the stereotypical "Anglo" suburbs in the San Gabriel Valley; but most of these communities nonetheless have a distinctly suburban feel. " The area as a whole is about 70% Latino, but many sections are virtually 100% Latino, and probably constitute the largest single -race enclave in Los Angeles County. M I1I • [['[ / I• .San Gabriel Valley is mostly suburban in feel, and has a racially mixed (with few African Americans, but large numbers of Asians, Latinos and Anglos) population.38 There are relatively few poor 9S wealthy households in the San Gabriel Valley, although the median income of the area is only slightly above the County average, only 8% of the households are poor. San Fernando Valley, San Fernando Valley is only 50% Anglo, over one-third rental, and is more working-class in character than middle-class. The western half is more affluent and less densely -populated. San Fernando Valley's 1.4 million population is approximately 63% Anglo, 25% African American, 8% Asian and 4% African American. Antelope Valley has 300,000 residents who are geographically isolated. It is the one truly "new" region in the County, with about half of its housing units built since 1980. Its population is more middle-class than the San Gabriel Valley, with a median family income of about $45,000 and a poverty rate of only 6%, about half the County average. It is about 80% Anglo. The "Westside" has over 300,000 households, but its average household size is relatively small, so the, total population is only 750,000, a little less than 10% of the County's total. Many parts of the Westside are wealthy; the median income of the Westside is close to $60,000 (in 1994 money). Approximately 50,000 Westsiders live below the poverty line." Westsiders tend to work in the professions or media industries. The South Bay is the most consistently affluent portion of the County, with a median income of close to $65,000 (in 1994 dollars). " The 1.5 million residents of the San Gabriel Valley are nearly half Anglo, about 30% Latino, 15% Asian, and 5% African American. " Note, too, that these statistics do not include the homeless population, which is significant in Santa Monica and Venice. 47 The South Bay has the highest per capita concentration of engineers in Southern California. The two areas are quite similar, however, in housing stock and physical appearance. The area is predominantly Anglo, with somewhat smaller Latino and African American populations than the Westside. Long Beach and Southeast "Border" communities have historically been home to Anglo ethnics with working or middle-class jobs. To a growing degree these neighborhoods have become more racially diverse, but the dominant Anglo ethnic character remains. The Southeast corridor is 56% Anglo and 27% Latino. The Southeast Interior is 63% Latino and 25% Anglo. The median income of the Interior is around $30,000, compared with around $40,000 in Long Beach and the Southeast Border. In many ways Santa Clarita is the community which is idyllic, relatively small, suburban, clean and supported by good schools and municipal services. In migration of many races would be expected; all things being equal. All things are not equal, however, for the cost of housing in Santa Clarita is higher, affecting the full exercise of choice by low income racial and language minority populations, but do not necessarily represent fair housing violations. The booming Los Angeles economy peaked in 1989. Under the simultaneous pressures of a national recession and sharp cuts in defense spending, the County's economy contracted for four straight years. The aggregate size of the contraction was modest -- about 6%" in real terms,40 overall -- but 40 The phrases "real terms" or "real dollars" mean "in dollars adjusted for inflation" or "in terms that ignore the distorting effects of inflation". We will use "real dollars" whenever we present income or price data over time; in general, we will give dollar figures in 1994 dollars, unless noted otherwise. M MOM i fI'I I I I'[ II'I UMN• I _. t' I I I S I I rM in following a period of rapid expansion, and in the context of continued immigration, the contraction brought widespread pain and dramatically -altered expectations. Unemployment nearly doubled, to around 11% in 1993, single-family housing prices fell (in real terms) by 3040%, and the volume of vacant office space increased substantially.All of these factors affected the housing search of individuals. Personal preferences also affected these searches. Whether a family desired an urban versus suburban environment, single family versus multifamily setting, rental versus purchase unit, near commercial establishments versus on a hidden away cul-de-sac all reflected personal choice. Typical kinds of neighborhood characteristics which are into account when choosing neighborhoods include the maintenance of surrounding housing, delivery of municipal services, incidence of crime and vandalism, quality of police protection, quality of schools, quality of neighborhood shopping alternatives and access to banking services. The results of a 1993 survey of Los Angeles County residents indicate, not surprisingly, that low income African American and Latino communities evidence more problems with housing maintenance than arty other income and ethnic areas. Low income African Americans, Latinos and Asians in Los Angeles County also complain in substantially higher numbers about the delivery of municipal services. (These numbers were not segregated in a manner to determine whether complaints involve Santa Clarita or any other particular community.) Although low income communities appear to have crime and vandalism problems for all racial groups, Latinos and African Americans at virtually all income levels complain in substantially higher numbers about these conditions than do their Anglo and Asian counterparts. The perception of survey respondents on the excellence of police protection is much more mixed along both income and racial ethnic fines. Generally speaking, African Americans are less satisfied with the quality of their schools, shopping alternatives and banking facilities. 49 1996 Assessment of Impediments to Fair Housing Choices for the Ct:ry of Santa Clarita A The tables included in the appendix of this document below reflect the survey results made available to date. Perceptions of the Quality of Housing Upkeep In Respondent's Neighborhood by Race and Income Los Angeles County, 1993 Household ° Income Range I Respondents who said that "housing and property not being kept up is "always a problem" or "often a problem" in the respondent's nei hborhood Anglo African American Latino Asian Under$15,000 8% 19% 22% 10% $15-30,000 12% 13% 12% 5% $30-50,000 4% 16% 13% 4% $50-80,000 0% 10% 14% 8% Over $80,000 14% 5% 0% 0% Note: These data are based on 1136 observations, about 28% of the projected data set. In some cells, the number of observations is too small to be statistically reliable 50 Perceptions of the Seriousness of Crime and Vandalism In Respondent's Neighborhood by Race and Income Los Angeles County, 1993 Household Income Range % Respondents who said that "crime and vandalism is "always a problem" or "often a problem" in the respondent's neighborhood Anglo African American Latino Asian Under$15,000 28% 35% 58% 43% $15-30,000 25% 31% 35% 26% 530-50,000 15% 23% 40% 17% $50-80,000 12% 24% 29% 0% Over $80,000 11% 19% 20% 8% Note: These data are based on 1136 observations, about 28% of the projected UCLA data set In some cells, the number of observations is too small to be statistically reliable. 51 Perceptions of the Quality of Policy Protection In Respondent's Neighborhood by Race and Income -Los Angeles County, 1993 Household Income Range % Respondents who said that the quality of police protection is "excellent" or "good" in the respondent's neighborhood Anglo African American Latino Asian Under $15,000 57% 37% 41% 58% $15-30,000 68% 1 44% 65% 53% $30-50,000 75% 48% 47% 67% $50-80,000 80% 43% 43% 42% Over $80,000 71% 43% 60% 62% Note: These data are based on 1136 observations, about 28% of the projected UCLA data set In some cells, the number of observations is too small to be statistically reliable 52 1I, • I/'/ I / /'I //'I I / / I / ft S I/ Perceptions of the Quality of Schools In Respondent's Neighborhood by Race and Income - In Los Angeles County Household Income Range % Respondents who said that the quality of public schools is /'excellent" or "good" in the res ondent's neighborhood Anglo African American Latino Asian Under $15,000 49% 39% 56% 33% $15-30,000 57% 39% 53% 53% $30-50,000 50% 31% 43% 38% $50-80,000 52% 16% 43% 33% Over $80,000 57% 28016 40% 38% Note: These data are based on 1136 observations, about 28% of the projected UCLA data set In some cells the number of observations is too small to be statistically reliable 53 TI a tt' I I 1M It't I S 0614TOMW Perceptions of the Quality Neighborhood Shopping In Respondent's Neighborhood by Race and Income -Los Angeles County, 1993 Household Income Range % Respondents who said that the quality of neighborhood shopping (e g., grocery and drug stores) is "excellent" or "good" in the respondent's neighborhood Anglo African American Latino Asian Under $15,000 67% 49% 58% 52% $15-30,000 73% 43% 67% 79% $30-50,000 73% 37% 70% 83% $50-80,000 76°%a 38% 64% 67% Over $80,000 88% 57% 100% 77% Note: These data are based on 1136 observations, about 28% of the projected UCLA data set In some cells, the number of observations is too small to be statistically reliable Perceptions of the Quality 54 PEOMMMOM Mor S e. of Neighborhood Banking In Respondent's Neighborhoodby Race and Income Los Angeles County, 1993 Household Income Range % Respondents who said that the quality of access to banks and S &,L's is "excellent" or "good" in the respondent's nei hborhood Anglo African American Latina Asian Under $15,000 80% 56% 62% 57% $15-30,000 85% 49% 76% 68% $30-50,000 82% 43% 70% 83% $50-80,000 86% 51% 78% 67% Over $80,000 86% 1 57% 100% 61% Note: These data are based on 1136 observations, about 28% of the projected UCLA data set. In some cells, the number of observations is too small to be statistically reliable Although these concerns are all legitimate considerations for home seekers to take into account. It appears that Latino and African American neighborhoods are viewed by the residents as being of the same quality as those housing Anglos, and to a lesser degree Asians. 55 VVYLOMMM=4A I M77.72 I / I I j I l / I i / j I 11101 -4i Assuming these perceptions are accurate reflections of reality, home seekers can reasonably. associate lower quality housing with race and ethnicity.. Equally a matter of personal choice is the degree of racial and ethnic integration home seekers consider ideal or appropriate: In a recent study conducted by the Fair Housing Congress of Southern California and the University of Southern California at Los Angeles the following results were obtained. It is a matter of speculation as to whether these results are influenced by the above reported correlation between race/ethnicity and less than optimal housing conditions, for the survey did not inquire into this matter. 56 1996 Assessment g - pediments to Fair Housing Choicesfor the City of Santa Clarity CA Desired Racial Mix in "Ideal" Neighborhood by Race of Respondent Los Angeles County, 1993° 41 These data are based on 1136 observations, about 28% ofthe projected UCLA data set In some cells, the number of observations is too smaU to be statistically reliable. 57 % Distribution of Neighborhood Residents (Identified only by Race) in Respondent's "Ideal" Nei hborhood Anglo African American Latino Asian Respondent's Racial Neighbors Neighbors Neighbors Neighbors. Group Anglo 43% 14% 22% 21% African 23% 40% 19% 18% American Latino 28% 17% 35% 20% Asian 32% 18% 20% 30% 41 These data are based on 1136 observations, about 28% ofthe projected UCLA data set In some cells, the number of observations is too smaU to be statistically reliable. 57 rr r //'I IM=3-II'I M07MMIMIMM, 44/ I I Z / 11 I . The results revealed that each group, except Asians, thought the ideal mix would result in their own race be most represented. No group wanted to be in the minority. Interestingly enough, however, no group chose to an absolute majority, i.e., 51%0 or higher. The predominant race would be no greater than 43% of the population, the percentage chosen by Anglos. Anglos were chosen as the next ideal neighbors, (except by Anglos who chose Latinos:) All groups (except African Americans) thought African American participation should be limited to between 14% and 18% of the community. These results are important because they show that there is no common definition of what constitutes "integration." Given the fact that the survey did not qualify the characteristics of the various neighbors,. these results are subject to further refinement_ It is likely that the responses may well have been modified if income, educational or professional characteristics were taken into account. A. Patterns of Latino and Asian Segregation Immigrants and non-English speakers make up a much larger percentage of Latino and Asian those populations than was the case in the 1970s. The phenomenon in our nation's cities of Anglo -to - African American neighborhood racial transition is no longer so common in Southern California. Instead there is a more complex process of multi-ethnic neighborhood evolution. This process has been most abrupt (and has perhaps caused the greatest tension) in the heart of the old African American community (the eastern half of South -Central Los Angeles), where dozens of neighborhoods changed from predominantly African American to mostly Latino during the 1980s. In some suburban communities of the County, there has been a similar process of steady replacement of working- and middle-class Anglo families with Latino and Asian families at similar economic levels. Elsewhere, however, the changing demographics have produced communities that are genuinely multi-ethnic, and which are experiencing only slow and modest rates of Anglo decline. W f I I • I'[ / I' 17/ "12!1 I I I' A Iill f I f I J t The large volume of immigration has had a number of other effects which are more subtle, but equally important, for understanding local housing conditions. Many immigrants have relatively low technical skills and little formal education. Thus, despite the general affluence of Los Angeles in the 1980s, the median income of families in Los Angeles County stagnated during the 1980s and fell in comparison to national averages. Upper -middle-class Angelenos generally prospered in the 1980s, but many low-income households had increasing difficulty handling the rising housing costs of Los Angeles County, So in assessing the causes and effects of segregation, income and job skills play considerable roles. The dynamics of segregation in the Latino and Asian communities are fundamentally different from those that prevail among African Americans. Patterns within both of these communities show unmistakable signs of following, for the most part, historical patterns of assimilation established by European immigrant groups in the late 19th and early 20th centuries. The Irish and' Italian immigrations produced initially high levels of segregation, e.g., in the .60 range, during initial waves of immigration, but gradually declined from that level in subsequent generations. Well before fair housing laws were passed, nearly all European groups, with the exception of Jews, had open access to housing markets. There are several classic indications of assimilation,d2 all of which apply to Latinos and Asians in Los Angeles County and Santa Clarita.43 " Strong correlation between integration with Anglos, spatial assimilation, and the length of residence in the United States; higher levels of integration with Anglos among second- and third -generation members; substantially higher levels of integration with increasing income and education; and high intermarriage rates between members of the group and other resident populations. 43 We were unable to find research studies on the patterns of dissimilarities and assimilation specific to the Santa Clarita Valley or the City. The most relevant information was conducted by the Fair Housing Congress of Southern California in connection with its City and County of Los Angeles Assessment study, on which this demographic information is based. M Ill • IL'L / L /'I L/'L / I ! I L L / L I IL 0=0111 Thus, absent discrimination, Latino and Asian levels of integration with Anglos should increase over time. However, overall Anglo/Latino segregation and Anglo/Asian segregation in Los Angeles County increased slightly during the 1980s. However, among second -generation Asians and Latinos, integration was relatively high, suggesting that third generation would be even more fully assimilated, absent discrimination. For both Asians and Latinos, however, assimilation was greatly inhibited by housing discrimination until the passage of fair housing laws. In some ways, these groups have benefited more from these laws than African Americans- Congress' main intended beneficiaries of the law. It must be emphasized, however, that there are wide disparities in housing market treatment within the Asian and Latino populations. Well-established subpopulations within these communities - such as Japanese -Americans and third -plus -generation Mexican -Americans- appear to fare better in the market than new immigrant groups, especially recent Latino arrivals, accented Latinos and dark-skinned Latinos. These suffer from rates of discrimination that are comparable to (and in some cases greater than) rates experienced by African Americans. Widespread discrimination against large, young families also disproportionately affects low-income Latino households. Santa Clarita's Latino and Asian populations are both young and largely families, so this type of discrimination may be relevant. We did not audit the nature and extent of such discrimination against Latinos, Asians and families in Santa Clarita. We do not have data on the degree to which discrimination is practiced against Latinos on the basis of accented versus non -accented, dark skinned versus fight skinned, large family versus small family, well established versus new immigrant characteristics or status within the City of Santa Clarita. Reliance upon the national statistics may not be indicated, given the number of complaints which have actually been received. However, the wide disparity between the County statistics and the number of complaints received suggest that although outreach campaigns have been undertaken they may not be effective, that neither the national nor the County statistics are indicative of the Santa Clarita experience or that some other factors are at work in the market. M III i / I �f I'/ ! � / t l / I / I ! � I I! I •II / / S Without conducting Santa Clarita specific audits of the rental, sales, lending and other markets, it is impossible to estimate the extent of discrimination in the City or what priority the City and SFVFHC should place on the various forms of discrimination in the City's fair housing enforcement program. It is possible that assimilation has occurred and the markets are free of discrimination, but we recommend confirmation of this. B. Patterns of African American Segregation While declines in African American segregation in Los Angeles County have been modest, they have out paced most other major communities in the United States, For Afiican Americans, Los Angeles County has gone from being one of the most segregated American regions (in the 1960s) to being around the national average (in the 1990s). The character of African American segregation in Los Angeles County has changed markedly in a number of ways: • In 1960, nearly half of Los Angeles County's Anglo neighborhoods had no African American residents. In the 1990s, there are virtually no neighborhoods in Los Angeles County that have no African American residents. • In 1960, African Americans paid approximately 10% more than Anglos paid for comparable sized housing, if one simply compared similar types of housing and households. In 1990, African Americans paid approximately 8% less for comparable sized housing, using the same methodology. The "savings" in African American neighborhoods largely reflects the lower level of neighborhood amenities reflected in the tables above. However, it is impossible to determine based on available data whether the discounts accurately reflect the diminished vale of housing in these areas. 31 • Even in 1950, the quality of housing in Los Angeles County was among the highest of any American urban area, for African Americans, as well as Anglos. In 1960, approximately one-third of African Americans lived in crowded or substandard housing, as compared to approximately one-sixth of Anglos. Some of this disparity was due to differences in income. There are no directly comparable measures of housing quality in the 1990 census. • In the 1960s, neighborhoods entered by African Americans in significant numbers tended to pass through "racial transition", i.e., Anglos leaving the community. Resident Anglos were three times more likely to move away from neighborhoods undergoing "racial change," and the number of Anglos moving into these areas fell by 90%. The fanning of Anglo fears concerning African American in -migration (blockbusting) contributed to producing all -African American neighborhoods. By the 1980s, this phenomenon had largely come to an end. Few neighborhoods witnessed rapid rises in African American populations; only 1 out of every 10 neighborhoods that were 20-40% African American in 1980 became more than 50% African American by 1990. Anglos continued to move into integrated, i.e., no more than 15%"-20% African American concentration, neighborhoods in significant numbers. However, there has been a gradual decline in the overall Anglo population of Los Angeles County. Santa Clarita is the type of community to which affluent Anglos have migrated, resulting in the City having a 87.3% Anglo, 13,4% Latino, 4.2% Asian and 1.5% African American population," 44 This compares with a 56.8% Anglo, 21.2% Latino, 10.8% Asian and 11.2% African American population in the County overall. 62 Income differences between African Americans and Anglos feed into the cycle of Los Angeles County and Santa Clarita housing patterns. The relatively small size of the African American middle class reduced the size of the "pioneer" group of African Americans who sought to relocate into predominantly Anglo neighborhoods, resulting such a small percentage of Santa Clarita's population, i.e., 1,5%. Thus, the initial threshold of African American settlement in Santa Clarita was too small to encourage sustained migration from predominantly African American areas. On the other hand, the low level of migration by African Americans into Santa Clarita was not great enough to cause Anglo migration, as Housing discrimination and prejudice no longer operate as an absolute bar to African American access to Anglo communities as it was in the 1950's, for it is no longer legal. Racial discrimination in housing has declined markedly over the past generation, and African Americans are present, though often in small numbers, in virtually every neighborhood in the County. While the number of African Americans who are absolutely refused the opportunity to buy or rent in their neighborhood of choice because of discrimination is relatively small, the number of applicants who are only offered more difficult terms and conditions or otherwise subjected to discrimination is much greater. Fear of discriminatory treatment will also cause African Americans to avoid the search for dwellings in Anglo areas. All of these circumstances have economic consequences that are noteworthy. " In addition, the lower average economic status of African Americans fed stereotypes and the phenomenon of "statistical discrimination", an academic designation for the phenomenon which results when people who discriminate not on the basis of racial animus, but because of assumptions about the economic capacities of individuals or classes. Although "statistical discrimination" has significance for economists, it should be noted that this form of discrimination is a violation of fair housing/lending laws, as is discrimination based on racial or national origin animus. "Statistical discrimination" is more relevant in the considering discrimination practiced against African Americans. The relationship between income and segregation is quite different for the Latino and Asian communities, as discussed above. 63 III • (f( tl /' I( f I f • l.. t' e I I t i/ II � J i � Although some argue that the principal cause of housing segregation isnot housing discrimination, but the preferences of most African Americans and Anglos to live in communities "with their own kind," studies reveal that the interaction of discrimination and neighborhood preferences is close. Studies also reveal that African Americans and Anglos prefer integrated living arrangements. African Americans and Anglos differ widely, however, on what constitutes "integration." Widespread survey data from the 1970s and 1980s demonstrated repeatedly that nearly all African Americans, and a substantial number of Anglos, preferred integrated neighborhoods to segregated ones. At the same time, most members of both racial groups often demonstrated an aversion to being a "minority" within a given neighborhood.. In those instances in which Anglos perceive themselves becoming minorities, Anglos have moved out of neighborhoods. Conversely, many African Americans have avoided Anglo neighborhoods which they perceive as unlikely to become meaningfully integrated in the short term. It thus appears to be the case that in Los Angeles (and other multi-ethnic cities), once a certain threshold of integration is reached in a general area, further integration becomes self-sustaining. In the Pasadena/Altadena area, for example, there has been a significant presence of Anglos, African Americans, and Latinos for more than a generation. Given this general proximity, and the absence of fears about any neighborhood being flooded by in -migration from a single group, the area has become steadily more integrated. By 1990, the Anglo/African American index of dissimilarity in that region had fallen to .50, as compared to a County index of .75, and virtually every census tract in that region had become more multiethnic during the 1980s,' 66 These theories related to demographic in and out migrations and the significance thereof for Los Angeles County were developed by Dr. Richard Sander, UCLA. M r r 1 a I[ ' / f1 /• I II "[ f I I I' ! I / r[ ! 4 f L f J Santa Clarita, like the Pasadena/Altadena area, has a very large Anglo population in comparison to its African American population, i.e., 87.3% Anglo and only 1.5% African American. The research on Los Angeles communities reflected above indicates that there should be continued assimilation of Santa Clarita's African American population. The 1.5% African American level is well within the ideal" limits of African American integration. All these factors combine to predict that not only will second and third generation Latino and Asian populations be well assimilated in the community, the City's African American population will be incorporated and, at least this level of integration, will be sustained. However, some developers of low income and other affordable housing advocates report that developers of affordable and special needs housing are reluctant to locate in Santa Clarita because it has a reputation for NIMBY activities with respect to virtually low income housing, even on occasion, that which is designed for seniors. In addition, lack of suitable and affordable property for development, as a result of the housing/development boom of the 80's and early 90's has affected affordable housing production. Communities with high levels of NIMBY activities are typically avoided because delays caused by such activism increase the cost of development, thereby making it unfeasible. Thus, while Santa Clarita appears to capable of assimilating higher income racial and ethnic minorities at middle and high income levels, as discussed above, the expectation is that the City, like other municipalities which promote such housing, will facilitate the development of affordable multifamily housing through the use of its CDBG, other funds, bonus densities and other incentives. The City should review its "pay as you go" policy with respect to such development projects and determine whether this policy and others have disparate impacts on fair housing goals and take any appropriate action in response to its findings. 65 III II I I fI /'�I C. Segregation of Disabled Persons We have not identified any comprehensive studies on the residential patterns of the disabled populations of Los Angeles County or Santa Clarita, and we know of no research on the housing segregation of disabled Americans. A major reason for the scarcity of research is the weakness of census data on this subject. Only in 1990 did the census add questions about disabilities in the general population, and these questions are quite general, asking whether respondents have a disability which restricts their mobility or restricts their ability to work at their usual occupations. The Census count depends entirely upon the technique of self identification of disabilities by individuals. As a result, the count does not include those persons who do not disclose physical or mental disabilities, or those persons who are unaware of their disabilities or are too disabled to respond. Approximately one-eighth of the adult population in Los Angeles County self identified themselves as being disabled in one way or another. This count does not include those persons who are disabled, but did not identify themselves as such. For most of the persons who self identified themselves as being disabled had mobility and work disabilities arising from conditions or diseases associated with old age; only about one-third of the census -defined disabled population is between the ages of 20 and 60. It might well be that particular categories of disabilities have similar characteristics, but the census data does not document whether or not this is the case. Disabled elderly persons residing in the County are likely to live with their children, in nursing or group care homes, with a spouse, or alone. The elderly are not frequent home seekers; for even if the elderly live alone, they are tend to remain in the same residence for a long time.Most working -age disabled persons do not live alone. Most appear to live with their parents, with siblings or in congregate living facilities. Approximately 20,000 disabled, working -age persons were reported by the census as either living alone or living in some sort of institutional facility (including group homes). These persons are geographically concentrated, typically in the dense low income neighborhoods, living alone. Thus, to the extent that we make observations about Santa Clarita's low and very low income families, the statements appear applicable to disabled persons living independent of their blood relations. We recommend that the census data be collected on different types of demographic information related to all disabled persons so that Santa Clarita can make more effective planning decisions. In order to accomplish this end, we recommend that the City service providers, public agencies and the City Council work in cooperation to accomplish this goal. D. The Segregation of Government -Subsidized Housing The City of Santa Clarita does not operate or have conventional public housing located in its jurisdiction. Santa Clarita has entered in a memorandum of understanding with the County of Los Angeles pursuant to which the City's residents seeking conventional public housing or Section 8 subsidies will apply to the County for such housing options. Because the City has designated the County as its agent in this regard, the observations made concerning the County's programs are imputed to the City of Santa Clarita. Local housing authorities aggravated, or at least helped to sustain, segregation in the early development of public housing projects. In the 1950s and 1960s housing authorities routinely concentrated their large conventional public housing units in predominantly minority neighborhoods, and many authorities assigned tenant applicants to projects segregated on the basis of race.47 E. Banfield, Politics and the Public Interest 67 111.II'l WEEI/'{/'[ RW57M7,R/ I/ I' 1/{I{ SIS As late as 1977, the year of the most recent and comprehensive segregation study, public housing in the nation's cities was as segregated as housing in the private market." In light of the segregated patterns in private and public housing, especially those dwellings housing low income persons, the Cranston -Gonzalez National Affordable Housing Act, Pub, L.No. 101-625, 104 Stat. 4079 (Nov. 28, 1990) was amended to add Sections 12701 and 12702 redefining the national housing objective to include "...improving housing opportunities for all residents of the United States, particularly members of disadvantaged minorities, on a nondiscriminatory basis...." Since conventional (the large complexes for families) public housing developments throughout most of the counte house families at 50% and below median income, these large complexes tend to segregate residents by class and race/national origin. Although public housing was conceived and promoted during the New Deal as a way station that would enable working families to "get back on their feet," by the 1960s it; had become a nearly permanent home for hundreds of thousands of female -headed households mired in long-term poverty." Officials at both federal and local levels, along with a range of community activists, began to promote "scattered -site" (i.e., small-scale and geographically dispersed) public housing as a way to reduce segregations' 48 -Bickford & Massey, Segregation in Public Housing. 49 -New York is a notable exception, developing a strong program early on of middle-class and mixed -income public housing. 50-L. Friedman, The Federal Government and Slum Housing. 51- Scattered -site housing was also seen as a way of reducing the stigma some public housing residents experienced, since scattered -site projects would tend to blend into private housing more. It was also expected that scattered -site housing would prevent public housing tenants from being limited in their neighborhood contacts only to other public housing tenants. W, ISI F.. [['[ II II'[ I 1 ( [ I l I _ f( !WITPITIN The Housing and Community Development Act of 1974 ("HCD") established a central goal of future federal subsidies was to be: the reduction of isolation of income groups within communities ... and the promotion of [neighborhood diversity and vitality) through the spatial deconcentration of housing opportunities for persons of lower income and the revitalization of deteriorating or deteriorated neighborhoods to attract persons of higher incomes." To implement these goals, Congress has enacted four housing support programs routinely referred to as "Section 8 subsidies", These programs include: • The Section 8 Certificate Program. Under this program, rent is made of a combination of a contribution from the tenant and a subsidy from the federal government. The tenant is not permitted to pay more than 35% of his/her adjusted gross income on housing. (This amount was initially 25%, and was increased to 30% and finally increased to "35% of adjusted gross income.) HUD determines what the Fair Market Rent is for the area, based upon the size of the unit and amenities provided. The landlord establishes the actual or ceiling rent for the unit in question, not to exceed the Fair Market Rent established by HUD. Once the unit is inspected and approved, the tenant contributes his/her share of the rent and the federal government will underwrite the rest of the rent. Title I, § 101(c)(6) of the HCD. III a /1'[ I fI I'f f I I • I *I_/ f __ • The Section 8 Voucher Program. This program is very similar to the certificate program except that tenants are not required to limit their contributions to 35% of adjusted gross income. Those who applaud this program, argue that tenants need additional flexibility to negotiate rents necessary to move out of minority areas. The program's detractors argue that allowing tenants to pay in excess of 35% of their income invites disaster and allows inadequate funds for other necessary expenses. • The Section 8 Substantial Rehabilitation and New Construction Program. Under the Substantial Rehabilitation program certificates are awarded to developers who agree to substantially upgrade deteriorated or abandoned housing; the developers receive fair market rent on all units covered by the certificates. These Section 8 certificates are tied to a housing unit rather than a particular recipient. The New Construction program is smaller and operates like the Substantial Rehabilitation program, except that the developers awarded the certificates for developing new housing rather than rehabilitating older units. Researchers have reviewed segregation of subsidized tenants, and they have documented trends. In one study often medium-sized metropolitan areas, researchers found that before the introduction of the Section 8 program in 1974, 75% of the publicly -subsidized housing development was located in central cities; in the first ten years of Section 8's operation, the central city share fell to 59%.53 In the ten metropolitan areas, the proportion of African American or Latino census tractS54 was, on average, only 16% of all tracts; nonetheless, 67% of the public housing built before 1974 was 53- R. Gray and S. Tursky, "Location and Racial/Ethnic Occupancy Patterns for HUD - Subsidized Family Housing in Ten Metropolitan Areas," in J. Goering, ed., Housing Desegregation and Federal Policy (1986). 54- The authors defined a "minority" census tract as one in which African Americans and Latinos exceeded 40% of the tract population. 70 u0 -i located in these tracts. In contrast, only 27% of the Section 8 Substantial Rehabilitation and New Construction units were located in A-A/L tracts. In the largest study of mobility behavior reviewed, Abt Associates examined the mobility behavior of Section 8 certificates in fifteen metropolitan areas during the final months of 1979.55 Sixty-one percent of the African American and Latino families .who received certificates moved from their current housing. On average, 52% of the residents in the census tracts from which they were departing were minority, the tracts they went to were 39% minority." County Public Housing Programs Los Angeles County public housing for low and extremely income families includes conventional and scattered -site housing (These complexes tend to be smaller in scale than the City of Los Angeles' developments), New and Substantial Rehabilitation Section 8 project based units, Section 8 Certificate and Section 8 Voucher units. • Racial concentration: African American recipients of County Section 8 voucher and certificate subsidies are much more likely to five in Anglo or racially -integrated neighborhoods than African Americans in the general population. The Los Angeles County's Section 8 New and Rehabilitation developments, however, tend to be concentrated in African American and Latino neighborhoods. 55-J. Strucker, "Race and Residential Mobility: The Effects of Housing Assistance Programs on Household Behavior" in Goring. 56 -These figures are the mean percentage of non-Anglos across these census tracts. 57 -It should be noted that several other studies of experimental programs that resembled the Section 8 Existing program showed smaller declines in the "racial deconcentration" experienced by African Americans in the programs. These, too, are described in the Strucker article. 71 • Poverty concentration; Los Angeles County's public housing has been built in mostly moderate income communities. In almost every program administered either by the County, conventional units housing Latino tenants are sited in slightly lower poverty neighborhoods than units housing African Americans. Units housing Anglos are located in higher income areas than those complexes housing Latinos. Racial and National Origin Segregation within Programs: Subsidized Anglo tenants are more likely to live in Anglo, higher -income communities. Although few subsidized buildings are all -Anglo (or all -African American), most have a distinct racial character. Anglo -African American segregation is about as high in public housing as in the private market; Anglo -Latino segregation is higher in public housing than in the private market. Segregation is also very high between African American tenants and Latino tenants, even though many of the public housing and Section 8 buildings are located in communities that have a mixture of Latino and African American residents. Racial and national origin segregation is nearly as high among Los Angeles County tenants as among Housing Authority for the City Los Angeles tenants, even though Los Angeles County buildings are more likely to be located in integrated, moderate -income communities. • Access to Programs Across Racial and Ethnic Groups: Asians are somewhat over represented among the ranks of publicly -subsidized tenants and African Americans are more dramatically over represented, In the County as a whole, the proportion of subsidized tenants to low-income tenants is roughly .05 for Asians, approximately .08 for Latinos and Anglos, and over .25 for African Americans. There are consistent patterns across programs in the Los Angeles County programs of racial and ethnic groups. 72 Because of Santa Clarita's reliance upon the County for its public housing alternatives, it should be concerned about these trends. We recommend that the City use its good offices to establish programs which provide mobility and fair housing counseling, and if appropriate, fair housing testing and investigations, for Santa Clarita residents seeking Section 8 and conventional public housing placements and Housing Authority subsidized residents seeking to move out of other parts of the County into Santa Clarita. II. Race Conscious Housing Programs In order to achieve the goal of integrated housing, a number, jurisdictions have developed race conscious governmental programs, some of which are viewed by the courts with great criticism and some of which are endorsed.: Those programs which promote racial integration are generally favored and those which take race or national origin into account when deciding whether to provide housing or housing related services is strongly criticized. See, e.g., United States v. Starrett City Associates, 840 F. 2d 1096; 1101 (2d Cir.) cert, denied, 109 S. Ct. 376 (1988). Governmental programs which combine these approaches present vexing issues for municipalities and the courts. Affirmative marketing regulations and programs which require special outreach efforts to racial and ethnic groups who would not otherwise be expected to seek housing in the community have been upheld. See, e.g.; Alshuler v. HUD, 515 F. Supp, .1212, 1234 (N.D. M. 198 1) affd 686 F.2d 472 (7th Cir. 1982) (relying on HUD affirmative marketing directive). Although there are some concerns with these programs, these are generally in the implementation phase of these guidelines. The Contractor has not reviewed the implementation of these programs are part of this effort, but recommends such a review be undertaken in the future. 73 1 1 I f�' I I a I'! I• I I ! r I I' 1/ I f 1 11 t 1! f 1 In those circumstances where local officials have a history of operating segregated public housing units, municipalities may adopt a voluntary race conscious remedy to desegregate. Cf. City of Richmond v. J. A. Croson Co., 109 S. Ct. 706, 729 (1989). In fact, where a local government willfully ignores the impacts of discriminatory municipal policies and practices, this knowing inaction may constitute the type of "outrageous deprivations of equal rights" referred to in United States v. City of Black Jack justifying punitive damages against the governmental entity. 508 F. 2d 1179, 1183-84 (8th Cir. 1974) cert. denied 422 U.S. 1042 (1975). Attempts to impose quotas for minority participation in programs in order to "maintain integration or attract Anglos to live in predominantly African American or "changing neighborhoods have been severely criticized_ See, United States v Starrett City Associates, 660 F, Supp. 668 (E.D.N.Y, 1987) ai d, 840 F. 2d 1096 (2d Cir.) cert. denied, 109 S. Ct, 376 (1988). Notwithstanding the fact that unlawful racial segregation was identified in the Title VIII legislative history as a major problem to be eliminated, the courts reject this solution where to achieve integration minorities must submit to further discrimination, i.e., the loss of housing opportunities, in order to allow Anglos preferences. In the 1989 United States v. Charlottesville Redevelopment & Housing Authority, 718 F. SUPP. 46 1, 465-71 (W.D. Va. 1989) opinion, the Court" ; .. recognized that integration was one of Title VM's goals, but held that the defendant's plan- which the court viewed as neither remedial, narrowly tailored, not temporary- went too far in breaching the `wall' that the statute had erected against racial discrimination." Schwemm, Housing Discrimination- Law and Litigation, Section 11.2(2)(e), p. 11- 23 (1994). There is no evidence that Santa Clarita has sought to impose quotas on minority participation in programs or has instituted integration maintenance programs. If the City of Santa Clarita proposes to establish any race conscious responses to the issues raised herein, it should observe the guidelines set forth above. 74 III. Sexual Harassment There is generally little familiarity and recognition of municipal obligations to end sexual harassment under the federal and State fair housing acts. Under both the federal and State fair housing provisions sexual harassment is a violation of the sexual discrimination provisions of the law. Cities are not the only ones that do not recognize that sexual harassment is against fair housing laws: victims are also unaware of the violations of the law. Where there is recognition, there is severe under reporting of the activity. Santa Clarita relies upon the operation of certain housing programs, and as such, it should be concerned that these programs are free of sexual harassment and that all managers of units, dispensers of benefits and residents appreciate what constitutes such behavior, as well as the remedies available. Sexual harassment is any unwelcome attention, behavior or remark of a sexual nature made in the context of a housing environment that renders a person so uncomfortable that the activity constitutes an interference with housing opportunities. It includes the display of offensive photographs, engaging in sexual innuendo, or the creation of a hostile or abusive atmosphere by the management or other tenants, gender-based insults and differential treatment favoring other tenants who bestow sexual favors. What it does not include is consensual sex which is not coerced. Those relationships which are freely entered into by both parties, without pressure, are not covered by either the federal or state civil rights laws. However, if after a sexual relationship between a tenant and housing provider or repairman is terminated, the tenant has the right to be free from continued unwelcome advances. Unwanted sexual harassment from a former lover who is a repairman or landlord violates the fair housing law, just as if such harassment were delivered by a housing provider who is the victim has never dated. 75 1/ • II ' / II /' I' I M772memMur I' l / I I1 I L N Sexual harassment is not about sex; it is about power. This abuse of power can take a variety of forms. Women, threatened with eviction or refusal to make needed repairs if they do not comply with sexual coercion, too often feel constrained to comply with the advances of landlords and managers who have the power to render them homeless. The federal Fair Housing Act and the California Fair Employment and Housing Act outlaw sexual harassment in housing as part of the prohibitions against sexual discrimination. Federal and state protections extend to women who have acceded to sexual coercion, even to the extent of having sex with their harassers. Women who are harassed often do not report such harassment. Many factors contribute to the severe under reporting of this form of discrimination. Sexual harassment is not about what the harasser intended. Whether the harasser intended the conduct to be offensive, is not relevant. Many harassers who believe their advances are flattering, funny or harmless are nonetheless liable under both federal and California law. What Constitutes Sexual Harassment? Until 1983, there was no case law on sexual harassment within a housing context. This situation was very different from employment law where the concept had a comparatively long history. Shellhammer v. Lewallen, 1 Fair Housing -Fair Lending Cases, Paragraph 15,472 (W.D. Ohio, November 22, 1983), was the first case to recognize that sexual harassment in a rental context constitutes a fair housing violation_ The ruling was made in response to a complaint contesting the right of the resident manager to institute eviction proceedings after the tenant refused to pose nude or engage in sexual intercourse. 76 III i /I / I III' /t'1 • L [I I / f I S/ f I'd I__. I._ The Shellhammer Court followed Equal Employment Opportunity Commission guidelines and defined sexual harassment as "[unwelcome sexual advances, requests for sexual favors, and other verbal or physical conduct of a sexual nature [29 C.F.R. Sec. 1604.11 (1981)]. Pursuant to the Shellhammer ruling unwelcome advances, requests for favors, and other verbal or physical conduct of a sexual nature in a housing context constitute sexual harassment when: (1) Sexual favors are sought in exchange for housing or housing benefits These conditions constitute a "quid pro quo" harassment claim; or (2) The housing is so permeated with discriminatory behavior that is sufficiently severe or pervasive to create an objectively hostile or abusive housing environment and the victim, in fact, feels abused. These conditions constitute a "hostile environment" harassment claim. "Unwelcome" Behavior A key element in sexual harassment is that the sexual behavior must be unwelcome. Even if the tenant submits to the harassment, including engaging in sexual relations, the tenant may file an administrative or judicial action if the sexual contact or overture is unwelcome. The behavior is "unwelcome" if it uninvited and the complainant did not cause the behavior and found it to be undesirable or offensive. Henson v. City of Dundee, 682 F.2d 897, 903 (11th Cir., 1982). In assessing whether an action is "unwelcome" the courts will have to decide what standard to apply. At this time, the law is unsettled. 77 Standards of Proof and Evidence Which Can be Considered In Shellhammer, the Court decided that the standard should be subjective, not objective, in essence holding that the harasser takes his victim as he finds her. Thus, if a harasser engages in sexual bantering or other behavior which a highly sensitive victim finds intolerable, the harasser operates at his own risk. In contradistinction to the Shellhammer approach, the Massachusetts Supreme Judicial Court held that a "reasonable person" standard should apply when evaluating whether sexual harassment occurred. Gnere v. Massachusetts Commission Against Discrimination, 524 N. E.2d 84, 88 (Mass. 1988). Another court held that a prima facie case for a hostile environment is established when the plaintiff "...alleges conduct which a reasonable woman would consider sufficiently severe and pervasive to alter the conditions of ....[housing] and create an abusive ... [housing] environment" Ellison v. Brady, 924 F.2d 872, 879 (9th Cir. 1991). Thus, whether an environment is "hostile" may turn on whether an objective or subjective standard is used, and if an objective standard is used, whether a "reasonable woman" or a "reasonable person" standard is employed. Defenses Although voluntary participation in sexual intercourse or other conduct is not a bar to pursuing a claim, it is a defense to the complaint if the activity is shown to be "welcome." The circumstances are to be viewed in their entirety. The Vinson Court held that the fact finder may take into account the complainant's sexually provocative speech and dress in determining whether an action is welcome. Vinson at 69. The Vinson Court also ruled that the existence of an anti -discrimination policy and an appeal procedures, as well as whether circumstances are calculated to encourage victims to come forward are to be taken into account by the fact finder in determining whether an environment is hostile. Vinson at 72. IV Prevalence of Sexual Harassment in Housing and 'Incidence of Under reporting Victims of sexual harassment in housing rarely complain and therefore there are few rental housing sexual harassment lawsuits. The most reasonable assumption is that, if appropriate education, outreach and training are conducted, the City and SFVFHC should be prepared to handle cases from up to 3.2% of the rental units in the City. Santa Clarita has 9,091 multifamily and mobile housing rental units. Based on the lowest estimate of the incidence of sexual harassment, the City could have as many as 290 sexual harassment complaints on an annual basis. However, given the present level of under reporting and the lack of education, outreach and training in this housing market, the likelihood is that the Council'will receive only 1-2 complaints within the program year. If the complaints are handled by the Council and not simply referred to DFEH or HUD, each investigation could take 100 hours of staff time. 57 " A 1991 survey of Los Angeles County fair housing agencies reveal that an average of one complaint of sexual harassment is filed with these councils a year. Litt, Robinson, Anderson and Bershon, Sexual Harassment Hits Home, 2 UCLA Women's Law Journal 227, 230 (1992). A 1986 nationwide survey of fair housing agencies revealed 288 allegations of sexual harassment complaints being reported to councils over the last five years. Comment, Home is No Haven: An Analysis of Sexual Harassment in Housing, 1987 Wisconsin Law Review 1061, 1065-1070 (1987). Based on comparable employment statistics, the author projects that there serious under reporting of this situation and that there were between 6818-15,000 cases over the five year period. M, at 1069. The California Department of Fair Employment and Housing (DFEH) report that 3.2 % of its complaints involve sexual harassment allegations. The Department investigate few of these allegations unless they involve physical violence, actionable under the California Ralph Act, Litt, Robinson, Anderson and Bershon, Sexual Harassment Hits Home, 2 UCLA Women's Law Journal 227, 230 (1992). A 1981 survey of federal employees revealed that 42% of females and 15% of all male employees reported being sexually harassed on the job. Likewise, 25% of Southern Illinois University students, 20% of University of California at Los Angeles students and 13% of female 79 47 ! 't ( ! I (' t! I I f I S S ! There is massive under reporting and this level of under reporting is neither unusual nor surprising. The reasons for under reporting vary. " Other factors which contribute to under reporting include the fact that victims may not know their rights, that :sexual harassment is illegal or that there are fair housing and other agencies available to assist them. The erosion of victims' self worth and self esteem as a result of the harassment also tend to undermine tenants' ability to take effective action, and 5% of male students at Arizona State University reported experiencing sexual harassment. United States Merit Systems Protection Board, Sexual Harassment in the Federal Workplace; Is it a Problem? 26(1981); J. E. Richards, An Assessment of Sexual harassment of Female Students in a University Setting (1979) unpublished thesis)(Available at Southern Illinois University at Carbondale); Metha & Nigg, Sexual Harassment: Implications of a Study at Arizona State University, 10 Women's Stud. Q., 24 (Summer 1982). The most conservative estimates translate into the likelihood at least 3.2% of Santa Clarita's rental units have been the subject of sexual harassment. Since the Fair Housing Council of San Fernando Valley reports no complaints of sexual harassment complaints during the last program year, there appears to be a serious under reporting of such activity. 58 Women, especially heads of low income families, do not report victimization because they cannot risk: eviction or being referred to the Unlawful Detainer Registry or other credit reporting services as bad tenants. • the physical well-being of family members and themselves. the stigmatization, humiliation and embarrassment associated with sexual harassment. reliving the incident(s) during which they suffered the loss of so much control over their lives and experienced so much powerlessness. ",..[Sexually harassed women often internalize their anger and fright, which may result in physical illness, decreased work productivity and depression" E. A. Stanko, Intimate Intrusions: Women's Experience of MaleViolence, 11-15 at 65 (1985). 99 ''I • 11'1 1 1I'! 11'1 1X. •r. 1' Ir r A I 1' ITOYr1 ! A' ! The allegations contained in a sexual harassment complaint may well involve both civil and criminal liability, requiring investigations of both types of investigations. Any investigation of a fair housing violation should be conducted under the supervision of an attorney and after consultation with a therapist, if possible. The law is unsettled regarding whether the notes, impressions and work product of a fair housing investigator working independent of an attorney have to be turned over to the accused or the accuseds attorney, if litigation is undertaken. A tenant's depressed emotional state following harassment may materially affect both the civil and criminal investigations for the victim's ability to provide information in a consistent manner may well be compromised. The tenant may have to be reinter viewed a number of times. Any changes in the complainant's characteristics, demeanor and mannerisms are of great importance and should be noted by the investigator. Because sexual harassment is often clandestine activity, there are seldom witnesses to the specific acts alleged. However, there may be other victims who have suffered similar abuse whose testimony can be presented. Investigating sexual harassment complaints utilizing traditional fair housing techniques is usually highly inadvisable because it is either ineffectual or puts the investigator at great risk. More advisable is the use of police officers in an undercover capacity, especially in those circumstances where an assault or battery is a likelihood. In addition, California law on the use of wiretaps complicates the investigation of allegations of sexual harassment. All these considerations make investigations of sexual harassment cases very labor intensive and require highly trained investigators. The investigation of 3 cases could easily command 10%-20% of a well trained investigator's time. The caseload can be expected to increase substantially if complainants learn more about potential damage awards. Unless municipal personnel who are likely to come into contact with victims of sexual harassment in a housing context are trained to recognize the need for fair housing intervention and the SFVFHC staff receive additional training and expertise in handling these cases, the public education campaign will create expectations for victims which can not be met. RE 111 • I!'I / I'I /('! } I I The potential damages are overwhelming in some cases. For example, the thirteen plaintiffs in the Northern California sexual harassment in a rental setting case Fiedler v. Dana Properties (E. D. Cal. filed 1989) Case No. Civs. 89-1396 entered into a settlement for approximately $1.2 million. If the Council becomes involved in sexual harassment cases which require extensive staff resources, the SFVFHC should seriously consider whether it is appropriate to become a plaintiff in the action or to otherwise arrange for its costs to be reimbursed," M Land Use Discrimination The legislative history related to the 1988 Amendments to the federal Fair Housing provisions make it clear that the Congress intended to curb the use of land use restrictions against group homes for disabled persons, health and safety laws and regulations which discriminate on the basis of disabilities and neutral practices which disproportionately impact on the basis of disabilities.' 59 If these costs are reimbursed, then the reimbursement is considered "program income" to which the City is entitled. The City can enter into an agreement with the Council allowing the Council to retain these reimbursements to increase the breadth of the program. " See U.S. House of Representative, Committee on the Judiciary, Report 100-711; the Fair Housing Amendments Act 1988 at 24, 100th Cong., 2nd Sess. (1988); Preamble II, 24 C.F.R. ch. 1, subch. A, app. I, 54 Fed. Reg 3246 (Jan.23, 1989). 99 f I I /ff�,1! S *MTRIVEN As a result, both intentional and indirect municipal actions which have a negative impact on the housing opportunities of disabled persons and other fair housing protected individuals are covered under federal law. 6' The exclusionary zoning practices of municipalities have also been challenged on the basis of racial discrimination in violation of Title VIII.62 Municipalities may not intentionally block racially integrated complexes, take an action which has a disproportionately negative impact on the basis of race or perpetuate racial segregation. Metropolitan Housing Development Corp. v. Village of Arlington Heights, 558 F.2d 1283, 1288-90 (7th Cir. 1977) cert, denied, 434 U.S. 1025 (1978). When the plaintiff alleges intentional discrimination, it can be shown through evidence of direct racial animus, a rare set of circumstances, or through circumstantial evidence of intent. Id. at 266. 