Housing discrimination bill in limbo amid concerns over federal funding

Nearly six weeks have passed since Republican lawmakers approved a bill prohibiting local governments from banning “source of income” discrimination. Yet Senate File 252 still has not been sent to Governor Kim Reynolds, according to the legislature’s website.

While Iowa’s legislature is in session, the governor has three days to sign or veto any bill that reaches her desk, or it will become law without her signature. The governor’s staff often asks for an extra week or two to review a measure’s contents. But there is no recent precedent for the legislature to sit on a bill for this long.

The governor must eventually act on every bill the legislature passes. The unusual delay has fueled speculation that Reynolds may cast a rare veto of a bill approved by the Republican-controlled House and Senate.

Communications staff for the governor and legislative leaders did not respond to Bleeding Heartland’s inquiries about why Senate File 252 has been held up. But signs point to the bill jeopardizing some federal housing funds.

ANOTHER ATTACK ON LOCAL CONTROL

Senate File 252 continues a pattern of Iowa GOP lawmakers pre-empting local governance such as minimum wage increases, ordinances prohibiting firearms on local government property, school district decisions on remote learning, and most recently, regulations on siting for methane or propane gas infrastructure.

The one-page bill states that cities or counties

shall not adopt or enforce an ordinance or regulation that prohibits an owner, lessor, sublessor, managing agent, or other person having the right to lease, sublease, or rent out a dwelling unit from refusing to lease or rent out the dwelling unit to a person because of the person’s use of a federal housing choice voucher issued by the United States department of housing and urban development.

An Iowa Senate committee approved the same concept last year, but the bill went no further. A similar Republican proposal was dropped from the 2017 bill reversing local minimum wage hikes.

Three Iowa cities–Marion, Iowa City, and Des Moines–currently have ordinances prohibiting discrimination based on a renter’s source of income. The original draft would have nullified those regulations immediately, but House members amended the bill to declare the regulations unenforceable as of January 1, 2023.

During the Senate and House debates, Republican floor managers argued the bill preserved private property rights by not forcing landlords to accept federal housing vouchers. Supporters also downplayed the impact of the bill, noting that most Iowa municipalities have no such ordinance on the books.

Democratic State Representative Bruce Hunter countered that the bill has broader implications, because the legislature is in effect “telling unscrupulous landlords across the state […] that it’s ok to discriminate against people using housing vouchers.” The 32 entities that lobbied against the bill (listed at the end of this post) included civil rights groups, associations representing local governments, religious organizations, and nonprofits advocating for marginalized groups such as domestic violence survivors or Iowans with disabilities or mental health challenges.

Ian Richardson and Kim Norvell reported for the Des Moines Register in February, “Iowans use vouchers to help pay for nearly 20,000 housing units statewide, according to 2020 HUD data. Their average household income is $12,577 a year.” About 27 percent of Iowans who use federal Housing Choice Vouchers (more commonly known as Section 8) are Black, and several Democratic lawmakers argued that refusing to accept that source of income is a back-door way for landlords to avoid renting to people of color.

House Republicans voted down Democratic amendments that would have exempted vouchers provided to veterans, to non-elderly people with disabilities, and to children in foster care or aging out of foster care. The majority also rejected amendments that would have grandfathered in existing ordinances and prohibited landlords from terminating or refusing to renew a lease because of a tenant’s use of a federal housing voucher.

Lawmakers approved Senate File 252 on party-line votes in both chambers. The House passed the final version on March 15, and the Senate two days later.

NO ACTION FROM GOVERNOR

I expected Reynolds to sign the bill promptly. She’s backed every other Republican assault on local control and typically supports the business community’s agenda. The five entities registered in favor of Senate File 252 all represent landlords or rental property managers.

One of them particularly caught my eye. Eastlake Partnership’s lobbyist is Jake Ketzner, who was chief of staff for Reynolds during her first year as governor. Eastlake’s point of contact is David Barker, whose companies own many apartments and whom Reynolds appointed to the Iowa Board of Regents in 2019. He also serves on the Republican Party of Iowa’s governing body and has made contributions worth about $80,000 to Reynolds’ campaign. Five times since 2017, Barker has donated flights on a private plane to the governor’s campaign (see here, here, here, here, and here).

Despite the heavy-hitters supporting Senate File 252, Reynolds has taken no action in the 41 days since lawmakers approved the bill. What is going on?

“FAIR HOUSING IS THE LAW”

U.S. Housing and Urban Development (HUD) Secretary Marcia Fudge discussed Iowa’s bill during an interview with MSNBC’s Joy Reid hours after the state Senate passed the legislation on March 17. Fudge made clear that the federal government would take a close look at Iowa’s policy.

