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Court Refuses to Dismiss Fair Housing Challenge to Owner’s Wholesale Displacement of Tenants
08.09.2016

In a potential landmark case watched by many locally and around the country, the federal district court on July 5, 2016 denied defendants’ motion to dismiss the complaint in CROSSRDS v. MSP Crossroads Apartments, LLC.

In September 2015, the defendants purchased the 700 unit Crossroads apartments in Richfield, Minnesota, acquiring the third largest apartment complex in the Twin Cities Metro. Crossroads, an unsubsidized but very affordable complex, was also home to many low income households, including a large contingent of Latino families, many disabled residents, and quite a few dependent on Section 8 and other public programs. Defendants immediately set out to transform not just the buildings but the tenant population as well. The tenants quickly found themselves with a new set of rules, including rent increases of up to 30%, a requirement that they all needed to reapply under much tougher admission standards, and that tenants reliant on Section 8 or other public programs would have to leave. At the same time the new owners extensively rehabbed the complex, adding amenities designed to appeal to young urban professionals, such as a golf simulator and a pet spa.

The residents, represented by HJC, filed a class action lawsuit in February 2016. The residents contend that defendants’ actions in transforming the building so as to largely replace the tenants of color and disabled tenants violates the Fair Housing Act. This is a groundbreaking application of the Fair Housing Act, as there is little precedent applying the Act to this kind of private party wholesale displacement of a tenant population. This is also a rare example of tenants fighting back against a wave of acquisitions of low cost apartment buildings and the repositioning of these buildings for higher income tenants, a disturbing trend in the Twin Cities Metro and in other strong market regions of the country. The court’s July 5th ruling cheered the residents and many Fair Housing advocates locally and across the country. The Court made several important rulings in the order that will have implications for this case and others to come in the future. First, the court held that the residents’ claim of intentional discrimination by the owners was supported by sufficient evidence to go forward. Second, the court reached the same conclusion for plaintiffs’ “disparate impact” claim. This Fair Housing claim, recently reaffirmed by the U.S. Supreme Court, is based on the notion that the Fair Housing Act can be violated, even in the absence of evidence of intent to discriminate, where the plaintiffs can satisfy a three part test. The court also rejected challenges to the legal standing of the tenants and co-plaintiff HOME Line to bring the case. Finally, the court left intact the residents’ additional claim that the owners’ decision to withdraw from the Section 8 voucher program violated the FHA, noting that there were unresolved issues with this claim to be determined in the future. This means the residents’ lawsuit will proceed toward trial largely intact. Next up the parties will begin discovery. A copy of the court’s ruling is available here.