63 Evidence related to previous denials of the zoning and funding proposals for racially integrated developments or complexes designed to increase the housing accessibility for disabled persons may be taken into account,64 as well as evidence of switching support for projects depending on who was to be housed, see, e.g., Smith v. Town of Clarkton, N.C., 682 F.2d 1055,1061-63 (4th Cir. 1982) and the nature of the public opposition, see, e.g., United States v. City of Birmingham, Michigan, 538 F. Supp. 819, 830 (E.D. Mich., 1982), affd as modified 727 F. 2d 560 (6th Cir.) cert. denied, 469 U.S.. 821 (1984). 61 Milstein, Impact of Fair Housing Amendments on Land -Use Regs, 28 Trends in Housing No 1 at p. 7 (June -July 1989). 62 See, e.g., United States v. Yonkers Board of Education, 837 F. 2d 1181; 1216-26 (2d Cir: 1987),`cen. denied, 486 U.S. 1055 (1988). 63 The Supreme Court has ruled that a tribunal hearing a case involving such circumstantial evidence of intentional discrimination should inquire into: 1) the discriminatory effect of the defendant's actions; (2) the historical background of the decision; (3) the specific sequence of events leading up to the decision; (4) departures from the normal substantive criteria; and (5) the legislative and administrative history of the decision. Schwemm at Section 13.4(3)(d)(1), p.13-35. ' See, e.g., In re Malone, 592 F.Supp. 1135,1162-63 (E.D. Mo. 1984), affd without opinion, 794 F. 2d 680 (8th Cir. 1986). A: A plaintiff may establish discrimination under the . . . Fair Housing Amendments Act by proving that (the) defendants' housing practices have a disparate impact.... Evidence that ... plaintiffs' housing rights will be negatively affected constitutes a showing of discriminatory effect, regardless of impact on non - disabled persons. A plaintiff need not prove discriminatory intent to state a claim; however, such evidence may bolster the case for discriminatory impact. Protection & Advocacy, Inc., Federal Caselaw Addressing the Fair Housing Rights of Persons with Disabilities in Land Use and Zoning Issues, p. 5 (1995). To show disparate impact under the federal statute, the plaintiff must first establish a prima facie case of discriminatory effect, i.e., demonstrate that there will be an impermissible impact. Oxford House -C v. City of St. Louis, 843 F. Supp. 1556 (E.D. Mo. 1994). The plaintiffs in Thorson v. City of Allegan, 863 F. Supp. 504 (W.D. Mich. 1993) failed to meet its burden when they failed to produce evidence that either perpetuation of segregation or a disproportionate impact on disabled persons would result from the denial of a special use permit to operate an adult foster,care facility in a business district. Similarly in Joseph Skillen & Co. v. City of Toledo, 528 F.2d 867, 878 (6th Cir. 1975) vacated and remanded, 429 U.S. 1068 (1977) and 558 F. 2d 350 (6th Cir.) cert. denied, 434 U.S. 985 (1977), the plaintiff failed to establish that the percentage of minorities would be substantially impacted, and the plaintiffs in Citizens Committee for Faraday Wood v. Lindsay, 507 F.2d 1065, 1068-71 (2d Cir.), cert. denied, 421 U.S. 948 (1975) were unable to show that minorities were disproportionately represented in the proposed middle income project. M Once a prima facie case is established, the burden of going forward shifts to the municipality to justify its actions. In order to meet its burden, the municipality must show that: "(1) the purpose claimed for the municipality's action must be legitimate; (2) this purpose must actually be served by the municipality's action; and (3) no reasonable alternative can exist that would accomplish the same purpose with a lesser discriminatory impact." Schwemm at Section 13.4(3)(d)(iii), p. 13-37. The disability land use law is not as well settled as the racial discrimination land use law. The courts have split over the level of protection to be afforded disabled persons. Some have held that the municipalities have a rational justification for the action taken; others require legitimate justification accomplished in the least discriminatory manner. Compare Familystyle of St. Paul, Inc. v. City of St. Paul, 923 F. 2d 91 (8th Cir. 199 1) and Stewart B. McKinney Foundation, Inc. v, Town Plan & Zoning Comm'n of the Town of Fairfield, 790 F. Supp. 1197 (D. Conn. 1992). Many disabled persons five communally, with and without care and supervision, or in combination with others in order to afford housing. Cal. Stats., Ch. 1277 Sec. 18 (1993) sets forth the intent of the California legislature to end the discriminatory land use practices which have been practiced against group housing for persons with disabilities and children in peed of specialized care. The California Legislature, in enacting the nation's strongest fair housing law, noted that disabled persons and children in need of specialized care are more likely to five in group housing with unrelated persons. The United States Congress reflected its concern in the House Judiciary Committee's statement that "[t]he (Fair Housing) Act is intended to prohibit the application of special requirements through land -use regulations, restrictive covenants, and conditional or special use permits that has the effect of limiting the ability of such individuals to live in the residence of their choice in the community." U.S. House of Representatives, Committee on the Judiciary, Report 100-711: the Fair Housing Amendments Act of 1988 at 24, 100th Cong., 2nd Sess. (1988)- M 1988) M III i// 1 / / /! / There are at least three theories under the fair housing statutes upon which courts may rule on appropriateness of an ordinance or municipal practices: 1) direct discrimination proven through differential treatment or discriminatory intent; 2) failure or refusal to make reasonable accommodations which will afford persons with disabilities an equal opportunity in housing. (An accommodation is not considered reasonable if it would impose an undue financial administrative burden on the municipality or would constitute a fundamental alteration in an otherwise valid program.); or 3) a disparate impact analysis. In addition, courts may find State or federal constitutional violations. A. "Family" Ordinance and Residential Zoning Issues Under Santa Clarita's Zoning Ordinance families consist of related persons. Related persons and groups of six (6) or fewer unrelated persons living together may five as a matter of right in residential zones. While the six (6) person standard is derived from the State code, there are no State or local findings or other data available to indicate why this number is appropriate, as compared with eight or ten or any other number. The six person standard is not tied to the occupancy code in the Uniform Housing Code which is based on square footage per occupant. Blood related families whose size is seven members or more may live in any zone without making any showings. Group homes of comparable sizes as such families are required to submit to conditional permit hearings 1 where they are required to make substantial showings of fitness to be in the residential zone. The reason for the differential treatment does not appear to be related to compelling or other governmental interest. Whether a six -person group is permitted as a matter of right in a residential zone also turns on the blood relationship between the occupants, not the number of persons occupying the space under consideration. M. In assessing whether these distinctions are actionable under the federal Fair Housing Act which prohibits discrimination on the basis of disabilities, the United States Supreme Court held that such ordinances are not exempt as a maximum occupancy restriction. City of Edmonds v. Oxford House, 115 S. Ct., 63 LW 4402, 4403 (1995). The Court also found that family composition rules comprise an essential component of preserving the character of neighborhoods as family residential communities. Whether this justification would be adequate was an issue which was remanded to the trial court for resolution.. In a similar action involving an ordinance which limited occupancy to families, which included groups of unrelated adults when they showed themselves to meet the standard of "permanence and stability" a District Court in New Jersey held that the federal fair housing provisions were violated, Oxford House v, Township of Cherry Hill, 799 F. Supp. 450 (D. N.J. 1992). The cases which have set aside the "family" or functional equivalent of family's ordinance have done so on a number of bases, i.e., discriminatory intent [Oxford House -C v. City of St. Louis, 843 F. Supp., 1556(E. D. Mo. 1994); discriminatory impact theory; Oxford House v, Town of Babylon, 819 F. Supp. 1179 (E.D.N.Y. 1993); Oxford House v. Township of Cherry Hill, 799 F. Supp.450 (D. N. J. 1992)] and failure or refusal to make reasonable accommodations to disabled persons. [Oxford House v. Town of Babylon, 819 F. Supp. 1179 (E.D.N.Y. 1993)] B. Neighbor Notice Issues Aside from the fair housing concerns raised above, the public review process appears to single out group homes for special attention and treatment. It is required that notices regarding the conditional use permit hearing be mailed to neighbors in the immediate vicinity, a four foot by eight foot sign be posted and publication of the hearing notice be put in a general circulation newspaper." " Zoning Code Sec. .17.1.100; 17.03.040. t III f! ! f "0'1 f! • / 21M• /. [ I [ I / � I I / * f f / This public notice process required for group homes is not necessary for single family homes housing occupants of comparable numbers, thereby singling group home occupants to special and , unwanted attention. Aside from subjecting these occupants and developers to differential treatment, these procedures raise privacy concerns, a right which is guaranteed by California's Constitution. We have no evidence that these notice requirements have resulted in any disabled persons being denied housing as a result of neighborhood opposition. However, imposing standards which result in singling out persons with disabilities in this manner, set them apart and stigmatizes them in their choice of housing. The City should explore the extent to which this requirement impedes development of housing for disabled persons, review State occupancy code and undertake measures to facilitate State and federal fair housing acts' reasonable accommodations provisions, Oxford House -C v. City of St. Louis, 843 F. Supp. 1556 (ED, Mo.. 1994), but see, United States Village of Palatine, 37 F.3d 1230 (7th Cir. 1994), In Potomac Group Home Corp. v. Montgomery County, 823 F. Supp. 1285 (D. Md. 1993) the Maryland district court held that the requiring a notice to neighbors of a proposed group home and the nature of the disabilities to surrounding neighbors violated the federal Fair Housing Act. See also Larkin v. State of Michigan, C.A. No. 93-73871 (E.D. Mich. Nov. 1, 1994) where the court found a notice requirement to neighbors within a 1,500 foot radius violated both the Fair housing Act and the Equal Protection Clause. C. Conditional Use Permit Issues Group homes of seven or more unrelated persons are considered group residential or care facilities.' These group homes and are permitted in residential moderate, medium high and high zones. 67 66 Zoning Code Sec. 17.07 (106)(126). 67 Zoning Code 17.13.030 (8)(9). MR071=7977MMY / I I Under some conditions, they may be permitted in other zones with conditional use permits.6e Juvenile facilities appear to be excluded from any residential areas and permitted only in agricultural, industrial commercial and industrial zones with a conditional use permit. If this is true, the apparent exclusion of juvenile facilities from residential areas would be a violation of the familial status provisions of the State and federal fair housing provisions. A conditional use process is intended to provide an opportunity for public review and evaluation of characteristics of a project or proposed use and ensure ongoing protection of public health, safety and welfare. Before approving a conditional use, Planning must find that the proposed location, size, design and operating characteristics of the proposed use 1) is in accordance with the General Plan, Zoning Code and development policies and standards of the City; 2) will be compatible with and will not adversely affect or be materially detrimental to adjacent uses, residents, building, structures or natural resources; and 3) would be operated or maintained in a manner which is not detrimental to the public health, safety or welfare, or materially injurious to properties or improvements in the vicinity."' In a 1985 Supreme Court decision, City of Cleburne v. Cleburne Living Center, Inc., 473 U.S. 432 (1985), held that the municipality had violated the Equal Protection Clause of the federal Constitution by requiring group homes to secure special use permits, while not requiring such from developers of housing for non -disabled persons. While the holding was unanimous, the Court was severely divided over what standard of review should be used in equal protection cases of this kind. Municipalities are required to provide protection under the law for citizens. "s Zoning Code Sec. 17.03.040;17.07 (106). 69 Santa Clarita Development Code Sec. 17.03.040. It When a municipality treats persons in need of housing in distinctly different ways, i.e., requiring one group to go through a special use permit process and not requiring such of another, equal protection issues are raised. There are two standards of review for equal protection cases, those for suspect categories of persons, i.e., racial minorities, and those for other persons. Where the differences in treatment break down along racial lines, the municipal action must involve a compelling governmental interest. In cases which do not involve suspect classifications of persons, a municipality needs only a rational basis for its action. In the Cleburne case the Supreme Court held that the municipality only had to meet the rational basis test, not the "heightened scrutiny" standard used in race and sex cases. 473 U.S. at 43947. Under the "rational basis" test "legislation is presumed to be valid and will be sustained if the classification drawn by the statute is rationally related to a legitimate state interest." Id. at 446. The Court thereafter ruled that the City had not met even this minimal standard, because "the record does not reveal any rational basis for believing that the [plaintiffs] home would pose any special threat to the city's legitimate interests" Id. at 448. In deciding the rational basis standards had not been met, the Court rejected the City's concern for negative attitudes of nearby property owners, the fact that the home was to be built on a flood plain, maximum occupancy concerns and the desire to avoid over concentration of group homes and street congestion in the area. Id. at 449-50. Instead the Court determined that "requiring the permit in this case appears to us to rest on an irrational prejudice against the mentally retarded." Id at 450. The rationale behind Santa Clarita's treatment of group homes in a manner which is different from other multifamily dwellings is unknown, but it is recommended that the City review its zoning code to determine whether the rationales satisfy equal protection requirements. This rationale, could very well be attributed to a cant' over from the County regulations when Santa Clarita drafted their Zoning Code. The Title VIII case law on what restrictions may be placed on group homes by municipalities is still unsettled, and it will take a while to develop case law on the subject. .41 Under the federal Fair Housing Acts it is unclear whether developers must actually apply for, and. be denied, a conditional use permit before challenging conditional use process as violative of the fair housing principles. Some lower court cases have held that unless the plaintiff goes through the process and is denied the case is premature. See, e.g., Thorton v. City of Allegan, 863 F. Supp, 504 (W.D. Mich. 1993). However, the Seventh Circuit has held that a plaintiff need not apply if to so would be "manifestly futile." See, United States v. Village of Palatine, 37 F. 3d 1230 (7th Cir. 1994) in which the plaintiff argued that requiring the plaintiff to participate in a conditional use permit process was itself a failure by the City to make a reasonable accommodation. Under the reasonable accommodation theory a group home for unrelated persons may be entitled to locate in a single family zone even though other unrelated persons, e.g,, students, may be barred. Elliot v. CityofAthens, Georgia, 960 F.2d 975, 987-88 (11th Cir.), cert. denied, 113 S, Ct. 376 (1992) (Kiavitch, J. dissenting). D. "Over concentration" Issues Although the City's Zoning Code does not address the issue of spatial separations between group homes for disabled persons, the Planning officials interviewed stated that the City does enforce the State statutory provisions in this regard. The Community Care Facility Act, Health & Safety Code Sec. 1520.5 states that it is State policy to prevent over concentration of residential care facilities and requires at least a 300 foot separation between facilities. The Santa Clarita Planning Office is charged with ensuring that there is at least a 300 foot separation between such housing units. At first, this does not appear to be a major problem because the spatial separations between many of the City's housing exceed 300 feet. However, as the City's lots are filled in this may well become an issue in the future, for this statute sets a maximum limit or quota on the number of disabled persons who may live in any jurisdiction and single out disabled persons for a limitation of housing opportunities and choice in housing. The law is still unsettled on this issue. 91 For example, the Eighth Circuit in Familystyle of St. Paul, Inc. of St. Paul, 923 F. 2d 217 (8th Cir. 1991) held that a state statute and implementing municipal zone code requiring new group homes to be sited at least a quarter mile distance from any existing group home did not violate the federal Fair Housing Act, However, the Third Circuit held in a 1993 cases, Horizon House Developmental Services, Inc. v Township of Upper Southhampton, 804 F. Supp., 683 (E.D. Pa. 1992), a, ff'd mem., 995 F. 2d 217(3rd Cir. 1993), held under similar circumstances that there no rationale basis or legitimate governmental interest to impose such a spatial separation requirement on disabled persons, Perhaps the most exhaustive analysis was set forth in an unreported case, Larkin v. State of Michigan, C.A. No. 93-73871 (E.D. Mich., Nov. 1, 1994). The court therein decided that the 1,500 foot separation radius violated both the Fair housing Act and the Equal protection Clause. Citing the Horizon case, the court rejected the argument that the government had a legitimate interest in promoting the integration of disabled persons as a pretext_ It reasoned that, as in cases of racial quotas, the brunt of the capping opportunities fell squarely on one of the categories of persons whom the Fair Housing Act was established to protect. The court also ruled that there was no rational basis for the licensing provision. In the another unreported case, Association for Advancement of the Mentally Handicapped; Inc. a City of Elizabeth, C. A. No. 92-537(D.N.J., Oct. 25, 1994), 1994 WL 761963 (D.N.J.), the court held that the automatic denial of conditional use permits for residential facilities within 1,500 feet of another group home violated the Fair housing Act. It held that statute was invalid on its face. In addition, the court also applied the disparate impact analysis and found the state's action and the city's implementation ordinance wanting. Notwithstanding the Familystyle case, the trend in federal law is to reject "over concentration" statutes and ordinances which impact disproportionately on disabled persons. There is at least one bill pending in the State legislation which addressing this issue. If SB 1690 (Kopp) is enacted the Care Facility Act, Health & Safety Code Sec. 1520.5 would be amended to increase the separation between facilities to 500 feet. This bill would require such spatial separation for even those facilities serving six (6) persons or fewer. 92 1996 Assessment Qflmyediments to Fair HousingChoicesdor the Ciu of Santa Clarita. r'e V. Differential Treatment Discrimination- Rental and Sales Markets The Department of Housing and Urban Development sponsored two definitive audit studies of housing market practices, the Housing Market Practices Survey ("HMPS") of 1977 and the Housing Discrimination Study ("HDS") of 1989. The HMPS used paired African American and Anglo testers in 40 cities, and established audit studies as a viable research methodology, however, the HDS, which encompassed 3800 audits in 25 cities, has provided information of unprecedented depth. This audit focused especially on five cities, including Los Angeles, in large part because an effort was made in the HDS to analyze the extent of discrimination faced by both African American and Latino and Chicano renters and home -seekers. The HDS supersedes the HMPS, both in being more recent and in having a more refined methodology. So we summarize only the results of the HDS here. Overall the HDS concluded that 53% of African American renters and 59% of African American home buyers, as well as 46% of Latino renters and 56% of Latino home buyers, experience discrimination by rental and sales agents: they are not shown available units, are shown fewer units, or are provided with less information and assistance. Further, just over 20% of both African Americans and Latinos are "steered" away from Anglo areas, higher -income areas, and higher -home -value areas. Rental and sales agents were disproportionately located in Anglo neighborhoods, and are much more likely to recommend units in neighborhoods with higher concentrations of minority residents than the metropolitan average. Further, African American and Latino -owned units are less likely to be advertised or to be offered for open house than are Anglo units. 93 WE V. fI ' [ 1 ' I fI ' I n "00701 NS / i The comprehensive nature of the HDS, and the size of its samples; make these audit results authoritative as descriptions of housing -market processes in urban America. Clearly, many real estate agents are racially biased both in shunning minority clients and in treating the absence of African American or Latino residents as a locational advantage-" Some indirect evidence on trends over time supplements this direct point -in -time evidence of housing discrimination. Leigh (1992) reviews housing trends from 1940 to the present. She finds that African Americans' relative overexposure to unsafe or overcrowded housing conditions has fallen, and racial disparities in rent levels and in the probability of home ownership have been steadily reduced. Nonetheless, serious racial gaps in housing persist. For example, the percentage of African American home owners has risen substantially; at the same time, the gap between the proportion of Anglo and African American homeowners has remained constant at approximately 20% since 1940. As Leigh notes, African Americans did not catch up with Anglos' 1940 home ownership rate until 1987. Supplementing these results, Stone finds that African Americans are more likely to be in unaffordable or crowded housing than are Anglos. One immediate consequence of discrimination in housing markets is deepening racial segregation. Turner and Weink (1991) finding show that United States residential segregation is greater than can be accounted for through affordability considerations or individual preferences alone; they suggest this "extra" segregation is due to discrimination in housing allocation processes. 70- It should be emphasized that the HDS findings do not suggest that every Anglo real estate agent overtly dislikes or hates minorities, or is consciously promulgating racial inequities or segregation. More subtle biases could generate the HDS results -- for example, any given real estate agent's perception of what a "good neighborhood" is may well be racially coded even if that agent does not intend to disadvantage minorities. In any event, real estate agents might counter charges they are racially biased by noting that Anglos have very low tolerance for integration in neighborhoods. See Massey and Denton, American Apartheid: Segregation and the Making of the Underclass, p. 92-96 (1993). i] !I!e ff 'f !' t However, what sort of discrimination may be at work is difficult to establish. For one thing, the effects of behavioral and structural factors overlap. The disparate treatment of minorities documented in the HDS reduces minority demand for housing in Anglo areas, and decreases the minority-owned housing supply offered to Anglos. Overt discrimination by real-estate agents and residents increases Anglo demand in Anglo areas, and reduces it in mixed areas. At the same time, structural discrimination leads to fewer minorities being able to afford homes: The correlation of minority status with lower incomes, and of minority neighborhoods with lower levels of public investment - what Galster and Keeney (1991) call the "nexus of urban racial phenomena" -- encourages housing -market bias against minority areas. Leigh (1992) documents the persistence and even growth of racial segregation and isolation: despite African American gains in suburbanization, the elimination of racial covenants, and the presence of fair -housing laws, racial segregation and isolation has remained stable or even deepened over time" " The shift of some minorities to suburbs has often led to segregated suburbs, not to integrated ones; indeed, by numerous measures, minorities' geographical isolation has increased (Abramson et al. 1995). 95 1996 Assessment of Impediments to Fair Housing Choicesfor the City RfSanta G7arita CA Massey and Denton (1993) argue that racial segregation, in turn, deepens structural discrimination independent of any other economic dynamics: With or without class segregation, residential segregation between blacks and whites builds concentrated poverty into the residential structure of the black community and guarantees that poor blacks experience a markedly less advantaged social environment than do poor whites (1993: 125). The HUD Housing Discrimination Study: Results for Los Angeles County Area This portion of this report summarizes available information on whether housing -market discrimination constitutes a barrier to fair and affordable housing in Santa Clarita. The link between fair housing and discrimination is provided by the Fair Housing Act of 1968. The Civil Rights Act of 1964 makes clear that the United States Constitution's "equal protection' doctrine and right to "due process" protects people from discrimination on the basis of race, gender, age, and physical capacity. This Act and its amendments encompass many substantive areas of civil and economic life, including credit markets and the workplace. The Fair Housing Act of 1968 extends the Civil Rights Act to the realm of housing; it provides, in section 3605(a); It shall be unlawful for any person or other entity whose business includes engaging in residential real estate -related transactions to discriminate against any person in making available such a transaction, or in the terms or conditions of such a transaction, because of race. [42 U.S.C., sec. 3601-3631 (1988)] Discrimination occurs whenever minorities or members of any other protected category are more likely to be rejected or subjected to more strenuous terms and Conditions in a given market transaction than are control group members. Numerous court cases and Congressional fine-tuning have clarified the legal meaning of discrimination. In March 1994, the federal agencies responsible for regulating the lenders issued a unified policy statement incorporating these clarifications To what extent do overt discrimination and disparate treatment exist in the housing market? These first forms of discrimination are personal in that they are carried out by individuals who knowingly treat people differently in the same sorts of transactions depending on who or what they are.. The important problem of disparate impact, wherein one group is at a structural disadvantage relative to another group due to biased commercial practices, is set aside here. 97 ll, • I!'I 111' ! I I I I ! I I' I I/ f i Information on disparate discriminatory impacts in Santa Clarita's housing and credit markets is presented and reviewed in the demographic and lending analyses that accompany this analysis. Suffice it to say that the three forms of discrimination identified above are interwoven: not only does overt discrimination or disparate treatment alter market and social outcomes when they occur; but in subsequent periods they may lead to disparate impacts - that is, to structural differences between the resources possessed by groups who are treated differently in different markets. Economists and legal experts agree that certain forms of the first two types of discrimination can sometimes be detected through well-designed, "tests" of whether the procedures of lenders, real- estate agents, and others are neutral from a fair lending perspective. These tests use different methods, in effect, to catch racial perpetrators in the actin Behavior can be observed directly, and/or the results of a sequence of interactions can be studied to determine whether outcomes differ systematically by race, to the disadvantage of the group against which discrimination is suspected. Evidence on Racial Discrimination in Housing Research on housing -market discrimination has relied heavily, but not exclusively, on direct evidence to test for overt discrimination and disparate treatment, This section presents an overview of this evidence; the next section discusses the results of the principal study of housing discrimination, the 1989 Housing Discrimination Study, in depth. " It should not be thought that racial perpetrators (or perpetrators of other kinds of discrimination) invariably aim at hurting the prospects or welfare of minorities (or the disabled, or women, etc.). The differential treatment in question may be carried out with "good intentions" -- for example, a real-estate agent may sincerely believe that minority home -seekers are universally more comfortable living in minority areas. No matter the intention, discriminatory acts have the same effect -- they artificially narrow the range of available choices, making other choices more costly or even unavailable. M. The preferred method of acquiring direct evidence is the "audit study." In an audit study, trained investigators "audit" the performance of individuals and institutions that control access to housing - market resources -- information about available homes and different neighborhoods, access to housing credit, information about application processes, and so on -- by playing the role of home seekers trying to get access to these resources. So rather than collecting statistics about the outcomes of the process, the auditors find out "what really happens" by role-playing. Having auditors of different races then can provide information on differential treatment by race; auditors of different genders can provide information on differential treatment by gender; and so on. Since HDS is both more current than the HMPS and has a more refined methodology, we focus here only on the HDS. As noted, HDS results -- especially those pertaining to Los Angeles -- are presented in detail immediately below. Some general results from the HDS can be succinctly presented here. Overall, over half of all African American renters and home buyers, over half of Chicano and Latino home buyers, and just under half of all Latino renters experience discrimination by rental and sales agents. In the main, this disadvantage means that they are not shown available units, are shown fewer units, or are provided with less information and assistance. Further, just over 20% of both Anglos and Latinos are "steered" away from Anglo areas, higher - income areas, and higher -home -value areas. Rental and sales agents locate disproportionately in Anglo neighborhoods, and are much more likely to recommend units in neighborhoods with higher concentrations of minority residents than the metropolitan average. Further, Anglo- and Latino - owned units are less likely to be advertised or to be offered for open house. The comprehensive nature of the HDS, and the size of its samples, make these audit results authoritative as descriptions of housing -market processes in urban America. There are many real estate agents who are racially biased both in shunning minority clients and in treating the absence of African American, Latino or Asian residents as a locational advantage." Some indirect evidence on trends over time supplements this direct point -in -time evidence of housing discrimination. Leigh (1992) reviews housing trends from 1940 to the present. She finds that Anglos' relative overexposure to unsafe or overcrowded housing conditions has fallen, and racial disparities in rent levels and in the probability of home ownership have been steadily reduced. Nonetheless, serious racial gaps in housing persist. For example, the percentage of African American home owners has risen substantially; at the same time, the gap between the proportion of African American and Anglo homeowners has remained constant at approximately 20% since 1940. As Leigh notes, African Americans caught up with Anglos' 1940 home ownership rate in 1987! Supplementing these results, Stone (1991) finds that African Americans are more likely to be in unaffordable or crowded housing than are Anglos. One immediate consequence of discrimination in housing markets is deepening racial segregation. Turner and Weink (1991) show that United States residential segregation is higher than affordability considerations or individual preferences alone would predict; they suggest this "extra" segregation is due to discrimination in housing allocation processes. Massey and Denton (1993) developed several indices of segregation. On applying these indices to decennial census data, these authors found that racial segregation has not lessened substantially over time. " It should be emphasized that the HDS findings do not suggest that every Anglo real estate agent overtly dislikes or hates minorities, or is consciously promulgating racial inequities or segregation. More subtle biases could generate the HDS results -- for example, any given real estate agent's perception of what a "good neighborhood" is may well be racially coded even if that agent does not intend to disadvantage minorities. In any event, real estate agents might counter charges they are racially biased by noting that whites have very low tolerance for integration in neighborhoods (see Massey and Denton 1993: 92-96). 100 The essays in Bullard, Grigsby, and Lee (1994) -- including one by Denton - document that racial segregation has remained severe, even as minorities have found their way into suburban communities. In effect, the racial character of suburbs has become more differentiated as more and more minorities have made the move out from central city neighborhoods. In effect, the persistence of segregation itself indicates the continuing strength of discrimination in housing markets. However, precisely what mechanisms of discrimination are most important in housing markets is difficult to establish. For one thing, the effects of behavioral and structural factors overlap. The disparate treatment of minorities documented in the HDS reduces minority demand for housing in Anglo areas, and decreases the amount of minority-owned housing supply offered to Anglos. Overt discrimination by real-estate agents and residents increases Anglo demand in Anglo areas, and reduces it in mixed areas. At the same time, structural discrimination leads to fewer minorities being able to afford homes. The correlation of minority status with lower incomes, and of minority neighborhoods with lower levels of public investment -- what Galster and Keeney (199 1) call the "nexus of urban racial phenomena' -- encourages housing -market bias against minority areas.. Leigh (1992) documents the persistence and even growth of racial segregation and isolation; despite Anglo gains in suburbanization, the elimination of racial covenants, and the presence of fair -housing laws, racial segregation and isolation has remained stable or even deepened over time-` " The shift of some minorities to suburbs has often led to segregated suburbs, not to integrated ones; indeed, by numerous measures, minorities' geographical isolation has increased (Abramson et a1. 1995). 101 Massey and Denton (1993) argue that racial segregation, in turn, deepens structural discrimination independent of any other economic dynamics: With or without class segregation, residential segregation between blacks and whites builds concentrated poverty into the residential structure of the black community and guarantees that poor blacks experience a markedly less advantaged social environment than do poor whites (1993: 125). Santa Clarita, Los Angeles, and the Study of Housing -Market Discrimination We now shift from the overall context of housing -market discrimination to results that pertain more specifically to Los Angeles County and Santa Clarita. This will involve a more detailed look at the 1989 HDS. While it covered 25 cities, some 370 of the 3800 fair -housing audit tests that comprised this study were conducted in Los Angeles County. Los Angeles County was a "focus" area for the HDS both because of its overall population and because of its sizable Latino and Chicano population. 75 Numerous statistics from the HDS are reported here. The results of the HDS have been compiled in seven individual reports issued by the U.S. Department of Housing and Urban Development,, the study's sponsor. The principal report (Turner, Struyk, and Yinger 199 1) was published in August 1991. Six background reports were then published in October 1991, Information reported here is drawn from four of these seven reports. One of the HDS' principal authors, John Yinger, has also written a book that sets out the main results of the HDS in an accessible manner (see Yinger 1995). 102 I i /( -- If I' f I'[ f S J I. I' I f I St [ f It is true that the FIDS was conducted a number of years ago; nonetheless, there are good reasons for our focus here on the HDS. The principal reason is expense. Direct tests of discrimination are powerful and definitive only when conducted in a manner that can yield statistically valid results; and tests generating valid statistics are extremely expensive. In a comprehensive study like the HDS, a sampling methodology is developed and put in motion, and participants are carefully trained.. The smaller the sample, and the less the training, the greater the possibility that any observed racial differences in treatment are due to random factors instead of to bias. Since there are no audit findings specific to the Santa Clarita area, the HDS provides the best benchmark for analysis of housing -market discrimination.. It must also be emphasized that because direct tests of discrimination rely on sampling techniques, they are not a pinpoint tool. Determining the presence or absence of discrimination in a given location such a Santa Clarita depends on having enough samples from market transactions in that location that valid conclusions can be drawn. However, repeated sampling from a small area creates the risk that the test itself will be detected, leading market participants to alter their behavior and thus defeating the purpose of the exercise (to see whether discrimination is present in the everyday operation of a given market or set of markets). The Housing Discrimination Study in Depth, with an Emphasis on Los Angeles We noted above that audit studies are well suited to develop evidence of whether certain applicant groups (for example, racial minorities and/or women) are unfavorably treated relative to other applicant groups when they seek housing. 103 The HDS measured three aspects of unfavorable treatment: first, its incidence, second, whether it was random or systematic; and third, its severity. That is, how often do African Americans or Latinos and Chicanos receive worse treatment than Anglos; how much of this worse treatment is based solely on their race (as opposed to Being based on characteristics correlated with their race); and how seriously are they disadvantaged? The possibility of unfavorable treatment was examined at three different stages of the housing acquisition process:: • First, housing availability, the preliminary stage where home- and apartment -seekers inquire about prospective units and are provided with information (or are turned away or ignored) by sales and rental agents; • Second, the sales effort made on behalf of the home- or apartment - seekers, including special terms and conditions offered and assistance in obtaining financing; and • Third, steering -- that is, whether home- or apartment -seekers of different races are guided toward units or neighborhoods and away from others. Unfavorable treatment can occur at any of these three stages. Housing Availability Discrimination at this stage of the housing search process involves primarily an unequal sharing of information. At the extreme, owners or managers will misrepresent the availability to minority' home- or apartment -seekers of certain units, or may deny these applicants the opportunity to meet agents or negotiate terms, while reserving these opportunities to Anglos. 104 r l/ e I 1/'/ Il ' 1 I S I I / 1' / f 14 r In the overall 25 -city HDS study, misrepresentations related to availability of units happens about S% of the time for African American and Latino and Chicano applicants. It occurs more often for rental applicants -- 12% for Latino and Chicano applicants, 15% for African Americans. Another 20% of minority applicants are given less relevant information than are Anglos about the availability of units in the market. Further, housing -availability gaps are higher for applicants for suburban homes than for those seeking central -city homes. The "severity" of unfavorable treatment is readily measured for housing availability: how many fewer units are minorities shown (or informed about) relative to the units shown to Anglos? In the overall study, African American renters were shown 25% fewer units than Anglos, and Latino and Chicano renters 11% fewer units than Anglos. African American home buyers were shown 21% fewer units than Anglos, and Latino and Chicano home buyers 22% fewer units than Anglos. Housing audits conducted in Los Angeles County per se found that about 25% of African Americans and Latinos and Chicanos home buyers faced unfavorable treatment in housing availability. The silver lining of this result is that of the 25 cities studied, only one city (Houston) had a lower unfavorable treatment proportion for African American home buyers, and only two (Denver and Houston) for Latinos and Chicanos. The incidence of unfavorable treatment for renters was somewhat higher in Los Angeles for both minority groups. Again Los Angeles' ranking was good relative to the national average for minority renters' treatment. Marketing Efforts Even when an application process is successfully initiated, different groups of applicants may be differently treated by their respective agents. Agents may move quickly or slowly; they can look for ways to overcome applicants' problems or let those problems fester; they can intervene in related transactions (such as those for credit) or let applicants fend for themselves. 105 III irMf1 ' I f / I S • I. I f f f f' ! I I I I INIAMMM Overall, about 45% of African American renters and 42% of Latino/Chicano renters received a, lower sales effort than did prospective Anglo renters. Among home buyers, less effort was made for African Americans about 46% of the time, and 47% for Latinos and Chicanos than was available to Anglos. Steering Steering occurs when minority home seekers are directed to homes in higher -minority, lower- income, or lower -home -value neighborhoods than are Anglo home seekers. Steering of this sort occurred for 21% of all minority applicants in the HDS study. Overall, neighborhoods recommended to Anglo home buyers had 3% fewer minorities than neighborhoods recommended to minority home buyers. The observed severity of steering was relatively low, largely because most units listed were in predominately Anglo neighborhoods which was a factor inherent in the tests conducted .76 Steering was analyzed in Los Angeles County specifically, as a focus region in the HDS, for both African American and Latino and Chicano home buyers." In Los Angeles, African American home buyers were less likely to be steered toward higher -minority neighborhoods or lower-income neighborhoods than were African American home buyers in the other three cities studied in depth (New York, Chicago, and Atlanta). Over a third of African American home buyers are steered to lower -value homes; but there were too few cases for these home buyers to make these results statistically significant. " The reason for the undersampling of homes in minority and integrated neighborhoods is that advertisements in major daily newspapers were used to generate homes for audit experiments_ The undersampling then occurred because homes for sale in minority neighborhoods throughout the urban United States are much less likely to be advertised in these newspapers than those in Anglo neighborhoods. 77 See Turner, Edwards, and NUelsons (1991). 106 The results for Latino and Chicano home buyers were similarly limited due to a small number of cases. Nonetheless, steering data suggest that Latino and Chicano home buyers are less likely to be steered to higher -minority neighborhoods than the national average; approximately one fourth of these home buyers are steered toward lower -value homes and/or toward lower-income neighborhoods. The relatively lower extent of steering in Los Angeles compared to that in the other target cities may be due to any or all of four factors: 1) less applicant discrimination (fewer racial perpetrators) than in other cities; 2) the larger population of Latino and Chicano residents than in such cities as New York and Chicago, and its relatively even spatial distribution; 3) the relatively small number of African Americans in Los Angeles, and the spatial isolation of African American population centers from the sampled residential areas in Los Angeles; and/or 4) the relatively small number of advertised properties in integrated and minority neighborhoods in the Los Angeles City, The report by Turner, Edwards, and Mikelsons (199 1) emphasizes the last point. They found that census tracts that were shown or recommended to auditors in the 1989 HDS had lower percentages of both African American and Latino and Chicano households than census tracts not shown or recommended (7.4% versus 13.1% for African Americans, and 23.4% versus 34.5% for Latinos and Chicanos); they also found that shown and recommended census tracts had higher median incomes ($16,342 versus $13,415) and higher median house values ($106,708 versus $90,192). In a regression equation measuring the determinants of neighborhood marketing in Los Angeles, percentage African American and the square of percentage Latino and Chicano both took on negative signs and were statistically significant.78 7e We should note that the authors of the HDS made an effort to geo-code steering data for Los Angeles and for four other cities. However, this effort yielded no clear results for either Los Angeles or any other city; each of these cities had too few data points to suggest definitively whether patterns of steering were present or absent. The maps summarizing steering results for the 370 Los Angeles audit tests are contained in Mikelsons and Turner (1991). 107 Overall results. The gross incidence of unfavorable treatment can be obtained by computing the probability that a typical minority applicantwill be exposed to at least one of these various forms of discrimination. A computation of this sort suggests that 46% of African American renters receive unfavorable treatment of some kind, as do 43% of Latino and Chicano renters. The percentages for home buyers are higher -- 50% for African Americans and 45% for Latinos and Chicanos. After "random" elements in agents' behavior are held constant, the overall incidence of discrimination rises for each of these four groups, was 53% for African American renters and 46% for Latino and Chicano renters, and 59% for African American home buyers and 56% for Latino and Chicano home buyers. Like the results for housing availability, Los Angeles' overall audit results contain both good and bad news. The good news is that Los Angeles' overall index of housing -market discrimination is below the mean for both minority renter and home buyer groups. The bad news is that some 40% of Latino and Chicano renters received unfavorable treatment of some sort in Los Angeles, as did over 40% of African American renters. Approximately 35% of Latino and Chicano home buyers, and about 37% of African American home buyers experienced discrimination. That these startling figures are below the national mean for the 25 cities studied in the HD5 offers some hope for the region in comparison to other parts of the nation, but it also affirms the depth of racial antipathy and suspicion present in our American society. M. VI. Discrimination Against New Immigrants According to James Kushner, Professor of Law from Southwestern School of Law and author of many fair housing texts, inter -minority group discrimination is a problem especially relevant and pressing in Los Angeles. This perspective was echoed by housing and community development professionals working within various Asian -Pacific communities. Many of the new immigrants are clustered into particular ethnic enclaves. Landlords from those communities are often immigrants themselves. These landlords express a preference for renting to tenants who speak theirlanguage. Some cultural norms undermine some new immigrant tenants' abilities to voice grievances or their rights. Particularly in the Asian communities, landowners may be viewed as socially superior. There is also a perceived kinship bond among some tenants with their landlords. Both landlord and tenant may also lack knowledge of fair housing or landlord/tenant laws. In interviews, attorneys for the Asian Pacific Legal Center reported that new Asian immigrant tenants are often made to submit to terrible conditions due to their lack of knowledge, power, or due to their vulnerable immigration status and fear of reprisal. International students from Japan and other Asian countries were also cited as a frequently exploited group. Due to their ignorance of local landlord/tenant laws and the perception that they are wealthy, the students are often targeted for, excessive non -refunded deposits and other gouging. Another practice which is targeted at immigrant populations is one of "predatory habitability" activities, i.e., advertising code deficient units and limiting access to those units to immigrant populations unlikely to complain. Advertisements which express a preference on the basis of race or national origin are illegal. Often, this preference is expressed by refusing to post signs in English, thereby effectively restricting tenants to the target group.. 109 r r/ : I'[ / t1 /' 11 I / f • / t' / / I f I /I ! y f Restricting tenancy to the target groups is also a violation of fair housing laws. The Northridge earthquake disaster relief efforts revealed that the Federal Emergency Management Administration does not publish information in all relevant languages, does not collect and analyze fair housing related data and that HUD, FEMA and local Housing Authority personnel routinely required more documentation of Latinos than they did other persons thought to be citizens. Because of the failure to collect personal characteristics on applicants and persons denied benefits, it was impossible to document the differences in services. VII. Obligations to Affirmatively Further Fair Housing 42 U.S.C. 3608(d) states in relevant part that [a] Il [federal] executive departments and agencies shall administer their programs and activities relating to housing and urban development (including any federal agency having regulatory or supervisory authority over financial institutions) in a manner affirmatively to further the purposes of [the Fair Housing Act] and shall cooperate with the Secretary [of HUD] to further such purposes. Section 3608(e)(5) further provides that the Secretary of HUD shall administer the programs an activities relating to housing and urban development in a manner affirmatively to further the policies of ... [Title VIII.] Similarly 42 U.S.C. 1441 provides that departments and agencies of the Federal government having powers, functions, or duties with respect to housing, shall exercise their powers, functions, and duties ... in such a manner as will encourage and assist ... the development of well- planned, integrated, residential neighborhoods .... These statutory provisions are given further definition by Executive Orders. 110 rrr iIt 't I!r'r II' I 47MMMIMM,r / I t' f l r r f i For instance, President Carter issued an orderdelineating the term "programs and activities" as covering those programs and activities "operated, administered or undertaken by the Federal government; grants; loans; contracts; insurance; guarantees; and Federal supervision or exercise of regulatory responsibility." Executive Order 12259, Section 1-202, 46 Fed. Reg. 1253 (1980). President Carter's Executive Order clarified that "applicants for" and "participants in" all federal housing and urban development programs are covered. Section 1-203. Section 3608 duties apply to both federal agencies and local housing authorities and other recipients of federal housing funds. Otero v. New York City Housing Authority, 484 F: 2d 1122, 1133-34 (2d Cir:. 1973); United States v. Charlottesville Redevelopment & Housing Authority, 718 F. Supp. 461, 464-65 (W.D. Va 1989), but see, e.g., Resident Advisory Band v. Ri=o; 564 F.2d 126, 140, n.18, 146 (3d Cir. "1977), cert. denied, 435 U.S. 908 (1978). Until recently the federal government provided municipalities with little guidance on what local actions constitute "affirmatively furthering 'fair housing." Now pursuant to 24 C.F.R. 91.225(a)(1)(April 1, 1995) local jurisdictions receiving federal housing and urban renewal funding are on notice that they are required to "affirmatively further fair housing" and in this capacity [each jurisdiction is required to submit a certification that it will affirmatively further fair housing which means that it will conduct an analysis to identify impediments to fair housing choice within the jurisdiction, take appropriate actions to overcome the effects of any impediments identified through that analysis and maintain records reflecting the analysis and actions in this regard. In the fall of 1995, HUD defined "affirmatively furthering fair housing" for local governments means taking at least the following steps to ensure that: a) ...[racial or ethnic minorities, disabled persons, families with children under 18 years of age and pregnant individuals] receive at least a fair share in proportion to their need of housing resources under the control of or allocated by that jurisdiction, and any additional share necessary to remedy any past disproportionate allocation; 111 (b) neighborhoods with a preponderance of persons from racial or ethnic minorities receive at least a fair share in proportion to their need of resources under the control of or allocated by that jurisdiction used for housing -related services, and any additional share necessary to remedy any past disproportionate allocation; (c) impediments to integration will be eliminated and the jurisdiction will take steps to promote mobility and integration; (d) there is an effective mechanism for enforcement of fair housing laws within the applicant jurisdiction and mechanisms in effect within the governing body of the jurisdiction to ensure that no subdivision or subpart of the governing body is engaging in discrimination against members of a protected class; (e) barriers to use of resources by person in protected classes will be eliminated; and (f) the jurisdiction completes and fully implements an acceptable Fair Housing Plan according to the provisions of this part." HUD further explains that these steps are minimums "to fulfill a jurisdiction's obligation to affirmatively further fair housing, but are not sufficient to establish a jurisdiction's compliance " with all the requirements of state and federal fair housing provisions. Id Some of Santa Clarita's specific fair housing obligations include: 1) refraining from engaging in segregation or other forms of illegal discrimination; 2) engaging in fair housing planning in conjunction with the submission of the City's Consolidated Plan to HUD; 79 HUD, FAIR HOUSING PLANNING MANUAL, SECTION IIl (2), p. 4- 112 Ill i / ' [ S 7 I ' / tl ' ! S ! 1 1 . l ' 3) conducting analyses of the area's demographic and socioeconomic data in conjunction with allocating or administering housing programs and housing related services to ensure that these programs do not directly or indirectly discriminate on any inappropriate or illegal grounds; and 4) undertaking actions which promote the goal of equal access to safe, decent, affordable housing and open housing, such as supporting mobility programs. In performing these affirmative fair housing tasks and analyses Santa Clarita is required to analyze and protect the rights of the following categories of persons: members of racial or ethnic minorities, disabled persons, families with children under 18 years of age and pregnant individuals, groups that have historically experienced discrimination on the basis of gender or religion, recipients of state, federal or local public assistance, and tenants and potential tenants receiving federal, state or local housing subsidies. Although it is clear that the term "affirmatively furthering fair housing" includes proscriptions against racial segregation [Executive Order 11063, 27 Fed. Reg. 11,517 (1962)] and discrimination in providing financial assistance [42 U.S.C. 2000d], it has been held to encompass much more. ,.,[T]he law's supporters saw the ending of discrimination as a means toward truly opening the nation's housing stock to persons of every race and creed. This broader goal suggests an intent that HUD do more than simply not discriminate itself; it reflects the desire to have HUD use its grant programs to assist in ending discrimination and segregation, to point where the supply of genuinely open housing increases. " 80 NAACP, Boston Chapter v. HUD, 817 F.2d 149,154-155 (1st Cir. 1987). 113 ��I• II"[ f[ fI'[ I •I [ A number of decisions have held that 42 U.S.C. 3608 is designed to not only advance minority rights, but also to actually achieve residential integration. See, e.g., Metropolitan Housing Development Corp. v. Village of Arlington Heights, 558 F.2d 1283, 1989-90 (7th Cir 1977), cert. denied, 434 U.S. 1025 (1978). "Action must be taken to fulfill, as much as possible, the goal of open integrated residential housing patterns and to prevent the increase of segregation, in ghettos, of racial groups whose lack of opportunities the [Fair Housing] Act was designed to combat." Otero v. New York City Housing Authority, 484 F.2d 1122, 1134 (2d Cir. 1973). The term also means that federal agencies, such as HUD, "may not expend funds in a manner that promotes or fails to deter discrimination in public housing." Jaimes v Toledo Metropolitan Housing Authority, 715 F. Supp. 835, 840 (N.D. Ohio 1989). The City of Santa Clarita does not operate conventional public housing units or directly dispense Section 8 subsidies. If Santa Clarita residents seek such housing, they must apply for and meet the eligibility requirements set up by the County of Los Angeles. According to draft report; produced by the Fair Housing Congress of Southern California "Fair Housing in Los Angeles County - An Assessment of the Progress and Challenges 1970-1995" (January, 1996) p. 59-62, the overwhelming majority of African Americans and Latinos in Los Angeles public housing live in communities which have at least 40% "minority" residents. Specifically, 76.9% of the African American and 81.5% of the Latino residents of Los Angeles public housing live in these complexes. Given the high degree of racial isolation in the Los Angeles County public housing complexes and lack of sufficient federal funding, Santa Clarita, unfortunately, must consider whether it should continue to rely upon County facilities as the only alternative for low and very low income persons seeking conventional public housing. 114 NWhMrM I' I Si 7 7 MMMMN4I e I I e S f 1 S[ f Santa Clarita contracts with the Los Angeles Housing Authority to administer the City's Section 8 Certificate and Voucher programs. African Americans utilizing Section 8 certificates dispensed by the County are overwhelmingly concentrated in communities with populations who are 40% or greater "minority." Latino Section 8 certificate holders are widely dispersed throughout the communities_ Fair Housing Congress of Southern California,"Fair Housing in Los Angeles County - An Assessment of the Progress and Challenges 1970-1995" (September, 1995) p. 59-60. Under this program recipients pay no more than 30% of their income towards the fair market rent for a unit. The fair market rent is established by HUD. While jurisdictions are given some flexibility to increase the rental payment to owners of Section 8 units, there is little economic incentive to do so. Once a rental payment is set, owners are not permitted to charge in excess of the amount agreed to by the Housing Authority. African American voucher users are somewhat more dispersed, with 14.2% of these individuals residing in communities with less than 10% minorities, 2% of African American voucher users in 10%-19% minority areas, 23.4% of such users living in communities with 20%-39% minority residents, 28% of the African American voucher holders residing in 40%- 59% minority communities, 14.9% in 60%-79% minority communities and 17.5% in 80% or higher minority communities. 