As a lawyer, what I know is that fair housing is the law. It is the law of the land. We passed the Fair Housing Act in 1968. We also know that discriminatory zoning is a violation of the law.

Now if they want to get into a fight about it, we’re ready to fight them about it. […] You cannot house people when they are purposely making it more difficult for people to find housing. It is a violation of the law.

Asked whether the federal government might sue to block laws like what Iowa’s legislature had passed, Fudge said she’d have to consult with the Justice Department about any such litigation. She added, “I would clearly believe that we are within our rights to demand that these communities cooperate with what we are doing, absolutely.”

Knowledgeable sources in the housing field confirmed that the federal Fair Housing Act neither requires landlords to rent to voucher holders nor prohibits source of income discrimination. 

But that doesn’t mean “what Iowa’s doing is free from scrutiny,” Kate Walz, senior attorney for the National Housing Law Project, told Bleeding Heartland during a telephone interview last month. She noted the “long history” of claims being made in Iowa that voucher holders are coming to the state from Chicago. (I recall people promoting that stereotype as far back as the 1980s.) “These are really statements of racial animus and racial hostility,” Walz said.

Walz speculated that Section 8 “has almost become a racial slur” in Iowa. She’s litigated cases where Black families who didn’t use vouchers were discriminated against because of a perception that “they must be.”

What kind of leverage would HUD have if Iowa’s governor signed this bill? Walz explained that even though the Fair Housing Act doesn’t explicitly prohibit this kind of discrimination, that doesn’t mean there wouldn’t be consideration of whether Iowa’s policy stems from racial animus. “There’s a lot of studies that show that voucher discrimination is really cover for most other forms of prohibited discrimination” on the basis of race, familial status, or disability.

A 2019 “Analysis of Impediments to Fair Housing Choice” in Dubuque found that rental units refusing to accept federal vouchers “creates disparate impact on protected classes,” including people of color.

How would someone demonstrate that Iowa’s new law was rooted in racial bias? Walz mentioned a federal court ruling that struck down a North Carolina voter ID law. On its face, that statute applied equally to voters of any race. But the court found evidence Republican lawmakers had drafted it so as to “target African-Americans with almost surgical precision.” Landlords may say they simply don’t want to do business with the federal government, “but again, it’s often a cover for other forms of discrimination.”

Other research has found that renters using vouchers often can only find housing in communities of color, another “indicator that the real issue that’s going on here is race,” Walz said. At least seven states and many municipalities have adopted source of income protections like the ordinances Iowa Republicans want to pre-empt. Those regulations give people a fair opportunity to be a tenant, Walz explained. “It is not a mandate that you take the voucher, it’s that you fairly consider them.”

Walz agreed with the Democrats who have warned that Senate File 252 would green-light discrimination against voucher holders. She added that it would undermine local housing authorities, whose staff “are diligently trying to place families with those vouchers.”

That could put some federal funding at risk.

“IT WOULD HARM THINGS IN TWO WAYS”

Walz mentioned that receiving federal housing and community development dollars imposes a “duty to affirmatively further fair housing.” Senate File 252 would run “directly contrary to that,” in her view. She inferred that HUD Secretary Fudge had this angle in mind when she discussed Iowa’s prospective law on MSNBC.

Walz pointed me to the Westchester County, New York case. A nonprofit sued the county under the False Claims Act, “alleging that County had failed to affirmatively further fair housing and that the County’s certifications to HUD from 2000 to 2006 that it had affirmatively furthered fair housing were false.” A federal court agreed.

As a result, HUD did not approve the County’s 2009 Consolidated Plan, which in turn delayed the County’s receipt of more than $8 million in Community Development Block Grant (CDBG), HOME Investment Partnerships (HOME), and Emergency Solutions Grant (ESG) funds until the County provided evidence that it in fact affirmatively furthers fair housing. […]

Because subsequent AI [Analysis of Impediments to Fair Housing Choice] submissions were also found lacking, Westchester has not received CDBG, HOME, or ESG funds since its FY10 [fiscal year 2010] block grants […].

I sought comment from the Iowa Economic Development Authority, which administers the Community Development Block Grant program. Spokesperson Staci Hupp Ballard commented via email in late March, “At this time, HUD has not given us any indication that CDBG funding would be impacted. The Iowa Economic Development Authority and Iowa Finance Authority are committed to quality housing for Iowans through our programs, which follow the Fair Housing Act.”

