Builder News Network

Fair Housing Scores a Victory in South Carolina Settlement

In a major victory for fair housing, a lawsuit brought by South Carolina developer Connelly Development, LLC and NAHB has been settled just as it was ready to go to trial.

The case was designed to demonstrate how local governments can run afoul of the federal Fair Housing Act even when government officials do not intend to discriminate. The effect of a local government action can trigger serious fair housing concerns for racial or ethnic minorities.

Connelly Development and NAHB filed litigation in federal court in 2005 after the City of West Columbia took action to stop development of a multifamily rental project supported by the low-income housing tax credit (LIHTC) program. The case was scheduled to go to court on Feb. 19, but the city chose instead to settle the litigation.

“Although I would much rather have just built the development without interference, I am pleased with this outcome,” said Kevin Connelly, president of Connelly Development. “Throughout this process, the NAHB litigation team has been right there with us. After all the time and effort we’ve put into this lawsuit, this is a very satisfying result.

“My hope is that municipalities across the nation will focus on the needs of all the residents in a community, focus on the qualifications of the developer and dismiss the preconceived notions of affordable housing that is being built today. Affordable housing has improved vastly over the last 20 years and these developments are an excellent example of that, given the chance.”

Another lesson for other local governments is that the city could easily have avoided litigation and the costly settlement, which was more than half a million dollars, said Jerry Howard, NAHB’s executive vice president and chief executive officer.

“A little more than three years ago, Kevin Connelly asked NAHB for help,” Howard said. “The city should have been doing everything in its power to support his project. Instead, it withheld one letter that was needed to make the whole development viable.”

“This has been a considerable effort for us,” Howard added. “We have been viewing the Connelly case as an important part of NAHB’s overall litigation strategy. The outcome affirms that effort and provides the industry with an important tool for those who want to build affordable housing to serve the needs of minority families.”

NAHB’s litigation team worked closely with Benjamin E. “Ned” Nicholson V and others at the McNair Law Firm in Columbia, S.C.

In 2004, Connelly Development, LLC planned to build “Tanners Crossing,” a rental project with units affordable to tenants earning no more than 60% of the area’s median income.

Connelly successfully navigated all of the land use, zoning and financing challenges for the development, but the city withheld one last but necessary approval of sewer service for the project. The sewer lines already existed, no costly extension of new lines was needed and there was more than sufficient capacity within the current infrastructure to accommodate the housing. Yet the city would not approve a sewer hook-up for the project.

Without a final sewer approval, Connelly became ineligible for low-income housing tax credits from the South Carolina State Housing Finance and Development Authority, making the venture economically infeasible.

After Connelly lost the opportunity to receive a tax credit allocation, the city annexed the Tanners Crossing site within its jurisdiction and used a restrictive zoning classification to block Connelly, or anyone else, from building a multifamily project on it.

“These tax credit projects aren’t easy, and it’s frustrating when the city won’t work with you when you’re trying to do the right thing,” Connelly said. “I hope other cities will understand now that they need to take care to stay on the right side of the Fair Housing Act.”

Congress created the Fair Housing Act in 1968 to ensure that certain classes of people most likely to experience discrimination — including racial minorities — would not be discriminated against in the sale or rental of housing. The Fair Housing Act also makes it unlawful to interfere with someone who seeks to aid or encourage racial minorities to enjoy their right to housing.

“Regardless of the motivation, the effect of the city’s actions was that Connelly was unable to build apartments for low-income families,” Howard said. “We felt there was a strong case for a Fair Housing Act complaint in this instance, and we were right.”

For more information, e-mail bsmith@nahb.comh at NAHB, or call him at 800-368-5242 x8583.

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