32.7% of Latino voucher holders in reside in communities of 10% or less of minority concentration, with the other Latino voucher holders being more widely dispersed_ In comparison to 17.5% of African American voucher holders residing in areas with minority concentrations of 80% or more, there are only 8.2% Latinos residing in such neighborhoods_. Id., at p. 59-60. Under this program subsidy holders may spend more than 30% of their adjusted gross income on housing, a situation of particular concern since the AFDC and General Relief programs are reducing their subsidies at the same time the federal government is reducing the contribution of the Section 8 fair market rent which the federal government will contribute from 45% to 40%. 115 M& MO 104=717417RUS e1 I' I tt ' t I WPM l t I t I f 1 f !! Based on these statistics, African Americans residing in conventional public housing and utilizing Section 8 subsidies are routinely more racially isolated than their Latino counterparts. The racial separation is longstanding. In order to assess the fair housing ramifications, we recommend an analysis of how the County's application procedures operate.. Under the County system, applicants are permitted to turn down two proposed placements,especially "good cause" reasons. It is unknown whether these rejections have an impact on the racial and national origin isolation patterns which exist in the County program. At the same time an analysis should be conducted on what would result if turn downs are not permitted. As is reflected in the demographic analysis, Anglos in Los Angeles County self isolate. There are African Americans and Latinos who wish to exercise the housing choice of living in large minority areas, while a percentage of others wish to live in racially integrated areas, and still others may wish to live in largely Anglo areas. If there were cooperating agreements among all the housing authorities in the region and one waiting for all housing services, there may be afforded greater housing choice for some applicants and residents. For more than a decade, the County has operated under rules which strip residents of public housing of their preferences on Section 8 certificate and voucher fists. Thus once an applicant for both conventional public housing and Section 8 subsidies is placed in public housing, s/he loses her/his preference for housing. Since only those persons with preferences on these lists ever receive housing, public housing tenants are virtually precluded from receiving Section 8 subsidies. The effect of these rules is to deny the predominantly African American and Latino residents of County public housing access to Section 8 benefits. The other factors with which the City now has to contend are the fallouts from Congressional and Administration attempts to balance the federal budget in part by severely diminishing the federal housing subsidies. 116 1996 Assessment of Impediments to Fair Housing nice for the CiCE of Santa Garita CA Although the national budget has not been finally adopted, there is virtual agreement among the federal decision makers that: 1) there will be an elimination of a 30% cap on the amount of rent paid by tenants in conventional public housing and receiving Section 8 subsidies, and a minimum rent of at least $25 a month will be imposed. There appears to be agreement that seniors and disabled persons will be exempted from these rent increases; 2) there will be little,. if any, "funds for substantial rehabilitation or replacement funding for conventional public housing units; 3) the low income housing tax credit program will sunset; 4) project based housing subsidies will shift to tenant based; 5) Section 8 subsidies should be limited to a specified period of time, probably not to exceed 3 years in a lifetime; and 6) no federal subsidies will be made available to preserve the stock of HUD and Farmers Home subsidized mortgages at risk of being prepaid within the next decade and going to market rate. Unfortunately, the State does not collect beneficiary information on tax redit allocations, which is a violation of its affirmatively furthering obligations and an impediment to fair housing choice analyses. Since African American and Latinos are disproportionately represented in the residents of the County's public housing, the failure of the federal government to provide rehabilitation and replacement funding for public housing will result in these minority individuals being most materially affected, unless these monies will be provided from other sources. To the extent Santa Clarita's residents rely upon the existence of public housing, the City should determine how the Housing Authority plans to tap into resources which have previously been used for other housing purposes. The City must also examine the impacts to determine whether there are fair housing ramifications. 117 WIM r •r I Ou Zt .r7ffrffM rr iW I EW M A municipality may violate its "affirmatively furthering" obligations in at least two ways:directly, through engaging in discrimination or approving assistance without considering its effectson the racial and sociological composition ofthe area, see, e.g., Shannon v. HUD, 436 F.2d 809,820 (3d Cir 1970); or indirectly, by providing financial or other assistance when the agency is awareof the grantee's discriminatory activities and the City has made no efforts to force compliance withfair housing laws. See, e.g., Clients' Council v. Pierce, 711 F.2d 1406, 1422-23 (8th Cir. 1983);Gautreaux v. Romney, 448 F. 2d 731, 739 (7th Cir. 1971). Because cities are acting in the place of federal agencies in many instances, they are required to adopt "institutionalized methods" for considering "relevant racial and socio-economic information" before allocating funds. Shannon v. HUD, 436 F.2d 809 (3d Cir. 1970). In order to develop these "institutional methods, cities must collect race, sex, national origin, and other characteristics of beneficiaries. 42 U.S.C. 3608(e)(6). In addition, municipalities must inform themselves of the consequences of considering such characteristics. See, e.g., 24 C.F.R. Sec. 200.700 et seq. See also, Jorman v. Veterans Administration, 500 F, Supp.. 460 (N. D., Ill, 1980) where the court held that the Veterans Administration, which was accused of providing so many loans in a neighborhood that it caused "white flight," was required to consider the impact of such loans on integration in the area. Council v. Pierce at 1416-1418. As a recipient federal funding that certifies to "affirmatively further fair housing" Santa Clarita is obligated not to itself discriminate and to collect and analyze relevant data to acquaint itself with the consequences of its funding decisions. VIII. PRINTED ADVERTISING The federal Fair Housing Act of 1968 makes unlawful: to make, print, or publish, or cause to be made,printed, or published any notice; 118 MUM M70=7171178tl I I (('I I ! II [ WITUM,I l' i I! l I/! statement, or advertisement, with respect to the sale or rental of dwelling unit that indicates any preference, limitation, or discrimination based on race, color, religion, sex, disability, familial status, or national origin, or an intention to make any preference, limitation or discrimination," Our newspaper study was conducted within the context of the Fair Housing Act, the case law that interprets the Act, and the HUD regulations and specific guidelines concerning advertising. The most blatant form of discrimination in real estate advertising, i.e., "whites only," "Latino neighborhood," etc., is largely a thing of the past, and none was evident in the subject newspapers. We also reviewed for more subtle indications of preferences on prohibited bases, sometimes referred to as "code words." The HUD advertising guidelines are generally useful in interpreting advertising that may run afoul of 42 U.S.C. 3604(c). The HUD Guidelines broadly set forth that words indicating a preference on the basis of race, color, religion, national origin, sex, disability and familial status, as well as "words and phrases used in a discriminatory context should be avoided." The HUD Guidelines cite the following as examples of terms to be avoided: "restricted," "exclusive," "private," 'integrated," "traditional," "board approval," or "membership approval.n82 81 [42 U.S.C. 3604(c)]. ez 24 C.F.R. 109, 109.20. 119 M r i aII' Fi7NriiTilTiDii7giTnrL7i3VMM,'rMUiTil,I I I It is clear that 42 USC Sec. 3604(c) extends to any newspaper or other entity that publishes an advertisement, any agency that assists in creating the advertisement, as well as, real estate owners and developers who paid to have the advertisement designed and run. Intent to express a racial preference need not be established by the plaintiff in order for the party to prevail. It is sufficient for the plaintiff to establish that "[to the ordinary reader the natural interpretation of the advertisements ... is that they indicated racial preference in the acceptance of tenants." United States vs. Hunter. 459 F.2d 205, 215 (4th Cir.) In this decision, the Court affirmed a finding liability against the newspaper publisher under Sec. 36040 despite the fact that the publisher ran advertisements without the intent to discriminate. The standard regarding the more subtle forms of written discrimination is subjective. For example, phrases such as "quality neighborhood" or "traditional neighborhood" or "quiet neighborhood" or "tranquil setting" or "active community" or "desirable neighborhood" have varying significance to readers with different life experiences. If these type of phrases are used at all, they should be used with caution. A great deal of the recent litigation in the area involves the selective use of raciall identifiable human models in housing display advertisements. It has been held that "human models in advertising attempt to create an identification ..,(among) the model, the consumer, and the product. In other words, advertisers choose models with whom the targeted consumers will positively identify...." Saunders v. General Service Corp, 69 F. Supp. 1042, 1058 (E.D. VA. 1987.) The case law that has evolved the rule that while the courts will not apply a quota or a flat rule of mathematical proportionality, where only Anglo models are consistently used, a claim under Sec. 3604(c) will be upheld. Ragin v. Harry Macklowe Real Estate Co., 6 F.3d 898, 905-07 (2d Cir. 1993). We conducted a five (5) month analysis of general circulation publications serving the Santa Clarita area preparation on for this report. The period of time analyzed was Sunday,October 1, 1995 through Sunday, February 25, 1996. All brokers ads for tracts and individual homes were reviewed; along with all informational and promotional articles regarding home ownership and activities in the local real estate community. 120 Additionally, all ads in the following advertising categories were examined and studied o Condos for rent; o Lease options, condos; o Houses for sale; o Houses for rent; o Townhomes for sale; o Townhomes for rent; o Mobilehomes for sale; o Apartments for rent o Rooms for rent The Equal Housing Opportunity logotype and accompanying statement that all real estate advertising in the newspaper was subject to the Federal Fair Housing Act of 1968, was not displayed in any of the Valley Homes editions studied. Midway through each section, however, was a well placed ad, almost a full column long, inviting those who suspect housing discrimination to call the Fair Housing Council.. The Fair Housing Logo is exhibited at the bottom of the ad with the phrase "Fair Housing Opens Doors." Failure to display in a prominent manner the Equal Housing Opportunity logotype or a statement that the newspaper is subject to, and complying with the 1968 Act as amended is considered actionable advertising under the HUD guidelines. Whether or not the ad for the Fair Housing Council would satisfy the HUD criteria is a matter for interpretation. The HUD guidelines broadly set forth words which are indicative of race, color, religion, national origin, sex, handicap and familial status. The guidelines also set forth "catch words", "words and phrases used in a discriminatory context should be avoided" and cites as examples, "restricted," "exclusive," "private," "integrated," "traditional," "board approval," or "membership approval." - 83 24 C.F.R::109, 109..20. 121 f I AMITMOMMMKOK It is clear that liability for a Sec.. 3604c violation extends to any newspaper or other entity that publishes the advertisement, any agency that assists in creating the advertisement, as well as, real estate owners and developers that paid to have the advertisement designed and run. Intent to express a racial preference need not be established by the plaintiff to prevail. It is sufficient for the plaintiff to establish that "[to the ordinary reader the natural interpretation of the advertisements is that they indicated racial preference in the acceptance of tenants...The standard regarding the more subtle of written discrimination is a subjective one indeed. For example, phrases such as "quality neighborhood" or "traditional neighborhood" or "quiet neighborhood" or "tranquil setting" or "active community" or "desirable neighborhood" have varying significance to readers with different life experiences. If these type of phrases are used at all, they should be used with caution. With regard to the written word advertisements, the papers serving Santa Clarita appear to fall within acceptable standards. Although there are no blatant or objective violations of the guidelines, phrases like "pristine neighborhood atmosphere", "Neighborhood important?", "A priority list of prospective home buyers has been started", and "Gentleman's Horse Ranch" send a message to those looking for housing. The term "family" is used a number of times throughout the pages of these advertisements. The term is used individually, and as an adjective to define every possible housing noun, e.g., The "family oriented atmosphere", "family home," "family neighborhood." Another advertisement uses the term "Needs a Family", to portray the character of the neighborhood under discussion. 84 United States vs. Hunter, 459 F.2d.205, 215 (4th cir.) (affirming finding of newspaper publishers liability under sec. 3604® despite the fact that the publisher ran advertisements without intent to discriminate). 122 Although the written real estate advertisements generally comply with the statute and the guidelines, the use of photographs and illustrations to advertise real estate appears to fall short of acceptable parameters. A great deal of the recent litigation in the area involves a selective use of racially identifiable human models in housing display advertisements. It has been held that "[Human models in advertising attempt to create an identification between the model, the consumer, and the product. Inother words, advertisers choose models with whom the targeted consumers will positively identify...."85 When the case law is harmonized, the evolving rule appears to be that while the courts will not apply a quota or a flat rule of mathematical proportionality; where only Anglo models are consistently used, a claim under Sec. 3604c will be upheld.66 Although the advertisers in one publication do not make use of picture ads to the extent used in other publications, a sampling of the ads will be mentioned here. • In the January 7, 1996 and subsequent issues, two young Anglo heterosexual couples are socializing on the porch, a new home. • In the February 11, 1996 and February 25, 1996 issues, one company features a large picture of three Anglo infants in their full page ad with the caption; "If you have too many feet for your square footage this may be a good time to buy." In contrast, one developer presents an ad that features two young children, an African-American boy and a Caucasian girl, with the caption, "The sounds of children laughing and playing coming soon." In that advertisement, The Fair Housing Logo is displayed with the phrase, "You'can share the dream" " See, Saunders vs. General Service Corp., 69 F. Supp.. 1042, 1058 (E.D. VA. 1987). %6 Ragin vs. HarryMacklowe Real Estate Co., 6F.3d 898, 905-07 (2d Cir:. 1993). 123 Il /!'I / / I' 1 I / I ' / / • In addition to display ads, there are endorsements of realtors by their satisfied clients. For example, in the January 7, 1996 issue an endorsement reads, "Thank you for the extra work and care in helping us find the right home". A picture of a young Anglo couple accompanies their endorsement. • In a news article in the February 25, 1996 issue, a happy white heterosexual couple are depicted as having just purchased a house at a new community. If these depictions suggest to the ordinary reader that a particular race is preferred or not preferred for the housing in question, a violation of the Fair Housing Act exists regardless of the intent of the advertiser or the publisher. • In addition to the advertising discussed above, each Sunday newspaper was filled with promotion material advancing the real estate industry in the area. Under a weekly feature entitled "In the News," as well as with brokers listings and advertisements, are pictures of various real estate brokers and agents. Approximately sixty (60) photographs are found in each issue. Of the more than twelve hundred (1200) photographs of agents in the five (5) months of issues, (many photographs were duplicated) one (1) African-American was spotted in the December 17, 1995 issue. Although none of the ads or pictures when reviewed individually violate, in and of themselves, fail housing provisions. These pictures do, however, provide additional "context" to the pictorial advertisements featuring Anglo models. A coupling of the written ads which emphasize to the extreme that this is a "family" area and the pictorials would serve to reinforce the view that "traditional" families are welcome . If there is an impediment to fair housing within the pages of these real estate sections, it is not in the specific words used, or exclusively in the pictures, but in the combination. 124 t t 't �i' , • �tMWA7017WAY , K t Pictorial advertising campaigns featuring able bodied Anglos to the exclusion of all others may as a disincentive to disabled and minority persons. If the real estate pages are to continue to feature attention getting photographs, the publishers should be encouraged to promote photographs designed to promote a greater level of diversity in the City and to convey a welcoming message to all races, ethnicity and levels of abilities., IX. LENDING DISCRIMINATION Racial segregation has been a barrier to fair housing since well before the Civil War. The Civil Rights Act of 1866 which gave African American citizens of the United States the same rights to inherit, purchase, lease, sell, hold and convey real and personal property as enjoyed by Anglo citizens was never fully enforced. As a result of the failure to enforce this law, racially segregated housing patterns became entrenched. In addition, the federal government contributed to segregated housing patterns in a myriad of ways. For example, the Federal Housing Administration (FHA) encouraged the use of racially restrictive covenants until the 1950s. The Agency even drafted a model restrictive covenant for the use in mortgages that it financed. Professional appraisers and real estate brokers ranked the following racial groups from best to worst on their alleged impact on housing values.. 1. English, Germans, Scotch, Irish and Scandinavians; 2. North Italians 3. Bohemians or Czechs; 4. Poles; 5. Lithuanians; 6. Greeks; 7. Russians, Jews (lower class); 8. South Italians; 9. Negroes; and 125 10. Mexicans. 17 The theory was that racial integration was a threat to residential stability because ..[most] variations and differences between people are slight and value declines are, as a result, gradual. But there is one difference in people, namely race, which will result in very rapid decline. Usually such declines can be partially avoided by segregation and this device has always been in common usage in the South where Anglo and Negro populations are separated," Underwriters were not alone in their practice of allowing racial bigotry to pervade their professional opinions. The "bible" of appraising, McMichael's Appraising Manual, first published in 1931, advised appraisers to determine whether there were "undesirable racial elements" in the neighborhood. Although the United States Supreme Court ruled in Shelley v, Kramer, 334 U.S 1 (1948) that racially restrictive covenants could not be judicially enforced, the ruling did not eliminate the use of race in appraisals. In fact, The 1951 edition ofMcMichael's Appraising Manual attacked the Supreme Court's [Shelly vs. Kramer] decision for adding "further confusion to appraising properties in foreign and Negro - occupied districts." McMichael then ...reprints [Homer Hoyt, One Hundred Years of Land Values in Chicago. Chicago; University of Chicago Press p. 316 (1993). 8% (Frederick Babcock, The Valuation of Real Estate, New York: McGraw-Hill (1932), p. 91:) 126 (the above) list of ethnic groups ranked by their effects on property values. This is followed by a discussion of how the "ingress" of certain ethnic groups precedes blight. (Citations omitted.)" 89 These bigoted teachings were not limited to the 1950s, but are reflected in the training manuals of the American Institute of Real Estate Appraisers (AIREA) 1973 Student Outline which stated: As a general rule, homogeneity of the population contributes to stability of real estate values. Information contributes to stability of real estate values. Information on the percentage of native born Anglos, foreign Anglos, and non -Anglo population is important, and changes in this composition have significance. As a general rule, minority groups are found at the bottom of the socioeconomic ladder, and problems associated with minority group segments of the population can hinder community growth.90 During the same year, AIREA students were exposed to a video presentation which showed a burned out store accompanied by the audio statement 89 Mortgage Lending Investigation Manual, Stephen Dane and Calvin Bradford (San Francisco, CA, 1992) p. 5. 90 [American Institute of Real Estate Appraisers, Student Outline Course 1 -A -Real Estate Appraisal. Chicago: American Institute of Real Estate Appraisers (1973), p. 166.] 127 /I' /I !' I I I I t "One exceptional factor which may affect value is the influx of inharmonious social or racial groups."" HUD, taking a cue from the appraisal industry, undertook a "study' of neighborhood decline in 1975. Its report, The Dynamics of Neighborhood Change, set forth five stages of growth and decline. Incipient decline of a healthy neighborhood was linked to the "influx of middle income minorities." Clear decline was measured, in part, by "more minority children in schools."92 1K of these practices resulted in the segregated housing patterns which were the norm by 1968 when the Fair Housing Act was enacted. Segregated residential patterns were reinforced by zoning laws which required segregation by block until such laws were declared unconstitutional. Outlawed zoning laws were soon replaced by covenants which were restrictive on the basis of race and religion. Even after the overtly racial covenants were withdrawn, municipalities continued to employ exclusionary zoning practices designed to limit access of minorities to suburban communities which were rapidly developing in the 1950s and 1960s. A favorite method was to limit development to single family homes, and thereafter to artificially inflate prices of these homes by requiring large lots. The confluence of race/national origin and income resulted in vast parts of the City and County being restricted to Anglos, while persons of color were being segregated to other, less desirable areas. The patterns which we live with today are the result of these underwriting, appraisal and governmental practices. Although the housing stock in predominately Anglo, African American, Asian and Latino neighborhoods are often comparable in quality, there are likely to be vast differences in valuation, because of the historical bigotry which has for generations influenced valuation of real estate. 91 "Course 1-A -- Real Estate Appraisal" at the Chicago School of the American Institute of Real Estate Appraisers (November 7, 1973).] 92 Public Affairs Counseling, The Dynamics of Neighborhood Change, U. S. Department of Housing and Urban Development, Washington, D.C.; U.S. Government Printing Office (1975). 128 "Location, location, location" has long been heralded as the most important consideration in valuing property. This approach to valuation of property thinly masks the fact that for much of our history Southern California has had residential patterns of racial isolation, with Anglo areas being more highly valued than largely non -Anglo areas of similar housing stock Federal and State law makes it illegal for lenders to practice differential treatment based on applicant or neighborhood characteristics (redlining) in credit and housing markets. Applicant discrimination occurs whenever lenders impose more strenuous terms and conditions on minorities (or the members of any other protected category) or decline to make loans to such persons while approving similarly situated Anglos. Redlining occurs transaction costs are more expensive, terms or conditions are more onerous or are less likely to be approved in a high minority community because of the racial or ethnic characteristics of the residents. Applicant discrimination disadvantages an applicant independent of the location of the security involved; redlining disadvantages applicants because of the location of the security to be used, independent of their individual characteristics. The fair lending and community reinvestment laws are designed to ensure that community credit needs are met uniformly; economists, however, have no established or uniformly accepted methods of determining such needs. In practice, the degree of redlining of any urban area has been determined on the basis of "fair share" analysis (a term first suggested by Anne Shlay of Temple University). Simply put, every neighborhood should receive its "fair share" of credit flows, no matter what the relative prices of homes, the relative racial compositions, and other relative differences among sub -areas within any metropolitan area. 129 III • / / ' / /(I ' (/ ' l 1 I 1 [ / / _ I _ /_'_ _ l _/ _ _ _ I I_ I _ I ,g - Economists and legal experts agree that one method for determining whether prescreening; a form of discrimination whereby prospective customers are discouraged from applying, can best be detected through "tests" of whether the procedures of lenders, real-estate agents, and others are racially neutral.' However, demonstrating a disparate racial impact, or an "unfair" credit flow disparity, requires the use of indirect, not direct evidence. This has led to some disagreement among experts about what standard of proof for indirect evidence is required to demonstrate a disparate racial impact or an "unfair" pattern of credit flow. The problem in both cases -- that is, for both disparate impact and "fair share" analysis -- is the same: differences between any two groups (say, Anglo and African American loan applicants) or any two areas (say, minority and Anglo neighborhoods) may arise either because of "rational" reasons, such as structural differences in economic resources, or "irrational" reasons, such as bank or agent bigotry. It is impossible to draw the line between the rational and irrational cleanly; and it is also not clear which structural differences among applicants can be used legitimately by lenders in distinguishing among borrowers or among borrower areas. In all fairness, how this line is drawn at any point in the past 20 years has depended in part on the political climate- a "value -free" or "politics -proof' standard may be difficult to attain What constitutes evidence of applicant discrimination or of redlining? Two qualitatively different types of evidence can be used to measure the extent of discrimination and redlining in credit and housing markets: definitive proof and suggestive patterns. We tum first to applicant discrimination. Definitive proof of applicant discrimination would take into account any and all factors that lenders may legitimately use in distinguishing among groups of borrowers. Dymski, "Why Does Race Matter in Housing and Credit Markets?" (1996) provides a detailed discussion of the points made here, with many references to the academic literature. This study will be published in 1996 in the volume, The Frontiers of Research on Discrimination, edited by Patrick L. Mason for Kluwer Academic Press, Boston; it is available from the author at Department of Economics, University of California, Riverside CA 92521-0427, 130 Suppose, for example, that lenders in a given city have much higher denial rates for minority applicants than for others; suppose at the same time that minority applicants tend to have lower and more unstable incomes than other applicants. Some or even all of the denial -rate differential may be attributable to minority applicants' income differential. Before a determination of whether racial discrimination exists one must adjust for relevant economic gaps between the racial groups .The only city for which "definitive" proofs of discrimination in credit markets have been attempted are the celebrated studies of Boston over the S years. The researchers found that even once you adjust for incomes and credit histories, a marked racial bias existed. In addition, comparably situated Anglos were much more likely to received assistance in overcoming difficulties in meeting lenders' standards. Even these studies, however, have not quieted some critics, who refuse to concede that definitive proof of discrimination has been established. In any case, establishing definitive proofs requires complete access to lenders' own files. Such deep voluntary access to data has been providedonly in the case of the Boston studies. Lenders that have been threatened with (by the Justice Department), or in fact, sued (by anyone) have also opened their loans files for review and analysis. Elsewhere in the United States, studies (conducted outside the context of litigation) of credit -market discrimination have relied on suggestive evidence - empirical data that is consistent with the presence of either discrimination or redlining, or both, without proving definitively that either practice exists. While experts agree that Home Mortgage Disclosure Act data cannot be used on their own to "prove" the presence of discrimination by banks, experts also agree that these data can be used to determine whether discrimination may be occurring in any given area. In effect, HMDA data can be used to conduct a diagnostic analysis of where in any geographic area discrimination may be a problem in the credit market. The detection of redlining presents fewer measurement problems than that of applicant discrimination. In principle, redlining may occur whenever there are significant social differences between any two subareas within a larger community: suburb versus inner-city; professional versus working class areas; largely Anglo versus largely new minority, a.k.a. "minority" areas. 131 In practice, most redlining analyses conducted today test for lending gaps between areas with differing racial compositions. Studies of redlining follow a three-step procedure. First, the community being analyzed is subdivided according to the percentage of minority residents in its various subareas (census tracts). Second, subarea loan flows and approval/denial rates are compared. If differences are found (for example, if minority areas received lower levels of credit), then an effort is made to determine whether these differences are attributable to economic fundamentals. Third, further tests for differential loan flows and denial rates are. run which take these further economic factors into account. For example, a racial lending gap may or may not persist when area income is held approximately constant. Further; one area may receive more home loans than a second area in part because it has more owner -occupied units. The logic of inquiry is similar to that used to detect discrimination: that is, efforts are made to determine whether racial gaps can be explained by other factors. However, fewer adjustments are appropriate than in the case of an effort to determine whether discrimination is present in a given case. "Redlining" itself is not a precise term -- it simply refers to the existence of structural differences in lending flows. These may arise for a variety of reasons. In effect, evidence of redlining signals the need to look more deeply into credit -market processes, to determine whether these differential loan flows will adversely affect the areas receiving fewer loans. The problem of conclusive versus suggestive evidence is not as important in the case of redlining as in the case of discrimination. The hurdle used to find evidence of redlining is a lower one: data that definitively shows redlining may provide only suggestive (incomplete) evidence of discrimination.This study relies exclusively on suggestive evidence of discrimination and redlining in the credit market. Achieving more definitive evidence of discrimination, in particular, would require much more detailed data than HMDA and Census sources can provide I. Analysis of Santa Clarita Credit Markets The sections that follow will present and review information that loan flows differ among different categories of Santa Clarita loan applicants and in different geographic areas within Santa Clarita. 132 WOW W47 H'1 I /! I' / '[ I I •/ [ I ! l / I ITaMOT411 It is important to look into the problem of applicant discrimination, given the tremendous ethnic diversity of the Los Angeles region and, increasingly, of Santa Clarita itself (as revealed in the demographic analysis presented above). It might seem inappropriate to look into neighborhood redlining as an issue in Santa Clarita. Indeed, many redlining analyses have largely compared inner- city and suburban areas within metropolitan areas, taken as a whole. Since Santa Clarita itself is a suburban city within the metropolitan area of Los Angeles, it might seem inappropriate to examine whether redlining exists within Santa Clarita. However, while it is true that Santa Clarita receives a healthy level of credit overall, it is worth investigating whether geographic variations in loan flows within Santa Clarita are significant. The "redlining" analysis is restricted because the City is relatively small and suburban in nature. Nonetheless, Santa Clarita is maturing as a residential community, some limited investigation of geographic variations of loan flows within Santa Clarita is warranted as a diagnostic device. This evaluation of Santa Clarita's credit markets is based on the 1993 and 1994 Home Mortgage Disclosure Act ("FlMDA") data for the City. These are the two most recent years of data available, 1995 data will not be released until August or September 1996. Two years' data are used instead of one to provide more data points; this permits us to conduct analysis with greater statistical confidence in any conclusions reached. One limitation of HMDA data is that they are collected at the census -tract level.. This limitation affects Santa Clarita because the City boundaries of Santa Clarita cut across numerous census -tract dividing lines. For purposes of our analysis here, data have been included for all census tracts whose population falls at least partially within Santa Clarita City limits. So this analysis of lending data in Santa Clarita encompasses eighteen census tracts.' This gives the most accurate possible picture of lending patterns in Santa Clarita. Our analysis proceeds in several steps. 94 9108.01, 9200.03, 9200.11,9200.12, 9200.13, 9200.21, 9200.22, 9200.23, 9200.24, 9200.25, 9201.01, 9203,11, 9203.12,9203.13, 9203.21, 9203.22, and 9203.24. 133 We first review the participants in the Santa Clarita residential credit markets: the most active banks and other lenders on the supply side of these markets, as well as the racial and income characteristics of the households on the demand side. We then evaluate suggestive evidence concerning discrimination in Santa Clarita residential -credit markets. Next, we review patterns of credit flow within the City. Who are the Participants in the Santa Clarita Residential - Credit Market? The supply side. The vast majority of residential loans in Santa Clarita are provided by mortgage companies. Table 1 provides some summary data for 1993 and 1994. Table Included in Appendix In 1993, mortgage companies provided 59% of all conventional home -purchase and refinancing loans. Thrift and commercial banks accounted for 24.3% and 13% of this market, respectively, and credit unions provided the remaining 3.6% of market share. Overall, there was a remarkable drop-off in loans between 1993 and 1994 - some 4581 fewer loans in these two categories were made in 1994, a 54% decline. Mortgage companies cut their activity by slightly more than the market as a whole, and consequently their market share dipped to 52% in the smaller 1994 market. Meanwhile, while the thrift market proportion rose to 29.5% even though their lending fell by 44%; and commercial banks' share rose to 16.3%. 134 The small credit union share was cut to just 2.3% in 1994. Not only do mortgage companies dominate the mortgage market in Santa Clarita, but large mortgage -company lenders control a smaller market share than is the case for banks and thrift. % The five largest lenders among commercial banks made 55% of all conventional home -purchase and refinancing loans by banks, in 1993 and 1994, and the five largest lenders among thrift made 55% of all thrift loans. By contrast, the five largest mortgage -company lenders accounted for 43% of all loans by mortgage companies. That is, mortgage companies are not only the most important suppliers of residential credit; there are many more such companies with significant market share than is the case for commercial banks and thrift. This pattern of market share is typical for newer suburban communities; lending data for such communities as Santa Clarita and Lancaster in Los Angeles County finds mortgage companies to control 60% or more of the mortgage market. In older communities and in the urban core areas, mortgage companies have a much lower market share. In the City of Los Angeles, for example, mortgage companies account for just over 25% of all residential loans, with thrift controlling half the market and commercial banks most of the rest. In Los Angeles County as a whole (including Santa Clarita), mortgage companies in 1994 made 43.5% of all conventional purchase and refinancing loans, thrift made 35.2% of all such loans, commercial banks 19.41/o, and credit unions 1.8%. The other notable aspect of Table 1 is the indication of substantial variability among lenders. The large number of failures among depository institutions in recent years, rampant bank and thrift consolidations continuing, and the rush by new competitors into deregulated markets have all made the residential credit markets very unstable. In the 1980's, thrift held a dominant share, of the mortgage market throughout Los Angeles County. However, continuity has been lost in this market; in communities such as Santa Clarita the market leaders in supplying credit vary substantially from year to year. 135 ,�� 'i � t •� i •i. �� i � .- � � �, i Ili. i The demand side. Who applies for a mortgage on a home in Santa Clarita? Including both conventional and VA/FHA loan applications, 78.4% of all applicants who identified their race in these two years are Anglo; another 12.2% are Latino, 2.5% are African American, and just 5.8% and 1.1%, respectively are Asian American and American Indian. This pattern contrasts little with Santa Clarita's prior demographic composition. As noted above, Santa Clarita's 1990 population count was 83.6% Anglo, 10.2%Hispanic, 1.5% African American, 4.2% Asian American, and 0.6% American Indian. These applications will not significantly alter the racial population proportions in Santa Clarita. At most, the Asian -American share of population might rise slightly over time, assuming applications are converted pro rata into loans (a topic discussed below). This ethnic stability reflects the recent settlement of the whole population of this City: within a matter of several years, literally every household recorded as living in Santa Clarita in the 1990 Census would have obtained a home loan for a house there. The absence in Santa Clarita of any kind of demographic contrast between population and loan applicant pool differs sharply from the remainder of Los Angeles County, where remarkable contrasts are plentiful. About 15.8% of Santa Clarita's applicants have incomes below $40,000; about a third (35.7% ) of 1993 and 1994 home - purchase loan applicants have household incomes in the range $40,000 to $65,000 per year; another 25.3% had incomes of $65,000-$90,000, and 23.3% have incomes exceeding $90,000 per annum. This distribution of incomes among applicants for loans in Santa Clarita isconsistent with the income character of those already living in this city, all of whose census tracts have median incomes above the Los Angeles metropolitan statistical area average. 136 Discrimination and Redlining in Santa Clarita: Basic Statistics The discussion above indicated that two types of racial problems have been singled out in federal legislation since 1968, discrimination and redlining, and also noted that HMDA data can be used to do diagnostic analysis of these two problems. This section presents some basic statistics concerning discrimination and redlining; the following section goes into more depth. Discrimination. The indication of discrimination involving the Santa Clarita home -loan market concerns a fact already noted -- the racial composition of its applicant pool. This applicant pool's racial composition, and that of its residential population, differs markedly from that of Los Angeles as a whole. The racial composition of Santa Clarita's applicant pool has been summarized above, The relevant data appears below in Table 2, Table Included in Appendix Consider, by contrast, the racial composition of all Los Angeles County applicants for conventional home loans in 1993 and 1994. 0£206,759 applicants in the County as a whole, 185,503 identified their ethnicity. Of this total, some 0.6% were American Indian, as in Santa Clarita. However, 17% were Asian American, 6.2% African American, 25.8% Latino and Chicano, and the remaining 50.4% Anglo. The proportion of minority applicants among those seeking FHANA loans in Los Angeles County in 1993 and 1994 is even greater. 137 Ty =777 ZYM 07M, Mol TUMMM Among the 78,196 County applicants for FHANA loans in these two years, 1.3% were American Indian, 5.1% Asian American, 12.9% African American, 42.1% Latino and Chicano, and just 38.6% Anglo. Taking all home -purchase loan applicants in LA County as a whole, 84% of applicants for Santa Clarita homes are Anglo, but only 46% of applicants for homes elsewhere in Los Angeles County are Anglo. This racial difference in applicant pools is remarkably large. With a contrast this extreme, it is statistically improbable that this pattern is pure chance. Some portion of these disparities, but by no means all of it, can be attributed to systematic income differences between Anglos and minorities. Without speculating on racial channeling and pre -application procedural discrimination generally, let us now turn to the data on home loan applications directly, and examine the patterns in these numbers_ Table 2 shows lenders' loan actions by applicant race, for both home purchase loans and refinancing loans. In a pattern that will be followed throughout this analysis, each cell in this table contains three numbers: the first is a raw count, the second provides the percentage of the row total accounted for by this cell's count, and third provides the column percentage for this cell. For example, 202 Latino and Chicano applicants for home -purchase mortgages were denied in 1993 and 1994; this figure represents 21.1% of all African American applicants, and 15.88% of all loan denials. Table 2 indicates that there is a small gap of about 2.5% between Anglo and African American approval rates for home -purchase loans, and a slightly smaller gap of 2.3% between Anglo and Asian American approval rates. There is, by contrast, a gap of 8.2% between Anglo and Latino/Chicano approval rates, and a still larger gap for the small number of American Indian applicants. Except in one case, loan denial and "other actions" rates are higher for minorities than for Anglo applicants," " Note that loan "approvals" includes both loans made and loans approved but not made. "Other actions" includes withdrawals, incomplete actions, and a small residual category. Most formal analysis of loan -market discrimination has examined only approval and denial outcomes. 138 1996 Assessment of Impediments to Fair Housing Choices for the GO! of Santa Clarita. CA, That is, there are modest racial lending gaps overall, with the largest being for Latino/Chicano applicants. The data for refinancing loans tell a different story. Here the approval gap between whites and African Americans widens remarkably to 21.5%, while that between whites and Latinos and Chicanos climbs to 15.5%, and that between whites and Asian Americans rises to just under 5%. Denial rates are consistently higher than for home purchase, and these rates are notably lower for Anglos than for racial and ethnic minorities. The high rates of denials for refinancing loans are surprising, given that homes being refinancing provide their own collateral and, in normal times at least, thus cant' little risk. The explanation here may be that the 1990's have not been "normal times" in the Santa Clarita real estate markets. Numerous explanations of racial gaps are possible.. For example, it might be that Anglo applicants usually have higher incomes_ than minority applicants; then, if applicant income is an important determinant of creditworthiness, what looks like a racial gap really reflects a racial income gap -for which lenders are not responsible. Table 3 tests this supposition by showing lenders' approval and denial rates for home -purchase applicants in three income levels. Table Included in Appendix Table 3 shows that the lowest -income applicant group is much less likely to be approved, and much more likely to be denied, than other income groups. But the relationship between acceptance (or denial) rates and income grouping is not a smooth one. We return to this topic below, However, information from practitioners indicates that minority applicants are often encouraged to withdraw their applications rather than be formally rejected. 139 I i I I II I'I it •1 I f• I I' Redlining. Of course, there is a lot more to be said about discrimination; but before getting into details, we first review some basic statistics on redlining in Santa Clarita. The basic notion of redlining is that geographic areas -- neighborhoods -- with a high proportion of minorities, or with low income levels, receive fewer loans than other areas. It is difficult to conduct a "redlining" analysis of a city the size of Santa Clarita, for Santa Clarita encompasses just 17 census tracts. This does not provide much of variation for analyzing area racial or income differences. Nonetheless, as Table 4 shows, some differences are evident in Santa Clarita's census tracts. For our purposes,. we will divide these tracts into four distinct minority -population and median -income groupings. For minority population, we distinguish between the four tracts with 15% or less of minority population, the nine tracts with 15% to 20% minority population, the three tracts with 21% to 25%, and the one tract with 39%. For median income, we differentiate the three tracts with over 170%of the median income level of Los Angeles County, the nine tracts with 140% to 163%, the four tracts with 122% to 135% of the median Los Angeles level, and the one tract with 115% of the Los Angeles -area median income. Some preliminary measures of redlining are shown in Table 4. 1, for both home -purchase and refinancing loans. The first column checks on one key prior in any redlining analysis: is there a demand for homes in any given area (including, for example, the high -minority areas)? This column records the home -purchase applications registered per owner -occupied unit in 1993 and 1994, by census tract. No pattern emerges: so in any event, lack of demand is not the defining prior problem in Santa Clarita's lower-income (and higher -minority) areas. The second column constitutes one measure of Shlay's "fair share" the number of loans per owner -occupied unit., For home -purchase loans, the coefficients do not show a clear decline as one moves from the top groups — the whitest and highest -income -- to the bottom ones -- those with the most minorities and the lowest incomes. 140 For refinancing loans, Shlay's fair -share measure does decline systematically for tracts in the lower groups -- a pattern consistent with lender avoidance of high -minority and/or lower-income areas. One might note that this "fair share" analysis is sensitive to the number of owner -occupied units, a figure which will be extremely unstable in a rapidly growing city such as Santa Clarita. The third column represents another measure of redlining -- the ratio of loans made to loans denied, by census tract. For both types of loan, these ratios do vary systematically from high to low as one moves from higher -income to lower-income areas. In sum_ the evidence on redlining is unclear. at best. Santa Clarita's small geographic size (in terms of census tracts) suggests that any geographic analysis would be best conducted in conjunction with individual -level (discrimination) analysis. We turn, then, to a more detailed examination of individual and area patterns in Santa Clarita's lending data. Applicant Based Discrimination and Redlining in Santa Clarita: Detailed Analysis The discussion above suggested that racial lending gaps may be explained by income gaps between Anglos and minorities. The close correlation between area income and area minority composition suggests this explanation may be a reasonable one. In effect, if minorities have systematically lower incomes than Anglos, analyses of racial lending gaps should adjust for this income gap, Table 5 makes this adjustment by dividing home- purchase applicants into four pools (less than $40,000 annual income, $40-65,000 income, $65- 90,000, and more than $90,000 income) A variety of income groupings were tried here, without altering the conclusions reached in the text. 141 J-9 I I i0 / / ! I' I f f I I !/ / ! ""F f I I Table Included in Appendix Note first in Table 5 that there are not systematic differences in approval/denial rates by income level. It is true that applicants with incomes less than $40,000 have a lower chance of being approved for a loan: only 71.4% of all completed applications in this income range were approved in 1993 and 1994. But in the higher income ranges, approval/denial rates are approximately equal: 82.3% of completed applications in the $40-65,000 income range were approved, versus 85.2% of those in the $65-90,000 income range, and 82.2% of those in the $90,000 or higher income category. Examining the data by racial category within income ranges reveals several patterns. First, Asian American applicants' approval rates are slightly greater than those of Anglo applicants in the two lower income ranges, but 6-9% lower in the two upper income ranges. African American and Anglo approval rates are approximately equal in the lower three income ranges, but African American applicants in the highest income range ($90,000 and above) have a 10% lower rate of loan approval than Anglos. The small number of American Indian applicants in each income range has a substantially lower approval rate than Anglos. Finally, Latino and Chicano applicants have loan approval rates consistently lower than those for Anglos in all income ranges, with the widest gaps (about 10%) in the two lower income ranges. So overall racial lending gaps are not attributable to the fact that all minority applicants fall into lower income ranges with lower approval percentages. Another hypothesis is that borrowers in different ethnic groups apply to systematically different types of lender institutions, and these lender institutions have different loan -making policies. If this were the case, then what appears to be a racial lending gap would instead be a financial -institutions lending gap. Table 6 shows, however, that there are no systematic differences in which racial borrower groups apply at which types of lending institution. 142 Table Included in Appendix Latinos are slightly more inclined to use mortgage companies than other borrower groups, and Asian Americans slightly more inclined to use commercial banks; but the differences even in these cases are slim at best. Table 7 does indicate that lower-income applicants are somewhat more likely to apply at thrift (savings and loan institutions) than elsewhere; but thrift also have a relatively high number of upper-income home -purchase applicants. Table 8 goes deeper into the question of differences among types of lenders. Table Included in Appendix It shows data separately for commercial banks, thrift, and mortgage companies (ignoring the numerically small credit -union sector). This table shows that commercial banks have a markedly higher denial rate for African Americans than for any other borrower category; and banks have a remarkably higher incidence of "other actions" (see above footnote). Thrift, by contrast, have remarkably high denial rates -- but their defining pattern is a much lower approval rate for minority applicants than for whites. Similarly, thrift have denial rates for minorities about 20% or more higher than for Anglos. Mortgage companies have distinctly higher approval rates than either commercial banks or thrift. However, mortgage companies too have a racial gap between Anglos and other borrowers, especially for African American and Asian American borrowers. Table 9 takes a different look at the question of differences among lenders. Table Included in Appendix 143 What if the key distinction among lenders arises because large lenders behave differently than small ones? Table 9 separates the home -purchase pool into large banks and thrift, large mortgage companies, and all other lenders.97 This division of the data suggests first that large lenders'approval and denial rates are weighted much more heavily against minority borrowers than are the smaller borrowers. The remarkably high rate of denials and other actions at the large commercial banks and thrift stands out -- for Anglo borrowers, about 40% of all loan applications fall into this category, and for minority borrowers, up to 62% (in the case of Asian American applicants). These statistics suggest that the racial lending gap is robust. We now analyze it further by going more deeply into the links between income and race. We suggested in the above section that applicant race and income are correlated in the US as a whole. Table 10 shows, however, that they are not clearly correlated in Santa Clarita's applicant pool. The African American and Anglo applicant -income profiles are almost identical, and Asian American applicants fall somewhat more frequently into higher income categories. While applicant income and applicant race are relatively uncorrelated, two other correlations do hold up, as shown in Tables 11 and 12. Table 11 demonstrates that applicant income and area median income are positively correlated -- the higher an applicant's income, the more likely she or he is to apply for a home in a higher -income census tract. Table Included in Appendix 9' The large-bank/thrift category includes Bank of America, Wells Fargo, First Interstate, Great Western, and Home Savings. The large mortgage -company category encompasses Prudential Home Mortgage, Directors Mortgage, CTX Mortgage, Countrywide Funding, and North American Mortgage. These lenders were singled out both because of their overall market presence and because of their active participation in the Santa Clarita market (see Table 1). 144 III i MATIMMUMN I I' / '1 1 / I I / /AYITTM Table 12, in turn, shows that minority applicants apply for homes much less frequently in low - minority areas of Santa Clarita than in other areas, compared to Anglo applicants. The fact that minority borrowers are more likely to apply for home -purchase loans in minority areas may indicate that lenders are "pushing" them that way; but this pattern would also emerge if minority home -seekers were channeled to such areas by real-estate brokers or developer representatives; or this pattern could indicate a higher demand for the amenities available in areas with more minorities. Table 13 details whether loan approval and denial rates vary by applicant race in areas with different racial profiles. These data are inconclusive. Anglo denial rates are lower in high -minority areas, but their approval rates do not vary across minority areas. Table Included in Appendix Latino denial rates are higher in low -minority tracts, but their approval rates do not vary significant across minority areas. African Americans actually have a higher approval rate in low -minority areas, and Asian Americans' rates do not vary significantly across minority areas. Table 14 repeats this exercise for income areas. Table Included in Appendix This table finds, as in Table 13, that racial approval and denial rates do not vary significantly as median area income rises or falls. The outstanding conclusion of this detailed analysis is that the racial gap between Anglo and minority applicants is robust -- adjustments of various types do not eliminate it. This conclusion is based on the numerous descriptive statistics summarized in the fourteen tables above. 145 R9: u't tt I'f tt 't A bit more critical analysis of this result is warranted. First, do more refined statistical tests indicate that this racial gap is a problem in Santa Clarita? Two refined tests suggest that this racial gap is not just a statistical artefact. The author of this report ran numerous logistical regressions using loan approval/denial as a limited dependent variable. Two separate specifications of the dependent variable were tried; and a panel of 15 independent variables were used in various combinations to "explain" the probability of loan denial. In the various equation examined, variables such as area race and area median income explained the dependent variable only sporadically. Applicant income too was an inconsistent estimator, which sometimes took on the wrong sign- a result that is not surprising in light of our discussion here. Among the few variables that were robust in repeated specifications was applicant race; this variable, when it indicated an applicant to be a minority, consistently increased the probability of denial by 18 to 22%. So this sophisticated procedure amplifies the result found here in the descriptive statistical data. A second refined test was done, with results reported in Table 15. Specifically, the racial gap test was conducted for two stratified pools of applicants: those who were "overqualified" in that their personal incomes exceeded the median income of the census tract for which they were applying by at least 25%; and those who were "under qualified" in that their personal incomes fell below the median income of the census tract for which they were applying by at least 25%. Table Included in Appendix This test yielded disappointing results. Note that there are remarkably few "overqualified" applicants of any type -- somewhat surprising, given that these application data are drawn from a period about four years after the Census at which point median -income statistics were computed. The scant evidence for over -qualified applicants shows no consistent pattern. 146 Similarly, most applicants are classified as "under -qualified" according to the method used here. Even reducing the figure to qualifying income level to 25% of median income left over 1100 applicants in the pool. Some systematic bias is skewing this test -- either many retirees are buying homes in Santa Clarita in 1993 and 1994, or the median income statistics are incomparable to other statistics, or many home -loan applicants have had income reverses which have not deterred their home -buying plans. Conclusion The small size of Santa Clarita from a statistical viewpoint makes it somewhat difficult to draw definitive conclusions. Using two years' worth of lending data, 1993 and 1994, has allowed somewhat more definitive conclusions to be reached. The overarching conclusion is that there is not enough data on hand to determine whether neighborhood redlining is occurring but based upon the Limited data in hand there is little evidence that redlining has emerged; however, evidence consistent with discrimination against minority loan applicants does exist. Racial lending gaps remained persistently in the data even when a variety of adjustments were made. Further investigation of the economic processes that generate these racial lending gaps seems warranted. B. Issues Raised By Lending Focus Group A focus group of lending professionals was convened on April 6, 1994 at the University of California at Los Angeles, Law School as part of the City and County of Los Angeles joint Analysis of Impediments to Fair Housing Choice. 