She did not respond to follow-up inquiries this month. Had staff within those agencies identified any legal problems related to Senate File 252? Might cities have trouble accessing certain federal funds? Had Iowa Economic Development Authority or Iowa Finance Authority staff had further communications with HUD officials about the bill? Did they know why legislative leaders had delayed sending it to the governor?

I turned to Jack Hatch, a former state senator and principal at the Hatch Development Group, which has worked on many affordable housing projects. He had the impression Reynolds was leaning against signing Senate File 252, he said in an April 12 email.

Did Hatch think the bill would put Iowa on track to lose HUD funding, like Westchester County had?

Yes, it would harm things in two ways: one, if a community that has Section 8 vouchers, does not use them, HUD will “take them back,” and reallocate them. The demand for S8 vouchers are so high, there is very limited tolerance for communities who do not use the vouchers.

Unprompted by me, Hatch echoed Walz’s comments about Iowa perceptions.

There seems to be this idea that “those people from Chicago will come here and use S8 vouchers to live.” I have heard that from people in Cedar Rapids. One friend said he heard it from two in Indianola and they were legislators.

He didn’t name the legislators. State Senator Julian Garrett, who floor managed Senate File 252, has represented the Indianola area since 2013. He’s been known to employ racist dog whistles. Republican State Representative Brooke Boden won the 2020 election in the House district that covers most of Warren County.

Hatch’s second concern relates to a fair housing lawsuit. He noted that about 47 percent of voucher recipients in Polk County are women of color with children. “Many disabled military veterans are also S8 users, and we all know which possible tenant will not be denied an apartment when they have a voucher, while the other would be clearly discriminated against.”

Was Hatch worried that if Reynolds signed the bill, Iowa developers might not be able to certify compliance with federal law when applying for the low income housing tax credit? “I am not sure about that,” he said. As a developer who uses those tax credits and accepts Section 8, “I must certify that I will adhere to Fair Housing.” He didn’t think the legislation would preclude him from doing that certification, “but de facto, it will prevent me from using S8 since the city returned needed vouchers.” That in turn might prevent him from renting a unit to a needy family.

Over the past two weeks, the governor’s spokesperson Pat Garrett has ignored four emails asking whether staff had discouraged the legislature from forwarding Senate File 252, and whether Reynolds was concerned about the state’s access to federal housing funds or developers’ access to federal tax credits.

At some point, the governor will need to confront this situation. I will update this post as needed. One plausible scenario: if House and Senate leaders send this bill down during the last three days before adjourning, Reynolds could issue a “pocket veto” by taking no action within 30 days.

UPDATE: The legislature sent this bill to the governor on April 30. I would guess Reynolds will sign it along with a dozen or two other bills and announce them as a group late Friday afternoon. LATER UPDATE: Indeed, she signed this bill and 37 others on April 30. The governor’s office news release listed only the bill numbers and not the usual brief summaries of each bill’s contents.


Appendix: Full list of entities lobbying for or against Senate File 252, which pre-empts local ordinances that ban housing discrimination on the basis of source of income

Supporting the bill:

  • Iowa Apartment Association
  • Iowa Landlord Association
  • Eastlake Partnership (represented by Jake Ketzner, who was chief of staff for Reynolds during her first year as governor)
  • Landlords of Iowa
  • Greater Iowa Apartment Association

Opposing the bill:

  • Iowa Housing Partnership
  • City of West Des Moines
  • Iowa Coalition Against Domestic Violence
  • Iowa Primary Care Association
  • Iowa Catholic Conference
  • National Alliance on Mental Illness–Iowa
  • Iowa Mental Health Counselors Association
  • Iowa State Bar Association
  • City of Iowa City
  • City of Waukee
  • City of Des Moines
  • Greater Des Moines Partnership
  • Iowa Conference of United Methodist Church
  • United Way of Central Iowa
  • Polk County Board of Supervisors
  • Metropolitan Coalition
  • United Ways of Iowa
  • Iowa Mental Health Advocacy
  • Iowa-Nebraska NAACP
  • Iowa Citizens for Community Improvement Action Fund
  • Iowa ACEs 360
  • Linn County Board of Supervisors
  • City of Cedar Rapids
  • Common Good Iowa
  • Iowa Credit Union League
  • American Planning Association Iowa Chapter
  • ACLU of Iowa
  • Iowa League of Cities
  • Iowa Developmental Disabilities Council
  • Iowa State Association of County Supervisors
  • Iowa State Association of Counties
  • Iowa Nurses Association

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