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Council of New York Cooperatives & Condominiums
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Legal Issues

Published: Autumn 1996

CNYC thanks Chicago attorney Herbert Fisher, who is Chairman of the Board of the National Association of Housing Cooperatives (NAHC), for the following guest article. It addresses the important issue of whether a cooperative can limit the number of people allowed to live in an apartment. Mr. Fisher examines regulations recently promulgated by the Department of Housing and Urban Development (HUD) to address occupancy levels, and discusses ways in which these regulations impact on cooperatives nationwide.

Interpreting Federal Standards for Overcrowding in Apartments

Ever since Congress included children as a protected class under the Fair Housing Status, there has been confusion surrounding interpretation. The first concept to come under attack was the more-than-a-generation-old guideline of two-persons-per-bedroom occupancy limitation. While this long-standing rule is not likely to be considered discriminatory per se, it could be found to be discriminatory if other special circumstances are present. The Fair Housing Amendments Act of 1988 is not only applicable to HUD-related cooperatives but to all cooperatives and all multi-family housing.

Keating memorandum opens discussion of occupancy guidelines

In March, 1991, the then HUD General Counsel, Frank Keating, issued a memorandum indicating that the two-persons-per-bedroom guideline is a starting point, but that size and layout of the unit and the age and sex of the children can also affect the conclusion as to whether discrimination has occurred.

Then, in July 1995, current HUD General Counsel Nelson Diaz, seeking to provide some clarification in an increasingly confusing situation, provided interim guidance which gave square footage of the unit as a safe approach and suggested the use of the standards set by the Building Officials & Code Administrators International (BOCA).

This approach also brought into the formula the applicability of local housing codes based upon square footage. The square-footage criterion produced concern that it would permit more than two persons per bedroom into cooperative and other dwelling units. The Diaz memorandum also brought into consideration the disparate impact theory, and that occupancy policies more restrictive than the BOCA would have to be justified based on "whether or not they constitute a business necessity and whether there are less-discriminatory, alternative means to accomplish the business necessity justifications, based on existing Departmental guidance application of the disparate impact theory."

Attempt to alleviate confusion

In an effort to abate the considerable confusion created by the Diaz memorandum, the HUD Assistant Secretary for Fair Housing and Equal Opportunity instructed HUD E.O. officials not to use the July 12, 1995, Diaz memorandum as a basis for conducting investigations and making determinations until a final rule was issued, and that former HUD General Counsel Frank Keating's March 1991 memorandum should continue to be used, it is reported that Nicholas P. Retsinas, HUD Assistant Secretary for Housing and the Federal Housing Commissioner, concurred in the FHEO Assistant Secretary's instructions.

The Keating March 20, 1991, memorandum addressed to All Regional Counsel, stated:

"... the Department believes that an occupancy policy of two persons in a bedroom, as a general rule is reasonable under the Fair Housing Act ... However, reasonableness of any occupancy policy is rebuttable..." and nothing "implies that the department will determine compliance with the Fair Housing Act based solely on the number of people permitted in each bedroom."
Rules allow owners to limit occupancy

Quoting from the final rule implementing the Fair Housing Amendments of 1988, Keating's memorandum contained the following:

"(T)here is nothing in the legislative history which indicates any intent on the part of Congress to provide for the development of a national occupancy code ... On the other hand, there is no basis to conclude that Congress intended that an owner or manager of dwellings would be unable to restrict the number of occupants who could reside in a dwelling. Thus, the Department believes that in appropriate circumstances, owners and managers may develop and implement reasonable occupancy requirements based on factors such as the number and size of sleeping areas or bedrooms and the overall size of the dwelling unit. In this regard, it must be noted that, in connection with a complaint alleging discrimination on the basis of familial status, the Department will carefully examine any such non-governmental restrictions to determine whether it operates unreasonably to limit or exclude families with children. 24 CFR Chapter I. Subchapter A, Appendix I at 566-67 (1990)."
Avoiding discriminatory policies

The memorandum then goes on to discuss the considerations which might be given to the size of bedrooms and unit, the age of children, configuration of units, other physical limitations such as building system limitations, as well as state and local requirements and other relevant factors such as past discriminatory statements, adoption of discriminatory rules governing the use of common facilities, steps to discourage families with children from moving in or enforcement of policies only against families with children. Keating pointed out that policies limiting the number of children per unit were more likely to be discriminatory than policies which limited the number of people per unit.

 
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