147 f I' I / f I/I' M=0/ f I S f I f The group included two regional sales managers from large mortgage companies, three community reinvestment loan officers from commercial banks, two sales managers from finance companies, three representatives of national private mortgage insurance companies and one representative of a large secondary lender. The two moderators were staff and a board member from the Fair Housing Congress of Southern California. Moderator Guides are available for review upon request. The moderators raised issues related to the Boston Federal Reserve Study conducted in 1992. The Reserve Study involved a survey of actual loan files. The results revealed that minority applicants with credentials comparable to their Anglo counterparts were denied loans in much higher rates, and that these minority applicants also received much less servicing by loan officers. The participants noted that the Home Mortgage Disclosure Act C HMDA') data is often incorrect because loan processors, when called upon to independently fill in applicant data, will supply which will put the lender in the best light. For example, staff will designate an applicant as Latino rather than Anglo, thereby increasing the Latino applicant pool. Thus, as poor as California and national lending data is with respect to loans to minorities, the actual picture is even more dismal. It is unknown to what extent this misreporting affects the statistics which are publicly reported. The participants also stated that lenders do not provide anywhere near adequate marketing resources for community reinvestment products and there the lack of bilingual (Spanish) loan representatives. It is therefore difficult to conduct business. In addition,providing compensation through commissions results in loan officers concentrating in areas where they can make the most money, i.e., not in areas like South Central. There was discussion of the subtle and not so subtle forms of discrimination which take place during the processing of loan applications. One point is as soon as the applicant reaches the desk. Minority applicants typically wait needlessly, receive less attention and do not receive assistance filling out the application.. In addition, applicants are immediately pigeon -holed as someone from a particular national origin or race. WE 'rI l I I /11 //' / f • [' I J I I/ r NM I After the pigeon -holing, the loan officer begins to process the applications based on all the stereotypes, e.g., there is a conventional notion that Iranians cheat on taxes and underwriters have been known to automatically, without any indication of problems, contact the Internal Revenue Service or the Franchise Tax Board to check on whether the applicant is under investigation. (Under normal circumstances, underwriters do not contact tax authorities without some indication of need reflected in the file.) Participants made plain that loan officials are aware of or speculate on the racial and national origin characteristics on applicants. Focus group participants stated that conditions are routinely imposed upon minority applicants that similarly qualified Anglos are asked to meet. In addition, minority applicants are asked to supply copious amounts of documentation until these applicants become fatigued and withdraw their applications. There was a long discussion about how the Fannie Mae secondary market programs are not being utilized by lenders' underwriters. According to participants,. Fannie Mae representatives have been making presentations on the Agency's modified guidelines and ensuring lenders that the Agency is prepared to purchase the loans of low income purchasers and that other than "plain vanilla" loans is eligible for purchase. Lender underwriters have either not gotten the word, do not believe that Fannie Mae will enforce their guidelines or simply refuse to underwrite such loans. Underwriters continue to apply the old, more conservative standards and refuse to approve "non-traditional" loans that would fit into Fannie Mae's new guidelines. One participant felt that the underwriters have been "burned" in the past and now are more cautious. The underwriters are afraid of fraud in the marketplace. Ah experiment was conducted with 100 loans from a very large bank that had been turned down. These loans were reviewed by Fannie Mae staff. Of the 100 declined loans, the Fannie Mae staff agreed that at least 45 would have been purchased by Fannie Mae. Another lender conducted a similar experiment and determined that of the 27 loans its staff would have turned down, 19 or 20 would have been purchased by Fannie Mae. Community Reinvestment Act ("CRA") lending was discussed. CRA lending ( up to 120% of median family income) constituted approximately 44% of Bank of America's 1993 loans or $3.4 billion. 149 Some of the large banks in California have institutionalized community reinvestment leading, but this is not the case with many middle sized and small banks. Part of the institutionalization has been to ensure that loan representatives do not get penalized for making small loans, and to formally recognize that service areas require more intensive market efforts. Although the participants did not consider race (and Fair Housing) a part of CRA, participants agreed that there was much more diversity in the sales staffs in California than other parts of the country., Outside California most of the underwriting staffs and senior credit officers of national mortgage insurance companies are Anglo. Without diversity there is little appreciation for differences in lifestyles. Underwriting standards represent another big source of discrimination. For example, most standards allow applicants to spend no more than 36% of their incomes on housing. This is a standard which was developed many years ago and may have been relevant at the time, but is no longer applicable for California's current population. It is a rare low or moderate income family that spends only 40% of its income on housing. Using the 36% maximum standard disqualifies immediately an nordinate number of minorities_ There is a longstanding underwriting standard that disqualifies condominiums for mortgage insurance if the complex has fewer than 70% owner -occupied units. This standard represents more of a concern in certain minority neighborhoods where condominiums are a source of affordable and decent housing. Condominiums are often buyers' initial homes. Once these purchasers wish to purchase another residence, these purchasers may be required, because of discrimination, to retain ownership of these condominiums and rent them as non owner -occupied dwellings. As the number of owner -occupants in the complex dips below 70%, insurance and traditional secondary lending options evaporate. Only within the last 2 to 3 years have California lenders started to recognize the viability of the low income market. One of the private mortgage insurance representatives noted that these loans are performing as well as or better than "conventional business." As a national private mortgage insurance company representative, he noted that he sees more of this type of business developing and being recognized in California than in the Mid -West and the East. 150 I I J l'[ / JI J ! JJ J / J JI / I � I ! l ! I ( I Participants noted that low and moderate income persons do not normally buy their home as investments, but as places to live in their American dream. Participants agreed that the new conventional wisdom for knowledgeable California lenders is that if a low income owner lose her/his job, s/he is even more likely than a higher income homeowner to hold down two jobs to retain their houses. Upper income minorities have higher declination rates than other groups. One large lender instituted a program of second level reviews of any declination of a minority applicant- independent of the applicant's income and regardless of the location of the security. The Office of Comptroller of the Currency mandated that the bank stop the program, claiming reverse discrimination. There are reasons for undertaking second look reviews at minority loans and engaging in education efforts with minority high school students, for these groups receive a disproportionately lower number of loans. In addition, loans from minority applicant often require more documentation. The need for this documentation has less to do with minority status of the applicants as it does the lifestyles of these applicants. For example, minority loan applicants often derive income from multiple sources and each source must be documented. There was general endorsement of home buyer programs for first time home buyers. If these programs are conducted properly, minorities are likely to be over represented in this programs because so few such persons have owned homes previously. One focus group member noted, however, that the best of these program participants are "creamed" by lenders to have their loans processed. The rest program participants are left to their own devices. There was general agreement that lenders pressure appraisers to come in at certain levels. This practice occurs in all neighborhoods, irrespective of minority status. Focus group members noted that cuts in value occur because of location and because appraisers do not specialize in geographic areas. The appraisers are not familiar with low income or urban areas, for many are from Anglo, suburban areas and do most of their work there. With national companies headquartered in the Mid- West or Southeast the perception is that the values of all California properties have declined, especially in low to moderate income areas. 151 1996 Assessment of IM pediments to Fair Housing C hoice or thei:U of Santa Clarity CA In truth, the real losses have occurred in high income areas. The experience in California's moderate income -inner city areas have experienced very minimal losses of 3% to 5%. One representative of a large p rivate mortgage insurance noted that for homes less than $250,000 the company had experienced little to no loss. If an appraiser wants to get a loan declined all that needs to be said is that the area is generally declining. Lenders that do not wish to lend to an applicant will have the private mortgage insurance company do the declination instead. Focus group members recommend that municipal governments increase their participation in first time home buyer, silent second and education programs. C. Bank Branching in the Santa Clarita Vicinity The next several maps and tables illustrate some of the demographic and banking patterns in the vicinity of Santa Clarita. Showing some of the areas outside the City is designed to put patterns into perspective. The first reference map shows the position of Santa Clarita relative to the northeastern end of the San Fernando Valley. This map (and all succeeding maps) shows the location of bank ranches as of December 31, 1995. Specifically, branches of commercial banks are shown as squares; branches of savings and loan associations are shown as triangles; and branches of credit unions as circles. Note that Santa Clarita has numerous commercial branches, several savings and loan associations and one credit union branch. In the portion of the San Fernando Valley shown, a sizeable number of bank branches are also found. Further, the branches in Santa Clarita are clustered closely together. Neighboring Lancaster has more branches, and these are distributed more evenly; Maps 1 to 3 illustrate the ethnic composition of Santa Clarita relative to Los Angeles County as a whole. The concentration of Latinos and Chicanos in this area's census tracts is shown separately, followed by that of African Americans, and that of Asian Americans. For each of these ethnic groups, the same technique was used. That is, first the 1652 census tracts in Los Angeles County were divided into approximately even quintiles based on their relative proportion of (for example) Latino and Chicano households. 152 So , in Map 1 for example, 332 census tracts have 0% to 5.86% Latino and Chicano residents, another 331 tracts in the County have 5.86% to 13.21% Latino and Chicano residents, and so on. Each quintile was then assigned a different "shade" of grey: the most heavily Latino and Chicano tracts received the deepest grey, while areas with the fewest Latino and Chicano residents were left as white. This "shading" scheme was then applied to all of the census tracts on the Santa Clarita reference map. This approach puts Santa Clarita into the context of Los Angeles County as a whole.Map 1, details African American residential concentration, shows that most of Santa Clarita has high relative numbers of Chicano and Latino residents. Map Included in Appendix By contrast, portions of San Fernando have relatively high concentrations of African Americans. Map 2 shows a residential patterns for Asian Americans live in most areas of Santa Clarita, Map Included in Appendix There are somewhat higher proportions of Asian Americans in the northern and western portions of the City. Higher concentrations of Asian Americans are found in the western portions of San Fernando Valley beneath Santa Clarita: the pattern of Asian American settlement in predominantly Latino/Chicano San Fernando, in the eastern quadrant, resembles that in Santa Clarita itself. Map 3 illustrates residential patterns for Latino residents are found in San Fernando. Map Included in Appendix 153 �/ • /1I I Ill'! !II I f II I' 1 1 To the west of San Fernando Valley, few Latinos are found. Maps.4 and 5 show aspects of the economic situation in this geographic area. First, Map 4 plots median income by census tract as of the 1990 Census. Map Included in Appendix This map shows that all of the census tracts in Santa Clarita fall into the top two income quintiles.. By contrast, most of San Fernando falls into the lowest three income quintiles- and the remainder of the upper San Fernando Valley resembles Santa Clarita. The next map shows concentrations of households below of the poverty line, as of the 1990 Census. This pattern closely resembles that for median income, with one exception- the southern most portions of Santa Clarita have relatively significant numbers (8% to 14%) of the poverty -level residents. Maps 6 and 7 illustrate the patterns of lending flows for home purchase in Santa Clarita. Conventional mortgage flows are first shown in Map 6; these flows are detrended -- that is, calculated on the basis of mortgages per 100 owner -occupied units. Map Included in Appendix This representation shows that most areas of Santa Clarita are in the top two quintiles in mortgage flows for home purchase. However, the City also encompasses several census tracts in the bottom quintiles in terms of conventional home purchase loans. Nearby San Fernando has low overall levels of conventional mortgage loans. Conventional mortgage flows are between these two extremes in then other portions of the upper San Fernando Valley shown here. Map 7 shows detrended flows of FHA/VA mortgages. 154 Map Included in Appendix FHANA loans re tailored for first-time home buyers and for those with limited means. Interestingly, almost all of both Santa Clarita and San Fernando fall into the top two quintiles of FHA/VA mortgage flows, relative to Los Angeles as a whole. By contrast, the western portions of the upper San Fernando Valley shown here receive few FHANA loans. Bank Branches in Santa Clarita The table on the next page lists all branches of commercial banks, thrift and credit union that are open for business as of December 31, 1995. The two maps that follows then map that follow then map out the location of these various branches in Santa Clarita proper. The most notable feature of this pattern of bank branch location is that an overwhelming majority of the branches located in the City are operated by the largest banking organizations in the State. Of the 30 branches in Santa Clarita, two very large thrift (Great Western and HOME Savings, 'operate 5, Bank of America operates 8 and Wells Fargo and First Interstate account for another 4, This concentration points up the relative absence of smaller, locally based lenders'in the City, with the exception of Valencia National Bank that has 3 branches. X. State Pre-emption of Fair Housing Field Under the 1988 amendments to the federal Fair Housing Act, HUD is to refer complaints of housing discrimination to state and local agencies whose fair housing laws and procedures are substantially equivalent to the federal law and system. [42 USC 3601(f)]. This mandatory referral was set up, in recognition of "the valuable role state and local agencies play in the enforcement process" and to encourage states and localities to adopt and enforce stringent and effective fair housing measures. 155 1996 Assessment of Impediments to Fair Housing ChoicgifpL the City of Santa Claiita CA California adopted legislation (AB 2244); which is expected to be certified as substantially equivalegt to federal law. By enacting AB 2244, which went into effect January 1, 1994, California simultaneously enacted the strongest state fair housing statute in the nation and decimated an important aspect of the infrastructure by which to achieve effective administrative remedies. The Act included a provision by which the state preempted the field of fair housing. This means that the City is precluded from adopting any fair housing ordinances. It means that the City may not apply for federal dollars to process and investigate fair housing complaints.The preemption clause in State law also draws into question whether municipalities can create new protections which are not now covered by existing State statutes. For example, although familial status is covered by both the federal and State statues, "family size" is not covered by either. Source of income is also not specifically covered by either statute. Both of these characteristics are used routinely to deny access to housing in a manner which has a disparate impact on the basis of race, national origin and familial status. The combined effect of lack of substantial equivalency on the state level and the preemption of the field, thereby nullifying the local laws and enforcement efforts, is a substantive impediment to achieving fair housing. There is serious question as to whether any municipality could adopt an ordinance to cover these conditions. XI. INSURANCE DISCRIMINATION The urban uprising in Los Angeles brought renewed attention to the racial and class divisions within our city. Congressman Joseph Kennedy and California Tax Commissioner John Garemendi sponsored hearings in May, 1994 on insurance redlining. Officials heard stories of how badly underserved the communities of color are in Los Angeles. 156 As part of the City and County of Los Angeles Al research, 4000 residents were surveyed related to a number of issues. The full results have not been made available to date. Based on limited returns, most African American respondents believe that insurance companies charge higher rates for home insurance in African American neighborhoods, and almost 10% believe that they have been refused coverage for discriminatory reasons. These perceptions were bom out by research conducted by the Fair Housing Congress in a 1992/93 study under the auspices of the National Fair Housing Alliance. Those findings indicated that persons of color pay more for less coverage. The results of these tests were forwarded to HUD as part of a nationwide complaint filed by NFHA. ' Since the conduct, of these tests, many property insurance companies have withdrawn from the California market. Only with the last few months are the major insurers beginning to come into the market. The City should assess the nature and extent of insurance discrimination through testing and research before it determine the exact perimeters of any education, outreach or enforcement program. There is no evidence at this point regarding the nature and extent of PMI insurance discrimination. According to the Los Angeles Times May 23, 1996 edition, the California Insurance Commissioner of Insurance Chuck Quackenbush "ordered an end to most new sales of homeowners and earthquake insurance under the state's Fair Plan as of May 31[, 1996]" p. A3. The Fair Plan is insurance of last resort within the State. Until this administration, homeowners who had experience redlining or for whatever other reason could not secure insurance from private carriers, always had the option of securing same through the Fair Plan- Without the availability of the Fair Plan, prospective residents of redlined areas will not be able secure financing, which is only available contingentupon property insurance coverage. 157 111 • f1'f 1 f11' Under California law, insurance companies which offer property insurance must also offer earthquake insurance. Many private insurance companies have chosen to get out of the homeowner insurance market rather than offer earthquake coverage. For example, Twentieth Century is about to cancel 200,000 homeowner policies at a rate of 15, 000 a month. Id. They cite that risks as too great for private companies to bare. These insurance officials also applaud the Commissioner's decision to withdraw from offering coverage, for each company would have to share in loss coverage. Quackenbush said that if a large quake should strike now, under Fair Plan provisions, private companies would be assessed a pro rata share of these liabilities that could mount to $10 billion in Los Angeles County alone and $17 billion statewide. Id. at p. A25. Without the Fair Plan coverage, minority renters may well be denied the opportunity to own. Of equal concern, majority group members seeking to move into integrated areas will also be unable to do so because of lack of property insurance coverage. It is unclear from the newspaper coverage what, if any, Fair Plan multifamily coverage will be offered. Since there are a disproportionate number of minority renters, multifamily coverage is of critical importance. XII. NIMBYISM, THE FIRST AMENDMENT AND THEIR IMPACTS ON FAIR HOUSING RIGHTS 158 r r r• MMOM727M There is sometimes a reluctance on the part of certain neighborhoods to mix economic classes.Low income, housing developments, housing for the physically, mentally and developmentally disabled and groups for juveniles often create fears between neighbors and adjoining communities. Such communities are often afraid that these complexes will lower property values, threaten the health and welfare of children or even lower morality of the community. Communities sometimes organize to keep such perceived housing out of neighborhoods. For example, in the 1970's the homeowners of Georgetown, a fashionable community in Washington, D.C., fought tooth and nail to divert a proposed subway from being routed through their neighborhood. The municipal approval of the diversion of the subway away from Georgetown offended many African American Washingtonians, The African American community was convinced that the decision was grounded in the Anglo community's perceptions of persons of color as synonymous with increased crime, noise, drugs and trash in the community. New York City and several suburbs recently faced a fierce battle over efforts to locate group homes in residential neighborhoods. Local citizens were outraged by the perceived potential of drunkenness, littering, and violence among residents of men's homeless shelters. In another community, arsonists set fire to a house slated to be a state -funded group home for twelve mentally ill men. There has long been community resistance to low income housing and group homes. Previously, the opposition was very directly related to the unsuitability of proposed residents. Today the resentment is more often - than not expressed in terms of "This facility does not architecturally blend in with our design expectations for modernity and size," "This development will create excess traffic congestion" or "The complex will put a strain on the City's sewer capacity." 159 Community opposition to low income housing, group homes and other types of "untraditional" housing raises a number of issues for the City, such as: • Santa Clarita and the federal government have legitimate and compelling interests in developing and preserving housing affordable to low and very income persons and the development and funding of programs to assist homeless individuals. If community opposition to this housing is successful, the result will be that these complexes will be concentrated in low income areas and isolated economically, racially and on national origin bases. • Community groups and individuals have First Amendment rights to petition their government and persuade other private citizens to oppose low income and group homes. Certain activities are protected and other are clearly unprotected. The law is still developing regarding those municipal actions taken to quell opposition and encourage economic and racial/national origin integration which is sanctioned and those which are prohibited. • NIlvMY activities may constitute coercion, intimidation or interference with an individual's fair housing rights and therefore be unlawful under 42 U.S.C. 3617. In those instances in which these NIMBY activities constitute both legitimate First Amendment protests and violations of the Fair Housing provisions against intimidation and coercion, the City must develop procedures and policies which permit both legitimate exercise of First Amendment rights and promote the fair housing rights of the applicants and occupants of low income and special needs housing. The First Amendment to the federal Constitution prohibits any law which abridges the freedom of speech. The Amendment was developed in response to the English history of restraining public speaking and writing. This is right available to individuals, associations, labor unions and corporations. It is meant to protect the most unpopular of opinions. Free speech is not an absolute right. Times Film Corp. v. Chicago, 365 U.S. 43, 81 S. Ct. 391. 160 111111 1 1 f / / ! I S /I ! S ► I/ , f I/ S I S It does not mean that anyone may speak on any subject at any time. A jurisdiction may constitutionally control the hours and place of public discourse. Saia v. New York, 334 U.S. 558, 68 S. Ct. 1148. Any ordinance affecting freedom of expression will be strictly scrutinized to determine whether an abridgement of free speech is involved. Jones v. Opelika, 316 U.S. 584, 62 S. Ct. 1231, vacated on other grounds, 319 U.S. 103, 63 S. Ct. 890. The First Amendment is not intended to give immunity for all abusive language [Stromberg v. California, 283 U.S. 359, 51 S. Ct. 532 1, and this freedom is subject to the proper exercise of police power, through reasonable regulations designed to promote and preserve public welfare. Near v. Minnesota 283 U.S. 697, 51 S: Ct. 625. Utterances which are not afforded First Amendment protections include libel and slander [Beauharnais v. Illinois, 343 U.S. 250, 72 S.Ct. 725, rehearing denied 343 U.S. 988, 72 S.Ct. 1970.], hostile and subversive utterances or those advocating violence, force or terrorist action. Where speech or press is used in circumstances and in a manner which creates a "clear and present danger" which the City has the right to prevent, it has long been held that a municipality may restrain the speech. Associated Press v. United stated States, 326 US 1, 65 S. Ct. 6. In those nstances in which a municipality seeks to exercise its power to abridge speech on the basis of a clear and present danger; the limitation upon liberty must relate directly to a reasonable apprehension of danger. Herndon v. Lowry, 301 U.S. 242, 57 S. Ct. 732. The First Amendment also protects the right of assembly to petition the government for redress of grievances. Even prior to the adoption of the First Amendment people had the right to peaceful assembly for lawful purposes and with the Constitution came the guarantee of free exercise of this right. See e.g., American Federation of Labor v. Reilly 113 Colo. 90,155 P.2d 145, 160 ALR 873; Spriggs v. Clark, 45 Wyo. 62, 14 P.2d 667, 83 ALR 1364. Like speech, assembly is not an absolute right. A municipality's interest in self protection, outweighs an individual's right to association. 161 However, a municipality justify any abridgement of association and petitioning rights upon a reasonable apprehension of danger to organized government: Herndon v, Lowry, 301 U.S. 242, 57 S. Ct. 732; De Jonge v. Oregon, 299 U.S. 353, 57 S. Ct. 255, The Fair Housing Act makes it unlawful to coerce, intimidate, threaten or interfere with any person: (1) In the exercise or enjoyment of any right protected by the Fair Housing Act; (2) Because the person has exercised or enjoyed a fair housing right; or (3) Because the person has aided or encouraged someone else in the exercise or enjoyment of such a right. 42 U.S.C, 3617. HUD regulations further state that "threatening; intimidating, or interfering with persons in their enjoyment of a dwelling because of the race, color, religion, sex, handicap, familial status or national origin of such persons" is conduct barred by section 3617 of the Fair Housing Act 24 C.F.R. 100.400(c)(2)_ This regulation also makes such conduct unlawful if it is undertaken because of the race or other prohibited characteristic of visitors or associates of such persons. HUD further clarifies that threatening or intimidating acts include acts against the possessions of persons, such as damage to automobiles or vandalism which limit a persons ability to have full enjoyment of a dwelling. Examples of interference against persons who have exercised their fair housing rights include situations such as: • vandalism perpetrated against a minority resident who has just moved into the area to intimidate the occupant to move out. Stackhouse v. DeSitter, 620 F. Supp. 208 (N.D. Ill. 1985)1- • 985);• municipality withdrawing police protection for a minority family who has just moved into the area for racial reasons. Campbell v. City of Berwyn, 815 F. Supp. 1138, 1143-44 (N. D. Ill. 1993). The law is unsettled whether a group of all Anglo neighbors, motivated by racial bias, violate Section 3617 in combining together to outbid a minority applicant's bid for property. 162 1 I / i ! ' I L) ' ! ' ! I S • I / ' I / / ! / I ! /I S The Sixth Circuit in Michigan Protection & Advocacy Service v. Babin, 18 F.3d 337 (6th Cir. 1994) held that under such circumstances, neighbors had the right to engage in such "economic competition" even the neighbors' motivation was grounded in racial animus. In so doing, it ruled that the plaintiffs Section 3617 claim. The Seventh Circuit ruled in favor of a plaintiffs 3617 claim under similar circumstances. A Nebraska federal district judge ruled that the Sixth Circuit was "clearly wrong in suggesting that there is some sort of `economic competition' exception to the [Fair Housing] Act." United States v. Hughes, 849 F. Supp, 685, 686 (D. Neb. 1994). In this case, the Court held that the plaintiff had stated a cause of action when it accused a bank of financing the purchase of a residence who were in competition with persons seeking to convert the property into a group home. The court held that "...[a] bank may violate the Act if it finances a purchase of property with the intention of aiding the purchases in the home from being purchased by others because those other buyers are associated with mentally ill persons. Id Examples of acts against persons who have aided others in their fair housing rights included the following circumstances: • Housing developers seeking to assist tenants to live in racially integrated environments objecting to the operation of exclusionary policies. United States v. City of Birmingham Michigan, 727 F. 2d 560, 561 (6th Cir.), cert. denied 469 U. S. 821 (1984); • Action by the seller of a mobile home coach owner objecting to the refusal of the trailer park owner to rent space to a minority prospective buyer of the home. Cf., United States v. Scott, 788 F. Supp. 1555, 1560-62 (D. Kan. 1992). • The real estate broker to secure his/her commission on the basis that the seller will not accept a qualified minority buyer, Crumble v. Blumenthal, 549 F. 2d 462, 468-69 (7th Cir. 1977); * Dismissing resident managers, sales agents or other because they refuse to discriminate. 163 According to HUD regulations [threatening an employee or agent with dismissal or an adverse employment action, or taking such adverse employment action, for any effort to assist a person seeking access to any residential real-estate related transaction, because of race [or other prohibited characteristic] of that person or of any person associated with that person violates 3617. 24 C.F.R. 100-400 (c)(3). A 3617 action may be undertaken whether or nor the minority home seeker is aware that s/he is/was the target of the actual or intended discrimination_ For example, a broker may institute an action for his/her commission if a seller rejects a buyer for reasons related to race even if the buyer never becomes aware that s/he was the target of discrimination. Four elements must be proven in order to show that a housing provider violated section3617' :(1) That the target of discrimination is in a class protected by Title VIII; or (2) That the plaintiff actually aided or encouraged the protected individuals in the exercise of their rights; (3) That the defendant discriminated against the housing being provided for these individuals, either intentionally or by taking actions that had a discriminating impact; and (4) That the defendant coerced, intimidated, threatened or interfered with the plaintiff on account of the plaintiff having aided or encouraged the residents or prospective residents in the exercise of their rights. 164 If force or threat is actually used, the perpetrator may be charged with a crime under 42 U.S.C. 3631. This provision has been used when defendants have: 1) engaged in cross burnings; 2)bumed down the home of an African American couple moving into a Anglo neighborhood; 3) fired into the home of an African American couple; 4) threatened employees of an adoption agency because they placed African American children with Anglo families; and 5) firebombed a Spanish surnamed family's home. Schwemm, Housing Discrimination- Law and Litigation; Section 20.1 footnote 15, page 20-4. In many instances, the acts of coercion, intimidation, threats and interference that give rise to claims under section 3617 involve verbal and symbolic speech. Persons opposing housing complexes sometimes engage in a range of activities that include picketing, petitioning officials, exerting informal influence, participating in public hearings, combining together to bid on or purchase the property in question, composing newsletters and writing editorials in opposition to the project, cross burnings, firebombing, vandalism and other hate crimes. Defendants often argue that each of these activities in which they engage are protected under the First Amendment. Some of these activities are, in fact, protected; others are not. Sometimes even those which would ordinarily fall under First Amendment protections fall outside the protective sphere when the activity is not conducted appropriately. Santa Clarita, like many jurisdictions, is necessarily concerned with the intersection of First Amendment and Fair Housing Act protections because the City facilitates the construction of low and moderate income housing and housing related programs and is deeply involved in the siting and development of special needs housing. In addition to Community Development Block Grants and other funds that the City is presently receiving, the City has expressed an interest in attracting HOME and other federal funds, which are also targeted for low income populations. 165 1996 Assessment of Impediments to Fair Housing Choices for the City!2fSanta Clarita CA The amount of NIMBY activity in Santa Clarita has not been well documented to date.The, City's plans include exploring access to additional low income and special needs housing over the next few years. With the increased presence of this type of housing the City should anticipate at least some adverse reaction by neighbors. Some of the most extreme reactions may come in the form of "hate crime" on the basis of race, disability, homosexuality or other characteristics. The Los Angeles County Commission on Human Relations reports annually on hate crimes. In April 1996, the Commission reported on the hate crimes that occurred in 1995_ The Commission reported that hate crimes were up 2% over the previous year and that the trend towards criminal offenses is increasingly violent against the person as compared with against property. Hate crimes against Asians Pacific Islanders increased 82.8%, against African Americans increased 23.3% and Latinos increased 11.9%. 78% of attacks on gays were assaults with deadly weapons, assault and battery, attempted assault, murder, rape or sexual assault. Although hate crimes in public places and residences are most common, crimes occurring in places of business have increased 28.1%. In those instances in which the sex of the perpetrators was recorded, 89.8% were males. Los Angeles County commission on Human Relations, Hate Crime in Los Angeles County in 1995: A Report to the Los Angeles County Board of Supervisors,(April, 1996), Santa Clarita reported no hate crimes in 1993. The State adopted SB 911 (Marks) making it a felony to attempt arson or bombing because the owner's or occupant's race, color, religion, ancestry, national origin, disability, gender or sexual orientation. The statute covers private dwellings, public agencies and private institutions. Some jurisdictions have dealt with the issue of hate crimes by promulgating ordinances. Municipalities seeking to enact such ordinances must be careful in how they do so, for such ordinances often raise First Amendment concerns. 166 The United States Supreme Court in R.A. V v. City of St. Paul, Minnesota, struck down that City's "hate crime" ordinance on First Amendment grounds. This ordinance made it a crime to knowingly arouse anger, alarm, or resentment in others on the basis of race, color, creed, religion or gender by placing a burning cross, Nazi Swastika or other symbol on public or private property. Here a juvenile burned a cross on the lawn of a African American family. The defendants argued that the ordinance was unconstitutional on its face because it too broadly proscribed permissible speech and also because it discriminated against certain types of speech. The local government defended its position on the grounds that the ordinance's prohibitions were, limited to "fighting words". The majority ruled that the ordinance indeed violated the First Amendment because its proscription outlawed only certain types of"fighting words" (e.g. those raising resentment on the basis of race), while allowing others (e.g. those which related to political activity). On this basis the majority ruled that the ordinance control the "content" of protestants' speech, something which is generally impermissible unless the protestant is advocating violence. The Court stated that the "[selectivity ...(in what is impermissible and permissible speech) creates the possibility that the City is seeking to handicap the expression of particular ideas" While the Court labeled the cross burning reprehensible conduct, it felt that the City had the means to prevent such conduct in constitutionally appropriate ways, i.e. adopting an ordinance which outlaws the "content" of speech unless the content created a clear and present danger of impermissible action. Had the ordinance been content -neutral, it might well have survived a constitutional challenge. See, e.g., Mungar v. United States, 827 F. 167 PAWIMPNOMMAns f[ f ' f ' [ I • I [ ' 17AY 4=1 l Supp. 100 (N.D.N.Y. 1992) where the Court held that cross burning is not First Amendment protected activity when such activity interferes by force or threat of force with housing rights. The RA. V. Court also held that where a municipality seeks to limit the "content"of protestant's speech, the city must show that the ordinance was reasonably necessary to achieve a compelling governmental interest. R.A. V. v. City of St. Paul, Minnesota at 2549-50. If the ordinance is "content -neutral" but nonetheless impacts on expressive conduct, the standard is more relaxed. According to United States v. O'Brien, 391 U.S. 367 (196 8) such an ordinance will upheld : if it is within the constitutional power of the Governmental; if it furthers an important or substantial governmental interest; if the governmental interest is unrelated to the suppression of free expression; and if the incidental restriction on alleged First Amendment freedoms is no greater than is essential to the furtherance of that interest. Id. at 377. lID Wl [' [ I I [ I f f f IN q The R.A. V. v. City of St. Paul, Minnesota case raises the issue of whether intimidation statutes such as 42 U.S.C. 3617 and 3631 are permissible under the First Amendment, and if so, what types of activities are protected and which are not. The Eighth Circuit dealt with the first issue in United states v. J.H.H., 22 F 3d 821 (8th Cir., 1994) in holding that the First Amendment challenge to 42 USC 3631 is " not directed toward protected speech, but [is] directed only at intentional threats, intimidation, and interference with federally guaranteed rights" and therefore poses "no significant danger of idea or viewpoint discrimination...... Cf Hishon v. King & Spaudling, 467 U.S. 69 (1984). The Court in United States v. Gilbert, 813 F. 2d 1523 (9th Cir. 1987) dealt with this issue. In this case the Court held that the intimidation provisions of the Fair Housing Act are not a violation of First Amendment sanctions. In those instances in which the targets of intimidation are chosen on account of their race, religion or other protected characteristic, an ordinance which punishes motive or intent to commit the underlying crime will be upheld. See, e.g. State of Wisconsin v. Mitchell, 485 N.W. 2d 807 (Wis. Sup. Ct. 1992). Bias- motivated crimes punish conduct, not belief. Dobbins v, State of Florida, 605 S. 2d922 (Fla App. 1992).The courts have dealt with penalty enhancement cases involving hate crimes. For example, the California statute which enhances penalties for felonies committed because of the victim's protected personal characteristics has been held not to violate the First Amendment. In re M.S., 22 Cal. Rptr.2d 560 (Cal. App. 1993); People v. Superior Court, 19 Cal, Rptr.2d 444 (Cal. App. 1993). In implementing the Fair Housing statute, court decisions and regulations, HUD has issued guidance related to substantive and procedural issues regarding the filing an investigation of fair housing complaints that implicate the First Amendment. The Department will not accept for filing or investigate any complaint that involves public activities that: o Are directed toward achieving action by a governmental entity or official; and 169 i o Do not involve force, physical harm, or a clear threat of force or physical harm to one or more individuals. Examples of the types of public activities that are directed towards achieving action by a governmental entity or official and are therefore protected by the First Amendment include'. o Distributing fliers, pamphlets, brochures, posters, or other written materials to the public at large; o Holding open community or neighborhood meetings; o Writing articles or letters to the editor or making statements in a newspaper; o Conducting peaceful demonstrations; o Testifying at public hearings; and o Communicating directly with a governmental entity concerning official governmental matters. These activities, when undertaken as a single effort, are clearly First Amendment protected actions and rarely the subject of complaints. The difficulty arises when protected activities are conducted in combination with prohibited or questionable activities, such when picketing - which is generally protected activity- is conducted so aggressively as to intimidate or interfere with housing rights. If the activity is designed to forcefully dissuade home seekers from occupying units because of their race or other protected characteristic, then the activity falls into an area which HUD is likely to investigate. However, such investigations are to be "prompt, narrowly tailored" and conducted in "close consultation with counsel." In a memorandum to the field from the Office of the Assistant Secretary for Fair Housing and Equal Opportunity dated September 2, 1994, HUD instructed field investigators that investigations which implicate First Amendment concerns are to be specially handled. 170 rrr : ! 'e r ar'f=7 r "Headquarters must concur in the investigative plan for all cases relating to possible First Amendment issues before the investigation is conducted." Prior history reveals that HUD investigations which are specially handled and processed through Headquarters severed slows down the process, resulting in these cases exceeding the 100 day statutorily mandated investigatory period. On occasion, a NIMBY organization will file a frivolous law suit in order to discourage and/or delay the development of low income or special needs housing on the basis of racial or disability animus. The Courts have found that frivolous law suits of this type may constitute violations of the federal Fair Housing Act. See, e.g. Sofarelli v. Pinellas County, 931 F. 2d 718, 725 (11th Cir. 1991); HUD v. Grappone, 2 Fair Housing -Fair Lending (P -H), Para. 25,059 (HUD Office of Admin. Law Judges 10/1/93). It is essential that the City of Santa Clarita be prepared to deal with both the legitimate and frivolous arguments that NIMBY organizations and neighborhood groups raise to the local governing body. The City should analyze the nature of the community objections, i.e.,what people object to and what they typically do about it. It should be aware of the underlying factors influencing community response to controversial human service facilities and examine alternatives available to service providers who face the prospect of a hostile host neighborhood. Research, education, and public presentations regarding the characteristics of residents of special needs housing and the benefits of affordable housing alternatives is likely to go far in developing a community receptive to low income and other housing developments. 171 Ka,WMM77F977M3Tn"W70 OI I Effective strategy on siting, architecture, as well as clearly defining long-term and short-term goals will go far in easing and assuaging fears of homeowners and business owners. Innovative models and ideas that allow the needs and desires of both neighborhoods and those in need of human services to be accommodated, often nip acceptance problems in the bud. Combining, at the very outset, a blue print (including planning, amending zoning codes, expediting permitting processes, designating city staff to facilitate objectives, establishing a mediation process etc...), with community-based approaches (public education, community outreach, alterations in facility design, incentives) concomitant with legal, neighborhood and service provider perspectives, may prove invaluable in gaining community acceptance for the development plans. However, there are at least two schools of thought on whether community acceptance should be sought for specific complexes, especially prior to the occupation of the units in question. Some argue that the standard against which to measure is the treatment afforded or expected of middle income, Anglo families. Given the fact that Anglo families of this income bracket are not expected to seek community acceptance before occupying a unit or complex, the argument is that to require or expect otherwise from low income, minority or special needs residents is discriminatory. Some argue that in those instances where the host community claims that it bears an inordinate burden resulting from the placement of a low income or special needs facilities in its area, the developer or municipality should take steps to mitigate the claimed burden. These mitigation efforts could include: community services such as planting flowers and trees and litter cleanups; priorities to serving members of the community; use of local builders and services; improvements in the neighborhood's quality of life, such development of recreational services or open space areas and/or enhancement of neighborhood security. 172 Often these strategies serve to dilute or eliminate neighborhood opposition. Other advocates assert that providing such amenities constitute just good planning for neighborhoods and, when possible, they should be available to all communities irrespective of whether the prospective residents are low income, minority or special needs. To the extent the provision of these services constitute a bribe, "extra hazard pay"or compensation for a perceived "taking", advocates object. Aside from the obvious stigma arguments, many non-profit developers, to whom the task of developing low income and special needs housing often falls, would be incapable of assuming the financial burden of providing such amenities while providing the subsidies necessary to make safe and decent housing affordable to low and very low income persons. The result would be that if developer were required to automatically provide these amenities they would be put in place in lieu of additional units. On the other hand, there appears to general agreement that units designed to house the poor should be in character with the surrounding neighborhood. However the above substantive issues are resolved, the City should institute the suitable procedures to ensure protection of the legitimate rights of home seekers to be free from coercion and intimidation and protesters to petition their government or otherwise engage in peaceful demonstrations, Chapter 5 Fair Share Analysis 173 III i =1_. uI'I__II 't I / •/_ I' I/ I I I ft f Sd S IN The following analysis is designed to deal with the issue of whether racial and language minority persons, disabled individuals and other fair housing protected groups are receiving their fair share of housing and housing related funding from and through the City. The analysis is severely hampered by the unavailability of the locations of funded or subsidized units and the racial and other demographic characteristics of beneficiaries. As an initial matter, we will review the characteristics of the intended beneficiaries of the housing programs and thereafter review the programs as presently constituted. In 1980, the population of Santa Clarita was estimated to be 79,015, therefore when Santa Clarita was incorporated in 1987, the city was already CDBG eligible. In 1990 the City's population was 110,642, representing a 31,627 increase in population or a 71% change. The city encompasses a number of distinct communities and 50% of housing was built after 1980. The housing dropped in prices between July 1992 and June 1993 by 9%0. In 1995, the average selling price of a single family home in the City was $185,417. The various communities that comprise Santa Clarita are • Newhall- Newhall was earliest permanent settlement, established in 1876 in conjunction with the Southern Pacific Railroad. The town originally consisted of oil, mining and railroad workers. There are a lot of commercial uses in downtown Newhall. • Valencia- Valencia is a Mexican land grant currently owned by the Newhall Land and Farming company. It was developed a master planned community and the housing is usually controlled by covenants, conditions and restrictions. Saugus- Saugus was established in 1887 and is a popular racing attraction. The Metrolink, providing service to Burbank, Glendale and downtown Los Angeles, opened in 1992. 174 1996 Assessment ofLMpediments to Fair Housing Choicesfor the City of Santa C7arita CA • Canyon Country- Canyon Country has the largest population of the City. It has a wide variety of homes from large lot single family homes to mobile homes. • Placerita Canyon Placerita Canyon is a sub community of Newhall which is a rural residential community. In December, 1990 there was a large annexation to the City which brought an additional 7,131 residents. Annexations of Pinetree-Copperhill added another 10,000 residents to the City's population. In 1990 the City had 41,133 units, of which 38,474 (88.75%) were occupied and 2,659 (11.25%) were vacant, 29,132 were owner -occupied and 9,342 were renter occupied. The majority of the owner -occupied units were three bedrooms, while the most common type of rental unit had two bedrooms. In 1988, the City developed a mobile home park zone ordinance resulting in rent stabilization for 2,160 units of this type. The ordinance imposed a 6% cap for annual space rent increases. Another 460 mobile home spaces were not covered by the ordinance. As of 1993 there were 30,974 single family units, 12,108 multiple family units, 2,224 mobile family units, for a total of 45,306 units. The City's housing stock is in good condition, 50% of which having been constructed since 1980. Approximately 10% of the City's units are considered substandard by the City's Building and Safety Division, In 1989 a survey was conducted of the City's housing conditions in conjunction with the City's first General Plan. The majority of the substandard conditions were concentrated in Newhall's census tracts 9203,11 and 9203.12 and in the unincorporated area of Val Verde (census tract 9201). 33.2% of the Hispanic, and 39,4% of all minority, residents five in census tract 9213.11. The monthly rental ranged between $600 and $1,000 per month with a majority of rental over $700. 175 III I��/IMM, I/ !/ / / ,, I R!/ ! i Single family homes were advertised for rents ranging between $900 and $1,500 with the majority ranging between $1;100 and $1,200. Fair Market Rents ("FMR) ranged from $541 per month for studios, $657 per month for one bedrooms, $773 per month for two bedrooms and $966 per month for three bedrooms. Although there were 1,385 that fell into the FMR for studios, only 466 fell into the range which were affordable, i.e., 30% of individuals' income. This difference in affordability revealed itself throughout the range of rental units. One result is that there is overcrowding among the percentage of the population who are low and very low income. According the 1995 Consolidated Plan, "[available information indicates a large quantity of vacant 2 -bedroom or larger units available within the City. This indicates that the reason families remain overcrowded for the lack of affordability." p. 14. In 1990, the median rent, was $759. 50% of the City's condominiums were managed as rental property. Since incorporation there have been no conversions from rental to condominiums or cooperatives. The 1990 census data reveal that 80.7% (95,069) of the residents were Anglo, 13.2% (15,582) were Hispanic, 4% (4,654) were Asian/Pacific Islander, .5% (544) were Native American and .1% were "other. The Hispanic population increased by 29.8% between 1980 and 1988 and the overwhelming derivation of the Hispanic population was Mexico. Id., at 18. Santa Clarita is a largely affluent community with a median income of $57,830, 80% of the population have incomes that are moderate income or higher. 81% of the Anglo and African American residents, 78% of the Asian, 61% of the Latino and 63%0 of the Native American residents fall into these categories. Conversely, 19% of the Anglo and African American, 22% of the Asian, 34% of the Latino and 375 of the Native American are low or very low income persons, i.e., earning less than 80% o the area's median income. 3,850 of the city's households fall into these categories. 33.2% of the Hispanic, and 39.4% of all minority, residents live in census tract 9213.11 in the Newhall area. 176 ,, a t I trpt u'I MMOMO WIT71MMM The next highest concentration of minorities is in Canyon County. The City's low income areas are concentrated in census tracts located in Newhall, Saugus, Canyon Country and North Valencia. Very low income (30% or less of median income) renters routinely pay more than 30% or more than 50% of income and report a high number of housing problems. Elderly persons report fewer housing problems in comparison. In addition, 32% of the elderly and 73% of the other owners have a housing problems. "Thus, it appears that the elderly with 51 to 81 % of median family income have substantially lower housing problems than other owners." Id., p.31. "The largest group of low and moderate income renters with housing problems are the large related households. 67% of low and moderate income large related households who rent have a housing problems" Id., at p. 61. 88% of small related households and 100% of large related households with very low incomes have a housing problem" Id; at p. 61. The most severe cost burden of paying more than 50% of income on housing is shouldered by 88% of small very low income renter families. In comparison, 66% of the elderly renter households fall into this category. "Large related renters with very low income show the greatest incidence of overcrowding at 81%." Id., p. 32. The only significant substandard housing stock exists in East Newhall. Minority headed households account for 9.4% of the very low (30% or less of median), 17.8% of low (31%-50% of median), 26.2% of moderate (51%-80% of median) income renters, while 11% of minority households with moderate incomes own their homes. 100% of low and moderate income African American renters have affordability problems. 40.8% of all owner- occupied households have housing problems., 53% of all minority households, 48.3% of all African American households and 57.8% of all Hispanic owners have housing problems. 177 MW r r •r7MIN, I rTPUrT*3FfiJW1TXQUWAYi=i 611MOV46111 "Thus,a greater percentage of minority owners have housing problems than owners in general" Id -,p.34. Low income minorities represent 25,8% of the elderly, 77.8% of the small and 100% of the large households. Id., at p. 36. The Sheriff's Department counted 60 homeless adults and 4 children in 1993. Some proportion of these individuals are migrant farm workers without temporary work, as well as permanent residents of the City. The City does not identify the respective percentages. It is estimated that 12% of the homeless population suffer from severe mental illness, 21% suffer from alcoholism, 8% from some combination, 5% from domestic violence, 5% are youths and 1% suffer from AIDS and related diseases. Id, At p. 42. Regarding the homeless,. survey them to determine what ties they have to community. Such a survey was conducted in Glendale and it was learned that there were many indicia of residency. There are 1,094 elderly renter households and 3,706 owner occupied households in Santa Clarita. These households constitute 12.5% of the renters and 12:5% of the owners in the City and 12.5% of the total number of households in the City. 28% of the elderly are low income and the City estimates that 7.8% or 165 individuals are considered frail elderly. The City also estimates that 796 adults are severely mentally ill, 355 developmentally disabled, 1,430 physically disabled, 796 addicted persons, 13 persons with AIDS and 40 battered women annually are in need of supportive housing. Id., at p. 46. Assuming a modest 10% of these persons are in need of fair housing assistance, 823 persons can be expected to avail themselves of SFVFHC services: 178 1996 Assessment of Impediments to Fair Housing Chnicesfor the City Qf Santa Clarita CA Impediments to Affordable Housing The 1995 Consolidated Plan identified the following as impediments to housing affordable to low and very low income persons: • Land Use Controls. The City has adopted a strong growth management policy and "pay as you go" requirements which apply equally to developers of affordable housing units. Developers are required to either provide infrastructure or pay fees for said infrastructure. Affordable housing developers have noted that the costs of dealing with the City's off and onsite improvement requirements have steeply increased the cost of providing affordable housing within the Jurisdiction. Other jurisdictions interested in promoting affordable housing have either waived such requirements and fees or provided assistance to developers of affordable housing to meet these requirements, typically through the use of tax increment monies. The City undertook a code enforcement effort to ensure the construction and retention of safe and decent housing. The City has not been able to provide a solution to the dilemma created, for it had not set aside any funds to create new units or rehabilitate the impacted units so that the impact could be lessened or eliminated. • Redlining and Financing Concerns. The Consolidated Plan makes a finding that "[r]edlining when financing availability was researched through the Home Mortgage Disclosure Act or the community Reinvestment Act sources." Id, at p.26. As noted above, previously, redlining, while suggestive of fair housing/lending concerns, is not conclusive one way or another, At a minimum, the City should seek to conduct tests to determine the nature and extent of such prescreening discrimination and otherwise determine whether underwriting, appraisal or other policies and practices tend to discriminate on a prohibited basis. 179 • Need to Land Bank. At present there is little, suitable and affordable vacant land, but it is expected that the cost of any such land will soon escalate. Although the Consolidated Pian does not identify land banking as a solution, it is one which other similarly situated jurisdictions interested in creating and preserving affordable housing have utilized. • NIMBYism. N1MBYism is specifically identified as an impediment to affordable housing. It is also a fair housing barrier, especially with regard to disabled and juvenile congregated living facilities, as well as to low income family housing developments. Opposition is less for senior units. Housing Programs Section 8. One response to the affordability crisis are the Section 8 certificate and voucher programs. The programs are administered by the County Housing Authority.. First Time Homebuyer Assistance. The City has a goal of assisting 5 families to become homebuyers by participating in the county's Mortgage Credit Certificate Program, Under this program the homebuyers may reduce their federal taxes by up to 20% of their mortgage interest payment. Handyworker Program. This program provides funds to low income and elderly owners/renters for repairs, ramps and modifications for disabilities. Subsidized Housing. There are no conventional public housing units located within City limits, but the City relies upon the County Hosing Authority to provide such housing for City residents desirous of locating into such units. The City also relies upon the County to administer tenant based Section 8 voucher and certificate subsidies. IM III f '! / (�l I I/ / IRIT79 / / I I t As of May, 1995 there were 273 such certificates being utilized in the City, 136 such contracts benefited elderly tenants. In contrast, only 55 such contracts issued for families and only 7 for large families. There are 100,000 Los Angeles County residents eligible for Section 8 benefits, 3,600 Santa Clarita residents who are eligible and 160 Santa Clarita residents with federal preferences. Given the number of preferences in the County, only the 160 Santa Clarita residents with preferences/priorities were ever likely to receive subsidies. With the recent changes in federal law, it is no longer clear if even these persons will receive subsidies, no matter how long they have been on the waiting fists. In addition, there are project based Section 8 certificates used in privately owned federally subsidized units, the overwhelming majority of which are senior units. Of the subsidized units, 875 are restricted to seniors, in which only persons who are 55 years or older can normally reside. Legally, managers of such units may exclude families with children under 18 years old under most circumstances. In addition, there are 45 units reserved for disabled persons, 546 units for low income persons and 113 units for low to moderate income persons.. Seniors may qualify for any of these additional units. Special Needs Housing for Other Than Homeless Persons. There are eight group homes with 54 beds in Santa Clarita for persons with physical or developmental disabilities. These beds are located in Newhall, Canyon Country and Valencia. None are located in Saugus. There are 1,271 families receiving Aid to Families with Dependent Children. 1,068 are single parents, of which 701 have no income. These persons are at distinct risk of becoming homeless. There are no shelters for battered women in Santa Clarita. There are no emergency shelters for disabled persons located in Santa Clarita, but the 5 person shelter in San Fernando Valley does serve Santa Clarita residents. 181 There are shelters for alcohol dependent or other drug addicted Santa Clarita residents. The closest are in Castaic. There is no AIDS hospice in Santa Clarita. Santa Clarita proposes to meet the housing needs of low and very low income persons, and has financially assisted a HUD 202 Project with the costs of off-site improvements. In the Consolidated Plan, findings have been in the furtherance of senior housing the need that has been identified as the most pressing is the need for housing for low and very low income large and small families. Those limited waivers and density bonuses that have been made available have in furtherance of senior housing. Efforts to increase the waivers for family housing, need to be made to strike a balance between the two. ' Based on the above statistics, senior households constitute 12.5 % of the City's total and much smaller percentages of the low, extremely low and moderate income populations. Small and large families constitute disproportionately higher percentages of these income groups and these families have been found to be in much need of housing assistance than seniors. Another factor to be taken into account when assessing funding priorities is the incidence of outright home ownership among seniors in comparison to that among large families. Since seniors, even those who are low income are more likely to be homeowners, owning their homes free and clear, than younger, large families, large families have a greater need for assistance. In addition, most of .the funding sources being utilized are to be targeted at meeting the housing needs of low and very low income persons and other sources are to be used for these same groups or moderate income groups. 182 29-tAwAx rr'r r Uvmp.( r 'r r rr r' f-iq9&QAA As revealed above, substantial proportions of the City's large family populations are extremely low, low and moderate income persons without adequate units to satisfy their needs and paying substantially portions of their incomes on housing, whereas comparatively few seniors fall into this category. Nonetheless, many more of the public dollars are used to serve the housing needs of semors. Once adjustments are made for the amount of free and clear ownership is factored into the formula, there is likely to be an overrepresentation of the fair share which seniors should command of the housing being developed with public monies. Another issue which impacts on this question is the fact that senior complexes may legally exclude families with children, thereby further exacerbating the affordability crisis for these families. The racial and national origin characteristics of the senior and other occupants of these units are not known, so we are unable to compare whether there are racial and national origin ramifications in providing more than a fair share of federal mortgage and rent subsidies in this manner. We recommend that the priority assigned to providing such a significant portion of the City's housing funds and other resources devoted to seniors be reviewed , factoring in the number of seniors who own their units free and clear and the ramifications on excluding such units to families with children. Federal, State and County Housing Programs and Policies That Discriminate Santa Clarita has identified a number of resources which it anticipates either directly or indirectly continuing to access or beginning to access a variety of federal and State programs to provide housing for its citizenry. There are programs too numerous to fully explore with in this submission which present significant impediments to the fair housing choices of Santa Clarita residents. 183 Examples of some of the programs which negatively impact on the basis of familial status include the modifications in project based and tenant based Section 8 programs, the conventional public housing program operated by the County of Los Angeles, the State administered federal and California Low Income Tax Credit programs and the proposals to change the State occupancy standards in a manner which would negatively affect families with children and disabled persons. These programs are cited only by way of example because the County of Los Angeles and State are required to submit similar analyses of impediments to fair housing choices and it is fully expected that these issues will be addressed. If they are not then addressed, the City should submit comments related to these analyses raising these situations as impediments which must be overcome. It is consistent with the City's interests that these issues be resolved and resolved quickly, for unless the City intends to assume the responsibilities now provided by the County Housing Authority it will continue to rely upon the County for the dispersion of Section 8 subsidies and operating conventional public housing. The federal government has reduced the percentage it intends to pay of the individual and project based Section 8 contracts fair market rent from 42% to 40% which families utilize and has increased the contribution to be made by the tenant from 30% to 35%. The Congress proposes to exempt 202 (senior) and disability complexes from these modifications. This difference in treatment has some obvious direct fair housing consequences. Depending the comparative situation of seniors, disabled persons, racial and ethnic minorities in an area, there may be disparate impacts which have fair housing ramifications. Although there are no conventional public housing units in Santa Clarita, there are persons who could benefit from such housing, i.e., there more than one thousand low and very low income Santa Clarita residents on the County Section 8 waiting list. It is unknown how many Santa Clarita residents have applied for conventional public housing units. Female headed households in Santa Clarita and the County are among the lowest income in the jurisdiction. lull The federal government has established a minimum rent policy, whereby occupants of public housing must pay a minimum of $25 a month. The County would, under this new policy, be permitted to require a minimum of $50/month. Pub, L. No, 104-99, Sec. 402(a), 110 Stat.40 (Jan. 26, 1996), 142 CONG, REC.. H 887 (Jan. 25, 1996). The persons who are most affected are the poorest of the poor, for anyone with income of approximately $80/month would already have been paying rent of at least $25/month. Under this modification, those making under $80/month will be required to pay rent of at least $25/month. In addition to the negative impacts on the basis of familial status, it can be expected that disabled persons without any income will be detrimentally affected, for a disproportionate number of this population do not have the ability to earn monies. Access to conventional public housing information is essential in analyzing whether families, disabled individuals and racial and language minority persons are receiving their fair share of housing funds. We recommend that the City determine the number former Santa Clarita residents who are now residing in conventional public housing and track those of its residents who are on the waiting list. For those former residents and applicants who will be required to pay a minimum rent of $25 which they would not have had to otherwise pay, we recommend that the City make a determination as to whether there are fair housing implications. If such implications exists, we recommend that the City request that the County and federal government consider these ramifications and waive the requirement to pay.. There are occupancy standards laws proposed on both the federal and State levels which would have devastating effects on the fair housing rights of families with children and disabled persons. For example, proposed legislation would require persons who challenge a occupancy standard which is more restrictive than two persons per bedroom (not per room) prove that the owner/manager/landlord engaged in intentional discrimination against the applicant in question. 185 11MMIRWR II •Irall=M !I •I777112MIMMM, OWN= I I I f1 ! ! This legislation changes existing law in several significant ways, all of which would materially affect the rights of families with children and disabled persons. Firstly, the landlord would designate which and how many rooms are bedrooms, so a den or pullout sofa in the living room could not be used as a "bedroom" unless the landlord was agreeable. Secondly, the size of the bedroom would not be taken into account as it is under existing law. Under existing law, the maximum number of occupants is controlled by the total square footage of the unit exclusive of bathrooms, closets and kitchens. Thirdly, under existing federal and state law, any fair housing violation can be proven by evidence of intentional discrimination or indirect, impermissible disparate impacts on prohibited bases. Since most persons who discriminate do not advertise their biases, evidence of intentional discrimination is often the most difficult to secure. We recommend to the City that efforts to educate The League of California Cities' lobbyist who represents the City of Santa Clarita on legislative matters, be made in order to facilitate future fair housing goal and objectives. Previous actions by the League have contradicted these goals. In addition, the City, in conjunction with other Southern California cities, should entertain and perhaps explore opportunities to hire a fair housing expert(s) to educate State and federal legislators as to the fair housing ramifications of their proposed actions. Such an approach would be cost effective, for it should forestall the enactment of fair housing offensive laws, thereby eliminating the need to engage injunctive litigation after passage or have individuals or neighborhoods suffer fair housing violations as a result of passage. Under federal and State criteria the most needy of low income persons are to benefit from the allocation of tax credits. Tax credits constitute the largest subsidy for affordable housing which is available throughout the nation. Nationwide, tax credits for the development of low income housing is second only to mortgage interest and capital gains deductions as housing subsidies. These income tax deductions amount to approximately $80 billion a year.. (The entire low income housing expenditures approximate $20 billion a year.) 186 The State, in enacting its tax credit code, identified providing housing low and very low income large families as a priority for tax credits, the State did not establish senior housing as a priority. Notwithstanding the fact that the State has not set senior housing as a priority, the Tax Credit Allocation Committee ("TCAC"), the California agency which distributes both federal and State tax credits, adopted a plan which establishes senior housing as a priority for tax credits. The result will be the equating senior needs with those of large families when TCAC decides which applications to fund. Since federal 202 funds for the construction of senior funds and no such set asides for family units and tax credits are awarded on the basis of project feasibility, the likelihood is that additional units will be constructed instead of the much needed large family units.. Since senior units may exclude families with children, the fair housing implications are clear. C. Racial/National Origin Issues Related to Fair Housing Concerns The Consolidated Plan does not analyze the racial and national origin characteristics of the City's housing market in anywhere near the depth as it deals with the issues which impact on the elderly,, female headed households or other "special needs" populations. The City analyzes some of the fair housing relevant demographic racial and ethnic data associated with all of its programs and those County programs on which it relies. We recommend that the City routinely analyze all such data and that a fair share analysis be undertaken as soon as data can be made available. 187 Federal, State and County Public Policies Impeding the Fair Housing Rights of Santa Clarita Residents There are many federal, State and County statutes, regulations and policies which interfere, on the basis of race or national origin, with the fair housing rights of the residents of Santa Clarita. This study will not, cannot, address all of these issues and the county of Los Angeles and the State are charged with conducting similar analyses of impediments. We would recommend that HUD conduct a similar study on behalf of the federal government. The following issues are set forth only by way of example of the concerns which create impediments to the citizenry's fair housing rights. Conventional Public Housing The County's conventional public housing is the home of the poorest of the poor, for most are at 50% or lower of median and require subsidies in order to live in safe and decent housing. The housing delivery system in Los Angeles County is built upon the assumption the federal and County governments will combine to address, at partially, the needs of the poorest of the poor. It is financially unfeasible for private providers to address the housing needs of low and very low income persons, without deep subsidies from the government. Most private providers require subsidies to meet the housing requirements of the working poor, much less lower income groups. A disproportionate number of Los Angeles' County's and the City of Santa Clarita's racial and language minorities fall into the categories of low and very low income persons. This has resulted in a disproportionately high number of such persons being on the waiting lists for, and residing in, the County's conventional public housing units. This concentration of minorities in public housing require racial and national origin analyses of the recent changes and proposals which are likely to be enacted in the near future for this housing program. ' X I af1 ' I I ffr7370.rUw7r7dTn f I • f f I I I I I S I S U S/ 1 Many of the modifications in the public housing program are fiscal in nature. Operational subsidies have been reduced below levels necessary to maintain units in a manner meet performance funding system ("PFS"), i.e., code enforcement needs as evidenced by the 1995 appropriations and rescissions actions to fund the housing authorities at 96% of PFS [ Pub. L. No. 103-327, 108 Stat 2308 (Sept. 28, 1994); Pub. L. No. 104-19, 109 Stat 232 (July 27, 1995)], the passage of the continuing resolutions at 90°/u of PFS [ Pub. L. No 104-99 Sec. 201(b), 110 Stat 36 (Jan. 26, 1996), 142 Cong. Rec. H 887 (Jan. 25, 1996); Pub. L. No. 104, 110 Stat (Mar 29, 1996).] and HUD's FY 1997 budget (March, 1996) which proposes to fund the units at 91% of PFS. In addition, modernization funds have been are cut. Compare Pub. L. No. 103-329, 108 Stat. 2305 (Sept. 28, 1994) which provided $3.7 billion in modernization funds, with the $2.88 billion in the post rescission level Pub. L. No. 104-19, 109 Stat 232 (July 27, 1995) and the $2.5 billion 1996 Omnibus Appropriations package H.R. 3019 (Passed House March 7, 1996 and S. 1594 (PassedSenate March 19, 1996) and the $3.2 for both modernization and development in the 1997 HUD proposed budget (March 1996). As a result of these actions the County Housing Authority will not have adequate revenue to manage and maintain its developments in which tenants now reside. Assuming the County relies exclusively on its present sources of funding, its units will fall into disrepair, creating uninhabitable conditions which a disproportionate number of minorities will be forced to endure. Another should be considered. Many of these complexes are in minority areas. The failure to maintain these complexes will lead to their deterioration, causing blight within these neighborhoods. Until January, 1996 the County Housing Authority was required to house the poorest of the poor and to give preferences in providing housing to homeless individuals, persons otherwise living in substandard housing, persons paying 50% or more of their income on housing and persons at risk of eviction because of governmental actions. In Los Angeles and Santa Clarita, persons of color and language minorities are disproportionately represented in among these preference categories. m 1996 Assessment of Impediments to Fair Housing Choice for the City of Santa Garita CA No longer are these preferences in effect. Pub_ L. No. 104-99, Sec 402(d), 142 Cong. Rec, H 887 (January 25, 1996), and the current unit set -asides for tenants with incomes beneath 50% of median are in substantial jeopardy of being repealed. See Public Housing Reform and Empowerment Act of 1996 which passed the Senate with a repeal of the provision which sets aside one half housing authority units for individuals at 50% of median. S. 1260, Sec. 114, 142 Cong. Rec S 160 January 10, 1996, and the United States Housing Act of 1996 which was reported out of House Committee on February 1, 1996 with a recommendation to repeal the entire United States Housing Act, including the set-aside provision. H.R. 2406, See 22(b) & 501(a)(1). In addition the prohibitions against skipping over low-income persons to reach higher income applicants may also be repealed permanently. The Balanced Budget Down payment Act permits the County to make the integration of higher income persons a priority and admit such persons for all its admission starting 1996. Pub. L. No. 104-99, Sec. 402, 110 Stat. 40 (January 1996). Pursuant to the Senate's version of the Public Housing Reform and Empowerment Act of 1996 the anti - skipping provision would be repealed and the income mix selection criteria would be required. S, 1260, Sec. 114, 142 Cong. Rec- S 160 (Passed January 10,1996). Included in the House Committee's version of the United States Housing Act of 1996, the entire United States Housing Act would be repealed and the income mix selection criteria would be authorized. H.R. 2406, Sec. 222(b) & 501(a)(1)(Reported from Committee February 1, 1996). With the reduction in federal funding, the County Housing Authority is under pressure to rid itself of the poorest tenants, who pay the least rent, and replace them with the highest income tenants who will pay the highest rents. The County now has all the tools to accomplish these modifications in the tenant mix. 190 1996 Assessment of Impediments to Fair Housing Chnices for the ritof Santa Garita A If this is accomplished it will result in the ouster of racial and language minority tenants and applicants in favor of Anglo tenants and applicants, for Anglos are more predominant among those persons at 80% of median, the population from the County can now chose. Other cost savings/fund raising authorizations which will be put into effect, also impact negatively on the bases of race and national origin. As of April 1, 1996, the County Housing Authority is authorized to establish a minimum rent of at least $25 a month. The County has discretion to charge a $50 minimum rent. As discussed, this increase impacts disparately on the bases of familial status and disabilities. In addition, there are very serious Congressional efforts to repeal the Brooke Amendment, the provision by which the rent of tenants of public housing is limited to 30% of their adjusted gross income. Pursuant to Senate version of the Public Housing Reform and Empowerment Act of 1996, the Brooke amendment would be retained only for very low income persons. Non -troubled public housing authorities, of which the County is one, may charge tenants with income of over 50% of median whichever the market dictates. S 1260, Sec. 103(b), amending Sec. 3(a)(3), 142 Cong. Rec. S 153, The House Conunittee's version of the United States Housing Act of 1996 contains a more complicated formula for imposing rent increases, while repealing the Brooke Amendment for all income groups. H.R. 2406, Sec. 225 (Reported February 1, 1996). The results of these modifications are many and none of them positive for low income racial and language minority individuals who represent a disproportionately percentage of the residents and applicants for County public housing. The current preference holder will lose their preferences. New preferences will undoubtedly favor higher income, steadily employed and Anglo applicants. The County will be inclined to rid itself of the most deteriorated developments, the most expensive complexes and those which house the poorest tenants in our to preserve the financial viability of the remainder of the portfolio of complexes. 191 22fiAm�v/'[ I [ t' I r I [ I I [ ' / ! f HUD has a established a goal of demolishing 100,000 public housing units, some of which are still inhabited. Cisneros, The Transformation ofAmerica's Public Housing, p. 4 (April, 1996). In order to reach this goal, not only deteriorated units,. but sound, habitable units affordable to low and very low income persons will have be demolished. HUD, after assessing its inventory, determined that 84% of its public housing units nationwide were sound housing and less than 10% of the stock could not be rehabilitated. A number of modifications of existing law are being promoted to make demolition of units easier: • Firstly, the existing one-for-one replacement requirement of public housing units demolished would be permanently repealed if certain bills are enacted. See, Omnibus Rescissions and Appropriations Bill for Fiscal year 1996- H.R. 3019 (passed House on March 7, 1996), S 1594 (passed Senate March 19, 1996) which suspends the requirement until September 30, 1996; Public Housing Reform and Empowerment Act of 1996 S 1260, Sec. 115, amending Sec. 18, 142 Cong. Rec. S 160 (passed January 10, 1996) which would repeal the one-for-one replacement requirement permanently and would make the Uniform Relocation Act inapplicable; United States Housing Act of 1996, H.R. 2406, Sec. 261 (Reported from Committee February 1, 1996) which would eliminate the requirement of one-for-one replacements. • Secondly, the grounds for justifying the demolition of units are to be relaxed. Pursuant to the Senate proposal on the subject, demolition of units could be based upon a certification by the Housing Authority that the rehabilitation of the units is not "cost effective." Public Housing Reform and Empowerment Act of 1996 S 1260, Sec. 115, amending Sec. 18(a), 142 Cong. Rec. S 160 (passed January 10, 1996). Pursuant to the House proposal related to demolition, additional justifications are provided for destruction of units. These additional grounds include being severely distressed, having design or construction deficiencies and unable to generate enough rental income after rehabilitation to cover operating costs. United States Housing Act of 1996, H.R. 2406, Sec. 261 (Reported from Committee February 1, 1996). . 192 • Thirdly, proposals are pending to allow housing authorities will be permitted to move tenants to consolidate occupancy. See, e.g, United States Housing Act of 1996, H.R. 2406, Sec. 261(k) & (1) (Reported from Committee February 1, 1996); Public Housing Reform and Empowerment Act of 1996 S 1260, Sec. 115, amending Sec. 18(a), 142 Cong. Rea S 160 (passed January 10, 1996). • Fourthly, if supplying tenants with vouchers would be cheaper than modernization and continued operation, then it is proposed by the House and Senate that public housing tenants be converted to vouchers holders. Under the Senate version, the conversion would have to benefit the tenants, the Housing Authority and the community. Public Housing Reform and Empowerment Act of 1996 S 1260, Sec. 116, amending Sec. 18(a),142 Cong. Rec. S 161 (passed January 10, 1996). Under the House version, there would have to be a sufficient supply of housing for the voucher holders. United States Housing Act of 1996, H.R. 2406, Sec. 203(6) (Reported from Committee February 1, 1996), These proposals would result in the demolish or taking off line 100,000 to 200,000 units nationwide. It is not known at this writing what, if any, demolition plans the County Housing Authority has. This issue should be addressed in the County's Impediments Study, however. The County's conventional public housing waiting list may well be scrapped, for tenants who are being "consolidated" may well commandeer all vacancies. In the consolidation operations, existing tenants may be moved involuntarily and robbed of their choice of housing. If large numbers of vouchers are issued to existing public housing tenants, there may increased resistance to voucher holders.. Neighborhoods in which Housing Authority complexes are located will suffer from the presence of vacant, no longer subsidized units. Many of these complexes are in low income minority communities, thus a disproportionate amount of the costs associated with deterioration of these units will be borne by racial and language minority communities. 193 1111111 FAUTOM II Chapter 6 The Contractor makes the following recommendations designed to meet fair housing goal objectives to the City of Santa Clarita. General Recommendations The City of Santa Clarita should: Periodically review all housing and urban development programs to ensure that there are none that engage in discriminatory practices, have policies or practices which have a disparate impact on a prohibited basis, or otherwise run afoul of legal mandates. 2. Encourage all City programs to be affirmatively advertised in a manner which is designed to attract those persons who are not likely to otherwise apply. All materials should be produced in English and Spanish, at a minimum. 3. Ensure that all CDBG programs collect relevant demographic data on beneficiaries, as well the site of property which is the subject of the CDBG funding. Thereafter the data from each program should be routinely analyzed to determine what, if any, fair housing benefits or implications are raised by each program. These analyses should include geocoding. If any such program does not contribute positively to open housing then a corrective plan, including providing fair housing counseling specific to that program, should be adopted. 4. Continue to survey developers, service providers and housing advocates to determine whether there are unanticipated fair housing impediments. 194 III i f/�/ / /[/'I f1 �/ I I •/. f f/ / / l / !I 14 I ! 5. Coordinate with the County in an evaluation of the County public housing placement policies and data related to applicant rejections of conventional public housing units to determine whether there are fair housing ramifications. This evaluation should include a review of regional waiting lists and cooperative agreements among the various housing authorities to determine whether they improve the fair housing choices for Santa Clarita applicants and residents. Analyze whether the County's practices of disallowing conventional public housing residents to retain their federal preferences for Section 8 certificates has fair housing implications for Santa Clarita residents. 6. Analyze the fair housing implications for Santa Clarita residents of the proposals to modify major federal housing and urban development programs and develop a plan to address any fair housing barriers which may result. 7. Conduct fair housing reviews of all housing and urban development programs to determine the nature and extent of any barriers to fair housing choices on a routine basis. 8_ Develop affirmatively furthering fair housing goal and objectives, ensuring consistency with the City's other housing documents, with appropriate public/private agencies. 9. Continue to collect data on the racial, ethnic, head of household, income and other relevant data on the applicants and beneficiaries of housing and housing related programs, as well as data on the location of housing funds distributed. Thereafter, analyze the placements to ensure that a) any past unfair share is addressed; and b) fair housing protected groups received their share of resources. 195 "Oa II ' I 11 It I' ft '[ I r I M f I I t f S t i y [ S Recommendations Regarding Provision of Fair Housing Services The City should: Assess fair housing needs and program priorities, taking into account the levels of anticipated participation in the market by likely victims of discrimination and the reasonable costs of services. Explore alternative sources of funding to accomplish this goal. 2. Encourage SFVFHC to seek an opinion by the Bar Association regarding whether the State and federal requirements for DFEH, HUD, State's Attorney General and Department of Justice to litigate "on behalf of victims of the discrimination results in an attorney client relationship between these victims and the counsel.. In addition, the SFVFHC should request a determination of what, if any, actual or apparent conflicts of interests exist in the present system. 3. Continue to ensure, and coordinate services for, the development of brochures and other materials in relevant target languages, e.g. Spanish, for victims of discrimination related to the strengths and weaknesses of the various alternatives, as well as resources available to address their needs. 4. Explore opportunities, and coordinate efforts with appropriate agencies, to impress upon DFEH the urgency of: a) investigating complaints within 100 days; b) adopting directives/guidelines for investigating and processing cases as soon as possible; c) seeking Constitutional amendments to allow for the Agency to appropriately redress discrimination through compensatory, emotional distress and punitive awards; and d) funding fair housing agencies to conduct testing in appropriate cases. 196 / e f1 '! I /I f' f 11'/ MYTIZI 1' I f / /' l f I 5. Explore opportunities to determine the feasibility having the State withdraw its pre-emption of the fair housing field, thereby allowing the City to adopt measures specifically designed to meet the needs of its residents, including the possibility of becoming a substantially equivalent entity., Recommendations Regarding Sexual Harassment Issues The City should: 1. Continue to implement measures designed to; a) highlight the issue of sexual harassment; b) communicate that sexual harassment is a crime and actionable under state and federal fair housing and other laws; c) alert victims as to where they can receive investigative and counseling assistance; and d) educate landlords, management companies, advocates, rape counseling services and tenants on the law and remedies; and e) outreach to public officials, including police officers, welfare workers and others, as to how these claims are investigated and treated under civil law and seek their cooperation. The focus of this program would be to assist both landlords and tenants in reporting and eradicating any existing activity and preventing any future discrimination., 3. Explore with other municipalities and agencies opportunities to modify existing law to allow courts to order defendants to pay for plaintiff s expert fees. 197 MUM.11 [1 I 1 I I I f I Recommendations Regarding Segregated Residential Patterns The City should: 1. Continue to assess the housing needs of its residents and analyze them on the basis of race and national origin, as well as various disabilities. Based on the results of these assessments by fair housing protected classes, the City should identify what constitutes a "fair share" of each resource to be prospectively administered. In administering these programs, efforts should be taken to provide incentives to develop and rehabilitate units in a manner which promotes choice in housing among the prospective occupants of dwellings. 2. Encourage the County to establish fair housing and mobility counseling similar to that available to public housing tenants in the Gautreaux/Moving to Opportunity demonstration program operating in the City of. Los Angeles. 3. Continue to explore opportunities to provide outreach, first time home buyer and other counseling efforts, enforcement efforts -including full application testing- training, education and other efforts to address rental discrimination in the private market. 4. Expand affirmative marketing programs of any City Housing program undertaken. Continue to encourage private developers to do likewise. 198 �I • t['I I [[ I't II'l t • t [' II I07 Recommendations Regarding Printed Advertising The City should.- Work hould: Work with local newspapers, The Signal and Daily News to update their knowledge of the obligations under State and federal fair housing statutes, regulations and guidelines. 2. Support the efforts of the City's Human Relations Forum to enhance the image of diversity on the bases of race, national origin or disabilities. Communicate with the real estate industry, apartment owners and realtor regarding advertising issues designed to promote integration and inclusion through the use of human models. Recommendations Regarding Lending The City should' 1. Encourage the local lending community to identify specific ways that can assist the City in meeting fair housing goals and objectives. 2. Encourage and become familiar with statewide and other efforts to ensure that lenders will continue to provide construction and permanent financing for subsidized and unsubsidized multifamily low and very low income housing, especially those which carries with them long-term deed restrictions to remain affordable. Participate in similar efforts with respect to the financing of those single family homes. 200 10y; u'e i 11'f Work with SFVFHC to establish fair lending and private mortgage and property insurance programs designed to deal with the education, outreach, counseling, advocacy and enforcement of individual and systemic concerns of Santa Clarita residents. 4. Work with SFVFHC and statewide organizations to undertake efforts to ensure that primary and secondary lender appraisal and underwriting policies and practices and products do not discriminate on a prohibited basis and are designed to affirmatively further the fair housing rights of Santa Clarita citizens. Recommendations Regarding Nimbyism The City should: Provide direction to staff and community groups during the review of the City's General Plan, when appropriate, as to the limits of First Amendment rights where Fair Housing rights are involved. Recommendations Regarding General Plan and Other Planning Documents In adopting General Plan, Housing Element, Land Use Element, Consolidated Plan and other planning documents, the City should: 1) Encourage the development of affordable housing for all age groups and ensure that families with children have unfettered access to any housing developed in the future. 201 2) Provide more fair housing information and justifications for rehabilitation programs for "very low" income dwellings in the Housing Element and other planning documents by showing the confluence of race/disability/ethnic and poverty. 3) Ensure that planning documents take into consideration that the terms "disabled" and "handicapped" include not only physically disabled individuals but also mentally disabled, recovering substance abusers, persons with AIDS and many others. Fair Share Recommendations The City should: Encourage participation in the County and State Consolidated and Fair Housing planning processes to ensure that issues affecting the City are included and handled appropriately. The Jurisdiction should also encourage the participation of community groups in the local, County and State processes, impressing upon them the significance of the planning efforts, the interrelationship between these planning efforts and policy development for these areas and impact these groups are capable of making; 2. Encourage, at all levels, full funding for operating and modernization monies for public housing units so they the poorest of the poor can continue to be housed, thereby avoiding disparate homelessness and overcrowding among low and very low income large families with children, disabled persons and language and racial minority individuals; 3. Undertake efforts designed to work with the County Housing Authority to improve management and eliminate waste, recognizing that City residents will use both conventional public housing units and Section 8 subsidies; 202 1 II'1 I /I 1'S II IOTIM MUM&NMO MMWM4TjV#TAYiI S NfirgONK. 4. Work with the County to target the most needy persons for Housing Authority subsidies, with the resulting positive disparate impact on the bases of race, national origin, disability and large families with children. S. Encourage the County and City of Los Angeles' Housing Authorities that they should not abandon limits on higher income residents if to do so would result in negative impacts on housing opportunities on the bases of race, national origin or other protected classifications. 6. Encourage the County and other regional Housing Authorities not to raise rents, 7. Discourage cuts in Aid to Families with Dependent Children, Social Security Insurance, General Assistance and other subsidies which would result in disparate numbers of fair housing protected groups paying disproportional amounts of their incomes on housing. 8. Encourage the surrounding public housing authorities to renovate or replace, not just demolish, existing public housing units.. 9. Instruct its lobbyist, the California League of Cities, to support legislation which furthers the fair housing rights of its residents. 10. Encourage the State to retract or modify of those aspects of the State's Low Income Housing Tax Credit allocation plan which result in discrimination of the bases of race and familial status. Recommendations Regarding Hate Crimes The City should adopt the L.A. County Commission on Human Relations' recommendations, to wit the City should`, 1. Demonstrate leadership through; 1) the recognition of elevating anxiety and tension resulting from anti -immigrant sentiments, backlashes against women, persons with disabilities, homosexuals, religious groups and persons of color; ii) the recognition of unprecedented and complicated economic and demographic transitions and iii) development of a comprehensive system of hate crime management that includes reporting, investigation, prosecution, assistance and prevention. ' 203 2. Require all City departments to be literate and sensitive to intergroup tensions and to address issues in diversity plans. 1 Utilize the Fair Housing Congress of Southern California's reward fund to promote obtaining information leading to the successful prosection of hate crime perpetrators. 4. Publicly condemn hate and bigotry motivated crimes. 5. Encourage schools in the City to: I) develop policies and a plan to deal with hate motivated incidents, including staff training on reporting, response and prevention; ii) specifically note that sexual orientation is a protected category under State discrimination laws and iii) urge the California State Schools Assessment Program Advisory Committee to include hate crime reporting in the general school crime report. 6. Establish a municipal task force which includes law enforcement, community organizations and victim assistance services. 7. Establish a 24 hour reporting hotline. 8. Prioritize funding to community organizations that deal with hate crimes. 9. Support the recommendations dealing with the Sheriff's and District Attorney's Office., 10., Identify effective counseling approaches. 11. Undertake a campaign designed to sensitize the media to the ramifications of irresponsible and slanted reporting of racial/national origin/homosexual issues and encouraging expanded coverage of hate crime stories to include supportive responses of victims' neighbors, community organizations and others. 204 f Appendix I: Literature Search 205 PM. FAIR HOUSING/FAIR LENDING LITERATURE SEARCH Aalberts, Robert J. and Terrence M. Clauretie, "Sexual Harassment in Housing," Journal of Property Management, Jan. 1, 1992, v 57, n. I pp. 44-47. In this article, the authors propose to review the Federal Fair Housing Act and sexual harassment in housing with reference to several court cases, examine one case that may have broad implications for residential property owners and managers, and comment on how liability for sexual harassment may be extended beyond the offending employee to the owner of the property or of the property management company. They conclude that, as cases of sexual harassment are likely to increase in the future, property owners and property management companies must be prudent in selecting their managers and should advise their employees of proper and improper conduct so as to avoid potentially litigious situations that might result in damage awards. "ACORN's efforts focus on African American market," Chicago Defender, Jan. 22, 1994, p. 38. ACORN, a national leader in fighting redlining in low and moderate -income neighborhoods, was launching its latest strategy in ongoing efforts to create an affordable housing market for African- Americans in Chicago by hosting a home -buyers fair. Allen, Edward, "Six Years After Passage of the Fair Housing Amendments Act: Discrimination Against Families With Children," The Administrative Law Journal oftheAmerican University, Summer 1995, v. 9, n. 2 pp. 297-359. Studies show that discrimination against families with children has been widespread. This article discusses the Fair Housing Amendments Act of 1988, and the impact that it has had on curbing such discrimination. Recommendations for what fair housing advocates can do to deter family discrimination more expeditiously are offered. 207 Andrews, James H., "U.S. housing agency to issue guidelines protecting free speech in bias probes," Christian Science Monitor, Sept. 1, 1994, p. 3. In September 1994, HUD was to announce new guidelines for anti -discrimination investigations under the Fair Housing Act. The guidelines reportedly were to make it clear that protests intended solely to influence housing decisions by public authorities would not trigger an investigation. Bullard, Robert, Eugene Grigsby III, and Robert Lee, editors, Residential apartheid Los Angeles: Center for Afro-American Studies, UCLA. 1994. Study of residential segregation. Bauer, Paul W., and Brian A. Cromwell, "A Monte Carlo examination of bias tests in mortgage lending," Economic Review (Federal Reserve Bank of Cleveland), Third Quarter 1994, pp. 27- 40. Despite three years of data from the Home Mortgage Disclosure Act indicating that the rejection rate for African American mortgage applicants is much higher than for Anglos, most financial institutions have received regulatory compliance ratings of satisfactory or better. The steps involved in determining discrimination are discussed. Berger, Joseph, "Yonkers defends actions in housing desegregation case," The New York Times, June 11, 1993, P. B5. The city of Yonkers, N.Y-, on June 10, 1993, tried to defend itself in court against charges brought by lawyers for the NAACP that insist that the city's lack of progress in housing desegregation proved that a revamped housing plan was needed. Berger, Warren, "Best intentions: are your adds fair?" Real Estate Today, April 1995, v28 p. 50-53. Real estate professionals who use advertising language that is discriminatory could face fines under 208 111111 Mf1 ' I I / I' f /I ' I I I • I /"111115111M., I the Fair Housing Act. Focusing the ad on the property rather than on the potential buyer is one way to avoid problems. Diver, Dan, "Portland, Oregon: Strategies for Fair Housing. Planning implementation by a large jurisdiction," Planning, April 1, 1995, v61, n4 p. 10. In response to the problem of having about 2,000 homeless people in the city and surrounding Multinomah County, the city of Portland, Oregon began a program called Strategies for Fair Housing, the winner'of the year's award for planning implementation by a large jurisdiction. The program and accompanying zoning changes allow all types of special housing, including long-term and mass shelters, to locate by right in certain zones. Portland officials think that the city may be one of the few municipalities in the nation now in full compliance with the federal Fair Housing Act. Buchholz, Barbara B., "The Call of a Better Life Gives CHA Residents Hope," Chicago Tribune, Feb. 28, 1993, p. Cl. Discusses a study conducted by James E. Rosenbaum and Leonard S. Rubinowitz for the Center of Urban Affairs and Policy Research at Northwestern University, a ten-year longitudinal study of families in the Gautreaux Assisted Housing Program in Chicago, a program which relocated more than 4700 minority families from the center city to suburban communities. The study revealed that simple access to suburban neighborhoods radically improved quality of life along several indices. Canner, Glenn B., Wayne Passmore, and Dolores S. Smith, "Residential Lending to Low -Income and Minority Families: Evidence from the 1992 HADA Data," Federal Reserve Bulletin, February 1, 1994 v.80 n2 p. 79-108. This article uses the HMDA data to analyze patterns of loan applications and their disposition by the income, race, or ethnicity of the applicant and by the location of the property pertaining to the loan. It also examines lending in different types of neighborhoods,. including those in central city and in noncentral city locations, and describes the role of mortgage originators and of institutions that purchase mortgages. Finally, it reviews the use of HMDA data to monitor the way institutions 209 comply with laws pertaining to fair lending, community reinvestment, and affordable housing. Center for Community Change, "Report to the Kentucky Human Rights Commission on the Results of the Mortgage Lending Discrimination Testing Project," 1989. This organization sponsored a project to detect discrimination in mortgage lending, using African American and Anglo testers among lenders in Louisville, Ky. The organization found that "the black buyer in the black neighborhood was refused or discouraged in eight of nine contacts with lenders," in sharp contrast to the Anglo testers. Clark, Charles S., "Housing Discrimination," CQ Researcher, Feb. 24, 1995, v5 pp. 171-188. There is concern about growing discrimination in the housing industry. Studies have revealed lenders' bias against minority borrowers. The Clinton administration is combatting the problem through new compliance examiners and HUD is working on an interagency force. The Fair Housing Acts was meant to ensure that there is not discrimination by owners and rental agents in real estate deals. While the initiatives have drawn attention to the problem, many Americans still believe that discrimination is not an active problem. There is also the feeling that present day segregation is by mutual consent. Consumer Bankers Association, "1994 Affordable Mortgage Program Study: An Analysis of the July 1994 Survey." The Consumer Bankers Association reported that 93.8 percent of banks have programs to increase home mortgage lending to minorities, and 70 percent are conducting self -testing for discrimination. Dadisman, Mary Ann, "Private Bar Opportunities in Fair Housing, Lending," Human Rights, Fall 1994, v21, n4, pp. 40-41. Discrimination is alive and well in the housing and lending markets despite fair housing legislation. 210 The outlines of where fair housing legislation landed the U.S. in 1994 are presented. Duncan, Douglas S. and Susan M. Wachter, "Evaluating the Evidence," Mortgage Banking, February 1994. Discusses the impact of a study by the Federal Reserve Bank of Boston. The study, released in October 1992, of 3,062 loan applications from 131 Boston -area banks, expanded on HMDA data, considering 38 factors in loan -granting decisions. It concluded that 17 percent of black applicants were rejected for mortgages compared with only 11 percent of Anglos with comparable assets. England, Robert Stowe, "Assault on the mortgage lenders: in the name of racial justice, the Clintonites want the power to decide who gets a home of his own," National Review, Dec. 27, 1993, pp. 52- 54. President Clinton and Attorney General Janet Reno want to force banks to make loans to minorities even if they would not qualify for loans under normal circumstances. This would set a precedent preventing banks from protecting their financial interests and avoiding risky obligations. Epstein, Gene, "Mortgage discrimination against minorities; complex problem, few solutions," Barron's, Jan. 15, 1996, p. 50. Mortgage discrimination against minorities persists despite three decades of prevention efforts because anti -discrimination policies do not address the causes of the problem. The majority of discrimination cases appears to be due to statistical discrimination and to cultural differences between lenders and loan applicants. Farley, Reynolds, Charlotte Steeh, Maria Krysan, Tara Reeves and, Keith Jackson, "Stereotypes and segregation: Neighborhoods in the Detroit area," American Journal of Sociology, November 1994, pp. 750-780. Two hypotheses seeking to explain why African American -Anglo residential segregation persists 211 M", ITIM"YeT17;fiffn I• despite open housing laws are examined using data from the Detroit Area Study of 1976 and 1992. Feldstein, Mark, "Hitting the poor where they live; insurance redlining," The Nation, April 4, 1994, pp. 450-452. The practice of redlining is being investigated in cities across the U.S_ The practice is an insidious one that makes it difficult, if not impossible, for 'redlined' area residents to buy or improve a home or business. Fuerst, J. S., "No Fairness for Public Housing," Journal of Housing & Community Development, July 1995, v52, n4 pp. 6-8. Public housing in the US has never had a fair chance and has resulted in a relatively restricted segment of people applying for public housing. HUD secretary Henry Cisneros has proposed a revised housing program that would open all existing public housing to privatization. Galster, George, "Racial Discrimination in Housing Markets During the 1980's: A Review of the Audit Evidence," Journal of Planning Education and Research, 1990, v9, pp. 165-175. Galster, George, "Racial Steering in Urban Housing Markets: A Review of the Audit Evidence," Review of Black Political Economy, Winter 1990, v18, n3 pp. 105-129. An analysis of housing audits between 1974-87 revealed that racial steering has been a widespread, consequential phenomenon in many urban housing markets. Implications of the findings for racial stability in neighborhoods and for fair housing policy are discussed. Garsson, Robert M., "HUD taking aim at redlining of poor neighborhoods by insurers," American Banker, May 12, 1994, p. 2. HUD official Roberta Achtenberg said that the government is developing regulations aimed at barring insurance redlining. Banks have argued that one barrier to increased mortgage lending in low - 212 income communities is the unavailability of insurance. Garza, Melita Marie and Matt O. Connor, "Suit alleges CHA segregation," Chicago Tribune, March 1, 1994, p. C4. Latinos United and 10 other community groups and individuals filed a U.S. District Court lawsuit against the Chicago Housing Authority and HUD, charging that the two agencies have a history of providing segregated housing that excludes Latinos. Giobbe, Dorothy, "HUD clarifies its classified ad language policy," Editor & Publisher, Feb. 4, 1995, v128, n5 p. 26. HUD attempted to clarify its position on claims of discrimination in real estate classified advertising. HUD stated that descriptions such as "master bedroom" or "Bachelor apartment" generally do not constitute a violation of the fair housing code. Glater, Jonathan D., "First Virginia Bank -Md. settles bias suit," The Washington Post, Dec. 24, 1994, p. DI. First Virginia Bank -Maryland announced that it agreed to pay $210,000 to settle a lending discrimination lawsuit brought by Howard University Law School Professor Spencer H. Boyer, who contended that the bank denied him a loan in 1993 because he is African American. Glater, Jonathan D., "Justice said to find bias in lending," The Washington Post, Oct. 25, 1994, p. C5. The Justice Department found that Barnett Banks Inc., Florida's largest bank, has engaged in a pattern of lending discrimination. Goldberg, Stephanie B., "Racial Steering," ABA Journal, Nov. 1992, v78 pp. 94-95. A federal court ruled that Harry Macklowe Real Estate Co. Inc. violated the Fair Housing Act of 1968 by featuring only Anglo models in its advertisements for two luxury apartment buildings. Cases 213 11, • I'I 1175111 /'L /['I / I I [ ' I / I TrI7,79M,M Me /I involving racially steered ads are discussed. Hacker, Andrew, Two Nations: Black and White, Separate, Hostile, Unequal, Ballantine Books, 1992. A Queens College political scientist weaves current statistics into this essay decrying the state of U.S. race relations, focusing on economics and cultural attitudes. Hanson, Gayle M. B., "Activists attract HUD thought police," Insight on the News, Sept. 19, 1994, pp. 6-9. Under the Clinton administration, the Fair Housing Act is being used by HUD to harass individuals who oppose shelters or halfway houses in their communities. Ways in which HUD is using FHA against activists who oppose subsidized government housing are discussed. Hartnett, James J., "Affordable Housing, Exclusionary Zoning, and American Apartheid: Using Title VIII to Foster Statewide Racial Integration," New York University Law Review, April 1993, v68 pp. 89-135. This article concludes that Title VIII of the Civil Rights Act of 1968 has yet to foster the truly integrated society envisioned by its drafters, and argues that a more aggressive application of Title VIII to existing state -administered housing programs would help diminish the isolation of the urban ghetto and promote a more racially and economically integrated society. It also undertakes a close analysis of the application of fair housing legislation to the current affordable housing crisis, focusing primarily on the New Jersey and California programs to develop affordable housing. Henry, Shannon, "Fed clarifies Equal Credit Opportunity Act," American Banker, Jan. 12, 1995, p. 9. The comment deadline on the Federal Reserve Bank's new proposed staff commentary on the Equal Credit Opportunity Act was determined to be Feb. 15; 1995. The document is an attempt to clarify 214 1 I I • l I 1/ // I I I l' I I I l some of the most controversial parts of Regulation B, including disparate treatment and credit scoring. Herman, Jordan, "Yes, in Your Back Yard! Occupancy Restrictions, Use Controls, and the Fair Housing Amendments Act," Human Rights, Spring 1995, v22, n2 pp. 14-17. Many communities oppose halfway houses and other group homes in their midst, but the Fair Housing Amendments Act and other laws govern the issue. A summary of relevant housing law is offered. Discusses how local zoning authorities can make exceptions for the handicapped without destroying zoning schemes. Hill, Herbert, and James E. Jones Jr. (eds.), Race in America: The Struggle for Equality, University of Wisconsin Press, 1993. University of Wisconsin scholars selected these essays on racial changes in America over the past five decades. They discuss civil rights, discrimination, and poverty. Hocker, Cliff, "Are home loans at risk? New study disputes mortgage discrimination," Black Enterprise, July 1995, p. 18. The Canner Study which does not see African Americans discriminated against by mortgage lenders, is seen as inaccurate by its critics. Loan applications by low income minorities are often rejected. Congress was prepared to use the study to destroy the Community Reinvestment Act, a watchdog for bank discrimination. Horvit, Mark, "Intimidation suit seeks damages from KKK," The Houston Post, Dec. 4, 1994, p. Al. The Texas Commission on Human Rights filed a lawsuit against the Ku Klux Klan in Vidor, Texas, that is the first suit to use the state's Fair Housing Act to go after civil rights violations. The suit sought damages for current and former Vidor residents who the state believes were harassed and intimidated by members of the KKK in an effort to stop integration. 215 Housing and Urban Development Department, "Housing Discrimination Study: Synthesis," August 1991. A HUD -sponsored study of transactions in 25 cities showed that African American and Hispanic "homebuyers and renters experience some form of discrimination in over half of their encounters with sales and rental agents." The probability of their being steered to certain neighborhoods according to their race was 21 percent. "HUD plays too rough," The New York Times, Aug. 27, 1994, p. A22. An editorial criticizes HUD for using strong-arm tactics against a neighborhood group in Berkeley, Calif., that protested the conversion of a local motel into a shelter for recovering drug addicts and the mentally disabled. Hunter, Teresa Colem, "Fair Housing Testing: Uncovering Discriminatory Practices," Creighton Law Review, June 1, 1995, v28, n4 pp. 1127-42. Kanter, Arlene, "A Home of One's Own: The Fair Housing Amendments Act of 1988 and Housing Discrimination Against People with Mental Disabilities," The American University Law Review, Spring 1994, v43 pp. 925-94. This article explores this nation's tradition of housing discrimination against people with mental disabilities and the strategies used to overcome such discrimination. Karr, Albert R, "Banks' lending fdes will be examined for bias as agency expands program," The Wall Street Journal, March 8, 1993, p. A2. The Comptroller of the Currency announced plans to expand its bank -examination program to curtail mortgage-loandiscrimination nationwide. The expansion came amid criticism that regulators have acted too slowly in response to the problem, 216 King, Jim, "NationsBank boosts effort to review loan denials," Atlanta Constitution, July 28, 1993, p. D1. NationsBank and the National Urban League said they are forming committees in 18 cities, including Atlanta, to review applications of bank customers who feel they were wrongly denied a mortgage or home improvement loan. Kulkosky, Edward, "Researchers find flaws in tests to detect bias," American Banker, Oct. 19, 1994, p. 23. Researchers Paul W. Bauer and Brian A. Cromwell, in a study on the effectiveness of using Home Mortgage Disclosure Act data and other related information in detecting bias by lenders, found that small samples tended to show discrimination where none existed. The study was published in the Economic Review, a publication of the Federal Reserve Bank of Cleveland. Lehman, H. Jane, "HUD weighs expanded attack on bias," The Washington Post, Nov. 19, 1994, p. Fl. HUD was considering drafting the U.S.' two largest mortgage funders, FNMA and FHLMC, to help it police home loan lenders engaged in discriminatory lending practices. Leigh, Wilhelmina A., "Barriers to Fair Housing for Black Women," Sex Roles: A Journal ojResearch, July 1, 1989, v21, 0/2 pp. 69-84. Barriers to fair housing for African American women in both private and public sectors are discussed. Subtle forms of discrimination on the basis of both race and sex appear to continue in fair housing. Mackin, Jenne, "Mortgage Lending Patterns Reveal Racial Bias," Human Ecology Forum; Winter 1994, v22, nl pp. 5-8. Research shows that certain racial groups and neighborhoods are being denied housing credit by lenders, despite protective legislation. The effectiveness of the laws and regulations in insuring that 217 77'I I f f 1. I' II I l ! S f/ all home loan applicants receive fair treatment is assessed. Mariano, Ann, "Bias Against Families on Rise," Washington Post, Sept. 22, 1990, p. Fl. About 12,800 family discrimination complaints were filed by March of 1989, which made up half of all HUD complaints. Mariano, Ann, "Low -Cost Housing Supply Shrinks, Two Groups Find; Study Cites Federal Aid Cuts, Shortfall in Private Market," Washington Post, Dec. 14, 1991, p. El. A study conducted by the Center on Budget and Policy Priorities and the Low -Income Housing Information Service has found that "a significant shortage of affordable housing exists in every region of the United States. For example, there were 4.1 million fewer affordable housing units than families in need. Massey, Douglas S., and Nancy A. Denton, "Trends in the Residential Segregation of Blacks, Hispanics, and Asians: 1970-1980," American Sociological Review, 1987, v52 pp. 802-825. Massey, Douglas S., and Nancy A. Denton, American Apartheid: Segregation and the Making of the Underclass, Harvard University Press, 1993. Two University of Chicago professors, using research funded by the National Institute of Child Health and Human Development, describe the forces that have thwarted the 1960's vision of a fully integrated America. Mintz, Bill, "Loan denials to minorities decline," Houston Chronicle, Nov. 18, 1994, p. Dl. Houston -area African Americans were still more than twice as likely to be denied mortgages than whites in 1993, newly released federal data show. Denial rates, however, were slightly lower than in the previous year. 218 11, e 1 =,=, 1 M71MMMIMMMY11M, Morales, James, "Creating New Housing Opportunities for Families with Children: The Fair Housing Amendments Act of 1988," Clearinghouse Review, Dec. 1988, v22 pp. 744-751. This article provides an overview of the law, recounts relevant legislative history, describes the discriminatory conduct that the law covers, and explains exemptions from the nondiscrimination provision. Nadar, Ralph, "Over -50's are being victimized— and we don't have to take it," New Choices for Retirement Living, June 1993, pp. 22-26. The aged are becoming victims of various forms of discrimination. Complaints of discrimination in employment, housing, transportation, and medical care among the aged are fast increasing. Cites the case of a 70 -year-old man who was told he would have to pay $900 to rent an apartment, and when the man's son inquired, he was told the rent was $825. Several recommendations on how the elderly can fight against prejudice and ensure their rights as individuals are presented. National Community Reinvestment Coalition, "America's Worst Lenders!:,A Comprehensive Analysis of Mortgage Lending in the Nation's Top 20 Cities," January 1995. A Washington, D.C.-based group ranks 2,000 major lending firms against their responses to the demands of the 1977 Community Reinvestment Act. This four-year, nationwide study found that moderate -income and minority individuals were being consistently underserved by 52 large mortgage lenders, mainly mortgage companies and commercial or savings banks. Newspaper Association of America, "Fair Housing Advertising," March 1994. This booklet from the publishers of large newspapers outlines the responsibilities of newspapers in avoiding discriminatory classified advertisement, offering examples of language that is "preferred" or "questionable." Novack, Janet, "The coming fight over FICO," Forbes, Dec. 18, 1995, p. 96. 219 A 71 1 ['1 g am7f, ie l 1TM11,[ , For; 14 Pressure groups are likely to attack mortgage lenders' increasing use of the FICO score to determine creditworthiness. The score, which is based on past credit history, may result in a disproportionate rejection of mortgage applications from minority and low income consumers. O'Connor, Susan and Julie A. Racino, "A Home of My Own: Community Housing Options and Strategies," Housing, Support, and Community: Choices and Strategies for Adults with Disabilities, 1993, pp. 137-160. Discusses how group homes and other congregate living facilities, which have been viewed as the best alternative to institutionalization, still segregate people with disabilities and confine them with little, if any, attention to individual choice. They argue that we must begin to abandon the term "integration" and work toward inclusive or nonsegregated housing, housing that is equally available to all. Prakash, Snigdha, "Justice Department move sends lenders scurrying." American Banker, Sept. 7, 1994, p.l. Following an action in August 1994 by the Justice Department against Maryland's Chevy Chase Savings Bank for lending discrimination, mortgage lenders are reviewing key aspects of their marketing efforts, such as market share in minority neighborhoods, branch locations, and advertising strategies. Reed, Veronica M., "Civil Rights Legislation and the Housing Status of Black Americans: Evidence from Fair Housing Audits and Segregation Indices," Review of Black Political Economy, Winter 1991, v19, n3-4, pp. 29-42. Segregation indices and fair housing audits measure the extent and nature of residential segregation and housing discrimination. These indicators show that housing discrimination exists, and it remains to be seen whether strengthened enforcement mechanisms in the 1968 Fair Housing Act will impact housing discrimination and residential segregation. 220 Salkin, Patricia E. and John M. Armentano, "The Fair Housing Act, Zoning, and Affordable Housing," The Urban Lawyer, Fall 1993, v25, n4 pp. 893-904. Discusses cases in which plaintiffs have used the Fair Housing Act to challenge provisions of local zoning ordinances. It concludes that municipal and land -use attorneys should become more familiar with the provisions of the FHA, including the 1988 amendments, for several reasons, first and foremost being because there is an increasing number of lawsuits alleging municipal violations of the Act. Saltman, J., A Fragile Movement. The Struggle for Neighborhood Stabilization. New York: Greenwood Press, 1990. The movement towards creating stable racially integrated neighborhoods has had many obstacles. Saltman discusses the struggle it has been, the successes, and the outlook for the future. Savage, Howard A. and Peter J. Fronczek, "Who Can Afford to Buy a House in 1991?" Census Bureau, July 1993. This Census Bureau report showed that the percentage of families unable to afford a medium-priced house in the area where they lived rose from 49 percent in 1984 to 51 percent in 1991. African American married couples unable to qualify tallied at 44 percent, compared with only 29 percent of Anglos in similar economic circumstances. Seiberg, Jaret, "Bias probes seen justified by latest home loan data," American Banker, Oct. 27, 1994, P. 2. The 1993 Home Mortgage Disclosure Act data released Oct. 26, 1994, which showed that African American loanapplicants remained more than twice as likely than Anglos to be rejected for home loans, was seized upon by fair -housing advocates as proof that the Justice Department should continue its aggressive stance against banks. 221 Sloane, Glenda, "Fair Housing: Problems Foster a New Program," Journal of Housing, March 1991, v48, n2 pp. 63-65+. The various strategies to open communities to minorities and the economically disadvantaged have been largely ineffective. This article suggests that one reason is that anti -discrimination and fair housing strategies have not been aggressively pursued, and it argued for the necessity of a new program for HUD. Explains "PHACA," HUD's Public Housing Affirmative Compliance Action Program. Smith, Anne Kates, "Does coverage depend on color? With homeowner's insurance, it might," U.S. News & World Report, Oct. 9, 1995, p. 85. A nine -city, three year investigation revealed redlining by home insurance providers. African Americans and Latinos were being charged more for the same policies than Anglos. Nationwide, Allstate, and State Farm were investigated and objected to the results. Smith, R. A., "Creating Stable Racially Integrated Communities: A Review," Journal of Urban Affairs, 1993, v15 pp. 115-140. Examines the past, present, and outlook for the future with respect to attempts to create stable racially integrated communities. Squires, Gregory D., "Biased Lending," Journal of Housing, July 1990, v47, n4 pp. 182-185. A unique public/private partnership for reinvestment was emerging in Milwaukee in response to racial discrimination in mortgage lending and housing. Wisconsin Governor Tommy Thompson and Milwaukee Mayor John Norquist created a Fair Lending Action Committee (FLAC) to identify reasons for the racial disparity and to make recommendations to' increase mortgage lending for African Americans and other racial minorities. FLAC's objectives are discussed. 222 Stein, M.L., "Small California daily tined for ads that violate Fair Housing Act," Editor & Publisher, Oct. 22, 1994, v127, n43 p. 34. The Banning Record -Gazette (circulation 3,500), paid a $20,000 fine for ads that violated the federal Fair Housing Act, even though the publisher said he was never notified of the violations. The Fair Housing Council of Riverside County, CA sued the newspaper, citing numerous ads for adults -only housing. Taibi, Anthony D., "Banking, finance, and community economic empowerment: Structural economic theory, procedural civil rights, and substantive racial justice," Harvard Law Review, May 1994. The Equal Credit Opportunity Act and the Community Reinvestment Act were both meant to address the inequality produced by banks and financial institutions that, wittingly or not, discriminate against minorities. The rationale behind community empowerment is discussed. Taylor, Andrew, "Boosted by OMB, House Banking approves bill on redlining," Congressional Quarterly Weekly Report, Sept. 25, 1993, p. 2531. The House Banking Committee approved a bill on September 22, 1993, to combat insurance companies' practices of refusing to sell insurance to poor Hispanics and African Americans in inner- city neighborhoods. The Energy and Commerce Committee created an anti -redlining bill on September 14, 1993, that was accepted by the insurance industry but consumers felt it was too week. The Banking bill was supported by the Office of Management and Budget as well as consumer groups because it requires disclosure by census track rather than zip code and requires payout disclosures. Townes, Glenn R-, "Missouri: Homewrecking," Hispanic, Oct. 1991, pp. 48-50. The Fair Housing, Education, and Outreach Program, a government pilot program, designated Kansas, Missouri as a focal point in correcting the problem of housing discrimination against Hispanics. The program is studying why Hispanics are discriminated against more than other minorities. 223 "Treat minorities better on mortgage loans," Chicago Defender, Oct. 31, 1994, p. 11. An editorial discusses the findings of a report released by the Federal Financial Institutions Examination Council under the Home Mortgage Disclosure Act that stated that African-Americans are denied mortgage loans at more than twice the rate of Anglo applicants. Turner, Margery Austin et al., The Urban Institute and Syracuse University, "Housing Discrimination Study: Synthesis," October 1991. This study, commissioned by HUD and conducted by The Urban Institute and Syracuse University, consisted of 3800 fair housing audits in 25 metropolitan areas during the late spring and early summer of 1989. Its objectives were to provide a current national estimate of the level of discrimination against African Americans and Hispanics, effectively measure racial and ethnic steering, and advance the state-of-the-art in the methodology of systematic housing audits, providing advocacy and enforcement agencies with more reliable tools for measuring patterns of discrimination. The study revealed widespread housing discrimination against minorities throughout the country. U.S. Commission on Civil Rights, "The Fair Housing Act of 1988: The Enforcement Report," September 1994. A federal panel say HUD has lacked a systematic approach to fair housing complaints and has missed deadlines in processing most fair housing complaints and that Congress and the president haven't given HUD the necessary resources to match its new workload. Udansky, Margaret L., "Blacks see'progress' against segregation," USA Today, Feb. 18, 1994, p. A3. African Americans were slightly less likely to live in segregated neighborhoods during the 1980's, the first widespread, nationwide drop since segregation peaked in 1960. But African Americans are still more likely to live in segregated neighborhoods than Asians or Hispanics. 224 Washington Lawyers' Committee for Civil Rights and Urban Affairs, "Ranking the Lenders: Investigating for Patterns of Racial Discrimination in the Making of Home Loans," December 13, 1994. Prompted by new Justice Department prosecutions, this group surveyed Washington, D.C.-area lenders for race -based disparities in lending. Wiese, Andrew, "Neighborhood Diversity: Social Change, Ambiguity, and Fair Housing since 1968," Journal of Urban Affairs, 1995, v17, n2 pp. 107-129. More than a generation after the Civil Rights Act of 1968, fair housing remains an ambiguous and unattained goal in the United States. Entrenched opposition, weakness in the original legislation, racial preferences, and division among proponents help to explain the situation. The author examines the latter two factors and identifies the role of historical change in the persisting weakness of fair housing. Through an analysis of the prointegration movement, he argues that demographic and social change since 1968 have eroded support among both Anglos and African Americans for integration and open housing and exacerbated divisions among proponents of fair housing. Welfeld, Irving, Where We Live: A Social History ofAmerican Housing, Simon and Schuster, 1988. An attorney and policy analyst for the Housing and Urban Development Department (HUD) shows how housing is both the result and cause of enormous changes in the social, political, and economic landscape. Weathers, Thomas, "Gay Civil Rights: Are Homosexuals Adequately Protected From Discrimination in Housing And Employment?" Pacific Law Journal, 1993, v24 pp. 541-589. This article analyzes the protections afforded homosexuals against sexual orientation discrimination in housing, and discusses whether such protections are adequate. It concludes that homosexuals may have some protection against housing discrimination under the Unruh Act. 225 Williams, Wendy Swall, "Discriminatory advertising: Do large dailies comply with the Fair Housing Act in portrayal of minorities in housing ads?" Newspaper Research Journal, Fall 1994, v15, n4 pp. 77-86. Amendments to the Fair Housing Actin 1989 significantly increased the liability of newspapers for discriminatory advertising and removed limits on punitive damages. Analysis of housing advertisements in 30 metropolitan daily newspapers finds only a third were complying with the FHA, however - Woolley, Suzanne, "Now, insurers get painted with redlining charges; Congress and state regulators begin probing claims of bias," Business Week, July 19, 1993, p. 76. State regulators, Congress, and consumer groups are taking action against discrimination against minorities and poor people by insurance, companies that offerhomeowners' policies. Yen, Elizabeth C., "Residential Housing Advertisements Using Only Caucasian Models Held to Violate Fair Housing Act; Mortgage Lenders May Be Liable for Discriminatory 'Steering' Acts of Loan Brokers and Real Estate Brokers," Banking Law Journal, March 1, 1995, v112, n3 pp. 288-293. A series of residential housing advertising using only Caucasian models may indicate an unlawful racial preference to the ordinary reader, in violation of the federal Fair Housing Act, even absent discriminatory intent or discriminatory effect. Galster, George C., and W. Mark Keeney, "Race, residence, discrimination, and economic opportunity: modeling the nexus of urban racial phenomena," Urban Affairs Quarterly, 24(1), 1988.. Pp. 87-117. Leigh, Wilhelmina A., "Civil rights legislation and the housing status of black Americans: an overview," in The housing status of black Americans, edited by Wilhelmina A. Leigh and James B. Stewart. New Brunswick, NJ: Transaction Publishers, 1992. Pp. 5-28. ' 226 Massey, Douglas S., and Nancy A Denton, American apartheid- segregation and the making of the underclass. Cambridge: Harvard University Press, 1993. Mikelsons, Maris, and Margery Austin Turner, Housing DiscriminationStudy- Mapping Patterns of Steering for Five Metropolitan Areas. Washington, DC: U.S. Department of Housing and Urban Development. October 1991. Stone, Michael. One third of the nation. Washington, DC: Economic Policy Institute, 1991, Struyk, Raymond J., and Margery A. Turner, `Exploring the effects of racial preferences on urban housing markets," Journal of Urban Economics 19, 1986. Pp, 131-47. Turner, Margery Austin, John G. Edwards, and Maris Mikelsons, Ho ,sig Discrimination Study - Analyzing dy- Analyzing Racial and Ethnic Steering. Washington, DC: U.S. Department of Housing and Urban Development. October 1991. Turner, Margery Austin, Raymond J. Struyk, and John Yinger, Housing Discrimination Study: Sytuhesis. Washington, DC: U.S. Department of Housing and Urban Development. August 1991. Turner, Margery A., and Ronald Weink, "The persistence of segregation: contributing causes," mimeo. Washington, DC: Urban Institute, 1991. Discriminatory Behavior.. Washington, DC: U.S. Department of Housing and Urban Development. October 1991. Yinger, John, Closed Doors, Opportunities Lost. New York: Russell Sage Foundation, 1995. 227 , e l I I f I 11TdMirgMe Appendix:Lending Focus Group Transcript 228 FOCUS GROUP; LENDERS Focus Group Guide PAGE Comments I-7 Introductions HNMA reporting not correct. Loan officers will fill in that the applicant is a minority of it isn't marked to get the loan through. CRA loans get more attention. "And actually there's almost to an extent -- and it's not almost, it's really a reverse discrimination going on right now because if they are a minority we will automatically say, minority, it's CRA." 12 "And especially when you look at a territory like mine which is L.A. County, it's hard to get my loan officers to spend time in South Central L.A. for $100,000 loans when they can go to Hancock Park and get half -million -dollar loans because they're commission based. And, yeah, they're harder deals, and I think the problem is they are commission based and it's always been hard to push them into the more low-priced homes," 14 "You can have a buyer come up to you and almost tell you, I don't want to sign this thing where it says what my race is or anything like that because they've heard so many other stories about people being declined because — and they feel like that has something to do with it. And like you said, it does. Somebody looks at that and they immediately pigeonhole somebody saying -- like Iranian. They immediately think their taxes are wrong, or, I mean. The underwriter immediately calls the IRS as soon as she sees Iranian down there to see if his taxes are right." 14 Underwriters are people just like anybody else, and they're risk management... But what we're saying is if you've got an underwriter over here who has inside - their mind what life is about and what life should be I've had underwriters tell me there's no way he could have that kind of money in the bank or there's no way this can be. How can this — or, because they make so much money here — it's not their position to ask that question." 15 I mean, they will save; "and for someone` to"say,-well,' I can't believe that they could -= it's crazy. 'I mean; that's°the subtlety in,disciim. on right now. nrM 15 And so they've been burned so'many thmes'that somebody'has said, well, okay, this group has done one thing Let's be more cautious-. And so they're probably more cautious because they're feeling the risk of the company that they're working for. And I don't know if ... 20 I think because they're living under — I think lenders in general, especially executives, tend to be older and their mindset is one of stereotyping people, etc., You know, you look at studies about racism, etc., you'll see that young people tend to be less racist or less stereotypic than older people. 21 1 think that while it may be true that a lot of lenders have gone into CRA lending because of a regulatory mandate, I think the ones that are smart -- certainly the two that I have worked for -- have found a they got into it that it is good business and it is profitable business. 23 So, what constitutes the special thrust given to CRA lending? Probably two or three hundred things done intrinsically within the institution in terms of specialized programs, second or third local reviews, special underwriting revisions, serious negotiations with the other two essential partners, the secondary markets and the MI companies, and incentive compensation for the salespeople to try to equalize the thing that you're talking about so that if you're doing a loan for $100,000 you're not going to be economically penalized because someone else is doing a loan for half a million. 25 More on changing HMDA data:. "Can you give me an example of how you do that? Do you mark a white applicant as a black applicant? MCLAUGHLAN: Or as a nonwhite applicant, okay, or as a Hispanic. SANDER: So someone who you think you're likely to approve you mark down as a minority so it's going to increase your minority approval rates. Is that what you're saying? MCLAUGHLAN: Not consciously, but subconsciously it probably happens. M: I could see someone doing it if for instance you got some bad credit or something else. 26 Frankly, most — it's my experience and I did loans for many years — loan agents typically don't care what HMDA data is. Most of them don't even know what it is. They just put it down. But, if they know I can get this loan easier if I mark the borrower as Hispanic then they'll do it. 33 Well, I mean, recently, actually in southern California I think the Orange County Register, — I think the Orange County Register had a study like that which showed that upper middle-income, minorities were [higher declination rates] than anybody else. DICKEY: That's been the case every time anyone has ever had a study. 35-40 Long discussion on need for education Specific recommendation was to have the City/County fund non-profit social service agencies to do first time homebuyer seminars to prepare people (credit clean up, budgeting, etc.) to take on a loan. 38 Appraisals a problem. Undervaluation of property. A big problem is lack of knowledge about property in minority areas on part of the appraiser from suburbs. "I don't think it's just the area, I think, as much as the condition because, you know, my review appraiser lives in Manhattan Beach. And he looks at this place in South Central L.A. and goes, this thing's got cracks, it's beat up, he's not used to it." 41 Problems with biases in underwriting. "And some of the worst ones are the ones that may have been around, unfortunately, for 15 or 20 years because they have these old prejudices about ratios, about credit, about types of property. And it's hard to break those prejudices, not just as far as race but about everything." 48 Marketing the problem: "Where I see it mostly is actually in the getting the transaction, originating it, going out into a certain area. I worked, as I said, with a big organization. And the only time, the only marketing efforts they would do, into have one CRA rep for an area the size of southern California or something and they were supposed to originate. Give me a break. I mean this is a big market. 50,000 loan agents in the market. And they would never do anything. We wouldn't go after -- never put an office close to South Central. I mean, they would go after the upper end." 51 Need for diversity on banking staff. 51 Need for training the back office people, too. (Underwriters, etc.) 53 More on need for education. 59 Discussion of CDFI's. Bankers think this is wrong way to go. "We got a bank, Family Savings, and they wanted us to be their broker. But we couldn't compete with the product that they were giving out to the community with anybody else. Everybody else's products were so much better and so much more cost effective. It was like ridiculous. So their interest rates were inflated much higher and it's like, wait a minute, you're trying to lend into the community and you're not even giving them a good product." 61 What you've got to do is take advantage of the institutions that are already there that can make the competitive loans and deliver those. And if you have the accessibility to the large lending institutions, the ones that have been in the communities, I think that's where the opportunity is, not to go out and try to now form another South Shore Bank. 61 If you take a hard look at what has been done by some of the major lenders here like Wells and B of A's Community Development Bank which was really modeled on South Shore and look honestly at what they've done in terms of performance, I think you will find that they have probably outperformed what South Shore has done even though that's the one that has gotten all of the acclaim. So you really need to look at cost benefit. 0 Lender Focus Group April 6, 1994 SANDER: 1 BANKING FOCUS GROUP Alison Towle Fair Housing Congress 1-"rq F. Mortgage Cor,c i Bob C. _ QLAt, Herb D. (:>L-wak—�— rno Susan K. Fmva+F. Moe d C7ai y Paul J. Pa�a1� N\cri�ec�e CsS+y <1 f Varnessa A. 13at1� Rick Sander UCLA Law School; Fair Housing Congress DonB- �=,MJcLkce- CU �tny . Royal H. BQvk— Marci M .• Land — Art A .- Sec Vv,d ,V ( Ma.r�,t-L- Dave MtL. r oavcr—� Cc PP� O. y This is part of a two-year project that originally mandated by HUD. It's had fair housing laws on the books for 25 years now and the U.S. Department of Housing and Urban Development has been giving some of its funds — some of its CDBG funds =- that it gives to cities every year to promote fair housing. And in '91-'92 HUD mandated that localities try to make some systematic effort to assess what progress has been made both in terms of fair housing in general and in terms of how effectively the specific programs that were being funded through these efforts had been in promoting fair housing goals. That was the genesis of the project. The Fair Housing Congress which kind of is an umbrella group for half a dozen fair housing councils in the Los Angeles area is the contractor for southern California for that part of the assessment. So we're looking a number of things. We're looking at everything from the segregative impact of public housing to trying ,to demographically model the degree to which different minority, groups have, successfully integrated into. majority.,`communities `and what the socioeconomic effects of that integration have had. So we're looking at a number of things, and ,. %...ac.*mia %PS04a694.MTG • . Lender Focus Group 2 April 6, 1994 this is part of one effort -- trying to find out how banking practices have changed and what Perceptions are within the banking industry about the main problems that exist. TO WLE: And we really would like to talk. If you've been in the business for a long time, you know, please share your views about what's been changing. You know that the market's been really tough for all of you lately, and we'd like to talk about that too. But sort of the broader issues. But we'lljust start with introductions. I'm Alison Towle, and I'm with the Fair Housing Congress, and I'm coordinating this part of the assessment project.' And thank you all for being here. I really appreciate it. When you introduce yourselves maybe you could talk about what type of business you do and what service area you cover and if you've had some special involvement in the whole fair lending issue maybe you could mention that too. Do you want to start? LARRIFFSure. My name is Larry FI am with"_ Mortgage which was formerly _ .Mortgage Corporation. I am the sales manager covering the basically L.A. area. I have a sales force out there with loanofficers going out and soliciting home loans. Mortgage has been very active with the fair housing group through Washington, D.C., and actually I think Alison called me as a source. So we've really made an effort with them to start trying to do a better concentration in those areas. So I think that's how we got involved. b0z' C.' --with Bank. I'm production manager in single- family originations in Sari Fernando and Santa Clarita valleys. In terms of fair housing; we offer the same products as most conventional lenders;' the CHPP and the Fan -hi' e Neighbors Program or the Advantage Programa Nothing in'particular with a`fair housing council.''It's really up to each loan officer or manager to get involved in the corn rnunity'and all that:° For instance, Don and I, WdMprejacv1F50a0694.Mrp .. - .. Lender Focus Group April 6, 1994 9 for example, are on your multicultural committee of the board. So we just try to'push the lack of discrimination or fair housing in that arena. M: Which board is it? 1603 C-'% San Fernando Valley Association. TOWLE: of Realtors? L--306 C, I. of Realtors. I'm Herm D. I'm Vice President and General Manager of In�r- artce Cad. Western Zone. is a mortgage insurance company. It insures high loan to value mortgages that are mostly sold to Fanni, Freddie and other secondary marketing agencies. And I'm responsible for both sales underwriting and operations for our 12- or 13 -state area. The biggest part of that is California obviously, and the biggest part of that is southern California. S�SC��1lC; I'm Susan K. also with and I work for Herm. I cover as a sales director southern California, Arizona, Utah, Nevada, New Mexico. And having worked for - for ten years I've seen a lot of changes in the industry. Our sales force has a charge of becoming involved in affordable housing issues either through helping lenders train or participating in any ,- sort of functions that we can in sponsorships as a company who is very involved in it. We're having Art come next week. PAUL. S t I'm Paul J I'm with Mortgage Insurance. I'm an affordable housing quality insurance specialist. My position is to address underwriting issues as they pertain to MI versus lenders. I'm also to give presentations according to what our guidelines are and affordable housing TOWLE Great Thanks. Umderlproj¢ XR50406%,MTG - Lender Focus Group April 6, 1994 V l'C f:SSA A! My name is Varnessa A 0 , and I'm a community outreach officer with 4. ;. ,41R'C- and I cover all of southern California and that would be from the Santa Barbara County to San Diego County. And in the past I've become very active with some of the local boards of realtors, working on their housing committees and promoting affordable home ownership to the local residents participating in homebuyer seminars. I'm also very active with some of the nonprofits in San Bernardino County such as Neighborhood Housing Service. I'm part of their lenders committee. And I'm currently working with our department in trying to come out with an educational program to increase the number of approved loans in our Neighborhood Advantage Home Loan Program. SANDER: I'm Rick Sander. I'm on the faculty here at the Law School. I teach a variety of courses including urban housing, which touches on the issues we're talking about tonight. My other hat is President of the Fair Housing Congress, and I'm codirecting the Tassessment project of which this is a part]. I'm Don B I'm from „q..Financial, and we're mortgage bankers and brokers. I work mostly in the San Fernando Valley. I do a lot there -- I mean other than just generate loans. I'm a loan officer. I do go out and get loans. I'm also a certified instructor for most of the homebuyer programs, and I am on multicultural of the board as Bob was saying. I'm on governmental affairs of the San Fernando Valley Board of Realtors — our association of realtors. I've also worked with Habitaffor Humanity for, you know; building law -cost housing in Pacoima recently." But this is a very we also have a subcommittee that Bob and I -- I'm the chairman of — on discrimination lending that we're trying to do some things just to make people aware. And it may not even be discrimination but we need to'know what people are thinking out VodeOpmju NRS0006W.MTG . Lender Focus Group 5 April 6, 1994 there so that we can address what's going on. And , Financial is a big -- [one of the seventh, I guess]. We were in the L.A. Times as the seventh largest minority lender..in;Los Angeles County. And I know who you are. IZVOL 14 .: My name is Royal H I'm with Bank. I manage anew production office at 1030 West Martin Luther King Boulevard right at Vermont in South Central Los Angeles. I cover the CRA area basically as far as South Central Los Angeles and for Fast Los Angeles and another office in El Monte, the same as the one on Martin Luther King. And I also work in the wholesale so I can vouch that Don does do loans because I work with him on a couple of our programs. 5 '7C.r A I'm Marci M I'in'manager for CRA mortgage lending for Bank. And the issue of fair housing and fair lending has been a personal issue for me for at least 25 years when I helped organize a neighborhood in Milwaukee where there was racial steering and block -busting going on. I think that was my first personal awareness of the difficulty in getting credit in certain areas. And it's amazing that it's taken this long to get on the front burner. But it now is on the front burner, so to have the opportunity to work with the two largest banks in the state — fust and now -- on CRA programs and really trying very hard internally which is the place that — I mean, I'd never worked for a bank until So to be in large financial institutions and have an opportunity to help really work with the innards of those -, institutions to change what they do so that it will affect fair lending is a wonderful opportunity. _ , and I m an account execu My name is Art R tive for - I used to sell affordable housing programs, but they basically sell themselves. • So now I spend a lot p of time educating lenders, training, consulting them, advising them.._.j. also work with local %-Me4roje UU040694.MIT' Lender Focus Group 6 April 6, 1994 jurisdictions to develop home ownership programs. I do some product development and also do things like community outreach which includes homebuyers fair and advertising. .Dst✓ty t-�CL, My name is Dave McL, I'm with _ :_;;,.�. Bank, and I'm Vice President/Sales Manager for Los Angeles, Ventura, Santa Barbara, San Luis Obispo counties. I've been in lending since about 1972 and watched a tremendous push towards the CRA development in loans and also affordable housing for, you know, minority groups and whatever.. I've been actively involved since about 1973 in various groups and subgroups and stuff. Most recently I was a guest speaker at the Ventura County Minority Groups for small business owners in which we were trying to develop ways for them to come up with loans through either direct sources through the SBA, residentia] situations, etc. Really seen the last year or two years in which the push for CRA lending and that type of activity is more economically driven by the banks than anything else because they know if they don't have CRA activity for its poor, the mergers or acquisitions they're going after will not go through. So I find it sad that the front burners finally come here, but it may be driven by the wrong reasons and so I'd like to see change a little bit. We have tremendous CRA activity within the state. We have two CRA loan officers, one in Orange County and one in San Diego. I work primarily — in fact I happen to have the largest concentration of Hispanic loan officers in the state, and it wasn't by chance or choice I was just lucky. I inherited some good people,' and we go a lot after a purely Hispanic driven market just by the nature ofthe beast because they`are4 first-time homebuyers. I've worked a lot with first- time homebuyers:•'�l don't'say that's'good. I don't say'it's bad:' It's -difficult qualifying them and whatever, but we do work with'them to'see+what we can do' o f the other -- let's see what — I lost my train of thought -there -I've been talking so much-Bob'knows` me 'I'm,lust enjoying 'auderlprojs \RS040694. MTG - ' 11. . Lender Focus Group April 6, 1994 lending as a whole, and I really enjoy it -- a lot of work, and otherwise I'd be stupid to stay in it because it's quite stressful. I'm 28, and I have white hair. TOWLE: Well, we have a great group tonight. This, & primarily information gathering for us as you know. But it sounds like you're going to probably bear a lot that's interesting to all of you about what each of you do. We're going to just get right into the meat of it because this is something that you all deal with all of the time. And what we're really interested in talking about are the racial disparities in lending that the Boston Fed study addressed, that some of the other academic research on the subject has shown, and that our initial review of the L.A. situation. I think if the Boston Fed study had been done here it probably would have had --some more findings. There aren't any rules about who should talk when in this situation. I'd just like to raise a question about why do you think -- what are the main reasons you think those disparities exist, particularly in the kind of environment we have now with so much attention paid to it? Could you review briefly the Boston Fed study? TOWLE: Sure, sorry. The findings were that even if you held -- regardless of , .- people's income or credit history -- if you control for those factors — race still played a very significant role in the declination rate -- people being denied loans. One of the numbers, Rick, was two or three to one. , SANDER: I'm sure you all heard about the HMDA data that came out two or three years ago which showed the rejection rate looking so different for different racial groups: ;And the contention that that immediately created,I think was well is this because, Blacks and c:'. Hispanics have lower incomes and more credit problems and older homes in, general than white wwery�;m.�xsoaoasa.nr� - � Lender Focus Group April 6, 1994 U and Asian applicants or is it because of other reasons? And the Boston Fed study was done under the auspices of the Federal Reserve. And they questioned about 3000 loan applications and got some banks to.., cooperate and actually supply information on about 35 variables about those loans.: Looking at all the details of the applicant, all the details of the property except for the geography (and that could be a problem), and they found that about three-fifths of the racial differentials say between blacks and Anglos or Latinos and Anglos could be explained by individual characteristics. But the remaining 40% couldn't be explained, and it seemed to be associated in various ways. It seemed very consistent for blacks and Hispanics versus Anglos. And their conclusion was that that was probably due to race. And that's kind of elevated the debate a little and put it on a more precise plane. So we really wondering how, we really wanted to know, whether -- I guess it's a two-part question. Whether you think this would be true in southern California and why do you think that residual racial disparity would exist? M: One question at a time. SANDER: Do you think it's true in Southern California? M: That there's a disparity? You're talking now actually about tum -downs. This isn't bringing the application in. SANDER: Right. Yeah. This is actually the applications here. And because of race does it get turned down more? I don't -= from my own situation I don't see that. "I've'always worked in the end of the business with commissions. All my loan reps are always'bn commission =A loan is a loan is a loan has been my saying since we -started. It's commission. It's green. It's money. Everybody wants the money".on'commission. -I can'see where there's a problem"in actually going out and 1�udMprojablR$O9p6g{.NiTG ' Lender Focus Group April 6, 1994 9 actively soliciting in minority communities or ethnic communities. I have a major Hispanic community in my area, and I'm having a difficult time breaking in because I need bilingual loan reps. It's more difficult to do business unless you speak Spanish. And trying to find one with me not having government lending has been difficult. So getting the business in the door is tougher. I'm not finding that once we have it that there's any difference. And actually there's almost to an extent — and it's not almost, it's really a reverse discrimination going on right now because if they are a minority we will automatically say, minority, it's CRA. And then for us, once we code something CRA, there's got to be three people turn it down. One person cannot tum the loan down. And that's been like the last two years or so. SANDER: So when the application comes in, if it's from like just African-American and Latino applicants it's coded as ... ? $. ,y Yeah, we, try to —see it's almost a joke if it's not filled out we're going to put minority because it will go through easier. But mostly Hispanic is the majority of course that we see because, you know, the Latino population is close to 50% now in L.A. County. African American, that's pretty much what it would be unless it's very low income. With low income, of course, how much of a house can they qualify for? I mean the prices are coming down, at least in the Valley they're coming down close enough to where lower incomes can qualify. Two years you cot'dn't buy a Rouse under $150,000 so you wouldn't be close to the numbers. ' So you're saying you only do a second level review for minority applicants? There is a tier. -I think it's, three -tiered actually.=- two- or three -tiered -= for CRA. And CRA is not lust minority it's also, low income or it's census tract. MAR -U M, Anything really in reference to affordable housing probably. UaWcr�projee MG40694.M r -_. Lender Focus Group April 6, 1994 M: M• 10 Including single mothers, etc., etc. No, not that. I think the way we as an organization define CRA -- what we call CRA's - our giant umbrella would be a minority, would be a low-income, or in a certain"` census tract, which in the San Fernando Valley we don't have any census tracts with the low- or medium -income level. And, of course, when we see it from the mortgage insurance side we don't originate it. It comes to us. And we have the same thing. We have really a third or fourth look at the situation. Anything that's coded affordable housing, CRA, gets really up through me eventually. In other words it goes through an underwriter to a regional underwriting manger to a zone underwriting director, and if it's still turned down it can go all the way up to the vice president and general manager for the zone. And we have three zones. And it's basically handled that way throughout. And just, you know, as far as that goes — as far as California -- all of you know what kind of real estate economic problems we're experiencing here. And as an insurance company we've tightened up probably in the last three years two or three times on our guidelines for conventional business, but we have never changed our guidelines for CRA. A lot of loans we can do if it's coded CRA coming to us where we can't do it if it's a conventional loan. lEtQ C L"- Oftentimes when we talk to an underwriter at an MI company -- mortgage insurer — the question is always asked is it CRA. So to the extent, you know, we'll push CRA. I wouldn't doubt that some of these CRAB are really not CRA's but we don't know that for certain. And usually it comes with either -= we're trying to push the ratio the11 '[back end] ratio — a little bit. We know that the limitations on, but most likely it's credit there's a couple of derogatories on the credit report versus fewer. wea�P,,;�,.+es aosv�, srrc Lender Focus Group 11 April 6, 1994 I'd like to take this a little closer to the inception of the loan process. And I think the situation that most minority borrowers are going to have to deal with is disparity of treatment at application meaning if they walk in are they smiled upon, are they made to wait" needlessly, subtle things like this. And ihen further, once if indeed you do get a seating with the loan officer or whatever that person is called, do they actually help you fill out the application and things like that. And I think that's where you've probably seen a lot of the more subtle forms of discrimination where minorities will feel that they feeling disparity treatment. And I think it's okay to think that commissions drives industry. But I think for a long time especially prior to 1994 the industry was driven by refinance madness as they called it out in the industry. And so when a minority applicant comes in especially if he was of low and moderate income he's buying a smaller home that's going to take more hand -holding, etc., etc. And I would think that loan officers would tend to do the bigger refinances that are considered slam-dunk loans versus doing a loan that is a first-time homebuyer, do they have to hold some hands and do some application — more work than they would have to do in a refinance. And I think that on an individual basis — while organization may say that they're not discriminating, on an individual basis I think that people still do. Being a person of color I still feel discriminated against when I shop for a home loan. Or when I go to the new car lot and go to buy a car whether I'm wearing a suit nr casual clothes I have to go inside the building and get a sales person to help me because they don't come araout to helpme -- which is okayif you're shopping and looking" around."But, .., w -car._ , ;.salesmen are notorious for latching onto a potential customer." I've 'probably vtsited teri'car ..--dealerships in the span of two months,'and I think only twice `did the car salesman actually help me of his own free will. Lender Focus Group 12 April 6, 1994 Lf (mq F f I think also commenting on what Art just said, I think you had a very good point of what I was going to say. Bob's right. We're all out to make commissions, but unfortunately the way our business has been set up over the last few years is we're so commission driven. And especially when you look at a territory like mine which is L.A. County, it's hard to get my loan officers to spend time in South Central L.A. for $100,000 loans when they can go to Hancock Park and get half -million -dollar loans because they're commission based. And, yeah, they're harder deals, and I think the problem is they are commission based and it's always been hard to push them into the more low-priced homes. M: [That's kind of more to deal with though if I'm not mistaken the turn -downs and not with actually 1. !� M: The origination. Cr `- S. d# I was going to comment on what Art said and also what Larry spoke about. On the front end, yes, you do see a difference. It's easier to originate and get through a loan — a bigger loan — than a smaller loan. Now I would say the same amount of work goes into a smaller loan just as a bigger loan, but where we have a problem is we have a problem because there's a fear or lack of education therefore we won't go into these areas and we put our own personal bias into everything we look at. 1, in my company, many times look -- and from a lender background look — at what the underwriter has done. And it's interesting :to find out because of what HMDA and because every other governmental regulatory rules they have they look at that government monitoring section. Once they look at that government monitoring section because we have done so much at CRA we have now put up new pegs up there now that we have W adeefMiea.M00694ATc Lender Focus Group 13 April 6, 1994 Hispanics: Oh, they can have mattress money, sa now everybody's applying mattress money only to Hispanics. They look at the Asians, and say, oh, ... SANDER: Can you tell us'what you mean by that, mattress money? M: Cash on hand. No bank account. M: Unverified monies. 'WW L Z: And they look at and they say, okay, we've had a few loans here with the Asian community. And they say, okay, Asians here -- have set up here. They can have multiple borrowers, okay, and you peg that for them. They look at the African-American and say, okay, we have bad credit or credit problems here -- and we do that. And you put them in certain pegs over here. And that's been a problem. Another problem is we look at many times the area or the house for which we personally would live in. And then we make our judgments by that instead of looking at what that borrower is trying to do, what that borrower is trying to achieve, what is appealing to that borrower.. We put our own personal bias in it, and I think that causes extreme -- well, the problems that we have in there. M: It's bias. It's called bias. M: It is bias, yeah. ��N $ I think a lot -- we have to deal with perceptions too. I mean right now we have CRA, we've got all these programs set up to take care of what we visualize as problems But the perceptions start, and it is a true that happened a while ago. You can have a 4.Is-i. tJJ f .u.. e, .. _.. k —, Vf{tfJi°--al ... .. r... buyer come up to you and almost tell you, I don't want to sign this thing where it says,what my 1J �.:.'u'. race is or anything like that because they've heard so many other stones about people being :�.t! _:,..i'.V ii(t 2'�:A"li'.' ,nUi...if'� ':, ..._ .F:°t•. _ .. ... !t. ,; .a �?�� Y_'.C;C�i Rte. ...v i.-.. ,.u.::. declined because and they feel like that has something to do with it And like you said, it does. .Lb %1W"lproje kRSQQ694.MTG . Lender Focus Group 14 April 6, 1994 Somebody looks at that and they immediately pigeonhole somebody saying -- like Iranian. They immediately think their taxes are wrong, or, I mean. The underwriter immediately calls the IRS as soon as she sees Iranian down there to see if his taxes are right. That's the way it is, and this is discrimination any way you look at it. And discrimination has changed. It is not the way it was before [totally]. We're going to separate this side. We're not going to let them live over here or anything. We're talking about very subtle discrimination. Like you can have two borrowers who almost -- exactly the same people making the same amount of money and they can both get approval. And one has 48 conditions and the other one has none because this one is a minority and this one isn't. And that is the discrimination we're running into now because they're saying, well, if you can get through this test you're going to get your house. SANDER: What do you think is the source of that discrimination? Is it simple bias, simple dislike of minority applicants or is it assumptions that a minority applicant brings certain negatives with them that you're going to focus on? Like you're talking about the Iranians. That's right. It's a perception. Underwriters are people just like anybody else, and they're risk management. They are looking at things not quite in the way the originator might -- I look at a package and I look at it one way and my processor looks at it another way and an underwriter looks at in another way and PMj might look at it another'way. But what we're saying is if you've got an underwriter over here who has inside their mind what life is about and what life should be — I've had underwriters tell me there's no way he could have that kind of money in the bank or there's no way this can be. How can this — or, because they make so'much money here -- it's not their position to ask that question. That's not what we're here for 'They do make that money. They do have the money, and it's verified and everything. %u.d.4mj %RS0 o6sa.tyro Lender Focus Group 15 April 6, 1994 Don't question how they made it or how long it's taken to put it in the bank. It's there, and it's been there for a period of time. But they don't believe somebody on this salary could save this kind of money. Well, I don't know. There are certain groups of people like Hispanics who will save every penny they have to own a house. I mean, they will save, and for someone to say, well, I can't believe that they could — it's crazy. 'I mean, that's the subtlety in discrimination right now. P V L ..5, I can say that there is that. You find that in shops and everything where underwriters will make that, you know, type of call. However, on the same token, a call can be only made as well as it's presented to you.. �p True. If you look at many files and everything and compare, you'll find a lot of times the minority files are this thick. And if you look at a nonminority and it's like this. And what we found out the is that no one asked them for the information. No one wants to go and really help and really do the work that's needed to be done. SVS�tI� K" Also to address it too from an underwriters perspective, having been one years ago, as a mortgage insurer we pay claims. And right now we're seeing a lot of fraud.. And those borrowers that that underwriter is thinking of — oh, he has mattress money or he's done whatever — is because they've experienced getting burned. And so they've been burned so many times that somebody has said, well, okay, this group has done one thing. Let's be more cautious. And so they're probably more cautious because they're feeling the risk of the company that they're working for. And I don't know if 14SQ Fraud. Fraud is a big issue in southern California -- I mean, southern California It's 95% of the problem that we have nationally. - 'A WeAPM;� M040ess.Mir, Lender Focus Group April 6, 1994 vARNT:sSA A. 16 But what you're doing is also discouraging good people. To add to what Paul said about that thick -file syndrome. You might have a minority applicant come in. The credit looks good. It goes through the underwriting and it's approved, and all of a sudden there is a list of items that this individual has to come in with. Then they supply that list. Then another list occurs because someone else takes another look. We have what you have the fatigue factor. They get tired. They say I just can't play anymore. So they withdraw. SANDER: Well, that's the opposite of what Paul's describing, right? You're --saying that in some cases minority applicants may be discouraged by being made to meet new requirements. F: Exactly. Yes. TOWLE: Some of it, from what I've heard might be asking for reverifications and things too, which isn't exactly a thick file. It's not an explanation. It's things have gone for a while. You say I need your docs again or something. civ L Well, and maybe too the fact that they may supply the docs requested documentation, okay — such as VOD, Verification of Deposit. It may have $8000 in it. And then they supply the bank statements to show that they have continually saved up this money. But then here come questions, and this is what I think she was trying to go to. Then you go back to , the borrower and asking him, well, how were you able,to save up this, how were you able to save up that, after they come to again with documentation. And after awhile ... The want to see when does he i l _ ' • •` Y pay bills, bills before they were paid. They , e ' wanted to see... r M: ._. A budget. UwdcNmje %RS060594.MTG Lender Focus Group April 6, 1994 17 V PsRNEA: _ Yes. And after a while -- I've spoken to several individuals- they just can't deal with this anymore. �DCN And the new thing is now — let's face it, as mortgage originators we, also claim credit.:I mean, we help people get their credit. I mean, we work with some people for six months, eight months, nine, a year, to get them in a position to buy a house, You help them and then you submit a loan after they've done what they had to do get their credit straight and everything worked out. And I'm not talking about a bankruptcy or anything. I'm talking about paying a medical collection or something like that that half these people don't even know they even had. But what happens? You submit the loan and a backup credit report is taken by whoever you submit the loan to. And these things come back up on the credit report because they might be on another, you know, entity that we don't -- and all of a sudden you have no loan because they think that something isn't right there. And I'm just saying that I just see too many things that are ways -- and I understand about fraud. But I also know that I feel; -- and I've only been in this business for about five and a half years -- what I see -- and every time something happens there's always a reaction. You have minorities or anybody else, and they can't get home loans, then all of a sudden some smart person thinks that they can make it so they can get home loans. And then that's where you start the ball rolling in fraud and everything else — overcoming or trying to stay ahead of the game of getting people into houses, and it's a defeatist purpose then. If we had just kept it the way it was and we were here discussing it like we're discussing it now instead of letting these people ride these people down the road. And that's all they're doing is _ taking advantage of them because they're setting them up for something else maybe later. on. lunderlprojr %RS040694.MiG IU L J' Lender Focus Group 18 April 6, 1994 That's the reason we have a lot of foreclosures some of them because of the fraud, because people are buying houses they can't afford. And they're just doomed. And I say on that same token, isn't that one of the purposes behind what we now have out in the community? I guess _ could probably say that the community homebuyer program which is out there to educate the borrower and I say that because we have so many [ 1 sales. But we have at many times a sales person -- a borrower say, well, I like this house about $120,000. A sales person sitting up there thinking about their commission says, well, hey, I can play these little numbers around. I can get you to qualify for a house of $170,000. What this education does it educates the borrower to sit up there and say no to that person who wants to put them in a higher house to say, yes, you may be able to get me to qualify for $170,000 house. That may be my fantasy dream. But, however, my dream is just to get into a house. And according to my livable standard — how I spend my money -- my priorities, I can only afford this $120,000 house. And again with that type of education then your default rate has gone down. The education has gone down because they know what it takes not only to get in to that house but to stay in that house. They understand what type of factors that come with home ownership such as possibly you might have to replace the roof, you might have to replace the plumbing or anything within those type of circumstances. So they learn how to budget for those particular things ahead of time. So they are prepared. So they are equipped. TOWLE: Can I ask a question about these special programs because a lot of you participate in these programs? We've had some inquiries from people who have had trouble "getting those loans insured and they were !told that it's because they have so little equity to the ---._... deals. _ %IMd<r\projce M040694.MIT' Lender Focus Group 19 April 6, 1994 Mw�C,1 M.O. The mortgage insurance? TO WLE: Yeah. That's what I was told in one instance. And the explanation was that these people were putting so little down that it didn't look like they were risking a lot and, you know. 4AZgB-4:�4 It really is a legal concern with us. By law in most states we have to require a minimum of 5% down. Recently GE and, I think, MGIC -- and we've had a 97 program for a long time. We've been trying to get our state of domicile, which is Arizona, to approve a 9717o loan for us. But, you know, it's taken a while. I spent about three years working with that. Then finally we're trying to get California. GE did a lot of groundwork with some Iobbyists in Sacramento to really pave the way for I think us and a lot of others to get that done. But there are still — I think there are 12 states that don't allow you to insure anything higher than a 95 % loan of value. So there is that. But there are still programs like Fannie Mae has. The 3-2 program is a good example.] M: We have a 97. M: [You've got a 97 program too.] So ii can be done. •, - - Yeah. I'd like to back up a little bit here. And I think one of the problems that is evident to me is that CRA and federal regulations is probably what's making the whole thing not work because banks and — somebody made a statement earlier — institutions are being driven by the economic fact that if they don't do the CRA lending, etc.,'iii ey're not going ,to be able to expand, etc: Well; actually'the situation in America today is that manufacturing jobs' f are going away; the service sector is expanding; and the part'of the population growth = 'where ,you're seeing your growth - is really in the service sector which are -lower paying jobs.. So if you Lender Focus Group 20 April 6, 1994 look at it realistically the customer of the future is that low- and moderate -income borrower. And as soon as lenders start realizing, hey, that is a marker to capture and quit worrying about CRA regulations and things like that I think they can probably put themselves ahead of the game and -.- just start going after this because it makes sound business sense. Another reason to pursue this market is that these borrowers are typically buying for shelter and not because they're going to look for appreciation to refinance out of later. They're not buying for status. They're buying shelter H -O -M -E with capitals all the way across. So they're motivation to stay in a home is probably significantly greater than someone who's a professional and is buying in a higher -income neighborhood and is more likely to probably file bankruptcy and do something else or walk away from the earthquake damaged home and take the insurance proceeds and do something like that. SANDER: Art, why do you think the people, why do you think the bankers who are pretty savvy about the market, would be [blinded by something like CRA in not seeing where probable loans can be made]? I think because they're living under -- I think lenders in general, especially executives, tend to be older and their mindset is one of stereotyping people, etc. You know, you look at studies about racism, etc., you'll see that young people tend to be less racist or less stereotypic than older people. SANDER: Right. But if you get rid of CRA that's not going to necessarily end the stereotyping RST �.: ✓ { t Right. But I think that CRA contributes a kind of -- it exacerbates the situation because now people are kind of artificially required to do this. So then they have some resentment -internal resentment -- against. it. And then they start putting people in boxes, %WAwlpmjm MO40694.WO Lender Focus Group 21 April 6, 1994 well, blacks are like this, Hispanics are like this, Iranians are like that. And I'm only doing this for CRA so I'd better watch myself instead of just — in fact and this is called the fair -lending round -table here I imagine. And we'rejust talking about treating everybody the same. And we're'= actually admitting that nobody is being treated the same. We're all admitting this right here. TOWLE: Marci, did you want to say something? YNP*,(Gt m4 ; - Yeah. I want to argue with Art. M: You're first. You don't feel like you're being treated the same? - M= [Not really.] ,I think that while it may be true that a lot of lenders have gone into CRA lending because of a regulatory mandate, I think the ones that are smart -- certainly the two that I have worked for -- have found a they got into it that it is good business and it is profitable business. And now at B of A is a mainline business. It was ... ��ZICZA,; , 44% of the business. jY1R t A ; - Thank you.. I thought you should say that rather than me. And Wells is on its way. SANDER: What is mainline business? K1Anrct M'' It's part of their main lending effort. If you look at B of A which is the largest lender, I think, in the state last year in residential lending and you can say that 44% of their lending was CRA lending you'd have to be a fool not �to want to pursue that business. Y�2Ns�SA i�: $3.4 billion. SANDER Andyour definition of CRA lending is the same as Bob's?_, _. M*CZ M.: It's lower income census tracts and borrowers up to 120 % of local median regardless of where they live So it's generally moderate income people and/or... F...a«F�;«duts oaae�. �.rrc Lender Focus Group April 6, 1994 22 SANDER: Not by race? F: No. YF}2N�SS�} I guess each institution looks at it a little differently. We don't address race as an issue. I mean, as far as breaking down the HMDA rmation it looked at. But: as far as qualifying an individual for these programs race is not an issue. k'tF2317, ; Most of the time you can't determine from the application, though. I think sometimes what's often considered as far as I think when they brought up the race many times is because of the fact that you might have someone to holler discrimination, that they could -- a person who was a minority -- under the same guidelines that they would give somebody for CRA in order to have a second look or a third look to prevent as a type of prevention. And one thing I wanted to add on to what you were saying, Marci yes, CRA affordable housing is profitable and I would like to say the fact that affordable housing is actually outperforming by a long shot, you know, standard loans. MIReZi M. ; — - I want to say something else on that if I may. One of the things that has just recently been determined is that we first got racial data and income data with the 1990 HMDA reports. 'Prior to that time racial data wasn't available and income data wasn't available. We just had census tract and all that. So now that we've had a couple of years to see what's happened since 1990, some of the people who do very extensive analyses of all the bank holding companies in the country or at least the hundred largest = who had made the presumption, as I had, -that what was'happening in California in the last few years was happening all over the country - in terms of really major movement of the big lenders into CRA lending. And ies`° determined that in fact that was_not the case. And the major movement was in California. It %.MeAp"je %R5040694.MrG Lender Focus Group 23 April 6, 1994 wasn't across the country. And I think it was the leadership of major banks because the thrifts have always been in the business -they own the business. The banks weren't long-term lenders until the S&L industry was deregulated, maybe 10 or 12 years ago. And everything has changed since then — the introduction of the secondary markets, the importance of the MI companies -- I mean the whole industry has gone through revolutionary change in the last 10 years. So now you see that what has happened on the West Coast and California particularly is different than anywhere else. And when I talk with people on the East Coast who follow this stuff what they tell me is, well, I've been telling you that for the last four years that what you're doing is different. And the way it's different is on the East Coast the money -centered banks have still not introduced the CRA lending as part of their mainline business. They've tended to create separate and different departments for subsidiary banks to do CRA lending and then they get great big press when they do two or three loans or ten or twenty loans. SANDER:, So the two banks that you have actually worked with have made CRA lending part of their main business. So, what constitutes the special thrust given to CRA lending? F: Probably two or three hundred things done intrinsically within the institution in terms of specialized programs, second or third local reviews, special underwriting revisions, serious negotiations with the other two essential partners, the secondarymarkets and the MI companies, and incentive comp for the salespeople to try to equalize the thing that you"re talking about so that if you're doing a loan, for $100,000 you're not going to be economically penalized :a because someone else is doing a loan for half a million F: Plus most of your. major institutions have a commitment that they've actually A' made to the communities. And when they look at the numbers on a regular basis if a certain group %"W"« pmj .NRs0e0694:Mrc Lender Focus Group 24 April 6, 1994 of your delineated area is not being served properly then you're going to have extra marketing efforts to attract that business so that you can comply with your CRA requirement. SANDER: So you're using HMDA data to figure out where your marketing should be targetted. F: I think once the lenders saw the 1990 report with all the racial data that frankly there was a lot of surprise and dismay and concern. I mean, at B of A at the time the head of the residential division looked at those reports and he said, I don't believe this. This is garbage. This can't be true. We've got to go back. We've got to do this again. He literally did not believe it. (break to side 2 of tape] McL , I get a lot of applications by mail. We never go face-to- face with the customers in a lot of cases., Okay. If someone's got a last name of Vasquez, I'm going to automatically assume they're Hispanic. And I've seen Mr. Vasquez walk in and he's white. And I go, wow, boy, did I screw this one up. So you're really basing it on a lot of information you may not have available. And that's what's sad about HMDA data. Like Bob. His loan office is there marking down something that these people are minority when they in effect are not. It's going to skew the numbers even farther down. And that happens. "tD8 c '. - Oh, a loan rep wouldn't do that. C MCL ;?Lr1' ; = ` Not a loan rep I know in his ng mind..`` SANDER: Let me pursue that one point though." If loan officers are making erroneous == if there's some error built into the repo rting'of race'on these forms. 1—M"lpmja %Rs060694.MTG ..._ Lender Focus Group 25 April 6, 1994 MCL; We're being forced to choose. Period. If they don't choose it, we've got to. SANDER: Right. And if errors are being made then consistently by creating more what statisticians call noise in the data, that would tend to mute racial disparities. That would tend to make every race or group more the same because they're randomly putting some people in the wrong category. The fact that the disparities are so strong even with that garbage in the data, it means the real patterns are stronger than that. MCL. `: No. The original data that went in probably went in correctly as far as the information because it went through, you know, how many thousands of applications. SANDER: Right. MCL Now the new data that's coming forth is going to skew those numbers completely off the board. Because now all of a sudden you've gotten loan officers who have gotten wise to the fact. Okay. And they're putting information in or kind of changing things. I mean, it's not unusual. SANDER: You mean now there's a kind of conscious effort to [police] the data so that it's going to look better when it shows up in the reports? MCL. Absolutely. SANDER Can you give me an ekample of how you do that? Do you mark a white applicant as a black applicant? w }; Or as a nonwhite applicant, okay, oras a Hispanic. >' SANDER So someone who you think you're likely to approve you mark down as a minority so it's going to increase your minority approval rates. Is that what you're saying? 'r^a�v�i��asoeosw. t�rc Lender Focus Group 26 April 6, 1994 MCL. -t Not consciously, but subconsciously it probably happens. I could see someone doing it if for instance you got some bad credit or something else. SANDER: Let mejust make one point. If that is what is what's going on that r�again would mute the racial disparities not increase them. QA -AYE MCL.. But we don't have the data for that. I mean, how old is the HMDA report when we get it? SANDER: About two years. MCL _ Okay. That's along time. SANDER: I'm sorry, I just want to let Bob go ahead. I interrupted. `BC013 C"' - I was saying that if someone is going to change the data, for instance if a loan agent was going to change it they would be taking, for instance, a white applicant they may have to run through a credit and putting it as a Hispanic applicant to get the loan through not to consciously change data for HMDA numbers. Frankly, most -- it's my experience and I did loans for many years — loan agents typically don't care what HMDA data is. Most of them don't even know what it is. They just put it down. But, if they know I can get this loan easier if I mark the borrower as Hispanic then they'll do it. SANDER: So that would go on if your institution has a program that's clearly giving the stronger weight to the Hispanic applicant. BOa C.: Remember now a Iot of people though my experience - most ` people lately have been filling the data out. Most borrowers will check the box. Lender Focus Group 27 April 6, 1994 VA�tJ�55R N. G But wouldn't they say they "visually observed" this individual to be, if they're marking it? 1�^ to C. ; No you don't. You just have to mark it. You're supposed to (put— visually] but most people just check, check. You do it based on a lot of different things. You don't want to say that, you know, I visually observed him and then they come back and say, hey. But they won't ever do that. WL, 2.'. I think what we've talked about so far is possibly one fraction of what the problem is. I thinkthere's a bigger problem once the application has been received and it's now in processing — and it's now in underwriting -- and the standards that are applied. And I know — I've watched it many a times and I've seen it in underwriting, I've seen it in process, I've seen it in sales, I've seen it in management, where a borrower didn't have the quote/unquote "28/36" ratio. They were pushed aside not understanding that out there in the real world here the majority of the people put over 40% of their paycheck towards housing. And it's our lack of understanding those particular things that the files are getting behind. Lfl�� F• I think a lot of the problems we're having when it comes to discrimination is the guidelines that Fannie Mae set up whenever they set up 50 years ago or the MI companies, especially when it comes to like appraisal issues — comes to these ratios. I remember sitting with the head of Fair Housing and going, who came up with these ratios? What do they mean? I mean, like you, said, everybody's different. `And I don't the intent was there to be discnminatory when they made these policy guidelines, but it turned out to be. > Especially when it comes to appraisal they say to condos and stuff in minority areas I mean that's where %,MdeAprvja %R50/0694.MfG Lender Focus Group 28 April 6, 1994 you mentioned earlier — I've had a lot of trouble with the condos trying to get mortgage insurance 11� on them in Inglewood and stuff. They don't like that, and I've had a lot of problems with that. Larry's point is very, very good, I think, And what Don was saying earlier about underwriting perceptions. I came into this business from the insurance business from our parent company about eight or nine years ago. And the one thing that I notices is that -- in fact I refer to it all the time -- is there's more old Spanish customs in the mortgage origination business as relates to underwriting. And things don't change very fast in this business, I noticed also when I came over - from automation to underwriting. There were underwriting policies -- and I'm not talking about just MI companies but lenders with lenders and with Fannie Mae but Freddie Mac that went back 15, 20, 30 years. And they were broadened for the country. You know, I made the statement when I came out. And I was in marketing at the time. I wasn't even in underwriting. And I said, why don't we have the same ratios for California as we have for other states. I said, you know, coming from Illinois the median home price at the time I moved out in '85 was, I think, $84,000. In California the median home price was $170 -something thousand in 1985, and I said here the average household has got to spend x amount of their income versus in Illinois the average was like 19 or 20% for house payments versus here. But those things don't change. Those underwriting perceptions -- those rules -- they don't change fast in the mortgage industry. Neither does automation or a lot of other things that move slowly through this industry, our industry. "And, you know, I haven't been that long into* it, but as somebody coming fr . _ .. a:.t m om'the oue I' tsidve�noticed in the lasCtwo to three years that things are moving faster now in the last two to'three years thanthey moved in the prior probably five to six years I was here. And the other thing that I think is very interesting -- getting back to Art's point - the thing that Umde,lprojec MO40694.MCG - Lender Focus Group April 6, 1994 29 I noticed in the last year especially is we have very large lenders, not just the large banks like B of A and Wells Fargo in California but not other very large lenders that have recognized that this is a huge, viable market that we've got out here. Not only that, as Paul was saying, what we- discovered and they discovered is that this business performs as well or better than the across-the- board "conventional business." But it's understanding how to originate that business and how to underwrite that business. And you go back to when I lived in Chicago. The inner city at that time was hard to get anything originated in. You had ethnic communities that if you were in a Polish community nobody wanted to do a $30,000 loan on a Polish community. SANDER: Except the Polish savings and loan. VEe13Z• ' E.ccept the Polish savings and loan. This is the point you see. And I think we've got the same thing here. And it's only just been recently in the last year to two to three years that we've recognized there are opportunities there that are changing a lot of those'old customs and perceptions. But it doesn't happen in this industry overnight. And what got it started was a lot of the mandate from some of the large banks. And it really — I can say Marci's absolutely right because we're a national company as , and we see a lot more of this happening out here than we do in the Midwest or the East. SANDER: One point that a couple of people raised about the performance of CRA loans or minority loans —are any of, your institutions computing statistics on default rates'. �08 C'• % We think a lot of it's because if it's the lower loan amounts the income it takes to make or service that debt isn't that great so if you„lose a job it's easier to find a job to make $2500 a month than it is an engineer who loses a job that's making $70,000. Cood ---luck to a guy to find a job like that now. �mmcetpmj« iRs040694. WM Lender Focus Group April 6, 1994 30 SANDER: 15 it also true that a relatively less expensive house is going to be easier to sell if you get into trouble foreclosure? .What we've noticed, especially in the last two years, is the low en& is the only end that's holding its value. rb(�M 13. 4. But still the main thing — and somebody said it before — is the people buying in that market are not buying for investment. They're buying to live someplace. That's their American dream. They want a house. And their motivated. They lose their job. They're going to go find a job, or two jobs, M: Let me tell you. They will do anything they can. That's the first thing I on their list -- payment, you know. That's what they're there for. m�(2.a M.: . And you also see that they don't turnover as quickly. M: Right because that's their main focus. M: Right. They may pay 30 years. They'll let the car go before. They will keep that house. SANDERS: So, does everybody here agree that the default rates are lower on average for black and Hispanic borrowers than for Anglo borrowers. I'll throw.a little mud in there'. Actually they have to perform quite well., We're seeing an Upward blip id delinquencies.' And we c'h ised it down and it looks like it's from third -party originators which'is not direct lenders? — It's brokers. 7 6"C-�Pmje %RS040694.Wr R 61 If you take a hard look at what has been done by some of the major lenders here like Wells and B of A's Community Development Bank which was really modeled on South Shore and look honestly at what they've done in terms of performance, I think you will find that they have probably outperformed what South Shore has done even though that's the one that has gotten all of the acclaim. So you really need to look at cost benefit. Lender Focus Group April 6, 1994 31 Well, but I think that gets back to Paul's point earlier about the education procedure. A lot of these Fannie Mae, CRA. SANDER: Well, do you think that somebody in the secondary market may be taking advantage of people who not as sophisticated about lending. M: Well, that's not exactly the point think. The point is that we require an education component because a lot of these are first-time and hourly wage earners that just haven't had the tradition of buying a home — or usually first time. So we're indoctrinating them on the front end, certifying that they took this education course. A lender, I think, will do it because he's on the hook. He's at risk for not doing it. When they start getting into third -party origination it's farther away from the They don't know if the guy really takes the course or not. Right. Because it's not hard to fill out that piece of paper. Right. It's just a certification that says I did the course and all that. w1V I do that training on every person. I don't care if they're in a community homebuyer program or whatever program. They get that training because really that's the smartest thing you could ever do is do that training on anybody who's a first-time homebuyer. ir303 C. It wouldn't be a bad idea to do it on any homebuyer. I took ' r deal (FANNIE MAE)and • • aa nd gave it to my son three years ago when he was buying`a home. Mt And he was not a first-time homebuyer [ 1. M: But he was a first-time homebuyer. 0 Lender Focus Group April 6, 1994 32 We're talking about all these programs that have come up to overcome -- the CRA programs -- to overcome a lot of the disparity in lending. But -- I hate to say it -- what we've created is another group of disparity in lending because you have the --.; believe it or not minorities are not low-income people all of them, you know. They're just not that. I mean, and we're talking about any minority. There are some who do not fit that -- how we've come up with the median income or whatever we come up with. All of a sudden they make more money than that but they're left out in the cold because -- I hate to say it - we are here to talk about discrimination in lending. And there is discrimination in lending. I don't care what anybody says. There is —like we're talking about 28 over 36. Well, if you don't hit the 28 over 36, it give somebody a reason to decline you. If you don't hit that guideline you can be declined because you didn't hit that guideline if you're a minority. I'm not saying anybody here is doing that, but I'm saying it's still there. Now you have another group of people who went over that income. We're telling somebody over here they can have 33 over 38, 33 over 40. And we're telling this person they have 30 over 38 or 30 over 40 — because they don't meet that criteria there they are no longer able to buy a house. i3 c t e" 4 So you're saying you see that more -- if there was a white person buying a house with a 30 over 40, you're saying the underwriter wouldn't have a problem with that? I'm saying the possibility is there..I'm saying there are.minonties who do not fit into the CRA programs, the homebuyer programs, the medium income programs. Lender Focus Group April 6, 1994 VPQt4Fis5Pt A,; It's true, What he's saying is correct. 33 There are statistics that show that an upper middle-class minority has a great chance of being declined. Zoe C-• ' Well, I mean, recently, actually in southern California I think the Orange County Register — I think the Orange County Register had a study like that that showed that upper middle-income minorities were [higher declination rates] than anybody else. Hrezz ' That's been the case every time anyone has ever had a study. PfC.I Let me tell you what we are facing as a lender, and some other lenders may be facing too. We're not happy with the disparity rates in terms of declines. And in an attempt to address that we've done a lot of the things that I mentioned before but we also instituted a second -level review for any minority applicant regardless of income, regardless of location, because we felt that was a way to identify internal problems that we could then address. The OCC has explicitly mandated that we stop doing that. They have said they consider that reverse discrimination and unequal treatment, and we may not do that. LE n. do See, we do second -level review on alldeals. We do it on every turn- down. Is that the way? Because you are just doing it for minorities? MSCI M.t Yeah. C• : Not because it's with CRA or low-income or anything, it's because YOU are doing it because it's straight race. Yes. It's minorities.- - Y M. I can see that, though. I can see OCC not being happy`with that. So the OCC is now vigorously enforcing the right1. of every white applicant. ` V*"Jcl'fmj« kR5040694. MfG Lender Focus Group April 6, 1994 M: M: Of everybody getting a second chance. Everybody. West M. Of every AWte applicant not being discriminated against. thinking if it were as vigorous on the other side we might not be sitting here today. 34 I can't help., SANDER: Yeah. Did you want to make a point? MCL Yeah. I just think the education process is really poorer on the minority side. And I'm not blaming the minorities for it, okay. The banking community I think should be doing more on bringing the education process down into the high school years and letting people know at that point what they're going to have to do. There are kids walking around in high school that haven't clue one what it's going to take to pay rent, utilities, car. M: That's anybody. rD WNE MCL ' _ What I'm saying is if I have applicants come in traditionally white applicants or whatever — upper middle-class whatever -- they're more prepared to deal with the application process than minorities are because they've been coached, they've been educated, and they know what they're doing when they're walking in the door. It takes a lot more work to put together a minority loan applicant than it does another because their sources of income comes from multiple borrowers sometimes so there's a lot more detail. There's a lot more documentation requirements, and not just because they're minorities. It's because of their lifestyles or how they do things or whatever. .. �� ' • %% A lot of it is upbringing or parental guidance too. If the parents are ` ' , r educated and college graduated, then their kids are obviously going to have a little more on the ball when they apply for the loan. That could go through any sociahor economic boundary %A ` ' +a,dMv�i�vuoaoe9a.trrc - _. _ . Lender Focus Group April 6, 1994 35 'D�N Z. ' One of my things has always been -- as a matter of fact right now I'm working with Laura Chick and we're trying to put together going into some high schools to start talking about credit, buying a house, stuff like that because it's important. And there is no high school that teaches that. They have no clue. They have no clue. M: Actually I know one high school. M: No. No. Mine was a joke. SON H.: - _ No. What I'm saying is when you talk about someone being more prepared or whatever, well, if someone has friends who have houses they have more of a chance of being prepared. If you have so many friends, it's just like when you see on TV the first black kid in a family to graduate from college. I mean, well, that's because nobody else went and no one else knows how it feels. But if you have no one to go to get that knowledge from then you're not going to get that knowledge. I think the best thing that could ever happen is to have the community homebuyer programs and thing like that. And then we have to do these training seminars and I'm glad people are over looking them and making sure they're being done, too, not just -- you know, it could have been just, oh, yeah, right, rubber-stamping. You can't rubber- stamp. It's the most important thing you said. Education is the most important thing. But we, as professionals, in all parts of real estate. We need to start going into the high schools. You're right. But that's everybody." �M'F— But, conversely, you know, we spent a fortune in Ventura County. We were going to do first-time homebuyer seminars. Okay. And you hear about some of these Pres. We did one of Long Beach." Five hundred people showed up - okay — 500 people. We had to double our rental space and all kinds of stuff. It cost us a fortune.~ We didn't know what" k' -AC Mjr Qd060690.MTG M Lender Focus Group April 6, 1994 36 we got into. So we thought, well, we'll try this in Ventura County because we didn't want to do it in Los Angeles again and get inundated with 15,000 people. So we did it in Ventura. We spent several thousand dollars in advertising costs. Twelve people show up, and not one minority amongst them. We were absolutely flabbergasted. We don't know what we're doing wrong. We - were in La Opinion, we were in -- I mean, you name it. We did what we thought we could do in order to attract the people. And then these 12 people show up and they're all white people with terrific income and stuff -- first-time homebuyers. We're going that's not what we're trying to attract. What did we do wrong? M: Wrong part of Ventura County. D blE McL . . One other thing I wanted to point out was -- there's a lot of minorities in Ventura County believe me. IDA -6F_ McL_ Right. Especially a very large Latino population. lPtI McL_ Extremely large. And we just really fell flat. But one thing I do want to point too is we've come a long way. I mean, the lending institutions have come out a long way. I mean, you guys are all pointing out disparities between this, this, and this. When I first got into business we had actually marked cards according to people's ethnicity. If they were married or not, if they were living in sin, we marked them. This was common practice. I could call up, I could look on the back and know that there was a white guy living with a black woman or vice -versa. M: What year was that? M: Seventy-two. Also I could ask a woman at that time - it was not considered .. - :�;,. .�..:. •moi, c:' k: :.:�,.. , .. .. ... . discriminatory at all - are you planning on having children And if she said no, what form of %&"tApmjx \RS04%94. MTG - Lender Focus Group April 6, 1994 37 birth -control are you presently using? So I'm looking at the world through rose-colored glasses now thinking we've come a long way. Twenty years is a long, long time. Believe me. But, I mean — and, you know, heaven forbid if there were two gay guys come in for a loan. It was like'' — it wouldn't happen. I mean, it was unbelievable the discrimination that happened. And now -- single woman, you know, well, you'll get pregnant next week and you won't have your $50,000 -a -year job. SANDER: So, would those of you who have been in the business for a while agree that that was common in the '70s? PproL.Q. And '80s. It's taken us that long to see improvement. That's for sure. • ��'�' • But it's still there. �D&vL As Herm was saying there's been more move in the last few years than there was the previous, you know, 15 to 18 before that. St PH % : - And technology has also helped us track it. We were unable to track things. ('IiPcf�t M.: Once you have to look at it in black and white, and you have the regulation, you know, albeit it is a regulation. Then you have to deal with it. Right. F: But we didn't before. TOWLE: " Right We'have a question about appraisal practice. I've talkedto a minority' appraiser' who's told me that they do the appraisals for lenders and that they're pressured a lot by the lenders to bring the values in at a certain level: "- M: That's for any of these r.m..a�i•a.�Rsaeonao. ttra Lender Focus Group April 6, 1994 F: That's for anybody. M M: That has nothing to do with minority. AUL Z:; I think the bigger problem is the appraiser who cuts the property because it's in a certain area. M: That's just in a certain area. M: I don't think it's just the area, I think, as much as the condition because, you know, my review appraiser lives in Manhattan Beach. And he looks at this place in South Central L.A. and goes, this thing's got cracks, it's beat up, he's not used to it. M: Oh, yeah, yeah, yeah. I think that's his problem. M: That's more of a problem. rMU 7 That's a big problem. And I think one way to address that is to make — when you're ordering your appraisals is to know what that appraiser's area that he works and what he specializes in. Too many times — and we still have this, like you say -- someone working _in Manhattan Beach doing appraisal on a property out in South Gate. And he has no idea of what's happening in that neighborhood. DN7—Y'Rc.We don't have a choice, though. We don't have a choice. r' -01y • ; They do work in the community. They know the community. But they — when the appraisal goes in and gets reviewed by somebody the review appraiser could live in Manhattan Beach, could live in Santa Ana, could live in Ventura County. ESB �• : It may be a desk review, and that's what he ever sees is the . underwriter's comments. [too many voices at once] - \-MV%projzb\RS040694. UTG - 0 Lender Focus Group April 6, 1994 39 �Dot4 B.: We still have pictures. I mean, some people will live in a certain area because it's their fust house and they feel in their minds they can make that place. They will make that house probably better than it ever looked in its lifetime. But they got to get in it first.', M: Right. And heaven forbid that there be graffiti in the photographs because then suburban bias come in. They'll go, gee, I'd never live there. M: I've got an underwriter who's husband is a contractor. Every time I get something in the picture that looks like it wasn't done right, I hear this, you know, my husband's a contractor and we want that fixed. You know, I always feel -- it's a 30 -minute conversation and she knows all about the contracting code. And we got a guy -- maybe a first-time homebuyer — he's going to go in and fix it himself. The guy doesn't have a whole lot of money to have a contractor come out and the seller just wants to dump it. [He's upside down.] (RZT• : _ ' ,z . In Fannie Mae guidelines they don't care if it's a legal addition or not as long as it's finished in a workmanlike manner. So, I have this woman who calls -- one underwriter who called up and says, well, what do you guys say about -- they'd split the garage and made a little bachelor out of it with a toilet and kitchenette. (I told her) "I don't care." Oh, and she's telling me with glee, you know, that these were Hispanic borrowers and they're probably going to rent it out to somebody. So I made them pour concrete into the toilet. She told me with -glee. i"M:' ' I think one of the problems too J. within guidelines I talked aboiit before -- and hopefully we are changing is Fannie Mae's got rules where we will not lend like, for example, what they call fair -condition homes. " PST That's not true. That's not true. It's got to be fair or better. U-d"\PMj MS04694.trrc Lender Focus Group 40 April 6, 1994 M: It would not be below fair. M: It's always the poor. It's got to be poor. M: See, we've always been told we cannot sell to Fannie Mae fair. [too many voices at once] `Pi�UI. J J What I'm saying is, yes, you have those ratings of excellent, average and poor. But as you know, if you look at the new appraisal form that came out in 1994 because of that discrimination where they were just marking excellent and average and every time they saw an appraisal it was either average or fair, what they said was there was discrimination going on. And so they took that out of the appraisal and they put it in a paragraph where the appraiser now has to write a narrative about that particular property. Okay. Now, still on the same fact of discrimination when we're dealing with the property, it comes back to that underwriter to see. And there's not so much you can nail that underwriter until you nail the ones he has to or she has to answer to. M: Right. }jrt1�S7.: That's right. And one of the things that we found out in looking at affordable housing underwriting is that going through the last two years that we've gone through — that all of us have gone through with all the refinancings and everything -- where you're, you know, averaging 12, 13, 14 aps per day per underwriter, files to underwrite, and working 12 and I 12 hours You may have an underwriter that does 12 or 15 loans in a row that are typically, plain vanilla type loans. M: Suburban. Right. ' Lender Focus Group 41 April b, 1994 0Eq-1D -Z.: Exactly. Then all of a sudden in the middle you got an affordable housing or a CRA loan, and then, you know, you got the reaction that Paul gets back to. My god, look at the appraisal on this. Look at this property. It's probably a property that she wouldn't or he wouldn't live in. But that has nothing to do with being a good property or good loan. And the same thing with maybe credit or ratios or mattress money. It's the same thing. So how do we improve ,that? What you have to do is it takes a lot of training. And we've designated underwriters in our offices that now know how to underwrite affordable housing. And until it becomes almost universal that now we have companies that have recognized this is a huge, huge market -- it's billions, hundreds of billions of dollars -- and it becomes the norm and then everyone is trained on this, until that happens you're still going to get what Paul is talking about where that underwriter is sitting there and it's what they grew up with. They come from their own experiences. And some of the worst ones are the ones that may have been around, unfortunately, for 15 or 20 years because they have these old prejudices about ratios, about credit, about types of property. And it's hard to break those prejudices, not just as far as race but about everything. �IWL :1. ; One of the key things I think he said and has been brought out tonight is the fact that it's the education that's going to change everything. That's the underwriters, right? [too many voices at once] �>`YU L That's all over even with the perceptioo n that when they think that 7t Zf? they cannot get a loan through_.,., because MI will decline it. ThaYt is a bad perception that's been put on MI. And I can say that by working with MI, and I can say that by working m many lenders' shops, manya time --a majority of the time is that lender whodoesnot want that paper but for ,. __ 1A.dulpnje IRS040694.MTr iR Lender Focus Group 42 April 6, 1994 business' sake they don't their name to go out there in that community saying that they're not doing this type of loan, so they'll send it up and let somebody else decline it so they can put it off on somebody else. What Art said when this discussion started is Fannie Mae won't buy it, and Fannie Mae says they'll buy it. I've had that discussion with so many underwriters that there is — I believe a lot of it is just non -CRA lending, just regular lending. When we're sitting there with like a 40 over a 50 ratio and we're saying, on the sales side -- the sales are always pushing loans -- Fannie Mae will buy it because we know a guy at Fannie Mae who says they'll buy it. The underwriter says, no. The underwriting manager says there's no way in the world Fannie Mae will buy it. We lose the transaction whether it's CRA or not. But there's definitely a lack of education of what Fannie Mae -- and Fannie Mae frankly is the big guys. You got to sell to them or you don't do business. And if they say -- you know, if the underwriters think they won't do it, then we don't have a chance at it. It comes back to education. Well, as Paul is my witness - am I training processors, underwriters, loan officers? WA)L 7. ; Absolutely. Fannie Mae has been putting on presentations left and right. Us 'R. -. I actually developed them. In fact I did an "Underwriting Low and Moderate Income Borrowers"And I have to come out with some trepidation because I figure if I brig out, you know what I did in the afternoon session I had speakers talk about Hispanic borrowers, African American borrowers, and Asian borrowers, the three main groups in southern California. I did so with some trepidation thinking the industry is going to say you're on your _. ,_. .er*mje \ASO40694, MTC Lender Focus Group 43 April 6, 1994 own personal agenda— applause, the greatest survey, you know, highest marks I every get'for any session. So that's going to be a continuum is getting the sessions going out there on a consistent basis. And in fact internally we have to do it too because some of the underwriters are'thinking•• the CRA low/mod lending is just a temporary blip on the screen. It's not going to last. Yeah. A lot of people think that. It's not. Yeah. It's here to stay. SANDER: I want to follow up with a remark that Dave made about appraisers. And I thought you were shaking your head like when people were talking about hiring appraisers from the local community familiar with the low-income housing. You were saying you couldn't do that for some reason?' :Dy:1 ve, M L; - 'z T don't have that capacity. SANDER: Why? U£ Mc -L7 I'm not allowed to pick an appraiser. SANDER: What do you mean? Y£ �Nc�-• We just go through our appraisal office and they in turn pick so that we are completely separate from the transaction as a loan officer being able to influence the transaction in any way, shape or form. I've worked at institutions that had staff appraisers too. No. We have an appraisal office, and if.it's local in Orange _, 'County' they can staff it.'-'I'f it's up in the Valley they fee it. SANDER.`:`' 'And the reason for that structuie is Eo prevent the loan officer`from an easy appraisal? kind of having j VNd@4Mja \R506069C.MIG Lender Focus Group April 6, 1994 DAVE mcL actually I like it. 44 Yeah. We're completely separate from that situation. And Psm EJ�WP You see, our situation is different. We have in-house appraisers. And we did have the big problem of declining values. And we now have and have had this person in place for at least the last two and a half years. We have an appraisal relations specialist. And any time there is some question about the value of the appraised value, she takes a second look at it to the point of going out and reappraising it herself. So our appraisals get as high as a three- tier review just like our declines. So that keeps consistency with the appraised values. And a two-month processing time, though. �� C• • And you know what's also interesting, Rick, is I've heard statements in general from people that -- especially when you're a national organization and you're headquartered in another state far away in the Midwest or the Southeast or something like,that -- they'll say, oh, well, we don't want loans in Los Angeles County, especially those low/mod loan because that's a declining market. Well, where did you get that data? Well, no, it's obvious, you know, and they claim to have demographic data. c*�rtfs- Mc. L , 4. Like USA Today? 6a ,C.: Right. Right. Or something like that when in fact the opposite is true. You've had your biggest losses — yeah, you have had losses in southern California, or actually California, but your biggest losses have been in the affluent areas' where you had too much appreciation And really .I think our overseer of the quality control says -that in low- and moderate -inner city neighborhoods you're looking losses in value of 3 to 5%, which is pretty much next to nothing. Wd"%Pmje< RSO40690.Wr Lender Focus Group 45 April 6, 1994 �-e F• [It's pretty good when Beverly Hills goes down 40 over the last two years.] H 1EEZ D• What's Art is saying is exactly right. Especially the northeast -- they ,- finally have a chance to bash California anyway, I think. And they're loving what's happening to us out here. But I was at a meeting recently, and I made a presentation. And it was I would say almost predominantly made up of Eastern -Midwestern lenders. And they were -- my discussion was strictly on the California market because it's in my zone. And they were absolutely amazed at some statistics that I was giving them. They didn't realize that, you know, if you look at median home prices under $200,000 or $250,000'we've had little to no loss of value in most markets. In fact in a lot of markets in California you have -- even have had appreciation in those price ranges to start with. And, you know, they think everything has been reducing at a rate of 20 or 25% a year for the last three years in California. So if that was the case, you know, a $500,000 home would be affordable for all of us. But at this point, you know, there is a lot of misperception I think about that. cPPjJJL Zt I think that's the media doing that too. 3 �� C• ' C ?�' s ' -'? One of the worst things I've seen ha ' - g happening in the affordable market is that condos would be, of course, the most affordable vehicle. But because of the regulations and fear mostly that there's going to become too many nonowner occupants owning a property, the really affordabler,-condos are not financeable..via the traditional secondary market or even try -"getting insurance on them. Well you just changed your underwriting guidelines didn't you on that, what abotit a'year ago? W[derlprojr kR5040694.M7G Lender Focus Group April 6, 1994 ode) C.. fip- - "R` 46 Well, just try to get a new complex done. Well, the thing is that you really want to -- I think the answer to the question Paul asked was that you could just segregate this so owner -occupants could live there and not investors. But we live in a capitalist society. W a.: What happens is you do end up getting -- you know, you see the paper on Sunday and you see condos in the Valley for $60,000, $80,000, $90,000. Heck, you can buy it as an investment and rent it out, right? SANDER: Sure. P�� (�• = And that's the problem is that there are too many investors competing with first-time homebuyers. Zoe) C-• : Well, too, you're going to have the first-time homebuyer who goes in there three years ago. He saves up some money. He wants out of a condo because condo living isn't ideal actually. He wants a house. He moves out and rents his condo. Now the occupancy issue is ..... 50%. I can't get a Fannie Mae loan on it. MCLAUGHLAN: Or mortgage insurance. �� C• : Or mortgage insurance. r SANDER: One other question that we want to talk about. Early in the '50s and '60s there was a very strong — going back to the old FHA guidelines in the '30s -- there was a strong attitude against lending in transitional neighborhoods, neighborhoods where racial composition or the demography was changing quickly. A'lot of that was based on the idea that property values decline when minority groups enter. And there were various studies conducted to refute that - successfully to academics but not successfully -to most of society I guess. I'm ` ,.. _ %m.a�.b,.j« kRS04N94.irro Lender Focus Group 47 April 6, 1994 wondering how much that view still exists. In Los Angeles we still have areas that are going through racial transition. Do any of you perceive that as an issue for appraisers? r-k)oe� C • % There's no place' for them to — they couldn't comment on something,', like that anyway. And the first time you would see someone comment on anything about composition of a neighborhood or transition of a neighborhood you'd never use them again. SANDER: But how about a euphemism like stability. B C.: Stability — really the only time I've seen stability as a factor in terms of price range and if it's declining -- and then I was at a very large organization, a very large bank, and every appraisal we have is declining. Well, you didn't make market unless we had staff appraisers which they wanted it declining. Frankly, L.A. County was declining, especially two years ago. Everything was declining. I mean, the prices did go down even in the low- to mod - income. They went down. I mean, we didn't have $100,000 homes in the Valley two years ago. We have them now. But every PMI knew they were declining. They were still doing them. But we as an organization decided declining in terms of value: Nothing about racial composition or — that really comes up with more condition. You know, like Art said, if you see graffiti. I mean, and I did apartment lending before where you really see the discrimination of lending in apartment buildings --'especially if there is — if there was graffiti out there before the appraiser went out there we'd go out — we got someone painting to clean it up. In housing, though, you don't see it as bad except the issue with the condition. SANDER: Okay. Does anyone else see this as an issue? No, not with the appraisers. Plus they are not allowed to comment. L -... boder\pmjm \Rs040694.M7S' Lender Focus Group April 6, 1994 SANDER: I know they're not allowed to, but if there's something that an appraiser thinks that's going to affect the value, then they probably find some way of AZT F. _ A wholesale statement that it's a declining market is generally what I hear. M: But that's not enough. M: Not in California, maybe it is in the Midwest. [too many voices at once] Well, but I can see it in making terms of -- in the neighborhood on getting around that by talking about what's happening in that neighborhood, what the trend is here, and they can paint an picture by describing certain things that are happening. And then by using your own separate perceptions and everything you get an idea of what's going on. And of course they can all put more emphasis on that through their pictures. Yf N��t A• % There's also a box that indicates access to stores, shopping centers. If it's a blighted area it is not going to have a whole lot. P�2T" e.: You know what I see most -- you know, it's a great discussion and I haven't seen as much discrimination as it was what I hear in terms of the underwriting and all that because usually if it's a loan we're going to fight it through anyway. And maybe that's the issue. Where I see it mostly is actually in the getting the transaction, originating it, going out into a certain area. I worked, as I said, with a big organization. And the only time, the only marketing efforts they would do, is to have one CRA rep for an area the size of southern California or something and they were supposed to originate. Give me a break. I mean this is d' a big market 50,000 loan agents in the market. And they would never do anything )Ye wouldn't go after never put an office close to South Central. I mean, they would go after theupperend. VudeAPMjn \RS0006%.NfM Lender Focus Group 49 April 6, 1994 And you could even tell in their pricing that they upper -end loans. They wouldn't price the [conforming product] the Fannie Mae product in a competitive market. ��•� As long as you have a compensation system that's based on almost 100%. - commission, see that commission is going to dictate who's going to go where. 1�a R . ` But, no, I think it goes beyond that. You know, I have been shocked because I get to talk to managers, executives from lending institutions. And right after the riots or shortly thereafter South Central was very sexy. People wanted to get in there and loan. So a production manager would come up to me and say, you know, try as I might I just can't get any loans in South Central. Oh, really, I'll say, how many African-American loan officers do you have? Do you really think I need them? Okay. And then the topper of all toppers was when a lending institution tells me well, you know, we're going to put a lending office down there on Martin Luther King and Vernon -- or some, you know, down there in the neighborhood, right. I said, oh, really, that's great. Who are you going to staff it with? Oh, I'll bring in people from Glendale and Arcadia — suburbanites to come work in the 'Hood. And I told them. I said, really, you should hire people from the neighborhood. Why would I want to do that? Well, economic, YOU know, you're invigorating the local economy, your eyes and ears and marketers locally. And, oh, yeah, uh-huh. They just don't get it sometimes, you know. I was shocked when he told me that. I don't think he was kidding me. I don't think. I think it s' still like that. I still think there are many, many mI'll stiti tions — and admita e. re one of them "- does a very poor job of getting loan reps out Liere "to those areas. __ .WOd�+�Projx4ULS0/G694. MTG Lender Focus Group 50 April 6, 1994 kebb-; Well, I can remember in 1970 or 19711 was a sales manager for our parent company there in the Los Angeles area. That was our territory, the whole L.A. area, and it was one of the largest regions nationally. We had about 25 regional offices then. And then all of a. sudden our parent which was Sears — the ultimate parent -- said we were mandated to -- for sales over the next five years one out of every new salesperson that we hired had to be minority and/or female. SANDER: One out of every what? One out of every four. Well, we were the only region in the country at the time who were already there. We had Hispanics. We had blacks. We had about 30, if you could believe it, female agents. At one time I think there were something like 20 regions in the late '60s or early '70s that didn't even have a female salesperson. But because that was the makeup of the Los Angles market, you see, our sales force was representative of that makeup. And, you know, it's just one of those things that happened. So they were using us as an example and said, well, how did you get there? Well, it was there a long time before I came down here as sales manager because we were such a large company. And it didn't mean that the L.A. region was perfect. But they were so much further along. It was just a natural thing. It evolved over a number of years. But you didn't see that in the Midwest or the East or the South. But that's a good point because that's something else you need to. look at with the lenders in terms of not just the front end, not just the marketing end or the sales' end, but you also need to look at the makeup of the underwriting staff, the processing staff. I do remember addressing a national credit meeting for one of the major MI companies -- not one of the ones that's here this evening — and I looked out in the audience: Now this was their national Lender Focus Group 51 April 6, 1994 meeting of all their credit officers, their senior credit officers. And I didn't see anything but white faces in the whole building. Well, if you don't have any diversity in the underwriting staff and the processing staff of the back end shop then you also are limited in terms of just the•_ exposure and the education of the staff and the understanding, the familiarity, of dealing with different kinds of lifestyles. u� 11 I I agree with you. I was going to bring that particular issue up. Yes, we need to get more sales out there and salespeople -- minorities -- in those particular areas. However, if you don't have them within your own particular network what's the use. You're just defeated, you know. —C 1b• % Our company is — well, we do a lot of minority lending. Our staff — we have about 35 loan officers. I would say the majority of them are black or Hispanic. Our processing staff -- every team -- we have a three-member team, and at least one person on that team speaks Spanish — has to speak Spanish because we have so many Hispanic buyers. So we have never had a problem ... (end of tape 1] M�-1 N1 ... and if that file doesn't present the complete picture, they're not going to make the right decision. It's totally different. You've got, these are the three essential partners]. You have the lender. The lender decides to do something,' -'it's -usually not enough. You need the [secondary market] You need the MI company or you don't have the deal ' - :• y e people to what's changing in the You"have to also train our back. office industry because they're in=house."Theydon't know. They just see a'file, and it's just normal, %wdCAom]«vMoaobva.Mic Lender Focus Group 52 April 6, 1994 everyday business. But until they know the climate has changed out there and there's a different approach to doing business this will perpetuate. �n� �• I think — didn't Fannie ,Mae do a test -- we were giving loans to. They did a test of a hundred loans that were turned down and took the loans -- Fannie Mae took the loans, and of those hundred loans I think 45 Fannie Mae looked at them and 45 of them they said they would do. RIVERA: Actually it was a lender with, I think, 27 loans that their underwriters would have declined. And I think we purchased something like 19 or 20, something like that. 'D,N 'b• , Something like that.- What I'm saying is a lot of times things don't get past a certain point because of their perception too -- I mean, not knowing where it can go or how far it can go or is it real or not real because there's a lot of minds that have to change in this business. So the education needs to go beyond just the borrower, but it has to get into the lender and the investor. M: Right. ION �•' Because if we educate them and sa y, oh, you can afford to buy a house, and all of a sudden they get the client. They say, well, why don't I get the client: You educated me to tell me I can afford this house, who's not being educated now. TO WLE: Well, a lot of what you're describing is stuff that needs to happen internally , within institutions. You know, how critical that is to expand opportunities for people ,to own homes I think the sponsors of this project would probably also,like to hear from you.ifyouu think „ that there are thing at the and the County could be doing, whether, it's the, you know, the s th .. e Ci. 2%, the program you know. ' WadMprojccn\Rs04069d„�{�'(' - Lender Focus Group April 6, 1994 hIILIS: Au e.: 53 How many house do we have? I know a real simple one, and that is we've already talked about the education process -- and I always tell lenders =- because a long time they saw it as a burden and now they look at it as a marketing opportunity. And I haven't heard anyone admit to it in Los Angeles but they've admitted to me in Seattle where the market's a little slow, they said they'll do the homebuyers' workshop - four hours. And these people all come in and they'll train them and they get their certificate. However, the loan officers cherry -pick out of the group. Where they have, you know, a hundred people they'll take the four or five that are going to make loans today and everybody else -- see you later, you're on your own. So there needs to be some mechanism which for us at least now is a network -- a loosely knit group of nonprofits that do the consumer credit counseling that will do the hand -holding -- that will take these people and show them how to budget and educate them and do that long-term education which commissioned salespeople don't really want to do, you know. AetvFsSAA„ Really can't do, you know, if they're going to I Sot hat needs to be supported. NLT e• Right. I think Countywide if lenders knew there was a public thing — because, you know, they'd say, oh, well, go to your local night school or something like that and keep up, you know, fix up your credit problems or whatever, you know, the borrower is going to actually come back, as I like to say, on a silver platter to the lender. I've got all my budget problems worked out, my credit problems worked out, and I'm ready to do a loan SU5A1J Ir'' Mm-hmm. Soto have that kind of outlet, then 'to receive a certificate would "'take that burden off the loan officer. But it would also take the burden off of a lot of people who Lender Focus Group 54 April 6, 1994 are trying to educate them in a way that maybe they're doing it wrong. Maybe they're not doing it as partners. And to have that one outlet you could send borrowers to. ,I WBS : I don't know. I would like that burden myself. f }� I heard that. When you told me that I was kind of shocked. But you said you. `NN �b.: I would rather have that burden because we're in a profession, you know.: Like you said, we got fraud, we got all these things. What do we want? We don't want just anybody out there who's doing this. We want people who are willing to commit themselves and do what it takes. And if it takes 12 months for someone to buy a house you have to handle, then let it be 12 months. If it has to be 6 months, put them on the plan and let it be 6 months. Hey, I get paid 6 months from now as well as 12 months from now.. I don't mind waiting 12 months. I'm still going to get paid, you know. I'd rather have my referrals.. R2 2.s 'DONIB. Nzi- e!. Your referral business. My referral business is very good. Yeah. I imagine so. You do all that hand -holding, and that's the payback. M: Yeah, but most agents wouldn't do that. Maybe on a half -a -million -dollar loan, yeah, because it's going to pay off. [_] the bank's too because the bank's office — the loan agents on the banking side don't make as much as a broker would make. They 0 make twice, three'times as much. tPr0L Z Well, I can say also since this has been brought up as or iscurrently being done on the borrower level, this is also being done on the lender level. sends out people 17 that are senior underwriters who are within affordable housing andwho do second -looks to put on Vuder�p.oj"MS070694. MrG Lender Focus Group 55 April 6, 1994 seminars to underwriting staff and senior management regarding how to look at affordable housing. Not only do they do that, they take lenders out of what we call collateral vans where we'll take them and we'll take them through 'neighborhoods to explain to them what's actually going on in a neighborhood so they don't look back at an appraisal and say, oh, our subject is next to an empty lot on one side and on the other side there's a boarded up house and say, uh-uh, we don't want to live there. No. We take them out and we explain that. And one of the functions I do is I give many of the presentations and also I attend othek9resentations that our other underwriters are doing to make sure they are consistent and to make sure everybody does understand because this is a market that has no basic set guidelines. And why I say that is because this is a market that's constantly changing and is something that has an ongoing education. And until we realize that, until we convey it out into the world, and to the community and to' this industry, that disparity is always going to be there. �0$ G. ; Richard, you were talking about what the City can do actually. It kind of fits up with what he was saying and what Don was saying, that is, have a class in the public schools. You can just start the program. Ten years from now it wouldn't be as big of an issue if public schools, the students in the public school were taught first of all about finance -- first of all if they got a credit card that they should make the payment on time. You know what I mean — 19 -year-olds that never made their payments. And then three yeas later they want, to get a loan and you.l.ook and there's,a long length of bad credit. ItsSoing to be 12 months with - Don over thele cleaning the" credit up, and then they're going to"go somewhere else anyway. But if you -can do that with financial planning =and there's some organizations I'm a member of I'm a,CFP, a Certified Financial Planner. And the organization sponsors it. It has like 500,000 high school 6-MCr.PMiW,.\RS0406 a.Mrc Lender Focus Group April 6, 1994 56 students through a financial planning module in the classroom. And they go through the simple stuff such as what a credit card is, how to balance a checkbook. A lot of people even out of school don't know how to balance a checkbook. How are you supposed to pay your bills on time if you don't know how much money you got in your checking account. The same thing with the discrimination. The potential applicant-- is where in high school they could do a better job in teaching about discrimination and cultural awareness or diversity awareness, which a lot of the organizations -now — I know our organization is another one that I've heard of -- are doing classes for their employees on diversity awareness -- just teaching about other types of cultures not necessarily just on racial grounds but, you know, the Persians and how they do business -- and just how to treat other individuals including women, for instance, as a sexual awareness. 't Fju l_ S.: Question for you, you mention that there's a need to go into the schools and you mention your company is doing that. Do they actually physically go into the school of do they rent out a hall and invite different schools in? No, it's not my company. I'm a CFP which is a Certified Financial Planner. And it's an organization that sponsors it. It's a financial planning organization. What they will actually do in conjunction with a teacher, a high school teacher, is they will go in a classroom I think one hour a week for ten weeks or something. And they have a little -- [in the college] -- the financial planning group's got a little booklet, and it's real simple — what we all would think is real simple stuff — but to someone who's 16or17 it's pretty complex stuff` And theygothrough it — budgeting, how to save money, what money is, you know, the system of banking, the whole ball of wax. It's actually a pretty good thing And I know in public schools UWWer\proj=U%RS040694.MrG ` Lender Focus Group 57 April 6, 1994 they don't talk about that. And this would solve the problem ten years from now that we're having. I think that is good but also keep in mind a lot of times when we have gone -• into schools we've gone in and we've picked out certain individuals that we want to hear, and usually the ones that a lot of times need to hear are the ones who are left out. And if we're not addressing them as a whole then we're losing. �!J© C.: But if they made this their required course, like biology or English. You know, let's face it finance is going to be more important as time goes on. We can't rely on the social net anymore. SANDER: I want to get a couple of M's two hours of suggestions. Wr?-Ci M" Yeah, okay. I mean, for starters I think the City and the County -- local governments generally -- I'm going to make a very broad generalization here. But there as been such, and I'm going to say it again, revolutionary change in home lending over the last five years. And local government people, including their housing staff, don't have a clue. Much'of the lending that could have only been done with some kind of subsidy or government support five years ago is now being done by mainline lenders. They don't know. They don't know. They need — I mean, they're in very bad shape and they're not doing the service they could because the people that come to them, if they just would find out. And lenders are happy to educate them. :. 'lily: �}L S : ? "I can say partiallyI would agree with._ On the ;: other hand, there are many community-based organizations out there who have been getting education, not only how we may present it maybe m a four-hour or a eight-hour seminar, but they've been doing it for years. And .._ .._. VuWCAp,.j-u RSO40694.MTG _. Lender Focus Group April 6, 1994 W they've been doing a program where they take a borrower over possibly a six-week or even longer period of time. M C 1 M. . I'm talking about government initiatives. SANDER: We're talking about subsidizing loans. ?ftL- :T•*. Oh, okay.. I'm sorry. t'4i23I., Where the gap is being filled now is by those organizations that you're talking about. But that's on a very, very limited, small basis. SANDER: The government has the resources. �W e• ! And in a sense Fannie Mae has kind of left it to the lenders to educate the cities. z5b C . What groups in the City are you referring to? MSCI M.: City Housing Department, City Redevelopment Agency, City Planning Department, Councils. Government employees. Essentially, they want to know -- I want to get a loan. I want this. I want that. But what is available they have no idea. They don't even know who. They haven't called. They have no referral system. They have nothing. Mtpt 2Ct M.; They still think you need 20% down. �S(�rt i2 I just happened to listen for a few minutes to KCRW which is right here, in Santa Monica, and the self absorbedness of the City Council They, . -re saying, we want a loan on this thing, and we're going to accept the terms, and that's it.: We don't want the lenders to make Lender Focus Group 59 April 6, 1994 terms for us. Oh, really?. How do you get a loan. But they were saying we're going to tell the lender — the loan is on our terms, and we're not going to take any terms from a lender. M: Sounds like some of my clients. SANDER: We're going to wind up in a couple of minutes, but I just want to ask you a couple of other policy questions. How many of you have ever heard of the South Shore Bank? M: South Shore? SANDER: It's a bank in Chicago that's owned by a coalition of foundations and churches that went into an inner city in '73 and started so-called greenlining it. It has a pretty good track record. But there's now a bill before Congress to try to create a string of community development banks in different inner city communities around the country, And the idea is that there would be some government subsidy of these, but they would be profit-making banks that would basically sounds do some of the things that Don's bank does of trying to kind of spend the extra overhead involved and solidify a loan so that credit is extended to where it isn't now. Does that idea strike you as something that is desirable or something that is going to interfere with what your institutions are doing? • - There are some already that claim to be those kind of banks. I don't know. The people in the inner city who are supposed to be lending -- there are inner city banks that are priced right out of the market. They have no clue of pricing to make it so someone could ever get a loan. No one would ever go, I mean; because they're so off the"maiket it's ridiculous. �F •�7 "'" = What you bring up that's ieally interesting to me. I find that `minorities who deal with minorities are predatory with their own people, local banks and stuff like that. %w-Wc 1proje kR5040696.Mr0 ... Lender Focus Group 60 April 6, 1994 4 C • They don't pass through to Fannie? M: No, no. The smaller organizations like the ... M: Ames Home Loan? No. I know Ames. $I We got a bank, Family Savings, and they wanted us to be their broker. But we couldn't compete with the product that they were giving out to the community with anybody else. Everybody else's products were so much better and so much more cost effective. It was like ridiculous. So their interest rates were inflated much higher and it's like, wait a minute, you're trying to lend into the community and you're not even giving them a good product. -Al2Z V—'.: That's because they're a much smaller bank, and they don't put the same price that a countrywide or a big national bank. �oN 1�•: Well, all I know is that when First Interstate put money into their bank, I mean, hey, this rate was still going to go onto the secondary market any way you look at it. M: Right. M: I mean, you still ... Really the [idea] is you want to bring people into your bank eventually, put their money into your bank. If you're going to treat them like - that's the only way they're going to [become a business]. Bte C. % Don, do you know if they did portfolio or pass through? They had portfolio and pass thruogh..They were doing multifamily,`and_; .• _ nothing they — any product they had was anywhere near anybody eise.,,Itrs kind of like we're the only bank in the area so therefore... %wW� ripmj�MO40694.MM .. Lender Focus Group April 6, 1994 61 That would be, Rick, to answer your question. To answer your question a little bit of my concern is how this bank would really treat their people if they were a monopoly. And I think it might cause more unfairness than it's probably worth. And also I'm not a big fan of anything that's government -run anyhow. AW13 b.: You'd have to have literally thousands of these. And what you're talking about [is the opportunity there]. All you're looking at another government subsidy program. What you've got to do is take advantage of the institutions that are already there that can make the competitive loans and deliver those. And if you have the accessibility to the large lending institutions, the ones that have been in the communities, I think that's where the opportunity is, not to go out and try to now form another South Shore Bank. MPr2C,1 1'A.: That's not really taking anything away from South Shore Bank. • a D. • No, not at all. They've done a great job. What you really want to ask, you know, is how much money do you want to spend on creating a whole new structure, a whole new system, and can it really be better? If you take a hard look at what has been done by some of the major lenders here like Wells and B of A's Community Development Bank which was really modeled on South Shore and look honestly at what they've done in terms of performance, I think you will find that they have probably outperformed what South Shore has done pven though that's the one that has gotten all 'of the acclaim."So-you really'need to look at cost benefit. �� • I think that one of the reasons that the South Shore was 'developed was because there'were no branches in the inner city area where they were developed. And I'm not so sure that ... U-W"%PMj« \as040e94.MM Lender Focus Group 62 April 6, 1994 SANDER: There were a few black owned banks in the area, but there were no downtown banks that had branches there at all. They had very restricted branch banking. �irT' i2ro : Right. Right now if you driver through heavily Hispanic and African- American areas people are making money hand -over -fist doing check cashing. In fact I just came up La Brea to Olympic. They're charging one -and -three-quarter points to cash your tax refund check, plus 65 cents. That's 1.75 plus 65 cents. -BOB C. : Is that because there's no bank in the area or they just [too many voices at once] ��• Well, a lot of people just don't understand the whole concept of banking. A lot of them are Hispanic sending money back home. So they need a money order. They don't realize that their check is going to cash over there like it would here. They need a money order. They're there. They can pay the phone bill. They can get the RTD bus pass. They can get their check cashed, the whole thing except get beer. LA22V F % A lot of it's education in the community. It's education. Yeah. And I think that's what he's talking about the community development bank is I'm not sure. I'm on the fence on that one because someone just offered me the proposition in a city in southern California, and he's going to do this community development bank, and he says for profit. And he says my problem is — he goes -- that I'm going to be for profit, I'm going to be in the inner city, and I'm a white guy, and people I know are going to start pointing fingers at me, you know. And I say, well, whatever. I don't know if I'm going g s predominantly et involved with him or not. But he's going into an area that's one of to , . . these check -cashing -facility areas with no branches. So I don't know. U&d-6PMje 1RSo40694.MTG Lender Focus Group 63 April 6, 1994 M: [I think your point's okay. It's gunpoint I'm worried about.] M: Right, you know. TOWLE: If you didn't sign in when you came in, would you please do it on the way out. And if I didn't mention this to some of you on the phone and mail, we've been paying people a $50 honorarium for doing these groups. If that's a problem for you for some reason, let me know. Mit M•5 Can we just donate it back? TOWLE: You can. Okay. Thanks. Can you do that for ours too. TOWLE: Okay. Thanks. M: I would have to fill out too many forms for the company, M: And you can keep mine too. SANDER: This is really -- you know, I think you sense how helpful this is for us. We've covered a surprising amount of ground in two hours. And as we do some of the write-up of this, we may be following up with some of you. One thing that I would find very helpful -- if any of you have any tables with your statistics on default rates that show these differences, show some of the CRA or other categorized loans are actually doing as well or better than conventional loans, then that would be extremely helpful to have that documentation. That's one type of statistic that we don't have from our research. M: Default ratios specifically for the minorities? SANDER: Either by race .or by category of housing or that kind of illustrates %..,dcrlPmj�M040696.MM Lender Focus Group April 6, 1994 M �Oa C•: I mean you want southern California data, right, L.A. County, SANDER: We'll take it any way you've got it. M: Do you want it by zip code or by [ �, SANDER: There's a great deal of that out there now about application approval rates and things like that -- but there's very little on default rate. So, thanks again, and if you want to talk with us, give us a call. We plan to send you all the summary of our report when it's done in June. [too many voices at once] M: And if you want directions on how to get back to your car... M: I'm parked in Santa Monica. F: Ali, be sure that your name is on that list also.. F: Great. Okay. I'm sending my card around too, saying Rick can be reached through me also. M: And since you all participated here, I was here, you're allowed one underwriting variant if you drop my name and Fannie Mae. F}Y� MSL: Can I get this tape? SON �• _ ,i Is anybody going to pass on thast? I can just collect the ones you don't want. M: Well, it was very enjoyable. Thank you. [too many voices at once] END %m-AcApmj=6\RsD4o690.MTG i^ `::-4(} 1996 Assessment ofImpediments to Fair Musing Choices for the G& at -Santa Clarita. CA Appendix: Demographic Data 297 Sheetl Santa Clarlfa 1990 Census tract 9108.01p 9200.03p 9200.11p 9200.12p 9200.13p 9200.21 p 9200.22 Total Population 2172 10293 8293 10481 3733 $079 4483 0 of Households 811 4388 1718 3362 1217 2625 13t2 • of Families 580 965 1374 2840 1042 2051 1139 Families es % of Households 94.9 22 80 64.5 85.6 78.1 84.2 0 of Female Headed HH 881 281 139 284 78 288 115 % Female Headed HH 11.11 5.9 2.6 8.4 6.2 10.9 8.5 Population > 65 years of age 128 2004 136 350 351 262 103 % of Population > 85 /o 7.8 19.5 2.6 3.3 9.4 3.2 2.3 Uving Alone >65 17 661 1e 47 5e 53 10 % of Pop > 65 /o Uving alone 13.3 33 11.8 13.4 16 20.2 9.7 Population < 18 years of age 592 1865 1482 3172 9281 2171 1416 % of PopulaUon < 16 /0 27.3 18.2 281 30.4 24.9 26.9 31.8 Persons per Household 3.18 2.33 3.191 3.13 3.03 3.04 3.28 Persons per Family 3.38 2.81 3.49 3.37 3.27 3.39 3.3 Median Age 31.7 35.3 29.41 30.4 35.9 29.1 28.7 Racial Composition % White 89.9 90.5 90.7 89.5 89.5 83.2 87.4 Black 2.2 2.1 1.5 1.2 1.71 1.6 1.2 Hispanic Origin 9.5 8.4 9.9 11.1 9.e 19.3 13.9 Amindlan 1.1 0.5 0.3 0.6 0.5 0.8 0.6 Asian, Pac. Islander 2.71 3.8 3.1 5.1 5.1 351 4.3 f1 Unguisticalty Iso. hh 79 54 35 29 45 28 Education % Less than HS diploma 9.5 11.2 7.4 9.7 14.7 16.9 11.4 % HS grad or higher 90.5 88.8 92.6 90.3 85.3 83.1 88.6 % Bachelors or> 35.7 22.1 25.4 23.6 23.1 16.3 21.2 Mobility Constraints TotalPo16-84 y1b 1314 6335 3641 6928 2488 5651 2902 w/ mobility limits 28 36 19 94 42 174 69 w/ self care limits 8 147 66 79 731 174 63 Population > 65 /b wl mobility limits 13 227 18 37 28 35 19 w/ self care limits 23 212 18 16 21 10 19 Labor Force Data LFPR of total pop 67.8 63.7 82.3 80.2 76.8 77.8 78.2 Total Un rate 3 4.7 2.3 3.3 2.8 4.3 3.2 Female LFPR 55.1 53.5 71.5 70.3 72 66.8 66.6 Female Un 32 4 1.7 3.8 1.2 2.8 2.2 Page 1 Sheetl Page 2 Santa Clartto 1990 Censu3 tract 9108.01p 9200.03p 9200.11p 92DO.12p 9200.13p 9200.2ip 9200.22 Housing Data Total 0 housing units 731 4726 1715 3520 1258 2779 1409 #occupied housing units 687 4400 1880 3343 1233 2658 1357 0 vacant housing units 48 326 55 177 25 121 52 Vacancy Rate 6.6 6.9 3.2 S 2 4.4 3.7 tt of Vacancies For Sale 14 159 23 133 18 42 8 0 of Vacancies For Rent 13 73 12 13 2 61 29- % Owner Occupied 81 87.2 88.7 88.1 94.7 73.9 78.4 % Renter Occupied 19 12.8 11.3 13.9 5.3 16.1 23.6 Persons/room mean 0.471 0.43 0.52 0.54 0.46 0.58 0.58 % w/no vehicles available 01 3.9 2.4 1.8 3.7 2 0.96 Median Housing value 500000+ 193000 223600 218100 253700 179600 213400 Owner Occupied) Mortgage as %of Y median Income < $20,000 50 38.6 40 50 501 SO 50 Income 20,000-34,999 50 29.1 48.9 27.7 24 43.3 50 Income 35,000-49,999 27.21 31.2 33.4 35.7 39.2 28.3 35.3 income > $50,000 25.9 23.4 24.4 25.1 24.5 22.4 25 Rent as % of Y median income < $10,000 50 50 0 50 0 50 0 Income 10,000-19,999 0 50 50 50 50 50 50 income 20,000-34,999 27.5 38.7 50 38.8 Sol 37.9 32.5 income > $35,000 20.7 22.3 19.3 22.9 25 19.9 21.3 Commuters 976 5010 2976 5598 2048 4244 2224 drove alone 784 4014 2484 4385 1722 3276 1758 carpool 91 677 427 974 262 742 317 public trans 0 72 18 8 11 0 0 other 11 50 9 83 4 88 60 walktwork at home 73 153 48 110 28 13e 71 mean travel time 30.7 33.8 34.5 33.1 30.4 33.5 34.3 Page 2 Sheetl Page 3 Santa Clarlta 1990 Census tract 9108.01p 9200.03 9200.11 9200.12 9200.13 9200.21 p 9200.22 Income and Poverty Median Household Income 80831 45420 57091 58229 81082 47234 54829 Median Family Income 88573 52821 57878 58143 53550 48078 55584 Per Capita Income .317281 21887 19845 19585 21753 18427 17313 % of Families < Pov. Level 8.8 1.9 1.4 0.9 0.5 2.9 4 0 of Female Headed HH < Po 25 8 15 9 • 28 % Female Headed HH < Pov 38.8 3.1 10.8 3.2 ' 9.8 % Individuals < Pov. Level 8.2 4.2 1.61 1.9 1.2 3.2 0.9 HH Income Distribution 811 4388 17181 3382 1217 2825 1352 Less than $5,000 8 125 151 33 7 17 5 $ 5,000.9.999 38 301 8 22 11 54 0 $10,000-14.999 0 254 431 59-65-92 47 $15,000-24.999 361 590 291 145 73 222 93 $25,000-34.999 48 535183 324 97 418 129 $35,000.49.999 83 898 318 718 197 827 307 $50,000-74.999 78 1223 6NI 1232 388 851 482 $75,000.99.999 72 401 270 805 234 198 198 More than $100,000 254 283 188 228 187 143 111 Income DWAbutlon % Less than $5,000 0.98%1 2.85% 0.87% 0.98% 0.58% 0.85% 0.37% $ 5,000.9,999 5.89%1 8.88% 0.35% 0.85% 0.90% 2.08% 0.00% $70,000-14.999 0.00% 5.79% 2.50% 1.75% 5.34% 3.50% 3.48% $15,000.24.999 5.89% 13.45% 1.89% 4.31% 8.00% 8.48% 8.88% $25,000-34.999 7.53% 12.19% 9.49% 9.84% 7.97% 15.85% 9.54% $35,000-49.999 13.58% 15.88% 18.51% 21.30% 18.19% 23.89% 22.71% $50,000-74.999 12.77% 27.87% 38.77% 38.84% 30.07% 32.42% 34.17% $75,000.99,999 11.78% 9.14% 15.72% 18.00% 19.23% 7.54% 14.8496 More than $100,000 41.57% 5.99% 9.78% 8.72%1 13.72% F 5.45%1 8.21% Page 3 Sheetl Santa Clarity 1990 Census tract 9200.23 9200.24 9200.25p 9201.01p 9201.02p 9203.11 9203.12 Total Population 1996 2960 10298 8625 11801 4073 761 1019 3828 2029 3501 1469 *of Families 231 748 2703 1748 2521 1005 30.4 73.4 70.8 86.2 72 88.4 * of Female Headed HH 88 88 462 1271 382 98 8.7 8.4 12.1 6.3 10.9 6.7 Population > 85 years of age 171 88 443 222 400 416 % of Population > 85 /o 8.5 2.9 4.3 3.4 3.5 10.2 UvIng Alone >65 68 11 138 55 105 158 % of Pop > 85 /o Uving alone 32.7 12.8 30.7 24.8 26.2 37.5 Population < 18 years of age 437 796 2607 1975 2831 3068 % of Population < 18 y10 21.9 26.9 25.3 29.824.6 24.7 Persons per Household 2.69 3.06 2.65 3.23 30.8 2.78 Persons r Family3.16 3.44 3.1 3.49 3.45 3.38 Median a 32.8 28.7 28.7 30.8 2.6 32.2 Racial Com shlon % White 91.6 82.3 87.4 88.3 72.4 88.5 Black 1.3 0.61 2.2 1.7 1.81 0.8 Hispanic Origin 10.5 21.11 12.1 11.3 3.4 11.5 Amindian 0.85 1.1 0.6 0.7 0.7 0.6 Asian, Pac. Islander 1.4 3.1 3.4 5.8 3.1 3.8 * UnguLstically iso. hh 28 • 57 53 399 50 Education % Less than HS diploma 15 11.5 12 9.3 16.1 16-.-8- • HS grad or higher 85 82.5 88 90.7 73.9 89.2 % Bachelors or> 16.5 11.9 20.9 22.9 20.5 30.5 Mobility Constraints Total Pop 16-64 y1b 1394 2149 7202 4392 8278 2651 w/ mobility limits 0 50 115 57 137 38 w/ sed care limits 22 34 113 18 173 42 Populaffon > 65 y1b w/ mobility limits 14 7 69 14 55 53 w/ self care limits 15 7 38 14 38 14 Labor Force Data LFPR of total 80 79.9 80.1 82.4 77.3 70 Total Un rate 4.8 5 4.1 3.3 4.3 3.5 Female LFPR 71.8 67 73.1 73.2 62.9 57 Female Un 3.8 3.2 4.4 2.5 3.7 5.9 Page 4 Sheetl Page 5 Santa Clartta 1990 Census tract 9200.23 9200.24 9200.25p 9201.01p 9201.02p 9203.11 9203.12 Housing Data Total # ho"units 785 994 4237 2198 3748 1750 * occupied housing unts 742 987 3892 2048 3540 1430 8 vacant housing units 22 27 345 148 208 320 Vacancy Rate 2.9 2.7 8.1 8.7 5.5 18.3 / of Vacancies For Sale 7 5 83 22 18 43 i of Vacancies For Rent 19 234 113 150 182 % Owner Occupied 93.7 83.2 87.1 82.8 43.2 81.5 % Renter Occupied 6.31 38.8 32.91 17.2 58.8 38.5 Persons/room mean 0.49 0.58 0.52 0.52 0.85 0.47 % w/no vehicles available 3.2 2.2 2.1 2.1 8.8 Median Housing value 213400 197400 207100 234200 271200 378300 Owner Occu Mort as %of Y median Income < $20,000 38.51 50 501 50 29 47.9 Income 20,000-34,999 50 39.5 40 45.7 38.1 18.9 Income 35,000-49,999 37.1 31.2 32.9 33.3 32.8 31 Income > $50,000 22.8 19.7 23.5 23.7 24.8 24.1 Rent as % of Y medlan Income < $10,000 50 50 50 50 50 Income 10,000.19,999 501 48.3 50 50 49.7 50 Income 20,000-34,999 30.2 34.11 33.7 33 32.9 Income > $35,000 31.1 20.2 22.1 28 18.8 17.5 Commuters 1124 1838 5822 3572 8255 2058 drove alone 77 78.3 4703 2973 4449 1717 carpool 17.2 14 893 359 1088 197 public trans 0.7 1.7 35 17 gal 14 other 0.5 0.5 70 47 215 23 walk/work at home 4.8 4.4 81 123 158 84 mean travel time 30 29.5 33.4 31.9 24.1 28.8 Page 5 Sheetl Page 6 Santa Clarity 1990 Census tract 9200.23 9200.24 9200.25 9201.01 p 9201.02p 9203.11 9203.12 Income and Poverty Median Household Income 44107 47863 45659 81238 42333 80103 Median Family Income 49265 54837 51063 61873 42102 71554 Per Capita Income 192391 17874 19843 18500 17495 27789 % of Families < Pov. Level 3.31 5.5 3.7 0.9 6.4 1 S of Female Headed HH < Po 3219 50 • 53 % Female Headed HH < Pov 44 1.5-10.8. 13.9 % Individuals < Pov. Level 4.3 5.9 4.5 1.9 10.2 2.5 781 1019 3828 2029 35011 1489 20 24 79 21 75 34 43 60 103 11 173 96 32 45 145 70 201 75 93 88 296 101 424 147 80 133 549 136 514 136 191 188 948 382 722 117 198230 1008 743 714 300 89 191 412 418 334 172 351 82 290 149 344 392 Income DlstrlbuUon % Less than $5,000 2.63% 2.36% 2.06% 1.03% 2.14% 2.31% S 5,000.9,999 5.85% 5.89% 2.69%1 0.54% 4.94% 6.54% $10,000-14.999 4.20% 4.42% 3.79% 3.45% 5.74% 5.11% $15,000-24.999 12.22% 8.84% 7.73% 4.98% 12.11% 10.01% $25,000-34.999 10.51% 13.05% 14.34% 8.70% 14.68% 9.28% $35,000-49.999 25.10% 18.25% 24.76% 18.83% 20.62% 7.96% $50,000-74,999 28.02% 22.57% 28.28% 38.82% 20.39% 20.42% $75,000.99,999 9.07% 18.74% 10.76% 20.50% 9.54% 11.71% More than $100,000 1 4.80% 8.08% 7.58% 7.34% 9.83% 28.88% Page 6 Sheetl Santa clarita 1990 Census tract 9203.13 9203.21 9203.22 9203.24 Total Population 5316 9936 2803 10691 S of Households 1759 3734 1016 3973 # of Families 1402 2711 791 2776 Families as % of Households 79.7 72.6 77.9 59.9 0 of Female Headed HH 167 230 67 67 9.5 6.2 6.8 5.9 Population > 85 years of age 317 534 204 712 % of Population > 85 /o 8 5.4 7.3 6.7 Uving Alone >65 72 226 40 40 % of Pop > 85 /o Uving alone 22.7 42.3 19.6 5.6 Population < 18 yeans of age 1386 2540 594 2264 % of Population < 18 /o 25.7 25.8 21.2 21.2 Persons per Household 3.04 2.62 2.81 2.55 Persons per Family 3.33 3.12 3.16 3.06 Median Age 32.1 32.1 38.2 36.2 Racial Composition % White 89.9 90.2 94.3 91.6 Black 0.53 1.4 0.9 1.53 Hispanic Origin 11.8 7.7 5.7 6.7 Amindlan 0.58 0.3 0.3 0.2 Asian, Pac. Islander 4.9 5.4 3.1 4.8 # Unguistically Iso. hh 44 95 13 88 Education % Less than HS diploma 13.9 5.7 7.5 7.8 % HS grad or higher 86.1 94.3 92.5 92.2 % Bachelors or > 26.3 35.6 44 40.2 Mobility Constraints Total Pop 16.64 y1b 3830 8888 2009 7687 w/ mobility limits 331 17 111 26 w/ self care limits 261 34 31 100 Population > 65 y1b w/ mobility limits 20 74 15 103 w/ self care limits 14 51 0 85 Labor Force Data LFPR of total pop) 78.1 79.9 79.1 75 Total Un rate 3.6 2.3 51 2 Female LFPR 69.9 70.2 70.8 88 Female Un 2.8 2.4 4 2.2 Page 7 Sheetl Page 8 Santa Clartta 1990 Census tract 9203.13 9203.21 9203.22 9203.24 Housing Data Total 0 housing units 1791 3945 1028 4541 / oocupled housing units 1745 3790 999 3988 # vacant housing units 48 1551 29 555 Vacancy Rate 2.6 3.9 2.8 12.2 0 of Vacancies For Sale 21 38 11 263 0 of Vacancies For Rent 8 94 17 109 % Owner Occupied 88.2 72.4 87.9 77 % Renter Occupied 13.8 27.8 12.1 23 Persons/room (mean) 0.5 0.49 0.44 0.44 % w/no vehicles available 3.7 3.1 0 4.5 Median Housing value 237900 285100 282900 332200 Owner Occupied) Mortgage as %of Y median Income < $20,000 281 50 501 50 Income 20,000-34,999 31.3 42.5 38.11 42.7 Income 35,000.49,999 19.2 34.5 21.5 39.1 Income > 550,000 23.6 25.3 21 25.9 Rent as % of Y median Income < $10,000 50 27.2 34.8 income 10,000-19,999 50 28.8 50 50 income 20,000-34,999 25.81 48.9 39.9 Income > $35,000 20.91 21.8 28.71 21.8 Commuters 2940 5684 1855 8025 drove alone 82 84.3 85.2 82.8 carpool 11.1 10.6 8.6 10.2 public trans 0.8 0.8 0.5 0.8 other 1.7 1.2 1.9 1.1 walk/work at home 4.1 2.8 4.4 5.1 mean travel time 26.9 30.2 27 27,9 Page 8 Sheen Page 9 Santa Clarita 1990 Census trail 9203.13 9203.219203.22 9203.24 Income and Pow Median Household Income 80125 58602 83002 60594 Median Family Income 82740 63729 86925 74079 Per Captta Income 21896 23518 23745 27545 % of Families < Pov. Level 0.4 1.5 1.1 1.2 S of Female Headed HH < Pov ' -9-2- 10 % Female Headed HH < Pov -3.9-3 % Individuals < Pov. Level 2.3 2.8 1.9 3.7 1759 3734 1018 3973 12 85 14 64 25 178 4 159 85 32 15 69 99 153 73 188 192 275 69 271 258 893 175 673 511 1238 305 1044 349 649 219 808 228 453 142 609 Income Disbitwtlon Less than SSW 0.68% 1.74% 1.38% 1.61% S 5,000-9,999 1.42% 4.77% 0.39% 4.00% 51Q000.14,999 4.83% 0.88% 1.48% 1.74% 515,000 24,999 5.83% 4.10% 7.19% 4.68% $25,000-34.999 10.92% 7.36% 8.79% 6.82% $35,000-49,999 14.67% 18.58% 17.22% 16.94% 550,000-74.999 29.05% 33.10% 30.02% 26.28% $75,000.99,999 19.84% 17.38% 21.56% 20.34% More than $100,000 12.96% 12.13% 13.98% 15.33% Page 9 Sheetl Comparison of Santa Clartta and Los Angeles County, 1990 Santa Clartta Los Angeles County Po uiation 8tausucs Total PopulaUon 110642 8883164 Total Households 38382 2994343 # of Families 28925 2013928 Families as % of HH 75.4 67.3 Female Headed Households 2981 390430 % Female Headed HH 7.8 13.4 Population > 65 /o 6916 860587 % Population > 85 /o 6.3 9.71 Population < 18 /o 28041 2085351 % Population < 18 25.3 23.7 Persons per Household 2.84 2.91 Persons per Family 3.25 3.51 Income Median Household Income $52,970 $34,965 Median Familly Income $58,064 $39,035 Medlan Per Captts Income $21,073 $18,149 Income DlstYfbutlon Less than $5,000 1.8 4.8 55,000-9,999 3.4 8 210,000-14,999 3.5 7.5 $15,000-24,999 7.5 15.2 $25,000-34,999 10.6 14.5 $35,000-49,999 19 17.3 $50,000.74,999 29.1 17.3 $75,000-99,999 14.6 7.5 More than $100,000 10.8 7.9 PoRates Family 2.2 11.8 Individual 3.7 15.1 Female Headed Household 4.8 25.9 Racial Com soon White 87.3 56.8 Black 1.51 11.2 Hispanic Origin (any race 13.4 37.8 Amerlcan Indian 0.6 0.5 Asian/Pacific Islander 4.2 10.8 Labor Force Participation 76.8 67.2 Un*mploymnt Rate 3.5 7.4 Pape 1 or Sheell Page Sheet$ Santa Clarks &=me DlsBib~ by Race Income Disirtbutlon In % Whits Black Hispanic Origin AsianlPl Lasa than $5,000 1.6 1.8 2.81 0.8 $5,000-9,999 3.8 2.2 21 0 $10,000-14,999 3.3 4.4 41 3.5 $15,000-24,999 7.3 3.8 11.1 5.9 $25,000-34,999 10.3 6.3 15.8 12.2 $35,000-49,999 18.6 16.7 23 17.5 $50,000-74,999 29.6 31.2 25.8 31.1 $75,000-99,999 14.7 21.6 10.2 18.8 More than $100,000 11.2 12.1 5.5 9.4 Poverty Rates by Rata White Black Hispanic Origin AsianlPl Family 2 13.7 4.8 2.2 Individuals 3.3 17.2 8.2 2.3 OWW Occupancy Rates by Race % try Race of Owner Occupied using White 77.4 Blade 58.1 Hispanic Origin 60.9 American Indian 53.4 Asian/PacifiC Islander 82.9 Page 3 00 90 70 M Chart1 Racial Composition of Santa Clarita and Los Angeles County: 1990 30 20 10 0 White B i c c L Hispanic Origin (any race) Q m e � e u n AslamPadOC islander ,r"04 %A n Page 1 6o 70 W KW Illivil 10 0 Chart2 Composition of the Populations of Santa Clarlta and Los Angeles County: 1990 ■ Santa Clarita ■ Los Angeles County Families as % of HH % Female Headed HH % Population > 65 y/o % Population < 16 Page 1 $50,000 $30.000 $10,000 so M Char12 Comparison of Median Household, Median Family and Median Per Captia Income: Santa Cladta and Los Angeles County, 1880 Median Household Income Median Familiy Income Median Per Capita Income Page 1 30 25 KII w v 0 t 7 0 X 15 S 6 10 5 0 Chart3 Distribution of Household Income for Santa Clarita and Los Angeles County: 1990 Less than $5,000 S10,000-14,999 $25,000-34,999 $50,000.74,999 More than $100,000 Pape 1 E 25 R r, 10 Chart3 Poverty Rates for Families, Individuals and Female Headed Households In Santa Clarita and Los Angeles County:1990 ■ Santa Clarita ■ Los Angeles County Family Individual Female Headed Household Pape 1 v e d Cnart4 Owner Occupied and Renter Occupied Housing Rates In Santa Clarita and Los Angeles County:1990 Los Angeles County Santa Clarks 0 10 20 30 40 SO 80 70 so Page 1 IN % Renter Occupied ■ % Owner Occupied se 3C 25 20 1s 10 5 0 Less than $5,000 Chart4 Income Distribution by Race: Santa Clarita, 1990 $10,000-14,1199 $25,000.34,999 Pape 1 $50,000.74,999 More than $100,000 AaiaNPadflc Islander American Indian E L' Hispanic Origin • o. ChartS Percent of Home Ownership by Race 0 10 20 30 40 50 60 70 BO 90 Page 1 101 9L K 70 so so 40 30 20 10 0 9100.01p Charts 9 Composition of Population by Census Tract 9200.11p 9200.13p 9200.22p 9200.24 9201.01p 9203.12p 9203.21 920324 Census Tract Number Page 1 1a 9c ac 70 80 so 40 30 20 10 ChaOo 9108.01p 9200.03p 9200.11p 9200.12p 9200.13p 9200.21p 9200.22p 9200.23 Pape 1 10( 9C 60 70 60 50 40 30 20 10 0 ChartlD 920024 920025p 9201.01p 9203.11 9203.12p 9203.13 9203.21 9203.22 9203.24 Page Y 0 9108.01p Chart/ 11 Median Household Income by Census Tract 9200.11p 9200.13p 9200.22p 9200.24 9201.01p 9203.12p 9203.21 9203.24 Pape 1 NIEL, 40 35 30 25 20 15 10 5 0 Chari* 1 -2 -- Selected Z Selected Poverty Rates by Census Tract ■ % of Families < Pov. Level ■ % Female Headed HH < Pov O % Individuals < Pov. Level 9108.01p 9200.11p 9200.13p 9200.22p 9200.24 9201.011p 9203.12p 9203.21 920324 Pape 1 0 1996 Assessment of Impediments to Fair Housing Choices -or the City QfSanta Mrita. CA Appendix: Tables 328 Table 1: 8189 49 1.3% 34 Most active residential -credit lenders In Santa Clarita, 1993 and 1994 Long Beach Bank, FSB Conventional home -purchase and refinancing loans only 27 0.7% 61 % o/ 1994 % or 1993 Commercial banks Lena«a s 1994 bsm market 19931oana market PNC Mortgage Corp of Amend 344898643 26 0.7% 58. 0.7% Colonial Bancorp 953791107 16 0.4% 83. 1.0% Chase Manhattan Mortgage Corp 22-2318907. 94 2.4% 21 0.2% Wells Fargo Bank 1741 48 L2% 74 0.9% First Interstate Bank 669667 61 1.6% 84 1.0% Bank of America -13044 194 5.0% 281 3.3% Total, all commercial banks 3800 827 16.3% 1098 13 nab Thrifts (savings and loans) Downey Savings and Loan 8189 49 1.3% 34 0.4% Long Beach Bank, FSB 7790 27 0.7% 61 0.7% Coast Federal Bank 7046 55 1.4% 41 0.5% First Federal Bank of Calif 1792 73 1.9% 36 0.4% RSL Mortgage Corp. 330236662 16 0.4% 99 1.2% Tempe -Inland Mortgage Corp. 741878850 29 0.8% 99 1.2% Glendale Federal Bank 3088 79 2.1% 52 0.6% World Savings Bank 8717 79 2.1% 91 1.1% American Savings Bank 8551 100 2.6% 109 1.3% Granite Savings Bank 3800 57 1.5% 177 2.1% California Federal Bank 5099 72 1.9% 162 1.9% Great Western Bank 3742 162. 4.2% 319 3.8% Home Savings of Anxnca, Inc. 6892 162 4.2% 343 4.1% Total, all thrift 7144400007 1136 29.5% 2046 24.3% Credit unions 7177900005 0 0.0% 199 2.4% Lockheed Federal C.U. 1999 30 0.8% 133 1.6% Total, credit unions 6410200009 89 2.3% 300 3.6% R Mort. Faxnce, Inc. 7527302998 10 0.3% 77 0.9% cion Hills Mortgage Co. 6410200009 34 0.9% 57 0.7% anal Hoax Mon. Corp. 6410200009 34 0.9% 57 0.7% lallion Mat. Co.. 468100006 30 0.8% 67 0.8% feral American Financial Corp. 7122700000 27 0.7% 72 0.9% dty Mortgage USA, Inc. 6467409995 15 0.4% 85 1.0% Capital Mortgage Services 3002310011 78 2.0% 23 0.3% forma Mortgage Ser me 8411400007 13 0.3% 105 1.2% arican Residential Mortgage 6464409991 0 0.0% 135 1.6% '°nal Pacmc Mort Co 6442409990 34 0.9% 102 1.2% thbnd Financial 6457409990 35 0.9% 103 1.2% furan and Broad Mat. Co. 6426800000 59 1.5% 83 1.0% tnd Mortgage Co. 3831400006 54 1.4% 105 1.2% cess American Mortgage Co 7144400007 58 1.5% 136 1.5% 11din Mortgage Capital 7177900005 0 0.0% 199 2.4% M Secuty Mortgage Co 7132600008 69 1.8% 173 2.1% anal Credit Industries 7053300004 125 3.2% 181 2.1% t Franldin 6473009998 132 3.4% 202 2.4% ctors Mortgage Co 6419200006 130 3.4% 296 3.5% Prudential Horne Mortgage 7155500002 106 2.8% 426 5.1% :h American Mortgage Co 7532600002 147 3.8%. 418 5.0% adrywide Funding Corp 641410939E 389 10.1% 775 9.2% TOTAL FOR YEAR 3849 100.0% 8430 100.0% Note: only lenders with Mrs than 80 combined bans in the two years are shown. Table 2: Action by Applicant Race All Lenders, Santa Clarita, 1993 and 1994 All Home Purchase Loans Loan made Row % Col Approvd,not made Loan denied Other actions Total American Asian African Latino/ White NA/ Indian American American Chicano Other TOTAL 32 282 122 541 3974 263 5214 0.61 5.41 2.34 10.38 76.22 5.04 35.96 62.53 62.24 56.53 64.77 51.77 3 12 6 34 240 34 329 0.91 3.65 1.82 10.33 72.95 10.33 3.37 2.66 3.06 3.55 3.91 6.69 13 89 29 202 838 101 1272 1.02 7 2.28 15.88 65.88 7.94 14.61 19.73 14.8 21.111 13.66 1 19.88 41 68 39 180 1084 110 1522 2.69 4.47 2.56 11.83 71.22 7.23 1 1 46.07 15.08 19.9 18.81 17.67 21.65 89 451 196 957 6136 508 8337 All Home Refinancing Loans Loan made Row Co! Approvd,not made Loan denied Other actions Total American Asian African Latino/ White NA/ Indian American American Chicano Other TOTAL 42 372 61 392 6587 736 8190 0.51 4.54 0.74 4.74 80.43 8.99 53.85 61.18 44.53 50.45 66.03 57.59 1 27 9 28 371 68 504 0.2 5.36 1.79 5.56 73.61 13.49 1.28 4.44 6.57 3.6 3.72 5.32 20 108 48 214 1812 247 2449 0.82 4.41 1.96 8.74 73.99 10.09 25.64 17.76 35.04 27.54 18.16 19.33 15 101 19 143 1206 227 1711 0.88 5.9 1.11 8.36 70.49 13.27 19.23 16.61 13.87 18.4 12.09 17.76 78 608 137 777 99761 12781 12854 Table 3: Action by Applicant Income, Santa Clarita All Lenders, All Home -Purchase Loans < $40,000 per $40-65,000 1 $65-90,000 1 > $90,000 year per year per year I per year I TOTAL Loan made 698 1886 1400 1230 5214 Row % 13.39 36.17 26.85 23.59 Cold 53.12 63.37 66.45 63.4 Approved, 5786 424 78 108 329 not made 17.33 26.14 23.71 32.83 4.34 2.89 3.7 5.57 Loan denied 301 424 257 290 1272 23.66 33.33 20.2 22.8 22.91 14.25 12.2 14.95 I Other actions 258 580 372 312 1522 16.95 38.11 24.44 20.5 19.63 19.49 17.66 16.08 I Total 1314 1 2976 1 2107 1 1940 1 8337 1 Table 4: Categorization of Santa Clarita census tracts Into area race and Income groups Census tract Minorities as % of tract population Tract med. income Minority as % of MSA Papulation income category Area income category I 9203.22 10.45 171.45 1 1 9203.24 13.42 189.78 1 1 9203.12 17.35 177.06 2 1 9203.21 14.46 163.26 1 2 9108.01 16.31 162.37 2 2 9200.11 19.18 148.71 2 2 9200.12 18.14 154.15 2 2 9200.13 16.93 162.8 2 2 9200.22 17.2 142.34 2 2 9201.01 19.03 161.61 2 2 9203.13 17.48 160.73 2 2 9200.24 2i.gl-----T 140.48 3 2 I I 9200.03 14.84 134.8 1 3 9200.25 18.75 122.26 2 3 9200.21 25.84 127.89 3 3 9200.23 21.28 126.21 3 3 I I 9203.11 39 115.54 4 4 Table 4.1: Measures of redlining by census tract, 1993 and 1994 data, Santa Clarita All home purchase loans All home reSnanclna loans Lvan Loans per Loans madel7oans applic Census tract ations per eligible building denied elia. buildinn 9203.22 Loan 0.2 3.07 Census tract applications per Loans per Loans madaloans 9203.12 elig. building. eligible building denied 9203.22 0.26 0.18 6.53 9203.24 0.15 0.11 5.94 9203.12 0.21 0.14 5.43 9201.01 0.44 0.27 2.66 9203.21 0.27 0.14 2.02 9108.01 0.21 0.15 5.05 9200.11 0.26 0.15 3.27 9200.12 0.23 0.14 4.48 9200.13 0.23 0.15 4.24 9200.22 0.16 0.09 3.21 9201.01 0.27 0.18 4.49 9203.13 0.52 0.33 5.60 9200.24 0.18 0.1 2.87 9200.03 0.26 0.18 4.94 9200.25 0.18 0.11 3.88 9200.21 0.25 0.14 3.24 9200.23 0.14 0.07 2.04 9203.11 0.29 0.17 1 2.91 All home reSnanclna loans Lvan Loans per Loans madel7oans applic Census tract ations per eligible building denied elia. buildinn 9203.22 0.33 0.2 3.07 9203.24 0.37 0.24 3.60 9203.12 0.39 0.26 4.44 9203.21 0.38 0.24 3.58 9108.01 0.4 0.29 5.06 9200.11 0.44 0.26 2.62 9200.12 0.43 0.28 3.47 9200.13 0.42 0.26 3.19 9200.22 0.31 0.19 2.88 9201.01 0.44 0.27 2.66 9203.13 0.53 0.37 3.93 9200.25 9200 23 I 0.2 1 0.12 I 3.63 Table 5: Action by Applicant Race and Income Level, Santa Clarita All Lenders, All Home Purchase Loans Incomes of $40,000 and less Loan made Raw % Loan denied American Asian African Latino! Indian American American Chicano White Other TOTAL 4 35 12 100 502 45 698 0.57 5.01 1.72 14.33 71.92 6.45 28.57 62.5 52.17 44.05 55.53 50 0 1 0 13 41 2 57 0 '1.75 0 22.81 71.93 3.51 0 1.79 0 5.73 454 2.22 3 11 4 73 188 22 301 1 3.65 1.33 24.25 62.46 7.31 21.43 19.64 17.39 32.16 20.8 24.44 7 9 7 41 173 21 258 2.71 3.49 2.71 15.89 67.05 8.14 50 16.071 30.43 18.06 19.14 23.33 74 56 23 227 904 90 1314 Incomes of $40,000 - 65,000 Row % Co! % Approvd,not made actions Total American Asian African Latinol White NAI Indian American American Chicano Other TOTAL 12 89 47 241 1420 77 1886 0.64 4.72 2.49 12.78 75.29 4.08 40 67.94 62.67 58.78 65.68 45.83 1 2 2 10 61 10 86 1.16 2.33 2.33 11.63 70.93 11.63 3.33 1.53 2.67 2.44 2.82 5.95 3 23 7 76 281 34 424 0.71 5.42 1.65 17.92 66.27 8.02 10 17.561 9331 18.54 131 20.24 14 17 19 83 400 47 580 2.41 2.93 3.28 14.31 68.97 8.1 46.67 12.98 25.33 20.24 18.5 27.98 30 131 75 410 21621 168 2976- - Table 5 continued on next page - Incomes of $85,000 - 90,000 Loan made Row % Loan denied Table 5 continues from previous page - American Asian African Latino/ White NA/ Indian American American Chicano Other TOTAL 9 84 43 123 1066 75 1400 0.64 6 3.07 8.79 76.14 5.36 56.92 34.62 62.69 69.35 64.74 68.33 55.56 1 0 2 3 4 60 9 78 0 2.56 3.85 5.13 76.92 11.54 5.17 11.3 0 1.49 4.84 2.11 3.85 6.67 290 2 21 10 30 170 24 257 0.78 B.17 3.89 11.67 66.15 9.34 15 7 15.67 16.13 15.79 10.9 17.78 2.24 15 27 6 33 264 27 372 L7.69 4.03 7.26 1.61 8.87 70.97 7.26 1 1510 115 57.69 20.15 9.68 17.37 16.92 20 26 134 62 190 1560 135 2107 Incomes of $90,000 or more Row % Col % Approvd,not made Other actions American Asian African Latino/ White NA/ Indian American American Chicano Other TOTAL 7 74 20 T7 986 66 1230 0.57 6.02 1.63 6.26 80.16 5.37 36.84 56.92 55.56 59.23 65.3 57.39 2 7 1 7 78 13 108 1.85 6.48 0.93 6.48 72.22 12.04 10.53 5.38 2.78 5.38 5.17 11.3 5 34 8 23 199 21 290 1.72 11.72 2.76 7.93 68.62 7.24 26.32 26.15 22.22 17.69 13.18 18.26 5 15 7 23 247 15 312 1.6 4.61 2.24 7.37 79.17 4.81 26.32 11.54 19.44 17.69 16.36 13.04 19 130 36 130 1 1510 115 1940 Table 6: Applicants by Lender Type and Applicant Race All Home -Purchase Loans, 1993 and 1994, Santa Clarita American Indian Row % Col % Asian American African American Latino/Chicano White Other and NA TOTAL Commercial Banks Thrifts (S&L's) Credit Unions Mortgage Co's 8 8.99 0.71 7 7.87 0.34 0 0 0 74 83.15 1.45 73 16.19 6.49 109 24.17 5.32 5 1.11 7.04 264 58.54 5.19 30 15.31 2.67 35 17.86 1.71 0 0 0 131 66.84 2.57 132 13.79 11.73 221 23.09 10.78 3 0.31 4.23 601 62.8 11.81 803 13.09 71.38 1606 26.17 78.34 53 0.86 74.65 3674 59.88 72.17 79 15.55 7.02 72 14.17 3.51 10 1.97 14.08 347 68.31 6.82 1125 2050 171 15091 TOTAL 89 451 196 957 6136 508 8337 Table 7: Applicants by Lender Type and Applicant Income All Home -Purchase Loans, 1993 and 1994, Santa Clarita Applicant income: $45,000 or less Row % Col % $45-90,000/year $90,000 or more $90,000 or more Total Commercial Thrifts Credit Mortgage Banks (S&L's) Unions Cows 218 319 13 764 16.59 24.28 0.99 58.14 19.38 15.56 18.31 15.01 378 626 26 1946 12.7 21.03 0.87 65.39 33.6 30.54 36.62 38.22 282 494 18 1313 13.38 23.45 0.85 62.32 25.07 24.1 25.35 25.79 247 611 14 1068 12.73 31.49 0.72 55.05 21.96 29.8 19.72 20.98 1125 2050 71 5091` TOTAL 1314 2976 2107 i�LH] BICY/ Commercial Banks Thrifts (S&L 's) Total Table 8: Action by Applicant Race and Lender Type All Home Purchase Loans, 1993 and 1994, Santa Clarita American Asian African Latino/ White NAI Indian American American Chicano Other TOTAL 4 45 15 54 452 19 589 0.68 7.64 2.55 9.17 76.74 3.23 50 61.64 50 40.91 56.29 24.05 1 2 2 6 24 5 40 2.5 5 5 15 60 12.5 12.5 2.74 6.67 4.55 2.99 6.33 1 17 4 38 142 37 239 0.42 7.11 1.67 15.9 59.41 15.48 12-51 23.29 13.33 28.79 17.68 46.84 2 9 934 31 185 7 257 0.78 3.5 3.5 13.23 71.98 7 1 25 12.33 30 25.76 23.04 22.78 8 73 30 132 803 79 1125 American Asian African Latino/ White NA1 Indian American American Chicano Other TOTAL 2 56 18 106 970 48 1200 0.17 4.67 1.5 8.83 80.83 4 28.57 51.38 51.43 47.96 60.4 66.67 1 2 1 15 111 6 136 0.74 1.47 0.74 11.03 81.62 4.41 14.29 1.83 2.86 6.79 6.91 8.33 3 30 12 69 299 11 424 0.71 7.08 2.83 16.27 70.52 2.59 42.861 27.52 34.29 31-221 18.62 1 15.28 1 21 4 31 226 7 290 0.34 7.24 1.38 10.69 77.93 2.41 14.29 19.27 1109 11.43 14.03 14.07 9.72 7 264 35 1221 1606 72 1 2050 Mortgage Companies Row not actions American Asian African Latino/ White NAI Indian American American Chicano Other TOTAL 26 177 89 379 2515 187 3373 0.77 5.25 2.64 11.24 74.56 5.54 35.14 67.05 67.94 63.06 68.45 53.89 1 8 3 13 103 23 151 0.66 5.3 1.99 8.61 68.21 15.23 1.35 3.03 2.29 2.16 2.8 6.63 9 41 13 94 388 53 598 1.51 6.86 2.17 15.72 64.88 8.86 12.16 15.531 9.92 15.64 10.56 15.27 38 38 26 115 668 84 969 3.92 3.92 2.68 _ 11.87 68.94 8.67 51.35 14.39 19.65 19.13 18.18 24.21 74 264 1131 601 3674 1347 6091 Table 9: Action by Applicant Race and Lender Size All Home Purchase Loans, 1993 and 1994, Santa Clarity Big Banks and Thrifts (see below) Loan made Row % made American Asian African Laino/ White NAI Indian American American Chicano Other TOTAL 7 21 12 59 406 8 507 0.2 4.14 -. 2.37 11.64 80.08 1.58 50 43.75 75 48.76 59.53 25.81 1 0 3 4 18 0 26 3.85 0 11.54 15.38 69.23 0 50 0 18.75 3.31 2.64 0 0 20 0 42 155 18 235 0 8.51 0 17.87 65.96 7.66 0 41.67 0 34.71 22.73 58.06 0 7 1 16 103 5 132 0 5.3 0.76 12.12 78.03 3.79 0 14.58 6.25 13.22 15.1 16.J3 2 48 16 121 682 31 900 Big Mortgage Companies (see below) made denied All other lenders American Asian African Latino/ White NAI Indian American American Chicano Other TOTAL 13 74 23 130 1149 82 1471 0.88 5.03 1.56 8.84 78.11 5.57 81.25 76.29 51.11 85 74.13 56.94 0 2 2 4 53 15 76 0 2.63 2.63 5.26 69.74 19.74 0 2.06 4.44 2 3.42 10.42 2 13 8 23 127 16 189 1.06 6.88 4.23 12.17 57.2 8.47 12.5 13.4 17.78 11.5 8.19 11.11 1 8 12 43 221 74 1074 0.32 2.533.8 2.42 13.61 69.94 1319.81316 6.25 8.25 26.67 21.5 14.26 21.53 16 97 145 1200 1550 144 2052 American Asian African Latind White NAI Indian American American Chicano Other TOTAL 18 187 87 352 2419 173 3236 0.56 5.78 2.69 10.88 74.75 5.35 25.35 61.11 64.44 55.35 61.96 51.95 2 10 1 26 169 19 227 0.88 4.41 0.44 11.45 74.45 8.37 2.82 3.27 0.74 4.09 4.33 5.71 11 56 21 137 556 67 848 1.3 6.6 2.48 16.16 65.57 7.9 15.49 18.3 15.561 21,541 14.24 1 20.12 40 53 26 121 760 74 1074 3.72 4.93 2.42 11.27 70.76 6.89 56.34 17.32 19.26 19.03 19.47 22.22 71 306 135 1636 3904 333 1 5385 Big banks and thrifts here are Bank of America, Wells Fargo, First Interstate, Great Western, PNC Financial, Home Savings, and Chase Manhattan. Big mortgage companies are Directors Mortgage, Countrywide Funding, .Imperial Credit Industries, First Franklin, and North American Mortgage.. Lenders were picked for these categories based on their overall size and their presence in the Santa Clarita market Table 10: Applicant Income and Applicant Race, Santa Clarita All Home -Purchase Loan Applications, 1993 and 1994 American Asian African Latino/ Indian American American Chicano White Other TOTAL Aoolicant Income: $40,060 or ice. 1456 134 75 410 904 90 1314 row % 1.07 4.26 123 1.75 1227 17.28 68.8 6.85 col % 15.73 12.42 11 73 23.72 14.73 17.72 $40-45,000 30131 134 75 410 2162 168 2976 1.01 4.4 2.52 13.78 72.65 5.65 33.71 29.05 38.27 42.64 35.23 33.07 $66-00,000 26 134 62 190 1560 135 2107 1.23 6.36 2.94 9.02 74.04 6.41 29.21 29.71 31.63 19.85 25.42 26.57 over $90,000 19 130 36 130 1510 115 1940 0.98 6.7 1.86 6.7 77.84 5.93 21.35 28.82 18.37 13.58 24.61 22.64 TOTAL 89 451 196 957 6136 508 8337 i Table 11: Applicant Income and Area Income, Santa Clarita All Home -Purchase Loan Applications, 1993 and 1994 Applicant Income: Area Median Income: 116% of median MSA Income or less row% co! % 122-135% of median MSA Income 141.163% of median MSA Income 171-190% of median MSA Income TOTAL $40,000 or $40-65,000 $65-90,000 over $90,000 less per yr per year per year per year 94 142 96 118 20.89 31.56 21.33 26.22 7.15 4.77 4.56 6.08 579 900 453 279 26.19 40.71 20.49 12.62 44.06 30.241 21.5 14.38 495 1677 1328 1141 10.67 36.13 28.61 24.59 37.67 56.35 63.03 58.81 146 257 230 402 14.11 24.83 22.22 38.84 11.11 8.64 10.92 2072. 1314 2976 2107 1940 TOTAL 450 2211 4641 1035 8337 n Table 12: Applicant Race and Area Minority Composition All Home -Purchase Loan Applications, 1993 and 1994 n African LatIno/ Area Minortty %: I American I Ameerican American I Chicano I White I Other I TOTAL less than 15% min's 46 244 115 196 1799 150 .2382 row % 130 1.26 1158 6.63 �49 2.06 8.23 75.52 6.3 col % 33.71 35.03 25 2048. 29.32 29.53 16-20%minorities 46 244 115 510 3444 279 4638 0.99 5.26 2.48 11 74.26 6.02 51.69 54.1 58.67 53.29 56.13 54.92 20-26% minorities 11 27 21 173 580 55 867 1.27 3.11 2.42 19.95 66.9 6.34 12.36 5.99 10.71 18.08 9.45 10.83 more man 26% min's 2 22 11 78313 24 450 0.44 4.89 2.44 17.33 69.56 5.33 2.25 4.88 5.61 8.15 5.1 4.72 TOTAL 89 451 196 957 1 6136 508 8337 n Table 13: Action by Applicant Race and Area Minority Population All Lenders, All Home Purchase Loans, Santa Clarita Area Minority Population of 15% or less American Asian African Latino/ White NAI Indian American American Chicano Other TOTAL 13 103 30 126 1238 96 1608 0.81 6.41 1.87 7.96 76.99 5.97 43.33 65.19 61.22 65.31 68.82 64 1 2 0 5 57 8 73 1.37 2.74 0 6.85 78.08 10.96 3.33 1.27 0 2.55 3.17 5.33 2 26 10 118 218 25 313 0.64 8.31 3.19 �32 10.22 69.65 7.99 6.671 16.46 20.41 16.331 12.12 16.67 14 27 9 31 286 21 388 3.6! 6.96 2.32 7.99 73.71 5.4} 46.67 17.09 18.37 15.82 15.9 14 30 1158 49 1196 1799 1150 12382 Area Minority Population of 1520% Row % col % Approvd,not made Loan denied Other actions American Asian African Latino/ White NA/ Indian American American Chicano Other TOTAL 15 150 74 2206 124 2843 0.53 5.28 2.6 1274 9.64 77.59 4.36 32.61 61.48 64.35 53.73 64.05 44.44 2 10 4 18 146 23 203 0.99 4.93 1.97 8.@7 71.92 11.33 4.35 4.1 3.48 3.53 4.24 8.24 8 53 13 118 476 55 723 1.11 7.33 1.8 16.32 65.84 7.61 17.39 21.72 11.3 23.14 13.821 19.71 21 31 24 100 616 77 869 2.42 3.57 2.76 11.51 70.89 8.86 45.65 12.7 20.87 19.61 17.89 27.6 46 244 115 510 3444 279 4638 - Table 13 continued on next page - Table 13 continues from previous page - Area Minority Population of 20-26 Row % made denied American Asian African Latino/ White White NA/ NA/ Indian American American Chicano Other TOTAL 4 0 15 15 95 347 183 34 9 510 253 0.78 2.94 2.94 18.63 17.39 68.04 72.33 6.67 3.56 36.36 55.56 71.43 54.91 56.41 59.83 58.47 61.82 37.5 0 0 0 1 9 25 12 3 0 38 15 0 0 2.63 23.68 13.33 65.79 80 7.89 0 0 0 4.76 5.2 2.56 4,31 3.83 5.45 0 3 0 7 2 34 91 53 12 9 149 87 2.01 4.7 1.34 22.82 20.69 61.07 60.92 8.05 10.34 27.27 25.93 9.52 19.65 23.08 15.69 16.93 21.82 37.5 4 2 5 3 35 117 65 8 6 170 95 2.35 2.94 1.76 20.59 14.74 68.82 68.42 3.53 6.32 36.36 18.52 14.29 20.23 17.95 20.171 20.77 1091 25 11 2 27 21 173 1580 313 155 24 867 Area Minority Population of more than 26% made actions American Asian African Latino/ White NA/ Indian American American Chicano Other TOTAL 0 14 3 44 183 9 253 0 5.53 1.19 17.39 72.33 3.56 0 63.64 27.27 56.41 58.47 37.5 0 0 1 2 12 0 15 0 0 6.67 13.33 80 0 0 0 9.09 2.56 3.83 0 0 3 4 18 53 9 87 0 3.45 4.6 20.69 60.92 10.34 0 13.64 36.36 23.08 16.93 37.5 2 5 3 65 6 95 2.11 5.26 3.16 114 14.74 68.42 6.32 100 22.73 27.27 17.95 20.77 25 2 22 11 78 313 24 1450 Table 14: Action by Applicant Race and Area Median Income All Lenders, All Home Purchase Loans, Santa Clarita Area Median Income of 116% or less of LA MSA Total American Indian American American Chicano Other TOTAL Asian African 50 Latino/ White 92 NA/ 1 5.16 Indian American American Chicano 48.28 64.86 Other TOTAL 0 58.23 14 1 344 1 14 183 11. 9 1.2 253 1.2 0 67.47 5.53 1.19 3.45 1739 1.41 72.33 3.63 3.56 2 0 10 63.64 27.27 27 56.41 0.57 58.47 2.86 37.5 65.71 0 0 19.82 1 2 14.93 12 0 17 15 56 0 28 0 6.67 4.43 13.33 14.58 80 7.29 0 41.38 15.32 0 18.6 0 9.09 2.56 111 3.83 1301 0 1158 0 3 4 18 53 9 87 0 3.45 4.6 20.69 60.92 10.34 01 13.64 36.36 23.08 16.93 37.5 2 5 3 14 65 6 95 2.11 5.26 3.18 14.74 68.42 6.32 100 22.731 27.27 17.95 20.77 25 2 22 11 178 313 24 450 Area Median Income of 122%-135% of LA MSA Loan made Row Col % Approvd,not made Loan denied Other actions Total American Asian African Latino/ White NA/ Indian American American Chicano Other TOTAL 14 72 50 172 994 92 1394 1 5.16 3.59 12.34 71.31 6.6 48.28 64.86 70.42 57.14 64.5 58.23 1 0 1 14 56 11. 83 1.2 0 1.2 16.87 67.47 13.25 3.45 0 1.41 4.65 3.63 6.96 2 22 10 59 230 27 350 0.57 6.29 2.86 16.86 65.71 7.71 6.9 19.82 14.08 19.6 14.93 17.09 12 17 10 56 261 28 384 3.13 4.43 2.6 14.58 67.97 7.29 41.38 15.32 14.08 18.6 16.94 17.72 29 111 71 1301 1541 1158 2211 -Table 14 continued on next page - Table 14 continues from previous page - Area Median Income of 141%-183% of LA MSA made Total made American Asian African Latino/ White Latinol NAI NAI Indian American American Chicano American Chicano Other TOTAL 16 Other 155 62 279 41 2276 7 133 2921 0.55 5.31 2.12 9.55 77.92 1.08 4.55 7.12 34.78 61.75 60.78 56.71 16.67 65.36 61.19 49.63 1 8 4 16 139 16 184 2 0.54 4.35 2.17 7 8.7 47 75.54 2.13 8.7 8.51 0 2.17 3.19 3.92 70.21 3.25 14.89 3.99 5.97 9 0 52 14 103 4.13 451 12.07 47 2 676 12 1.33 7.69 2.07 15.24 66.72 6.95 1.26 19.57 20.721 13.73 20.93 12.95 17.54 20 16.67 36 22 94 616 72 860 2.33 4.19 2.56 10.93 16 71.63 8.37 4 43.48 14.34 21.57 19.11 2.19 17.69 8.74 26.87 77.6 46 2.19 251 102 492 3482 33.33 268 18.6 4641 Area Median Income of 171.190% of LA MSA Loan made Row Col Approvd,not made Loan denied Other actions American Asian African Latinol White NAI Indian American American Chicano Other TOTAL 2 41 - 7 46 521. 29 646 0.31 6.35 1.08 7.12 80.65 4.49 16.67 61.19 58.33 53.49 65.13 50 1 4 0 2 33 7 47 2.13 8.51 0 4.26 70.21 14.89 8.33 5.97 0 2.33 4.13 12.07 2 12 1 22 104 18 159 1.26 7.55 0.63 13.84 65.41 11.32 16.67 17.91 8.33 25.58 13 31.03 7 10 4 16 4 183 3.83 5.46 2.19 8.74 1142 77.6 2.19 58.33 14.93 33.33 18.6 17.75 6.9 12 67 12 186 800 58 11035 made Table 15: Action on "Under" Qualified Applicants by Race, All Home Purchase Loans, 1993 and 1994, Santa Clarita made American Asian African Latino! White NA/ Indian American American Chicano Other TOTAL 3 310 7 253 44 19 1636 0.47 48.74 1.1 39.78 6.92 2.99 60 70.14 43.75 47.56 63.77 37.25 0 16 1 29 2 6 54 0 29.63 1.85 53.7 3.7 11,11 0 3.62 6.25 5.45 2.9 11.76 0 50 5 131 16 12 214 0 23.36 2.34 61.21 7.48 5.61 0 11.31 31.25 24.62 23.19 23.53 2 66 3 119 7 14 211 0.95 31.28 1.42 - 56.4 3.32 6.64 40 14.93 18.75 22.37 10.14 27.45 5 442 16 532 69 51 1115 Note: The applicants included here are "under" -qualified in the sense that their reported Incomes are 50% or less of the median income of the census tract in which they are applying for a home loan. In other cities an "over' -qualified applicant pool is also identified, with 125% of median income used as a cutoff point; there are not enough minority applicants in this "over' -qualified category, not to mention relatively few white applicants, to generate interpretable statistics. Table 16: Refinancing Loans by Applicant Income and Race, All Lenders, 1993 and 1994, Santa Clarita Applicant Income less than $40,000 Row % Other actions Total American Indian American American Chicano Other TOTAL Asian African Latlnol White 2046 NAI 2566 Indian American American Chicano 79.73 8.38 Other TOTAL 1 22 50.67 6 54 846 D 6 2 1006 0.1 20 2.19 0.6 5.37 1,43 84.1 �77 7.65 12.5 2.83 44 31.58 40.6 5.19 65.03 7 46.95 12 1 6 78 2 11 44 1.54 6 71.85 70 1.43 25.93 8.57 2.86 15.71 18.04 62.86 8.57 38 12.5 63 12 10.53 8.27 1.21 3.38 1.21 3.66 67.65 4 13 25.93 10 48 247 12.62 47 367 1.09 39 3.54 2.72 12.53 67.3 12.81 50 261 52.631 34.59 18.99 28.66 2 9 1 164 34 232 0.86 3.88 0.43 [2-2 9.48 70.69 14.66 25 18 5.26 16.54 12.61 20.73 8 50 119 1133 1301 164 1675 Applicant Income of $40,000-65,000 American Asian African Latino/ White NA/ Indian American American Chicano Other TOTAL 13 122 18 152 2046 215 2566 0.51 4.75 0.7 5.92 79.73 8.38 48.15 57.55 46.15 50.67 66.02 55.84 D 6 2 9 103 20 140 0 4.29 1,43 6.43 73.57 14.29 0 2.83 5.13 3 3.32 5.19 7 46 12 76 559 78 778 0.9 5.91 1.54 9.77 71.85 10.03 25.93 21.7 30.77 25.33 18.04 20.26 7 38 7 63 391 72 578 1.21 6.57 1.21 10.9 67.65 12.46 25.93 17.92 17.95 21 12.62 18.7 27 212 39 300 3099 385 4062 - Table 16 continued on next page - - Table 16 continues from previous page - Applicant Income of $65,000-90,000 Row % Col % made Loan aemea actions American Asian African Latino/ White NA/ Indian American American Chicano Other TOTAL 13 119 23 112 1821 240 2328 0.56 5,11 0.99 4.81 78.22 10.31 54.17 70.83 52.27 56 68.72 63.49 0 6 2 4 91 15 118 0 5.08 1.69 3.39 77.12 12.71 0 3.57 4.55 2 3.43 3.97 7 15 8 50 444 59 583 1.2 2.57 1.37 8.58 76.16 10.12 29.171 8.93 18.18 25 16.75 15.61 4 28 11 34 294 64 435 0.92 6.44 2.53 7.82 67.59 14.71 16.67 16.67 25 17 11.09 16.93 24 168 44 200 2650 378 3464 Applicant Income of over $90, 000 Row % Cd % Approvd,not made Loan denied Other actions Total American Asian African Latino/ White NA/ Indian American American Chicano Other TOTAL 15 109 14 74 1874 204 2290 0.66 4.76 0.61 3.23 81.83 8.91 78.95 61.24 40 51.39 64.05 58.12 0 9 3 4 133 27 176 0 5.11 1.7 2.27 75.57 15.34 0 5.06 8.57 2.78 4.55 7.69 2 34 18 42 562 63 721 0.28 4.72 2.5 5.83 77.95 8.74 10.53 19.1 51.43 29.17 19.21 17.95 2 26 0 24 357 57 466 0.43 5.58 0 5.15 76.61 12.23 10.53 14.61 0 16.67 12.2 16.24 19 178 35 144 2926 351 3653 Table 17: Action by Applicant Race and Area Minority Population All Lenders, All Refinancing Loans, Santa Clarity Area Minority Population of 15% or less made Row % Col % )vd, not made denied American Asian African Latino/ White 228 3711 NA/ 4682 0.58 Indian American American Chicano 9.53 58.7 Other TOTAL 11 64.84 103 12 107 2022 5 15 193 39 2448 0.34 0.45 4.21 0.49 4.37 13.27 82.6 2.17 7.88 5.68 3.43 50 63.19 34.29 57.22 61 69.97 119 1098 59.57 1470 0 4.15 9 2 2 97 21.74 18 31.82 128 19.19 0 7.03 1.56 1.56 11 75.78 696 14.06 0.82 �57 5.83 0 5.52 5.71 1.07 3.36 15.83 12.5 5.56 12.16 6 28 17 42 440 55 588 1.02 4.76 2.89 7.14 74.83 9.35 27.27 17.181 48.571 22.46 15.22 18.98 5 23 4 36 331 58 457 1.09 5.03 0.88 7.88 72.43 12.69 22.73 14.11 11.43 19.25 11.45 17.9 22 163 35 187 2890 324 3621 Area Minority Population of 15-20% Row % not actions Total American Asian African Latino/ White NA/ Indian American American Chicano Other TOTAL 27 226 44 228 3711 446 4682 0.58 4.83 0.94 4.87 79.26 9.53 58.7 62.78 50 52.17 64.84 58 1 16 5 15 218 39 294 0.34 5.44 1.7 5.1 74.15 13.27 2.17 4.44 5.68 3.43 3.81 5.07 10 61 28 119 1098 154 1470 0.68 4.15 1.9 8.1 74.69 10.48 21.74 16.94 31.82 27.23 19.19 20.03 8 11 75 696 977 0.82 �57 5.83 1.13 7.68 71.24 1130 13.31 17.39 15.83 12.5 17.16 12.16 16.91 46 360 88 437 5723 769 7423 - Table 17 continued on next page - - Table 17 continues from previous page - Area Minority Population of 20-26% made Total Row American Asian African Latino/ White NAI Indian American American Chicano Other TOTAL 1 31 12 4 35 22 518. 336 57 40 646' 0.15 0.72 4.8 0.62 0.24 5.42 5.31 60.19 81.16 8.82 9.66 25 50 54.39 40 25 38.89 34.92 62.64 62.69 50.89 54.79 0 2 0 1 7 4 33 23 5 6 48 0 0 4.17 2.08 2.94 14.58 11.76 68.75 67.65 10.42 17.65 0 0 3.51 10 25 7.78 6.35 3.99 4.29 4.46 8.22 2 13 6 2 31 22 166. 108 26 12 240 0.83 1.32 5.42 0.83 0.66 12.92 14.57 69.17 71.52 10.83 7.95 50 33.33 22.81 20 25 34.44 34.92 20.07 20.15 23.21 16.44 1 11 10 3 17 15 110 69 24 15 166 0.6 0.9 6.63 1.81 0.9 10.24 13.51 66.27 62.16 14.46 13.51 25 16.67 19.3 30 25 18.89 23.81 13.3 12.87 21.43 20.55 4 57 28 10 90 63 827 536 112 73 1100 Area Minority Population of 26% or more made Row % American Asian African Latino/ White NA/ Indian American American Chicano Other TOTAL 3 12 1 22 336 40 414 0.72 2.9 0.24 5.31 81.16 9.66 50 42.86 25 34.92 62.69 54.79 0 0 1 4 23 6 34 0 0 2.94 11.76 67.65 17.65 0 0 25 6.35 4.29 8.22 2 6 1 22 108 12 151 1.32 3.97 0.66 14.57 71.52 7.95 33.33 21.43 25 34.92 20.15 16.44 7 10 1 15 69 15 111 0.9 9.01 0.9 13.51 62.16 13.51 16.67 35.71 25 23.81 12.87 20.55 5 28 4 63 536 73 710 1996 Assessment of Impediments to Fair Housing Choices for the G& of Santa C7arita, CA Appendix: Maps 361 Newhall / Val vfrae 4ti Santa 0 a Reference map: Santa Clarita relative to San Fnando Valley L ZnF�— Val Verde O 920325 9=12 / 920022( --Wt 4 Santa C rita 920003 .920.111 13 920312 106M 1 -;�-(i 112011 Fj 11202 1093CK 1Z973000 J/ , - S. Clarita Map 1: African Americans as % of population, 1990 Census El 0 to 0.52 (332) 0 0.52 to 1.77 (331) D 1.77b 4.14 (327) [3 4.14 to 12.67 (328) 19 12.67 to 100 (334) —v — 103400 lom 103 081 113106,-V 11321V— j 1112 106M 1 -;�-(i 112011 Fj 11202 1093CK 1Z973000 J/ , - S. Clarita Map 1: African Americans as % of population, 1990 Census El 0 to 0.52 (332) 0 0.52 to 1.77 (331) D 1.77b 4.14 (327) [3 4.14 to 12.67 (328) 19 12.67 to 100 (334) —v — 103400 Newhall Santa P YSfi�64�"�F {4M i yf i� S. Clarita Map 2: Asian Americans as % or population, 1980 Census - - ❑ 0 to 1.73 ❑ 1.73 to 3.91 (329) 3.91 to 7.09 (330) 7.09 to 13.24 (330) z ;; ■ 13.24 to 87 (331) F Gx�t�i 3 r� ux'f�3T:� F'°ayw.ti 3"4 l ' dff., ,t t?)Yr9as eao2oo Newhall S. Clarita Map 4: Tract Median Income 1 1 relative to U1 County median, 1960 Census ® 0 to 62.83 (331) Vel Verde 101 �i '• ' f 82.83to. 89.5 (331) 920Q22 ( 88.5 toll 1.46 (330) 6200}3 025 ❑ 111.46 to 143.e9 (330) ''.. ❑ 143.89 to 384.27 (330) s� Santa C alta ,I o 92000s 97,0371 13 920312 v 920303 108803 106WO y �r � ° �� •• n �� sa •r °Gtr° �� H 1«14 I � A� e':♦ Py9^'Ia •<-U 920200 Newhall 920012 Val Verde 101 920013 ``( 920022 \ 0025 A( — 1 ` Santa arita 0 920003 fit 1 920325 LI 13 9=12 S. Garita Map 5: Persons in Poverty as % of populabm, 1990 Census ❑ 0 to 4.4 (331) ❑ 4.4 to 8 (331) ❑ 8 to 13.89 (330) El 13.89 to 24.08 (330) M 24.08 to 100 (328) jff 920303 106603 ,06500 08402 wwH a 1 0 ,06200. 03 1 10664.3`$?e. (•,104 i 103 111201 09100 ; 103200';. _ 113106 y 11202 109300 109400 _ 1rr — 1132 111 111301 109700 T a " " 1031 13213 11332 " 13322 � ' 11,302 Fl09900 09601 ; � �"' � §1:3 103400 f 1 1 f 920200 , 1. Newhall 1� Val Verde 01 ` ;vrfas p n, t 1 Santa C `, -920311 ,0. s. 920312 r 108200 .� 106643 03 1 1511201 s e 't2t12 y !:_ 113106 y 111301 13213 11332 133224`111302 v ' S. Clarita Ma 6: Conventional Mort. Loans n$ �` per 100 owner -Occup. unRs, 1993 & 1994. r 0 to 5.2 (331) i E3 5.2 to 6.89 (331) f 6.89 to 8.35 (331) ❑ 9.35 to 13.26 (332) '� < ❑ 10.26 to 242.31 (327) 0 .920003 . f. Santa Clarita Financial Institution branches as of December 31, 1995 Census tract Institution 9200.03 thrift SOUTHERN CALIFORNIA FS&LA 9200.12 corn bk BANK OF AMERICA NAT TR & SA 9200.13 thrift CALIFORNIA FEDERAL BANK 9200.21 corn bk VALENCIA NB 9200.21 thrift GREAT WESTERN BANK, A FSB 9200.23 oom bk BANK OF AMERICA NAT TR & 9200.23 corn bk FIRST INTERSTATE BK CA 9200.23 corn bk WELLS FARGO BK NA 9200.24 corn bk BANK OF AMERICA NAT TR & 9200.24 thrift CITIBANK, FSB 9200.25 corn bk TRANS -WORLD BK 9200.25 thrift GREAT WESTERN BANK, A FSB 9201.01 corn bk FIRST INTERSTATE BK CA 9201.01 corn bk WELLS FARGO BK NA 9203.11 cpm bk WESTERN SECURITY BK NA 9203.12 corn bk BANK OF AMERICA NAT TR & SA 9203.12 corn bk BANK OF AMERICA NAT TR & SA 9203.13 thrift CALIFORNIA FEDERAL BANK 9203.21 can bk BANK OF AMERICA NAT TR & SA 9203.21 thrift GLENDALE FEDERAL BANK, FSB 9203.22 corn bk VALENCIA NB 9203.22 thrift AMERICAN SAVINGS BANK, FA 9203.22 thrift FIRST NATIONWIDE BANK, A FSB 9203.22 thrift GREAT WESTERN BANK, A FSB 9203.24 corn bk BANK OF AMERICA NAT TR & SA 9203.24 com bk BANK OF AMERICA NAT TR & SA 9203.24 corn bk VALENCIA NB 9203.24 thrift HOME SVG OF AMERICA 9203.25 thrift GREAT WESTERN BANK, A FSB 9203.25 thrift HOMEFED BANK, FA 9203.25 cred un SIX FLAGS EMPLOYEES FCU Address City Zip code 28425 SIERRA HWY NEWHALL 91321 26811 N. BOUQUET CANYON R SAUGUS 91350 26542 BOUQUET CANYON RD. SAUGUS 91355 18539 SOLEDAD CANYON CANYON COUNI 91351 18571 SOLEDAD CANYON CANYON COUNT 91351 19401 W. SOLEDAD CAN CANYON COUNT 91351 19401 SOLEDAD CANYON CANYON COUNT 91351 19310 SOLEDAD CANYON CANYON COUNT 91351 19120 SOLEDAD CANYON SAUGUS 91351 19100 W. SOLEDAD CAN CANYON COUNT 91351 18411 SOLEDAD CANYON SAUGUS 91351 16520 SOLEDAD CANYON CANYON COUNT 91351 24301 W. MAGIC MOUNTAIN PA VALENCIA 91355 23430 VALENCIA BLVD VALENCIA 91355 24355 LYONS VALLEY AVENUE VALENCIA 91321 23323 LYONS AVENUE NEWHALL 91321 24740 VALLEY ST NEWHALL 91321 24180 LYONS AVE. NEWHALL 91355 23754 VALENCIA BLVD VALENCIA 91355 23754 VALENCIA BLVD VALENCIA 91355 23620 LYONS AVENUE NEWHALL 91355 23402 W. LYONS AVENUE NEWHALL 91321 23453 W.LYONS AVE VALENCIA 91321 24160 LYONS AVE NEWHALL 91355 23929 W. VALENCIA BOULEVAF VALENCIA 91355 25115 W. STANFORD AVENUE VALENCIA 91355 23920 W. VALENCIA BOULEVAF VALENCIA 91355 24000 VALENCIA BLVD VALENCIA 91355 25882 MC BEAN PARKWAY VALENCIA 91381 25950 MCBEAN PKWY. VALENCIA 91381 26101 MAGIC MOUNTAIN PKWY VALENCIA 91381 OF AMERICA NAT TR & SA L l 1 (1/EIlS �j RST INTERS TE BK CA cm ERICA NAT TR & BANK 3 BK NA TR & FIRST INTESTATE B BANK OF AMERICA NATIR-& `I JK OF AMERICA NAT TR & SA BANK OF AMERICAAAT TR & SA ENCIA NO i / BANK OF AMERICA NAT TR & SA j CWESTERN SECURITY BK BANK OF AMERI T TR & SA mercial bank branches in S a Clarita as of Dec. 31 '95 LIFORNIA FEDERAL BALK VFSB CSI FLAGS YEES F�CU, T STERN ;00 LE FEDERAL BANK,CITIBANK, FSBHOME G OFAMERICA• HOMEFED BANK, FA REAT WESTERN K, A FSB S UTHERN CALIFORNIA FSBLA / j. GREAT WE S K FSB r ICAN SAVING BANK FA f RNI L BANK j FIRST NATIONWIDE BANK,A Thrift an credit union branches in to rita, as of Dec. 31 '95